Emails destroyed in rail investigation

By PAM GRAHAM

Tranz Rail destroyed emails relating to a Commerce Commission investigation into the company's alleged anti-competitive practices, the commission said yesterday.

Unnamed Tranz Rail employees ordered the destruction of emails, and possibly documents, in October and November of 2000.

The commission revealed the "Enron-like" document destruction for the first time yesterday as it closed a probe that failed to prove Tranz Rail abused its market power against rival Top Cat ferry, which operated on the Cook Strait in 1999 and 2000.

During that probe, Tranz Rail challenged the use of a search warrant.

The Court of Appeal ruled in October 2002 that the warrant was invalid and that the documents seized could not be used.

"Since receiving the Court of Appeal judgment, the commission uncovered, and Tranz Rail confirmed, that one of its employees in October or November 2000 directed the destruction of emails and possibly documents relating to ferry service negotiations that were being investigated by the commission at the time," said commission general manager Geoff Thorn.

"We will now never know the extent of that evidence, and how it might or might not have been relevant to our investigation."

Document destruction has become a potent issue for investigators since the Enron scandal in the United States.

Enron's auditor, the international accountancy firm Andersen, collapsed after it admitted destroying files relating to a criminal investigation of the bankrupt energy giant.

Thorn said the commission was committed to the use of search warrants, particularly after Tranz Rail's admission that its employees destroyed emails.

"This example of destruction will be used by the commission in the future when applying for warrants," he said.

"We now have a New Zealand example of an Enron-like destruction of corporate information."

The commission eventually concluded that there was no evidence of below-cost pricing against the Top Cat ferry, which competed against Tranz Rail's ferries.

Commission general counsel Peter Taylor said the Top Cat ferry business suffered difficulties for all sorts of reasons.

"We could find no apparent evidence of anything that was in the way of an anti-competitive arrangement."

Tranz Rail revealed the destruction in response to questions put to the company by the commission last year.

Taylor said that even when the commission learned of the document destruction, a lot of factors in the investigation pointed the other way.

"On the information we could see, we could not see a contravention of the legislation."

Tranz Rail has since been taken over by Toll Holdings of Australia.

Since the Court of Appeal judgment, the commission has been careful, when applying for warrants, to establish the necessary grounds.

Warrants executed against Carter Holt Harvey saw mills have not been challenged by the company in the courts.