The owner of a failed courier firm received more than $70,000 under the Government's wage subsidy scheme but is now being blamed for spending nearly all of it on general bills, leaving staff out of pocket.
Receiver Damien Grant has highlighted the case as he launches an attack on the wage subsidy scheme as a whole, which he thinks has seen a mix of money wasted on good companies, and funds wasted to temporarily prop up a walking-dead legion of "zombie firms".
Kiwi Transport Services, owned by Nitin Nand, employed 10 staff and operated as a contractor to NZ Post's CourierPost and Pace Couriers and was put in receivership on April 17.
Grant, principal at Waterstone Insolvency, told the Herald his company was reporting Nand to authorities. Nand denied any wrongdoing.
Finance Minister Grant Robertson has described the rapidly rolled-out, $10 billion-plus wage-subsidy scheme as a "high trust" programme. Some 800 complaints were paid during the first nine days of payments. By April 24, more than $17 million had been repaid.
It was followed up on May 1 by government loans of up to $100,000 for firms of up to 50 staff, which are interest-free if paid back within a year.
Grant, who doubles as a political pundit, is a fierce critic of the two schemes.
"Very few companies that are going to fail will be saved as a result of the wage subsidy," he told the Herald.
"Almost all of the $10b has gone to firms, like mine, that qualify for the cash but were never going to go bust, or firms that are doomed.
"The wage subsidy has created a number of zombie firms that will cling on for a month or two before failing.
'This, along with the new interest-free loan scheme, will prop up failing companies for a month or two, but it's nothing other than very expensive palliative care. Worse, the costly medicine is being handed out to the vast majority of healthy firms who will take the cash even though they didn't need it."
Grant said his insolvency business was seeing a spike in inquiries but not formal appointments.
"People are waiting to see what happens. The IRD appears to have stopped enforcing tax arrears, the courts are closed ... , and banks and landlords are taking a more liberal approach to arrears. Other than paying wages, most firms who are not trading have gone into hibernation."
Kiwi Transport Services, of which Nand is the sole director and shareholder, was put into receivership on April 17 over a $50,000 debt to Ignite Finance.
Grant and Michael Turner, of Waterstone Insolvency, were appointed receivers.
In an April 30 letter to Kiwi Transport staff, sighted by the Herald, Waterstone said Kiwi Transport received $70,291 on April 14 as part of the Government's coronavirus subsidy scheme.
"Instead of using the Covid-19 subsidy package for the intended use, the director Nitin Nand used this money for other purposes such as general bills of Kiwi Transport Services. After three days of spending, there was only $2951.90 left of the Covid-19 money," the letter said.
Nand told the Herald he had $67,762.68 in a company account on April 17.
He had intended to pay staff on April 20, but had been headed off by the receivership. He had been waiting for a payment from Courier Post so he could pay staff in full rather than the minimum 80 per cent rate required under the subsidy scheme.
Waterstone's Grant said the $67,762.68 in funds came from a $20,000 ASB overdraft, plus a $44,642.42 payment from CourierPost which was already earmarked for Ignite Finance.
"The payment from CourierPost had arrived when we'd been appointed," Grant said. "This debt had been factored, which means he had received cash from my client on the understanding that he would pay it to my client [Ignite Finance] once he received it. He didn't. Which is why he went into receivership."
The Waterstone letter to Kiwi Transport staff said, "Since this money [the $44,642.42] has come from NZ Post and not the Covid-19 wage subsidy, the money is owed to other debts of the company in priority over employee wages."
A "small amount of money" left in the company would be distributed to staff.
The Waterstone letter added, "Nitin Nand has used the subsidy for other purposes rather than 'meeting your named employees' ordinary wages and salary in relation to this subsidy'. We will be reporting him to the relevant authorities."
Nand told the Herald yesterday that he had been in contact with fraud officers at the Ministry of Social Development, and shared paperwork with them that would, in his view, clear his company's name and prove Waterstone's version of events incorrect. He offered to share them with the Herald as well but did not immediately do so.
Nand said: "You won't find any Ferrari in my driveway. I work 24/7."
The Kiwi Transport owner blamed the "cut-throat" nature of the courier business for his company's financial problems.
The company has operated since 2014 and has also at times sold car audio equipment and offered panel beating services. Nand said the stink bug scare had put an end to the latter.
Waterstone's Grant said he saw no prospect of a trade sale.