Gas bosses guilty of fraud

The Duthie Whyte building which houses the Serious Fraud Office situated on the corner of Mayoral Drive and Wakefield street in Central Auckland. Photo / NZ Herald

Two former directors of a Wellington gas retail company have been found guilty of fraud charges totalling more than $17 million worth of offending.

The verdict was given to E-Gas' former managing director Ronald Rosenberg and former general manager Sydney Lio Hunt by Judge Bruce Davidson at the Wellington District Court today.

Each was charged by the Serious Fraud Office (SFO) with 41 counts relating to the dishonest use of documents.

The judge-alone trial, which began in mid-February, lasted about four weeks.

Both men stood silently in the dock while Judge Davidson read out the guilty verdicts.

At today's hearing the public gallery was packed with supporters of the two defendants.

The SFO laid the charges in July 2012 after an investigation alleged that between May 4, 2005 and October 5, 2008 the two men deliberately under-reported the quantity of gas supplied to its retail customers.

E-Gas under-reported its gas consumption to the tune of about $8.74 million, and penalties were avoided to the figure of about $8.67m.

In his written decision, Judge Davidson said over the three and a half year period, the company under-reported its gas use by nearly 950,000 gigajoules - about 12 per cent less than it should have reported.

That resulted in "substantial financial benefits for E-Gas", which must have improved the company's solvency, he said.

The Crown's case was that both the accused deliberately under-reported the monthly gas allocation and avoided substantial charges and penalties.

Crown lawyer John Upton QC said the amount of money avoided was about $17.1m.

However, the defence said this figure was between $4.5m and $9.7m.

As well as avoiding insolvency, Mr Upton said the extra cash available to the company allowed Hunt and Rosenberg to continue to draw a salary and other entitlements.

The under-reporting remained largely undetected until gas industry audits from 2009 onwards, Mr Upton said.

Both Rosenberg and Hunt denied they were dishonest, and each genuinely believed the monthly allocation could be under-reported.

Rosenberg's lawyer Richard Laurenson said his client said it was a "deliberate management strategy", which started in 2005 in consultation with Hunt and others.

Hunt's lawyer Kevin Preston said his client denied being part of a deliberate strategy and it was much later that he was aware of the level of under-reporting, but was assured it was justified.

Judge Davidson ordered pre-sentence and reparation reports for the pair.

He told them that while the pre-sentence report covered the feasibility of home detention, they were to be "under no illusion" that a prison term was possible.

The charges carry a maximum sentence of seven years' imprisonment.

Rosenberg and Hunt were remanded on bail until sentencing next month.