An Auckland construction industry business that was the target of the nation’s first-ever criminal prosecution for “cartel conduct” has pleaded guilty.
The company, which continues to have name suppression despite the guilty plea, is now set for sentencing in the High Court at Auckland next month.
In exchange for its admission of guilt one month ahead of its scheduled trial, prosecutors agreed today to withdraw identical charges against the company’s 56-year-old director. He also can’t yet be named.
Today’s arraignment comes eight months after co-defendant MaxBuild Limited was ordered to pay a $500,000 fine and its director, Munesh “Max” Kumar, was sentenced to community detention.
Bid rigging carries a sentence of up to seven years’ imprisonment and a fine of up to $500,000 for human defendants. Companies can be liable for fines of up to $10 million.
According to court documents, Kumar colluded with the other business to tailor their supposedly competitive bids on two NZ Transport Agency Waka Kotahi endeavours – the Northern Corridor Improvement project and the Middlemore Railway Bridge repair project – from January to May 2022.
Kumar’s company, which employed 29 and had annual revenue of $5.1m at the time of the offending, had built a strong reputation over the years in the narrow niche of bridge maintenance and concrete repairs.
Kumar met with the director of the other company and asked him to bid 5-10% higher on the Northern Corridor project so that MaxBuild would get the contract, court documents state. To do so, he gave the other company MaxBuild documents showing what they intended to bid.
After two bridge projects were awarded to MaxBuild – resulting in a profit of $161,775 – the two met again and agreed to continue the scheme, Kumar admitted.
It all unravelled, however, after an employee for the suppressed company accidentally attached a document outlining the illegal scheme in an email to the group in charge of selecting bids.
“Shortly after sending the document with the attachments showing the defendants’ collusive pricing, [he] attempted to recall it but was unsuccessful,” state the summary of facts that Kumar agreed to last year.
The employee was never charged.
Kumar later made a full confession, stating that he acted out of character due to desperation caused by the 2020 and 2021 Covid-19 lockdowns that temporarily crippled the construction industry.
“I am the one that instigated this, not [the other company director],” Kumar insisted in an interview with the Commerce Commission, which prosecuted the case.
“I asked him for a favour, right, and he legitimately tried to help me … There’s no kickbacks, there’s no favours. There’s none of it.”
Kumar recalled calling the other director, whom he knew from past projects, and saying: “I spent a lot of time on this project and I’ve put a lot of energy and effort into it and I would like to win this tender and I know how your pricing usually works – you’re always a little bit more expensive than I am anyway. So do you think you could help me with this?”
He continued in the Commerce Commission interview: “I know that’s stupid, but I did it. And [he] wanted to help, I believe, and he said, ‘Okay, come and see me’.”
In a statement to the Herald today, the Commerce Commission said Kumar’s prior conviction and his insistence that he was the only direct beneficiary of the conduct contributed to the decision to withdraw the charge against the other individual.
“Most relevantly, the Commission decided it was not in the public interest to continue to pursue the individual defendant considering his ill health and the guilty plea of his company, in circumstances where the company’s conduct involved not only this individual but at least one other individual,” a spokesperson said.
While instances of cartel conduct are not new to New Zealand, this case marks the first time it has been prosecuted as a crime punishable by prison. Prior to a 2021 law change, such matters were dealt with via financial penalties in civil court.
Both the company and its director are expected to apply for permanent name suppression at the sentencing hearing.
Craig Kapitan is an Auckland-based journalist covering courts and justice. He joined the Herald in 2021 and has reported on courts since 2002 in three newsrooms in the US and New Zealand.
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