Merepeka Raukawa-Tait: Mainzeal - important questions needed to be asked

Mainzeal was one of New Zealand's biggest construction firms. Photo/File.

At my first MBA class years ago Professor George Hines told the class that we didn't have to know all the answers but we had to know when to ask questions.

And to keep asking if necessary. The right questions should provide the answers for us to make the best-informed business decisions.

He also stressed the clear demarcation between management and governance.

Management is tasked with the operational heavy lifting but it is the board that has ultimate responsibility for the actions a company takes.

I've been following Mainzeal's sorry tale. A downward slide over the years that finally led to the business being put into liquidation early in 2013.

How did it manage to go from being a successful business, the third largest building company in New Zealand behind Fletcher and Hawkins, to insolvency?

And have the cheek to trade for several years while technically insolvent.

When you extract $42m from a business it's bound to come back and bite you on the bum. No business can afford to let loans totalling this amount remain outstanding.

The directors should have insisted that all loans to parent company Richina Pacific be repaid. Asked the damn questions and demanded answers.

The recent decision by Justice Francis Cooke in a 178-page ruling in the case against Mainzeal's directors laid out the chronology of events that finally rendered the company washed up.

The findings: money withheld, a lame business, leaky buildings, broken promises, false hopes and all-around corporate ineptitude. The result is a $36m ruling for reckless trading against four of the five directors.

Alarm bells should have been ringing and questions asked by the four directors five years ago, and they should have kept demanding answers, starting with "when are the loans to be repaid"?

They should have watched one or two of Judge Judy's TV programmes - the American Judge who tells those appearing in her court to "get it in writing".

She is adamant all financial deals, no matter the amount of dollars involved, must have a written contract. Something it appears the directors of Mainzeal never insisted on.

Justice Cooke noted there was little if any paperwork pertaining to the loans made to Richina Pacific. You have to ask how this could happen.

What advice did the accountants, lawyers and banks give to Mainzeal?

The subcontractors reading the Judge's decision must be very angry. They provided goods and services for a company they had every right to trust.

Collectively they are out of pocket by millions of dollars. They would not have been aware anything was wrong with the decisions being made in the boardroom. Decisions that were exposing them to risk, that would ultimately affect their livelihoods.

You can imagine how Mainzeal's collapse has affected them. Small and medium-size businesses who probably had everything on the line subcontracting to Mainzeal. The bank loans and overdrafts. Family houses mortgaged to ensure they could carry on working and paying their workers.

There will be marriages and relationships in tatters because of the extreme financial pressure families are under. And you can bet health problems too as owners struggled to keep their businesses afloat hoping things would come right with Mainzeal in the long run.

Mainzeal's collapse has far-reaching consequences. It extends into the homes and lives of ordinary New Zealanders. It also tells us something about boards that run big businesses.

I have no sympathy for a board that failed to embrace reality and deal with it. Hard working families are suffering as a result. Questions should have been asked and answers demanded.

Merepeka Raukawa-Tait is a Rotorua District councillor, Lakes District Health Board member and chairs the North Island Whanau Ora Commissioning Agency. She writes, speaks and broadcasts to thwart political correctness