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Home / The Country

Fonterra caught in claims of export breach

21 Sep, 2001 08:40 AM3 mins to read

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By PHILIPPA STEVENSON agricultural editor

Just days from the final acts creating the monopolistic Fonterra dairy co-op, one of its constituent companies is under investigation for lawbreaking.

Kiwi Dairies is alleged to have breached export regulations by selling about 5000 tonnes of dairy products which were marketed overseas without a licence from the sole exporter, the Dairy Board.

The alleged offences have come to light within days of completion of a merger between Kiwi, New Zealand Dairy Group and the board to form the country's largest company.

A legal breach is potentially embarrassing for Fonterra chief executive Craig Norgate, formerly head of Kiwi, and for the mega co-op, which has styled itself New Zealand's flagship company and "a national champion for innovation, efficiency and success".

Arguably, the co-op's protestations of corporate integrity helped the merger to avoid Commerce Commission scrutiny.

Kiwi chairman Greg Gent, who is Fonterra's deputy chairman, said he and Mr Norgate were told of the suspect export product by retiring Dairy Board chief executive Warren Larsen.

A joint board and Kiwi committee was overseeing an investigation which was now in the hands of accountancy firm KPMG, auditor to both Kiwi and the board.

"We both want the damn thing sorted out quickly," said Mr Gent.

He said Kiwi had done its own internal investigation before bringing in KPMG.

Several different dairy products originating from Kiwi and possibly other sources were found in an unidentified overseas country.

Although the volume of product was small, said Mr Gent, any law- breaking was serious and he would be particularly concerned to find Kiwi staff involved.

The Dairy Board would deal with breaches of its regulations.

"It appears the product has been sold to a company in New Zealand that has then on-sold it offshore," he said.

"So Kiwi has not sold it directly offshore."

The investigation would establish whether Kiwi staff knew the products were destined for export.

The timing of the potential breach, just before final formation of Fonterra, was not added cause for concern.

"I don't think timing is ever good on any of these things," Mr Gent said.

Fines for breaching the Dairy Board Act were a modest few thousand dollars.

"But it is the moral issue here that probably concerns me more," he said. "That is what I want to get to the bottom of."

No value has been given for the product but any deal not sanctioned by the board is likely to have been done for higher returns rather because of an inability to get an export licence.

Mr Gent said he expected the KPMG investigation, under way for about a fortnight, to be completed within two weeks.

Dairy Board and Fonterra chairman John Roadley said the board's single-seller status would be revoked next week by the Governor-General's signature on industry restructuring legislation passed in Parliament this week.

But the board had a duty to investigate any possible breaches of its act before then.

He declined to give details of the suspect deal but promised an investigation of "appropriate rigour and impartiality".

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