Fonterra closes firms at centre of scandal

By PHILIPPA STEVENSON

Fonterra has axed the two Australian subsidiaries at the centre of the $50 million Powdergate illegal exporting scandal.

In the company's most significant move yet on the scandal, deputy chief executive Chris Moller said yesterday that Cottee Dairy Products and the firm that took over its trading operations this year, Australasian Dairy Ingredients, would close.

Mr Moller said the closure was part of a rationalisation process following Fonterra's formation.

"We will continue to eliminate duplicated cost structures and inefficiencies as we move to create a unified organisation following the Fonterra merger."

He did not mention the illegal exporting saga, which occurred under the companies' previous owner, Kiwi Dairies.

It has led to investigations on both sides of the Tasman by the company and regulatory authorities.

Earlier, a senior Australian-based executive, Ross Cottee, was sacked and two New Zealand managers, Paul Marra and Malcolm McCowan, suspended pending the outcome of the inquiries. All three were directors of Cottee Dairy Products, and Mr Marra and Mr Cottee's wife, Sandy Cottee, were directors of Australasian Dairy Ingredients (ADI).

The company developed and marketed health and nutrition products.

Cottee Dairy Products was registered in 1997, but a company bearing a similar name has existed since 1911. It has eight staff.

ADI was registered in 1999 and operated from the same premises as Cottee, with Sandy Cottee as chief executive, company secretary and one of two directors.

Mr Moller was unavailable for comment but spokeswoman Cassandra Orange said Cottee and ADI had been placed in voluntary liquidation and their business would continue within Fonterra's global ingredients product division NZMP, and Australian joint-venture partner Bonlac.

The decision to rationalise the ingredients business had nothing to do with the Powdergate investigations, she said.

A spokesman for liquidator PricewaterhouseCoopers said a creditors' meeting would be held on Tuesday.

Meanwhile, investigations are continuing into the illegal export of milk products worth at least $50 million by a web of companies with links to Kiwi.

A Fonterra board subcommittee of chairman John Roadley, deputy chairman Greg Gent and directors Graeme Hawkins, Henry Van Der Heyden, John Hood and Mike Smith is expected to hear the latest developments from its investigators today.

The in-house inquiry is being conducted by accountancy firms KPMG and Deloitte Touche Tohmatsu and former CIB detective John Hughes.

The Ministry of Agriculture and Forestry is also expected to give an update on its investigation today.

Feature: Powdergate