Callaghan Innovation fund queried

Mary Quin says entrepreneurs can have more than one failure. Photo / Dean Purcell

Grants criteria questioned by Cunliffe

Callaghan Innovation, the government-backed innovation hub, faced questions this week from opposition MPs about why it had funded companies that subsequently failed and gave grants to unprofitable subsidiaries of wealthy overseas firms, or local firms that moved overseas.

Chairwoman Sue Suckling, chief executive Mary Quin and chief financial officer Richard Perry were appearing before Parliament's education and science select committee for Callaghan's 2013/14 financial review, covering its first full year.

They were questioned most extensively by Labour's David Cunliffe about criteria for making grants including the $332,966 paid over to Trends Publishing International before the grant was halted in December, following an audit of the magazine publisher's funding claims that led to a referral to the Serious Fraud Office. Trends chairman David Johnson in December castigated Callaghan for how it had handled the situation. Johnson "absolutely" denied Callaghan's allegations and said Trends met the criteria for the grant.

Cunliffe also questioned the $287,500 in grants to eHome NZ, the offsite home builder that went into receivership owing $17.5 million. He asked why Chatham Rock Phosphate got funding for technology to mine rock phosphate before being granted a consent, which was subsequently declined.

He also asked what was the status of grants to biotech start-up BioDiscovery since its decision to relocate its global R&D centre to California, and why a grant was made to the unprofitable local unit of Bayer, the Germany conglomerate "making huge profits".

"I support the concept of Callaghan and I want it to work," Cunliffe said. "But the quality of some of its grant making, lack of clarity on some of its criteria and policy failure that grants are automatic if applications meet the criteria have led to some bizarre results."

Suckling said that applications "are carefully scrutinised".

"There will be failures."

Chief financial officer Perry said of those grants singled out for criticism, not all the funds had been paid out. Clawback provisions gave Callaghan scope to recover grants. In the case of BioDiscovery, it had elected not to seek its funding. No money had been paid out to Chatham Rock. In its 2014 annual report it cites grants of almost $270 million made last year to 541 businesses.

Mary Quin said: "With entrepreneurs, you can have people who've had one, two, three or four failures. Looking at failure as a negative can be a mistake."

• BusinessDesk receives funding from Callaghan to assist in the coverage of the commercialisation of innovation.