Early Powdergate warning sign overlooked

Craig Norgate delivered his evidence in rapid-fire style yesterday. Picture / Richard Robinson

Craig Norgate had no knowledge of alleged illegal milk powder exporting by his staff until falsely labelled bags were discovered in Italy in 2001, he told a court yesterday.

But the former Fonterra and Kiwi Dairies chief executive said yesterday he kicked himself after coming close to uncovering the scandal in mid-2000.

Looking relaxed in the Auckland District Court at a depositions hearing, Norgate delivered his "Powdergate" evidence at a speed that probably gave the court stenographer nightmares.

He told how - during his time as Kiwi chief executive - he was asked by accountants about the overdue debt of a company called SPD.

The Serious Fraud Office alleges that SPD was the intermediary used to illegally transfer milk powder from Kiwi Milk Products (KMP) to Australian exporters such as Cottee Dairy Products (CDP).

In May 2000, Norgate was asked by an accountant whether SPD was related to Kiwi. "I told him unequivocally that it was not," he said. "It was a 20-second conversation that we kicked each other for later.

"If I had been asked that a different way or I had reason to follow up the question we would have got to the bottom [of the issue] then."

Norgate said he asked Paul Marra questions about SPD's outstanding debt to Kiwi on several occasions during 2000 and early 2001.

Marra is the most senior Kiwi executive charged with "Powdergate" offences. He reported directly to Norgate.

Norgate said he was never totally comfortable with the answers he got but was not prepared to accuse Marra without more concrete evidence that something was wrong.

At the time, he assumed that the SPD debt was just a housekeeping matter that Marra was unable to resolve because he was side-tracked by other projects.

In the context of Marra's overall responsibilities, the issue was not particularly significant.

In May 2001, the Dairy Board presented Norgate with evidence that he could not ignore.

It had discovered Kiwi dairy product in Italy that had been labelled as originating from Australia.

"My investigation did not take long and what [the board] gave to me as evidence was pretty hard to hide," Norgate said.

He recalled a confrontational meeting with Marra when he approached him with evidence.

Marra tried to tell him that the Dairy Board "had it all wrong".

"However, I had sufficient evidence by then to get him to tell me what had happened."

At that point, an internal Kiwi investigation was initiated.

Norgate confirmed earlier reports that he had allowed Marra and fellow defendant Malcolm McCowan to draft the terms of the inquiry.

At that stage, he did not believe the pair were directly involved and there was commercial sensitivities which meant details of KMP's business could not be disclosed to the Dairy Board.

Marra had tried to cast the net wider and had explained that the Australian exporters were buying powder from dairy companies other than just Kiwi. "But I was only interested in what our company had done," Norgate said. "I did not want to be diverted by other issues."

The inquiry resulted in Marra and McCowan receiving formal written warnings.

Norgate said this was a harsh disciplinary measure given their seniority. At that point, he believed the issue had been resolved.

POWDERGATE


The defendants
* Paul Henry Marra
* Malcolm Alexander McCowan
* Terence David Walter
* William Ross Cottee
* William Geoffrey Winchester
* Stephen Ross Wackrow
* Sean Robert Miller

The allegation
* $45 million of premium milk powder was illegally exported by Kiwi Co-operative Dairies' employees and subcontractors on 210 occasions between January 1997 and October 2001.
* The hearing finishes today .