Callaghan seeks repayment of Trends grant

David Johnson, chairman and publisher of Trends Publishing International.

Callaghan Innovation has terminated a grant awarded to Trends Publishing International after an investigation it referred to the Serious Fraud Office and is seeking repayment of $382,911.97, a demand the company chairman calls "fundamentally unjust."

Callaghan suspended the research and development growth grant in December after an audit of Trends' funding claims. It has now followed up by terminating the grant, saying an independent review showed Trends "breached the terms of its funding agreement and was unable to demonstrate that amounts claimed against the grant were for eligible research and development."

"It is important the public is confident government R&D funding is being managed in a responsible and robust way and that businesses know that the system designed to help them innovate is being run transparently and fairly," Callaghan chief executive Mary Quin said in a statement.

Trends chairman and publisher David Johnson told BusinessDesk the move was "fundamentally unjust" because his company had "complied with the contract 100 per cent."

"We complied with the contract but were unable to comply with the correct reporting procedures. We still don't know what those procedures are to this day," he said. He said he was surprised by the media statement, which was released after a meeting between Callaghan and Trends today, at which the funding body presented its final report on its investigation to the company.

"I need to seek some good advice," Johnson said, when asked whether he would accept the demand for repayment of the grant. The announcement in December that Callaghan had referred its investigation to the SFO had "completely impugned our reputation."

Growth grants provide 20 per cent public co-funding for qualifying firms' eligible R&D expenditure. The qualifying criteria includes firms having to have spent at least $300,000 on research and development in each of the last two years and spent at least 1.5 per cent of their revenue on R&D in NZ over the last two years. The grant terms include clawback provisions.

Trends is majority owned by Johnson, a former EY Entrepreneur of the Year who has also been an international judge in the annual competition. The firm's website says it has 60 publications in the home interest and commercial design area that are published in New Zealand, Australia, US, south east Asia, the Arabian Gulf, China and India. Last year the company launched a digital platform connecting homeowners, professionals and suppliers and in October this year it launched a MyTrends project on digital lead generation.

Callaghan's 2014 financial statements show it had total income of $203 million in the 12 months ended June 30, 2014, of which $186 million was revenue from the government including grants. It also generated $14.5 million of commercial revenue.

(BusinessDesk receives funding from Callaghan Innovation to write about the commercialisation of innovation.)