Former Nelson Mayor Aldo Miccio admits using Kela funds for own firms, claims accounting error

Former Nelson Mayor Aldo Miccio claims funds were paid from an Australian company he headed for the expenses of his New Zealand start-up interests through an "accounting error".

Embattled businessman and former Mayor of Nelson, Aldo Miccio, has acknowledged that he used the accounts of Australian company Kela Charms, where he was chief executive and a company director from 2017 through 2019, to pay more than A$32,000 ($34,000) worth of bills racked up by two other companies he co-owned.

He told the Herald the payments were made in error and the sums were repaid.

At the time, Miccio was a director of Kela and chief executive and was also building two New Zealand companies: seafood processor New Zealand Coastal Seafoods (NZCS, also known as Kiwi Ling) and cannabis company Medical Kiwi (later known as Aether Pacific Pharmaceuticals).

Miccio said that the payments were the result of “accounting errors”, due to all three companies “sharing the same bookkeeper”: Janice Watson.

Watson declined to speak in detail about the Kela accounts, but she told the Herald: “I was not the bookkeeper for Medical Kiwi nor for NZ Coastal Seafoods. I did a couple of payments in Medical Kiwi to pay the directors’ fees.”

Kela Charms sold hair jewellery and was the trading arm of Kela Holdings. The companies became insolvent either in or before the second half of 2019, according to the external administrators who were called in. The entities reached a plan of arrangement with creditors, who lost over $3 million, and the business continues to trade.

In an interview with the Herald, Kela co-founder and director Kelly Litterick, based in Western Australia, claimed that she and the company’s other board members (with the exception of Miccio) had no knowledge of the charges made to Kela for the expenses of Medical Kiwi and NZCS.

Litterick claimed the board only learned of the transactions from the company bookkeeper after Miccio resigned in mid-December 2019.

Former Kela board member William Harris echoed Litterick’s claims; board member Ian Burton declined to comment on the matter.

Miccio has issued the Herald and Kela’s board with cease and desist notices and has reserved his rights to seek damages for defamation.

Litterick provided the Herald with a Kela document titled “Account Transactions [Accrual]”; the record shows over 130 payments made by Kela for Miccio’s other companies over a 16-month period.

The first of the payments was made in August 2018 and the last was made in November 2019. In that month alone, Kela paid for 14 transactions related to the other companies. The spending included flights, car rental, Ubers and taxis and bar and restaurant tabs.

Invoices supplied by Miccio show that the debts were repaid between September 2019 and August 2020.

Over 2018 and 2019, Kela was seriously cash-strapped. The company extended shareholder and investor loan repayment dates through the period, telling investors it could not meet interest and repayment deadlines.

Miccio resigned and left the company on December 15, 2019; four weeks later, the remaining directors put the company into voluntary administration.

Miccio told the Herald he disagreed with the decision to put Kela into administration.

Administrator BDS Recovery reported in February 2020 that the company may have been insolvent before September 2019. Among the “reasons for failure”, it noted the company: had “inadequate cashflow to meet increased advertising costs and administration expenses”; significant trading losses were “unable to be continued to be met by shareholder capital injections and/or loans”; and a “dispute between management/officers of the company”.

A number of Kela shareholders and lenders told the Herald they were angry that the company’s scant reserves had been used to advance funds to Miccio’s other business interests.

Cannabis company Medical Kiwi was one of two Miccio-founded New Zealand firms to benefit from "accounting errors" at Australian firm Kela, when Miccio was chief executive and a board member.

Miccio told the Herald that all financial matters were “fully disclosed in board meetings with comprehensive monthly accounts prepared by the independent CPA accountant, Mr Bruce Whall. These accounts included relevant journal entries, proving the board was fully informed”.

Miccio claimed that the “appointed administrators reached the same conclusion”.

He also claimed that if other directors were unaware of the transactions it implied negligence and dereliction of duties on their part.

Contacted by the Herald, Whall declined to confirm that his role at Kela included the preparation of monthly accounts for review by the board.

He told the Herald he could offer “no comment, as all of the matters are private and confidential”.

Kela documents show that Whall was involved in helping to raise funds from investors for the company. He also held senior roles in the other Miccio-related companies.

In 2020, Miccio was chairman of Medical Kiwi and Whall was CFO. At the time, Medical Kiwi made incorrect or misleading statements to investors in disclosures to investors. It was ultimately found in breach of the Financial Markets Conduct Act 2013 and fined $250,000 by the Financial Markets Authority. The company was later denied a listing by the NZX.

Whall and Miccio are current directors of Medical Kiwi with suspended duties; the company collapsed last year and is in liquidation.

Whall was also a contract CFO at NZCS for just under four months in 2022, the company’s annual reports show.

Administrator’s report

The Kela administrator’s report noted that the “management and control of Kela Charms was the responsibility of Mr Cataldo Miccio, the former director of the companies, until he resigned on 15 December, at which point the remaining three directors took control of the business”.

The report noted directors’ allegations that funds could be recovered from Miccio (described as the companies’ former director), but it made no determination on the matter.

Company directors, the report said: “provided us with a spreadsheet detailing approximately 7,000 transactions for the period from 1 March 2017 to 31 December 2019 totalling A$332,300, of which approximately 3,000 they have categorised as unaccounted for and/or personal that were entered into by the companies’ former director. The directors have claimed that these payments are recoverable from the former director ... ”

Miccio told the Herald that any personal charges made to Kela were “reimbursed immediately and disclosed to the independent CPA accountant. And dealt with accordingly through monthly preparation of financial statements in the board meetings. They would go to a suspense account and would be reimbursed from there”.

Litterick and Harris allege that Miccio’s personal spending was not disclosed to the board. Litterick said she was limited in what she could say because of legal risk.

In addition, Miccio said he deposited A$49,990 into Kela’s bank account in December 2019, several days before he resigned (he provided copies of bank transfers to the Herald).

He claimed that the purpose of the deposits was to “provide critical financial support to the company during a challenging time”. Miccio also claimed that the funds “fully covered any remaining balance in the expense account, thereby satisfying their [the administrator’s] inquiry”.

The administrator did not form a view on the spending allegations. The report said that substantial further investigation would be required for the claims to be better understood and that such an investigation would need to be undertaken by a liquidator.

It also noted that sufficient funds for an investigation were unlikely to be available in liquidation without additional funds from creditors or a litigation funder.

Kela’s creditors ultimately agreed to a Deed of Company Arrangement (DOCA), on the administrator’s recommendation. The business operates today as Australia-based Kela Holdings and US-based Kela Holdings USA.

Trouble at the other Miccio-related companies

Medical Kiwi, where Miccio is executive chairman, is in liquidation. In a first report, liquidator Waterstone reported that the company has debts of over $8.7m. Asset sales are under way, but total asset value is thought unlikely to reach more than several hundred thousand dollars.

Miccio said the company entered administration “primarily due to two loans being called in early, a matter unrelated to governance concerns”.

A final liquidator’s report is expected later this year.

NZCS’s New Zealand operations (NZCS Operations Ltd) were put into liquidation in April 2024, but according to the liquidator InSolve’s report, it ceased operating in “late 2023″. Miccio co-founded the company and New Zealand Companies Office records state that he remained a director until December 8, 2023.

Miccio provided the Herald with a slightly different timeline. He said he resigned in October 2023 from both NZCS (the parent company for which he was chairman) and the New Zealand subsidiary.

The first liquidator’s report said the New Zealand subsidiary’s liabilities eclipsed the value of its assets by nearly $9m. A final liquidator’s report has not yet been released.

”I oversaw the development of the NZCS (ASX) [the New Zealand entity’s parent company] and subsidiary company’s restructuring strategy, which involved the intentional divestment of an unprofitable 100% parent owned subsidiary ‘NZCS (NZ)‘, which occurred in 2024 after my resignation ... NZCS continues to trade, operate and is listed on the ASX, of which I am a shareholder and founder,” Miccio told the Herald.

However, there are signs that the NZCS parent company is also struggling: it’s currently listed as a “long-term suspended entity” by the ASX because of failures to publish disclosure documents which were due for release in October 2024. Consequently, the company’s shares cannot trade on the exchange.

In addition, the company was formally censured by the ASX in February for disclosure failures that date to May 2023. At the time, the company told the market it had a material $2.5m purchase order for ling fish with Chinese distributor Gold Saint International Resources Group.

The company failed to disclose to investors that NZCS managing director Peter Chai was a related party in the deal – he was also a director and 10% shareholder of Gold Saint.

In addition, NZCS failed to disclose that its largest shareholder, Guoyu Li, was also a director and shareholder of Gold Saint.

Ultimately, documents released by the ASX show, NZCS made just one $154,000 delivery of ling fish to Gold Saint, which the recipient advised as “infested with parasites”.