Illegal exports a risk to NZ’s name, court told

Illegal milkpowder exporting could seriously damage the $14 billion food export industry, the "Powdergate" hearing was told yesterday.

Andrew McKenzie, executive director of the New Zealand Food Safety Authority, said trading partners expected breaches of export law to be dealt with. It was a cornerstone of the country's trading relationships that it had a legislative regime which was enforced.

McKenzie appeared in the Auckland District Court as a prosecution witness in the Serious Fraud Office (SFO) case against four former Kiwi Co-operative executives and three associates.

The SFO alleges that $45 million worth of milk powder was exported illegally between 1997 and 2001.

At that time - before the merger which created Fonterra - all exports were supposed to be handled by the Dairy Board.

Explaining why the alleged offending had serious implications, McKenzie said his organisation ensured that $14 billion worth of exports were accepted in foreign markets.

In the worst-case scenario, those markets would ban goods if they lost confidence in New Zealand's quality control system.

McKenzie said the authority, which reports to the Ministry of Agriculture and Forestry, had rigorous processes for ensuring all exports met approved standards. That involved testing and visits to production factories.

Companies found to be flouting the rules faced loss of certification and possible prosecution.

McKenzie said he was made aware of the "Powdergate" allegations by the board six weeks prior to it being wound up in 2001.

At that point, a MAF and food safety authority investigation began and it became clear that the practice of illegal exporting was more widespread than first thought.

MAF referred the case to the SFO, which rejected it because of a lack of evidence.

But MAF continued with the case, finding more evidence, thus prompting the SFO to take it on.

Under cross-examination, McKenzie was asked why MAF had persisted with its inquiry after the initial SFO rejection.

"It was the kind of case where you couldn't back out because of the implications to our trade," he said.

Defence lawyers probed McKenzie on the extent to which Trade and Agriculture Minister Jim Sutton became involved in driving the "Powdergate" investigation.

McKenzie said the minister might have been sent a brief about the case, but he did not become directly involved.

Seven facing charges

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 will finish on Friday.