Blood and oil: Tragedy stains African move

Olivado investor Alan Mountfort says the bullet wound in his back from the attack on him in Nairobi left more than physical scars. Photo / Sarah Ivey

Driving through Nairobi traffic with blood pouring from a gunshot wound in his back is not how Alan Mountfort ever saw it playing out when he answered an ad to invest in an olive grove.

It was February 2008, and the Auckland chemical engineer was in Kenya working for Olivado, the avocado oil venture he and a clutch of other New Zealand investors had built up over the previous eight years.

Now in receivership with debts of $5 million, Olivado is at the centre of a bitter dispute between its founder and main financier. And there has literally been blood on the floor.

Back in 2000, with thoughts of making specialty olive oil, Chris Nathan, a chef by trade, advertised in the Herald for like-minded folk to invest in his Kerikeri operation.

But olive-oil ventures were 10-a-penny and the group looked for a point of difference. They were soon developing award-winning avocado-oil products.

The company grew to the point of needing additional capital.

Enter Switzerland-based expatriate Gary Hannam - a movie and television producer known for titles such as The World's Fastest Indian - as Olivado's major backer. Over time Hannam became heavily involved in the business.

The New Zealand avocado crop can be unreliable and Olivado became constrained by supply. After an unsuccessful expansion to Queensland Olivado ended up in Kenya, where the climate allows for a much more consistent avocado harvest.

Kenya is a long way from Kerikeri. By any measure expansion to an unfamiliar Third World country that takes two days to get to would seem a bold move for a Kiwi startup.

For this venture, tragedy struck.

Chris Nathan's father, Julian, was brutally murdered when intruders apparently looking for cash entered the Nairobi apartment he was staying in.

Guards at the apartment complex had been paid off. Two other Olivado staffers were gagged and threatened, and Julian was beaten to death. The offenders were never caught.

The crime made major headlines, but behind the scenes Olivado was already having problems.

Five months after Nathan's murder Alan Mountfort offered to return to Kenya for the 2008 avocado season - other staff members refused to go back - and try to sort things out.

He had only been back in the country a week when he also became the victim of a violent attack.

In contrast to Nathan's death this incident never received publicity outside Kenya. Even other Olivado shareholders knew nothing about it for several weeks.

Late one Saturday afternoon Mountfort was giving a Kenyan friend a driving lesson at a local park.

Suddenly there was a man standing in the middle of the road, forcing the novice driver to slow down.

The man had a gun. As the car slowed two accomplices leapt from bushes.

"I've got a gun at my head now, through the side door," Mountfort says.

He grabbed the wheel and told his friend to hit the gas.

"I aimed for the guy in the middle of the road, because that's our only way out of here ... And there was a hail of bullets from all three of them."

One bullet cut a trench across Mountfort's back. The Kenyan friend was hit in the shoulder and thigh.

As soon as they could they changed seats. "I drove through the streets with a bullet in my back ... jamming myself against the seat to stop the bleeding."

Kenyan hospital staff treated the wounds and Mountfort put on a brave face. But post-traumatic stress set in.

Following his father's death, Chris Nathan had stepped away from the day-to-day running of Olivado and Gary Hannam had taken over as chief executive.

Mountfort says Hannam's handling of the latest incident was "bizarre".

There was pressure to remain in Kenya, he says. "I was saying, 'look, I need to come home', and he was saying 'oh no, just take a week off'." Mountfort returned to New Zealand anyway. He was unable to work for nine months and required intensive counselling.

For Mountfort, Nathan and many of the others, the events surrounding the shooting have become a litmus test for all that went wrong with Olivado. It happened as dissent over the running of the company was coming to a head.

"You think it would be time at a high management level to review ... why are we here [in Kenya], and how are we operating," Mountfort says.

But Hannam says of the shooting that Mountfort was "foolish".

In December last year, with no mention of the incident, he told the Herald that Kenya was a safe place to do business. He stands by those comments, saying Mountfort put himself in danger.

"I don't take that [the shooting] as being something that says Kenya's a very dangerous place," says Hannam.

Setting up in Kenya had always been controversial, with at least three Olivado shareholders disagreeing with the decision, Chris Nathan says.

It was driven by Hannam and he initially supported it.

But Nathan visited the factory in an industrial suburb of Nairobi the month before his father's death, and "nearly cried" at what he saw.

When he was shot Mountfort had been preparing a report on the suitability of the plant and whether the company should relocate.

His subsequent March 2008 report concluded that the plant was unsuitable for food-grade production.

The report said it was not connected to the Nairobi water supply or sewage system. Water had to be trucked in daily, with waste water from the factory going to an open sewer. The inground water tank was next to the open sewer.

By February last year Nathan says he put heavy criticisms of Hannam's management before board members. He says the Mountfort report was deliberately withheld from the board.

He says he has been sent recent photos and nothing has changed in Kenya.

Hannam says the claims of substandard conditions in Kenya are a fabrication.

"We have all the food standards approvals that are required. We are monitored through our Fair Trade and Organic certifications and have inspections at the factory to ensure it's okay."

Mountfort has not returned and Nathan has not been there since August 2007, Hannam says.

Nathan has now joined forces with rival avocado oil company AvoHealth and "one needs to look at the motivation of somebody who's now a competitor of Olivado", says Hannam.

Olivado made 110,000 litres of oil in Kenya last season compared with 40,000 in New Zealand.

Yet its bottles are labelled "Product of New Zealand", with "made from local and imported ingredients" on the back.

Olivado has just re-signed to supply the Woolworths, Foodtown and Countdown supermarkets. The "imported ingredients" covers the Kenyan component, Hannam says.

A spokesman for the supermarkets confirms they are now stocking Olivado avocado oil and spray, and macadamia nut oil.

It has been assured the avocado products are New Zealand-made and the macadamia comes from Australia. Since the Herald's inquiries the company has "requested verification from Olivado".

Meanwhile the Food Safety Authority confirms it is investigating a complaint about Olivado products.

In Kenya, locals with a small shareholding in the operation there have taken High Court action alleging false returns have been filed over directorships and shareholdings in the Kenyan company.

Hannam says he has no knowledge of this action.

Back in New Zealand, PFK Corporate Recovery & Insolvency is handling the receivership of Olivado Holdings.

It is the same firm doing the receivership of television production company Ninox, of which Hannam is also the major backer.

In February Ninox was placed in receivership by its lender as a means of sacking a dysfunctional board, the receivers said.

In July PFK blamed the Olivado receivership on "a breakdown in the relations between its primary lender ... and the company's shareholders".

A common theme, says Nathan. He alleges Hannam ran an orchestrated campaign to take over Olivado.

Auckland marketing consultant and fellow shareholder John Ellegard is more measured. There was fault on both sides, he says.

Like Alan Mountfort, Ellegard answered Chris Nathan's ad 10 years ago for investors. Those that joined forces all brought skills to the operation as well as funds, and Ellegard became marketing director.

"We all basically rolled up our sleeves and did everything, from developing new products to blind tastings, and even helping out in the factory."

They were a tight team. But the rot set in after Julian Nathan's death.

Hannam was already chairman and had put up most of the money for the expansions to Australia and Kenya.

When a devastated Chris Nathan took time off to mourn his father Hannam took over as CEO.

The directors were told to keep their noses out of the day-to-day operations, Ellegard says. Marketing decisions were taken out of his hands.

"Gary basically grabbed the reins, and literally from that time onwards the rest of us were kept in the dark as to everyday operations and a lot of decision-making.

"You had to basically almost become nasty to get any information."

He never saw Mountfort's report on the Kenyan factory, aside from a "sanitised" precis from Hannam.

By this time Nathan wanted to become more involved in the business again, but Hannam "wouldn't have a bar of it", Ellegard says. "That's when things really started to get very nasty between the pair of them."

The other shareholders tried to broker meetings. By this time Nathan was living in France and Hannam was in nearby Switzerland, but no meetings ever took place.

The shareholders could see there was no future if the two men could not work together. "But I do feel that for the last 2 years Gary has been working towards wresting the company away from the rest of the shareholders," Ellegard says.

Nathan points to moves such as Hannam appointing his partner's daughter, Sarah Nicholls, as general manager in Kerikeri, and his Swiss-based company Tanlay doing Olivado's European distribution.

Hannam says Tanlay had always done the European distribution. "To me this is like getting into the laundry issues of the company. From my point of view I'm interested in making Olivado a leading export company and getting on with the job."

He is owed $4.3 million, $1 million more than the receivers say the company is worth.

Olivado has not yet made a profit, he says. By 2002 sales had reached $750,000 but that had shrunk to $190,000 by 2006. Sales are now back around 2002 levels, he says.

"From Olivado New Zealand's point of view, the changes that we made in management two years ago have really begun to pay off."

He says he'd set out a plan to restore Olivado and he was prepared to put in time and effort, and more money.

But the other shareholders wanted interest payouts, while his investment firm wasn't receiving any. "I wasn't there to subsidise anybody else."

At a meeting of shareholders in November he gave the company three months to buy him out. That period was extended and when it hadn't happened by July, as the holder of the major security over the company he called in the receivers.

Nathan flatly rejects the claim about interest, saying in fact his trust decided in February 2008 not to demand the payments. Ellegard says he has asked for information from the receivers, and has been told he's not entitled to it. He presumes Hannan will take over ownership of the company to cover his debt.

Hannam says he is in Olivado for the long haul.

Meanwhile the small shareholders will get nothing. Ellegard has lost $750,000, Nathan about $2 million, Mountfort his house.

Chris Nathan says the whole saga has taken a great toll on his family, who just want to move on.

"But I get these recurring visions of my father in the night saying to me, 'you know, you've got to set the record straight'."