Portrait of an industry in conflict

The "Powdergate" defence team has painted a picture of a dairy industry where rumours and accusations of illegal exporting were commonplace.

While cross-examining former Dairy Board executive Grant Waterhouse, defence lawyer Paul Davison, QC, highlighted an internal memo written in 1998 by Chris Moller, then general manager of the board's ingredients business.

"For many years, the sale of dairy product by dairy companies, outside of the board, has been a source of conflict within the industry," Moller wrote.

Asked what this referred to, Waterhouse - who had been with the Dairy Board since 1977 - said it was probably "a reference to the fingerpointing, the rumour, innuendo, the backbiting and the whole way the industry had developed with everyone blaming everybody else".

After Monday's suggestion that the New Zealand Dairy Group may have also been illegally exporting milk powder, the defence raised more examples of possible offending.

Waterhouse was asked if he was aware of an issue in 1996 involving the Bay Milk company. He said he was not.

He was also presented with an accusation that the Dairy Board itself may have been involved in the practice.

In a 2001 email, written after the "Powdergate" scandal hit the headlines, Chris Wagner - a commodity broker - made the accusation to Dairy Board staff.

"I would suggest at this point that you don't want the whole world to know that NZDB is just as guilty of facilitating illegal exporting as everyone else they stand accusing."

Waterhouse told the court that he had never seen the email.

When re-examined by SFO lawyer John Upton, QC, Waterhouse said he "could say categorically" that he knew of no one at the board who could be accused of facilitating exports without permits.