Wine boss kick-back trial begins

Peter Scutts shown here in a file photo from 2008. Photo / Tim Cuff

Former New Zealand Wine Company chief executive Peter Scutts played a "double game", receiving kick-backs from a wholesaler the company was supplying wine to, the Auckland High Court has heard today.

In a case brought by the Serious Fraud Office, Scutts is facing 16 Crimes Act charges of dishonestly using a document and one Secret Commission Act charge of receiving secret reward for procuring contracts.

He has pleaded not-guilty to all charges.

During her opening at today's High Court trial, Crown prosecutor Rachael Reed said Scutts played a "double game" in early 2011, working for the New Zealand Wine Company (NZWC), which he later became chief executive of, while also receiving kick-backs from Australian-based wine wholesaler Liquor Marketing Group (LMG).

Scutts received AUD$1 for each case of wine supplied, the kick-backs ultimately totalling AUD$53,000, Reed said.

NZWC did not know of the reward paid and it was in direct conflict to his role with them, she said.

In his contract with NZWC, Scutts was able to provide services to other companies, provided that they did not conflict with the business of NZWC. However, the contract stipulated he was to inform the company if any conflicts of interest did arise, Reed said.

NZWC first supplied wine to LMG in May 2011 and Scutts proceeded to invoice LMG for what he recorded on the invoices as "marketing services".

The invoices were in fact "thinly disguised brokerage payments" which were hidden from NZWC, Reed said.

Scutts told SFO investigators that LMG had asked for photographs of the head NZWC winemakers, but they had refused, so an agreement was come to where a photo of Scutts' son Oliver was used instead for a fee of AUD$1 per case sold.

The explanation defied logic and commercial reality as it was common practice in the industry for wine makers to provide marketing materials and wine tastings for free, Reed said.

It also contradicted the evidence, as Oliver Scutts' image only appeared on marketing materials for six-months, yet Peter Scutts invoiced for 15-months of "marketing services" from May 2011, Reed said.

In defence, Scutts' lawyer John Billington said the "key and central difference" between the crown and defence case was the timing of the agreement between Scutts and LMG.

The agreement came about when the wine was on the water and it was realised that NZWC did not have the resources to market the wine in Australia, Billington said.

The agreement was also a good one for NZWC as Scutts supplied a significant amount of Marlborough Savignon Blanc to the market for a profit, during the time of a wine glut in the Australasian market and when NZWC was under the scrutiny of its bankers and on the brink of insolvency, Billington said.

NZ Wine Company, whose stable included Grove Mill, Sanctuary and Frog Haven brands, merged with Foley Family Wines in September 2012 after shareholders agreed to California-based billionaire Bill Foley taking an 80 per cent stake in the company.

The trial, which is being held before Justice Mary Peters, is set down for the rest of this week.