Fines total $58,500 for Powdergate accused

Executives within New Zealand's dairying giant Fonterra may have escaped prosecution in the Powdergate scam which yesterday saw six men receive fines for illegally exporting milk products, a court has heard.

Paul Marra, Malcolm McCowan, Terence Walter, William Cottee, Stephen Wackrow and William Winchester originally faced charges of conspiracy to defraud following a Serious Fraud Investigation which rocked the country's dairy industry.

Between them they were fined a total of $58,500 on six charges each of producing false Customs documents.

Marra was fined $15,000, McCowan $12,000, Cottee $12,000, Walter $7500, Wackrow $6000, Winchester $6000.

Powdergate was supposedly an elaborate operation run out of the then Kiwi Dairies, re-labelling and illegally exporting milk-products by circumventing the New Zealand Dairy Board.

Before industry deregulation and the formation of Fonterra, it had a monopoly on exporting dairy products.

Last week the Serious Fraud Office reduced the charges against the men and they pleaded guilty.

Justice Rodney Hansen said yesterday he was left with an uncomfortable feeling that others involved in similar operations may have escaped prosecution.

"There was something of a culture or climate of non-compliance with a number of schemes involving the export of dairy produce without a licence," he said.

Defence counsel for the men said there had been at least eight supply chains circumventing the Dairy Board during the late 1990s. Five of them came from the Waikato-based New Zealand Dairy Group, and three of them came from its Taranaki rival Kiwi Dairies.

Counsel for Marra, Paul Davison, QC, said Marra, like the others, harboured a great sense of injustice at being prosecuted and having the investigation and charges hanging over them since 2001.

Marra had been tipped for a top job at Fonterra following the merger of NZDG, the Dairy Board and Kiwi, but his career in the dairy industry was over, while others allegedly involved in similar schemes had seen their careers blossom, the court heard.

"What was really happening was an arm wrestle or struggle for control of Fonterra. Which of the two factions [Kiwi or NZDG] was going to end up with the controlling say," Mr Davison said.

The Serious Fraud Office originally alleged $44.6 million worth of product had been illegally exported by the group between 1997 and 2001.

Last week it decided the men had only exported $3.2 million worth of goods.

Lawyers for all accused said yesterday the men had not benefited financially from the exports and the New Zealand industry and trade had not suffered.

Crown Prosecutor David Jones, QC, however, said the men had shown a complete disregard for the laws in place at the time.

While there were eight such schemes referred to he said this was the major one.

"They are significant offences of substance. They involve in this case offending at a corporate level where one could describe it as the ends justifying the means."

Marra, McCowan and Wackrow were all executives at Kiwi at the time, Marra was chief executive of Kiwi Milk Products, McCowan was general manager and Wackrow was trading manager.

Kiwi sold milk products to a company set up by Terence Walter, South Pacific Distributors - SPD - which he ran with the help of Winchester.

SPD then on-sold product to Cottee in Australia. Cottee, an Australian company, had gone into receivership in 1996 and Kiwi bought into it.

It was "simple, effective and dishonest," said Justice Hansen yesterday.

Product from Kiwi was relabelled as stock food or protein and sold to SPD, which then on-sold it to Cottee.

Dual invoices were produced one calling the product dairy product and the invoices sent to Customs listed it as stock food or protein.

Outside court Mr Davison said the fact the SFO had reduced the charges meant it realised it could not substantiate the allegations it was making.

He said the SFO investigation had been limited to Kiwi and overlooked other schemes.

There was material in front the SFO which showed the activity was not restricted to Kiwi.

"Why one wouldn't go beyond that and look in a wider framework is not a matter I am going to offer any conjecture on.

"A selective investigation produces unjust results," he said.