Warning for Govt before firm crashed

Joe Capizzi (left)

Serious Fraud Office to investigate after TV recycling contractor goes bust leaving taxpayers to foot $2m bill.

The Government was warned a recycling contractor was collecting an excessive salary and his company was insolvent months before his firm collapsed losing millions of taxpayer dollars.

Joe Capizzi, the sole director and owner of television recycler RCN E-Waste, is revealed in a formal report prepared for the Government in February to have been paying himself a $300,000 salary despite having little involvement in the day-to-day running of his small company.

The report, prepared by Grant Thornton, found what it believed to be a "dangerous" level of creditors that could not be paid, "inadequate" management, and raised concerns that Capizzi was "unresponsive" when questioned whether monthly payments of $43,000 to Kiwibank were to service a personal loan.

The majority of RCN's business was a $4.4 million Ministry for the Environment contract left half-finished when the company entered liquidation in July. The firm is being investigated by the Serious Fraud Office.

A Weekend Herald investigation can also reveal Capizzi charged the costs of operating his 2001 Ferrari 360 sportscar back to RCN, and the company's financial controller, John Gray, has convictions for theft and false accounting from his role managing finance companies.

The Ministry for the Environment this week defended its handling of the RCN contract and said the firm had passed due diligence checks, but confirmed the involvement and history of Gray was unknown when the contract was signed.

Capizzi, 61, did not return phone calls this week, and visits to a $2.5 million Mairangi Bay mansion where he has been living found the house empty. In correspondence with the ministry, obtained under the Official Information Act, Capizzi disputed the findings in the Grant Thornton report.

Gray, who was sentenced to nine months home detention after pleading guilty in 2010 to frauds committed while the accountant for National Finance, could not be contacted and is understood to be overseas.

RCN was the major contractor in the ministry's $11.5 million TV Take Back scheme, designed to recycle old analogue television sets.

The scheme was intended to recycle 300,000 sets nationally, but RCN's collapse meant only a third of that number was initially achieved and an additional $2 million was spent to recycle the 100,000 TVs left scattered and unprocessed at the company's sites across the country.

RCN liquidator Derek Ah Sam of Rogers Reidy said the company, along with related firm RCN & Associates, owed a total of $7.5 million to creditors - including $850,000 in unpaid taxes - and assets were negligible. "It's a messy job," he said.

Mike Mendonca, the ministry's director of operations, said it was too early to assess what went wrong.

"The ministry is currently undertaking an external review of all aspects of the TV Takeback programme and this will be concluded in the New Year," he said.

Labour Party finance spokesman Grant Robertson said the RCN case was a "dramatic failure of contracting and governance processes" and demanded accountability.

"How is this allowed to happen? We have a government who likes to claim they're good at managing the economy but if you aren't looking after the pennies, the pounds don't look after themselves," he said.