Businessman slams culture of kickbacks

PUBLIC SCRUTINY: Simon Everett wants a debate on sharp business practices among contractors.
PUBLIC SCRUTINY: Simon Everett wants a debate on sharp business practices among contractors.

A trickle of corruption cases being investigated by authorities shows the New Zealand business community has evolved a culture of inducements and kickbacks, a businessman says.

Simon Everett was formerly managing director of roading contractor Blacktop Construction. His company collapsed in September, and Everett said he was now in a position to call for a debate on business practices that had become increasingly sharp.

Everett called for a debate in the business community as consolidation in industries meant larger contracts - and higher stakes - for remaining players and increased the pressure for more and more lavish inducements to win or maintain business.

"You shouldn't be buying a client a car and you shouldn't be sending your customers to the Hong Kong Sevens," Everett said.

Everett said the line between positive relationship-building and inducement wasn't clear, nor openly discussed.

"I'm conscious that having a culture of strong relationship between clients and suppliers is a

positive thing. There's nothing wrong with a ham and a bottle of wine at Christmas or a game of rugby. Everyone wants to celebrate things and enjoy one another's company and build a relationship," he said.

Everett said Blacktop gave gifts "pretty infrequently . . . If you asked around I'm sure you would be told we were considered pretty cheapskate. Right or wrong, we took a moral high ground position."

Everett's concerns were echoed by industry spokesman Jeremy Sole, chief executive of the New Zealand Contractors Federation, who warned recent public-sector contracting changes raised risks.

"There's a propensity for some clients to move to very large contracts, which raises the stakes considerably. The game is changing dramatically, and the incentives are there to do whatever it takes. We might start to see an increase in corruption as a result," Sole said.

Dealings between private and public-sector bodies needed to be policed more thoroughly, Sole said. "Most of our interactions are with central or local government agencies, and we would be very upset if anything above a Christmas Card was exchanged."

The Serious Fraud Office is investigating individuals at Auckland Transport over alleged irregularities in the procurement of roading maintenance contracts. The council-controlled company fired a senior manager in September following an internal investigation into the corruption allegations dating back to 2010.

Sole said the Auckland Transport investigation was concerning for the industry, as it posed reputational risks for everyone involved, and also penalised players who operated above board.

"Not only does it cast a darkness over our industry, but it's also fundamentally unfair," he said.

Despite the light being shone on his industry, problems raised were probably present elsewhere in the economy, Sole warned.

"I don't think anyone's immune from corruption. As the auditors will tell you, most people are honest most of the time. But when life conditions change, and opportunity and motivation meet, corruption occurs."

Private investigator Danny Toresen, who caseload includes two current corruption cases, said the problem was widespread.

"It's all sorts of industries - machinery suppliers, fabricator suppliers. To beat out competition or retain work there's pretty overt requests from managers that are signing the contracts with suppliers," he said.

"I would say it's commonplace in New Zealand for these kickbacks and these little sweeteners are happening all over the place.'

Toresen said public-sector organisations had rules against employees receiving gifts from contractors, but these were being skirted. "Most large organisations have a gift register and it's being breached. It's a funny sort of no man's land because it's not really well tested."

The culture was slowly changing, Toresen said, evidenced by more cases bubbling to the surface - including the Auckland Transport case and the conviction of a man taking kickbacks from his insurance broker for over-charging his employer.

"In my opinion crime's a constant, but maybe it's a bit more topical as it's now coming through the courts," Toresen said.

Everett said New Zealand's high ranking in the Transparency International rankings for least-corrupt country on earth had resulted in naivety.

"I've worked extensively offshore in a couple of environments and countries where corruption is more openly discussed, and I've been into that environment without exposure to it and had my eyes wide open. Whereas in New Zealand I think my observation is that there is activity along those lines but it's much more subtle," he said.

Sunday Star Times