The NZ Ministry of Agriculture and Forestry (MAF) has revealed that its probe into illegal dairy exports could go back several years beyond the “Powdergate” shipments scandal, and involve at least NZ$50m (US$21.11m) of sales (over NZ$10m higher than first thought).
Revelations in a letter by dairy giant Fonterra‘s chairman John Roadley also point to the involvement of the two Fonterra forerunners, Kiwi Dairies and the NZ Dairy Group (NZDG). Roadley stressed however that accounting firms KPMG and Deloitte Touche Tohmatsu have studied Kiwi and NZDG and concluded that any illegal export transactions did not impact on the valuation of the two companies as they merged to form Fonterra.
Roadley explained to Fonterra’s farmer shareholders that their concerns had prompted more openness on the company’s investigations. The letter said that over 9000 tonnes of products from Kiwi were illegally exported over the past two years and sold for NZ$50.3m. Another 794 tonnes of goods produced by the NZDG is also under investigation for being exported without Dairy Board permits over the last season.
The two companies allegedly sold the goods through different exporters.
Greg Gent, deputy chairman of Fonterra and former chairman of Kiwi, had previously valued the total export tonnage implicated in the scandal at NZ$39m. Roadley revealed in his letter however that the total value could be worth another NZ$10.8m.
MAF spokesman Tim Knox told the New Zealand Herald that the government would investigate “any line of inquiry which identified potential offending”, adding that critical decisions on the form of the continuing investigation would be determined this week.
The inquiry was prompted in April, when the Dairy Board’s Italian partner discovered undeclared rennet casein from Kiwi’s Sydney subsidiary, Australasian Dairy Ingredients (ADI) (formally Cottee Dairy Products). The product had been distributed via South Pacific Distributors (SPD), which was owned by Terry Walter, director and then CEO of Cottee.
Roadley revealed that disciplinary action had been against several employees, including Ross Cottee, as a result of the investigations into the Italian find by Dairy Board executive Grant Waterhouse and former Kiwi CEO Craig Norgate.
Meanwhile in June, Dairy Board directors Marise James and Murray Flett discovered milk protein concentrates in plain paper bags at a Mexican company, La Mesa, which turned out to be produced at Kiwi’s Hawera site.
And in September, the Dairy Board requested information on illegal exports from other companies. The NZDG then revealed that its subsidiary, NZ Dairy Ingredients, had sold 794 tonnes of dairy products to Biocorp and Probiotech last season and “that may also have been exported without the necessary approval”.