Projenz denies serious fraud charges

A verdict in the Auckland High Court trial is expected this month.

A company director accused of bribing senior managers at Rodney District Council (RDC) and Auckland Transport (AT) has said paying for lavish dinners, swanky accommodation and overseas travel for council staff was an “industry standard”.

Stephen Borlase, the director of contracting company Projenz, is facing serious fraud charges relating to spending tens of thousands of dollars on entertainment and travel for council staff and over $1.1 million of bribes.

Co-accused Murray Noone, a former transport manager at RDC and AT, is accused of accepting the bribes between 2006 and 2013. Both have pleaded not guilty to all charges.

The serious fraud case was due to wrap-up as Mahurangi Matters went to print and a verdict in the judge-only trial is expected this month.

Mr Borlase took the stand on November 7 and 8 as the trial entered its sixth week. Under questioning from his lawyer, Ron Mansfield, Mr Borlase did not dispute that he spent a significant sum wining and dining RDC and AT staff, but said they were “legitimate business expenses”.

The extravagant dinners cost over $5000 in some cases, while tens of thousands of dollars of travel was spent on a number of council staff.

“It was an industry standard. Our attitude was that we saw all our competitors and colleagues doing the same thing,” Mr Borlase said. “For example, we had a competition between us and Opus to see who could take Manukau District Council staff to a conference. We saw it as a normal business expense.”

He said there was a culture of “work hard, play hard” that the company “shared with our clients”.

“Entertainment fostered a relationship and meant that collaboration was a strong point. Lavish meals and accommodation were a way of breaking down barriers and helped contracts to run more smoothly and encouraged open communication.

“Having that relationship meant that if mistakes were made they would be resolved easily, rather than legally at a lot of cost. It also meant if my team wasn’t performing, I’d get a heads-up.”

He said the expenses were worthwhile for the business.

“We didn’t want to be seen as stingy clients.

“It would impact on our profits, but it was a pretty good investment.”

He said Projenz entertained private clients as well as council staff, but not to the same extent because RDC and AT made up 70 to 80 per cent of the company’s business.

A number of RDC staff were named in court documents for receiving significant benefits from Projenz, including significant amounts of accommodation, travel and electronics.

Ten RDC staff also received iPhones or iPads from Projenz. Mr Borlase said it was to make it easier to communicate with staff.

“At the time, the phones RDC were supplying weren’t smartphones so they didn’t communicate via email. It [buying the phones] made it easier for them to do their job and communicate with us.”

The court heard how gifts to former RDC and AT transport manager Barrie George started in 2006 and escalated to over $100,000 worth of gratuities by 2012. Mr George was sentenced to 10 months home detention in September after pleading guilty to receiving bribes from Projenz.

It started with a travel voucher that Mr Borlase gave to Mr George at his 60th birthday party at the Spencer on Byron Hotel in Takapuna in November 2006.

Mr Borlase said he made no secret of the gift – it was presented in front of everyone at the party, including RDC staff and other contractors – no one raised a complaint.

Mr Mansfield then walked Mr Borlase through tens of thousands of dollars in travel and accommodation that Projenz gifted to Mr George and his family. In just over a year, between 2008 and 2009, the trips included a $3532 holiday to Fiji, a $4793 trip to Europe, a $6200 trip to Thailand, a $2148 trip to Asia and a $4662 trip from the UK.
Mr Borlase said the travel was a compassionate gift to the family, which was going through a rough time. The intention was “purely good will”.

One trip included giving Mr George $5500 in foreign exchange, which Mr Borlase said he was not aware of and would not have agreed to.

The trips quickly escalated – in 2010 Mr George claimed over $33,300 for a single trip.

Mr Borlase said he was unaware the cost of the travel had reached that level.

“When I first saw this I was bitterly disappointed that Mr George had betrayed that trust.”

Documents show Hiway Stabilizers also contributed tens of thousands of dollars to Mr George’s travel, including $17,584 towards a trip Mr George and his wife took to Japan in June 2012. Projenz also contributed $5733 towards this trip.

The trips were to visit Mr George’s son, Owen, who was arrested in 2011 at a Japanese airport after being caught with over two kilogrammes of methamphetamine in his suitcase. He is currently serving a nine-year prison sentence.

The Serious Fraud Office said that while the court case was ongoing it would not comment on whether it was, or had, investigated Hiway Stabilizers.

Payments ‘good value’

The Crown alleges that former council transport manager Murray Noone was paid $1.1 million in bribes, disguised as payments for consulting work for a South Island branch of Projenz, which was never done.

Instead, it said the money was bribes in exchange for influence at AT and RDC.

Under questioning from Crown solicitor Brian Dickey, Mr Borlase admitted there was no record of the work Mr Noone did as he gave verbal reports and attended meetings to show how he was benefiting the company.

“There was no need for summary reporting. We were more than happy with the verbal reports we got from Mr Noone.”

Mr Dickey said spending that amount with no paper trail or witnesses was unbelievable.

“Where have you seen a million dollars in consultancy fees without generating any written work product in the consultancy world?” he said.

Mr Dickey said despite supposedly paying Mr Noone over $1 million in consultancy fees to help build the South Island branch of Projenz, the business had very low profits from the south, while income from the RDC and AT skyrocketed.

“You got the millions in profit, but out of Rodney and AT,” Mr Dickey said.

But Mr Borlase denied the claims.

“It’s typical that you make an investment and it doesn’t always eventuate.”

He said Mr Noone was a “significant contributor” to Projenz.

“It is self-evident that the amount of revenue we’ve gained from his advice is significant and we valued his input, otherwise we wouldn’t have kept going with him.”

One of the largest payments occurred in 2010 – Mr Noone was paid $200,000 for a six-month consultancy contract to provide business development advice.

There were no records showing Mr Noone did any work. The Crown has argued this was a bribe to entice Mr Noone to take on a role at AT to continue a fraudulent relationship. At the time, Mr Noone was considering taking a position at GHB, but decided to take a lower paying job at AT instead.

Mr Borlase said the money was for a “strategic market review” of opportunities in other areas of New Zealand and Australasia.

He said monthly payments would have continued even if Mr Noone became employed at GHB, which is a direct competitor of Projenz.

Mr Borlase said there was no conflict of interest in employing Mr Noone as a consultant because he was not on the tender evaluation panels at AT or RDC.

“He said he had informed his employers he was running a consultancy business and as long as that business was outside of Auckland he was free to do so.”

Mr Borlase said it was no secret Mr Noone was a consultant for Projenz.

“He was an advisor, we didn’t need to broadcast it.”

Throughout the period, from 2006 to 2012, the money paid to Mr Noone and gratuities paid to council staff were coded to RDC and AT contracts in Projenz’ accounts – the Crown argued that Projenz recouped the expenses by inflating invoices to those organisations.

Mr Borlase said the coding system was a way of tracking costs, by coding them to profitable projects to enable him to easily track the net profit of the business each month.

“It was a simple tool to determine the bottom line. It didn’t have an impact on the invoices to RDC or AT,” he said. “It probably wasn’t the correct way of doing things.”