Projenz denies serious fraud charges in court

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 tens of thousands of dollars spent 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 Hibiscus Matters went to print and a verdict 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 described wining and dining RDC and AT staff as “legitimate business expenses”.

The dinners cost over $5000 in some cases, while tens of thousands of dollars was spent on travel for 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.

“We didn’t want to be seen as stingy clients. It would impact on our profits, but it was a pretty good investment.”

A number of RDC staff were named in court documents for receiving 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.

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.

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. He is 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 is investigating Hiway Stabilizers.

Noone 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.

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.

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 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. “The amount of revenue we 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 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 took a lower paying job at AT instead.

Mr Borlase said the money was for a “strategic market review” of opportunities in NZ and Australasia. He said the monthly payments would have continued even if Mr Noone was employed at GHB, 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 was outside Auckland, he was free to do so.”

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.”

The decision on the trial will be linked to this story as soon as it is released.