Steel & Tube confirms guilty plea on steel mesh misrepresentation charges

Wednesday 29th November 2017

Steel & Tube Holdings has confirmed that it pleaded guilty to 24 charges laid against it by the Commerce Commission for making false and misleading representations about its steel mesh products.

Interim chief executive Mark Malpass said in a statement to the stock exchange this morning that the charges regarding compliance with the testing standard for seismic mesh related to the application of testing methodologies only, not the performance characteristics of the seismic mesh. The Commerce Commission brought the charges under the Fair Trading Act following a complaint in 2015 about mesh used in housing and driveway construction not meeting required standards.

Malpass said half of the charges related to the inadvertent use of a testing laboratory's logo on test certificates and half related to the application of testing methodologies in the applicable standard. It said it has had external accredited laboratories testing seismic mesh since April 2016 and has taken "significant steps" to enhance its quality and product assurance systems.

The Commerce Commission confirmed to BusinessDesk yesterday that Steel & Tube had entered the guilty plea more than three months ago, on Aug. 15, in the Auckland District Court. That was three days before the company reported a 22 percent drop in annual profit, which acknowledged the prosecution and included costs, penalties and fines that could be imposed within its $4.8 million of provisioning.

At the time, then-chief executive Dave Taylor said the company was working with the Commerce Commission to reach an appropriate resolution and that "the expected costs of this prosecution have been accrued, as have any expected proceeds under the group’s insurance policies", without explicitly stating it had entered a guilty plea. Taylor stepped down a month later, ending eight years in charge of the company.

The company's auditor PwC assessed group materiality to be $1.45 million, or 5 percent of pre-tax profit, in its 2017 audit report.

Steel & Tube shares last traded yesterday at $1.99, the first time the stock has closed below $2 since July 2016.

The regulator has said two other firms facing prosecution - Timber King and NZ Steel Distributor - also pleaded guilty and will be sentenced on Dec. 8 in the Auckland District Court. Charges against another company have been filed and the commission expects to lay charges against one further company.

(BusinessDesk)

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