Transend's big spending knew no bounds

By Jock Anderson

Friday 20th December 2002

Postal executives wallowed in millions of dollars of business-class air travel, lashings of food and drink and first-class London hotels, insisting on Hyde Park views.

They set up grandiose offices in countries where they did little if any business and broke many of the rules in the accountability book.

A handful of Transend managers spent thousands of dollars on food and drink for brief one- to three-day meetings in exotic locations such as London, Washington, Madrid and the Caribbean.

Now auditor-general Kevin Brady's inquiry into New Zealand Post subsidiary Transend has backed what Act New Zealand finance spokesman Rodney Hide yesterday termed "rampant profligacy."

Mr Hide said the auditor-general's probe into allegations of impropriety at Transend sheeted the blame for Transend's financial swashbuckling to former managing director Drew Stein.

Anonymous allegations of impropriety within Transend were passed on to NZ Post deputy chairman Syd Bradley in January 2001.

The auditor-general's inquiry resulted from a recommendation of Parliament's finance and expenditure committee driven by Mr Hide.

The powerful committee condemned NZ Post's response to its requests for information as unhelpful and tantamount to obstructive.

The inquiry confirmed the high life enjoyed by Mr Stein and his chums as they swanned around the globe in business class looking for post offices to run. Mr Hide said Mr Stein's extravagant management style obviously contributed to policies of "wasteful and excessive" spending highlighted in the auditor-general's report.

But nothing happened, said Mr Hide who first broke the Transend scandal in The National Business Review two years ago, forcing a select committee inquiry and the auditor-general's probe.

Mr Hide said some of the "culprits" in Transend were not sacked as NZ Post now tried to assert. "They were made redundant and got payouts."

He said he understood that when NZ Post chairman, the discredited Ross Armstrong, was pushing to hire Mr Stein, former Electricity Corporation chief executive Roderick Deane warned NZ Post chief executive Elmar Toime about Mr Stein's liking for spending other people's money.

Mr Stein quit Transend claiming poor health but is still an $80,000 a year consultant to the international postal management arm of NZ Post.

The auditor-general's report confirmed that during Mr Stein's reign staff enjoyed first-class international hotel accommodation, some of it in London with Hyde Park views costing up to $1131 a night. In Washington their room rates reached $1900 a night.

Many breaches of Transend's travel spending policy, credit card use and cash advances policy were uncovered.

From as early as 1999 Transend expected to spend $3-5 million a year on air travel.

Qantas was favoured but there was no financial analysis of the tenders to indicate why it was considered the best deal, nor was there any documentation to indicate the views of an "evaluation panel" were obtained to support the selection of Qantas.

Questions also surrounded the unorthodox appointment of Kamden Marketing, a small Auckland company run by one of Mr Stein's associates, which Transend paid $896,000 to over a four-year period.

First-class hotel accommodation, formerly enjoyed by Transend staff, has apparently been changed to "modest business-class" hotels.

On what said to be a long-haul, air-born whim of Mr Stein, a headquarters was established in Madrid in June 2000, a month after Spanish Post said it was no longer interested in doing business with Transend.

Nevertheless Transend staff maintained and endured an office in the sunny suburbs of Madrid for 13 months before leasing and relocating to a historic 16-room mansion in the leafy village of Bray, England, just 20 minutes from Heathrow Airport.

There, three Transend staff are understood to still labour in the English countryside in a building signed up until 2011, with no exit before May 2006.

The Bray base, leased by Mr Stein in anticipation of gaining work that did not eventuate, costs about $246,000 a year to rent and Mr Stein had no authority to sign up for it.

Those questioned by the auditor-general included all current NZ Post board members, Dr Armstrong, Mr Toime, Mr Stein, several staff members of both NZ Post and Transend, board lawyer Kristy McDonald QC, John Selby of PricewaterhouseCoopers (engaged to assist the investigation of allegations) and lawyer Cameron Mander (appointed as an independent intermediary).

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