NZ's own Enron scandal nears end

By Chris Hutching

Friday 5th July 2002

New Zealand's own Enron-type scandal is drawing to a close after nearly a decade of receivers and liquidators picking over the carcass of moribund meat company Fortex Group, which collapsed in 1993.

Liquidator Bruce McAlister will soon remove Fortex from the company register now that most outstanding issues have been dealt with in the $130 million collapse.

In March 1993 the then managing director, Graeme Thompson, called in The National Business Review for a special interview where he revealed the stunning and unfathomable news that the company might be facing losses of $50 million.

Although Thompson remained in his Price Waterhouse Centre office for a week trying to ride out the situation, special investigators began to uncover the real story - Thompson and his senior executive colleagues had acted together to hide overseas bank loans by treating them as income in the balance sheet. They had even pumped up inventories by turning mutton flaps into French cutlets.

The financial controller and Thompson were tried by jury and sentenced by retired High Court judge Sir Allan Holland to stiff jail sentences. Justice Holland commented that other executives who had co-operated with investigators were lucky to have escaped prosecution. On the civil front, the receivers, KPMG, pursued the then auditors, Price Waterhouse, Fortex chairman John Austin and Thompson and received out-of-court settlements. The claim against Price Waterhouse was $170 million but it is understood the settlement was for about $50 million.

The final tally from the receivership report states that secured creditors and unsecured creditors were owed about $130 million, of which nearly $30 million was owed to unsecured farmers.

The sale of the meat inventory provided for full recovery for first-ranking secured creditors who received $87 million back but unsecured creditors received nothing. Receivership and legal fees came to $7 million.

Thompson faces further Serious Fraud Office charges on July 29 that he ran a business in breach of a five-year banning order imposed in 1996. After getting out of jail he became involved in a business venture with an Austrian businessman but they fell out.

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