Saturday, March 30, 2024

Random actions and unpleasant surprises

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Agriculture, particularly dairying, is changeable enough without something completely random popping up. But that’s exactly what happened when Jeremy Hamish Kerr, whatever his reasons, decided to threaten to contaminate infant milk powder with 1080 poison.
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There was plenty of criticism of the decision to keep the threats secret for some months, then at police actions when it came to interviewing 1080 protestors. But it emerged during the disputed facts hearing at the Auckland High Court last month that Kerr had gone out of hisway to make it appear as though his letters came from groups opposed to the poison, not someone like himself, receiving a substantial income from a rival product.

Much was made of his finances. On the one hand the Crown said royalties he had been receiving from Feratox, the poison he developed, had fallen off, and on the other the defence said he wasn’t under financial duress and his behaviour was completely irrational.

Chief High Court Judge Geoffrey Venning decided financial motivation was at play, although it was hard to quantify exactly what boost to his income Kerr hoped to receive.

Feratox could only be used for ground baiting and a new aerially applied poison would have to be developed rapidly if 1080 use was curtailed. But in the interim there would be greater sales of his product.

His living expenses were well within his income but he was putting considerable amounts of money into a start-up business, Nature Support, using possum skins to alleviate back pain in particular.

Little return was being seen from that business and in order to keep it going Kerr obtained more than $100,000 of loans from a friend and helped himself to up to $50,000 he persuaded his elderly mother was a gift to her grandchildren.

Forensic accountant Shane Hussey told the court Kerr was in a relatively comfortable position, and always had the option of not developing products further and just filling orders for those already on the market.

Other employment opportunities were available to earn him up to an estimated $60,000 a year. He could have borrowed money from his bank or his two sons, and he could have even have sold his entitlement to receive royalties from the sale of Feratox.

One son, Tim, a chartered accountant, who now has power of attorney over his father’s affairs, told the court if Nature Support had been liquidated his father would have had no liabilities. He had negotiated the sale of $30,000 worth of equipment since his father’s arrest.

While Hussey didn’t feel Kerr was under undue or dire stress, he certainly was juggling his finances, he said.

Kerr knew who his creditors were and had a cash book.

“He was ahead of many people,” he said.

“And he had options to ease his financial position to keep his creditors current.”

Hussey said many businesses were not able to pay on the 20th of the month following presentation of an invoice, and then “the squeaky wheel gets the oil”.

“We might see more of it in New Zealand with Fonterra changing its terms of payments and living off people’s credit as well,” he said.

For Fonterra suppliers the emails they were sent not long after Kerr’s arrest, requesting a 10% cut in their charges and changing the co-op’s payment terms to them from the 20th of the month following to 61 days from the end of the month in which their invoice was received, came out of the blue. Most were small-scale businesses and had long and valued associations with Fonterra and the legacy companies from which it was formed.

A big part of their dealing with a large co-operative, owned by 10,000 farmer-shareholders, some of whom also doubled as suppliers, was the expectation they would see out both good and bad times together.

So what appeared to many to be a quite random change in the way Fonterra did business came as a most unpleasant shock.

Protests were all in vain for many suppliers. Others won a partial reprieve, but for all the bad taste remained.

At Fonterra’s recent half-year results announcement there were apologies from the chairman and chief executive for lack of communication and a promise that appropriate measures were now being taken to clarify the situation.

But the damage had been done. In its email to suppliers Fonterra’s chief financial officer, Lukas Paravicini, said it would only achieve its full performance potential if it had efficient supplier relationships and strong alignment with those suppliers.

Its much improved financial position and early dividend payment plans for struggling farmers are good news at a time when there’s little about.

But by putting long-standing relationships under strain Fonterra might have weakened the very community standing it’s previously gone to great lengths to build, and needs now more than ever.

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