Or is it Ron Massey, Economic Development Manager, Napier City Council?

Or can one be both?

NCC senior manager Ron Massey has been involved for several years as director and adviser to a company, Nature Green, which is now in liquidation proceedings.

According to the Liquidator Report just filed, wearing his Nature Green hat, Mr Massey sent over 15,000 pages worth of emails over the NCC computer system conducting the affairs of Nature Green.

The Liquidator concludes his public report as follows:

“201. I am of the view that a claim should be brought against Mr [name] and Mr. Massey for breaches of the Companies Act; in particular for trading the company while insolvent; trading recklessly and failing to exercise the duty of care that a prudent director in similar circumstances would have done.

202. Further, as Mr Massey was at all relevant times that he functioned as a director of Nature Green, a paid employee of the Napier City Council, signing his correspondence in that capacity and operating from his council office, I intend to seek legal advice as to the potential liability of the Napier City Council with regard to the conduct of Mr Massey and any duty of care the Council may have to Nature Green and its creditors.”

Mr Massey has made clear (according to this Marty Sharpe report in the DomPost) that he will strenuously defend his business skills and actions. Cool. We leave that to Mr Massey.

And BayBuzz has no view as to whether the ginkgo biloba business is a good one for Hawke’s Bay.

Our questions do, however, go to the public responsibilities of Mayor Barbara Arnott and Chief Executive Neil Taylor, as follows:

1. As one of your most  senior managers (and a very close confidant of you, Mayor Arnott), what did you know of the extent of Mr Massey’s involvement in the Nature Green venture?

2. Would you consider a senior NCC manager conducting 15,000 pages of email communications about his or her private commercial venture (negotiating bank loans for it, promoting it, etc.)  ‘business as usual’ for an NCC employee?

3. Are you aware of other NCC employees with such active business interests ‘on the side’?

4. If you do not regard this situation as a conflict of interest, exactly what does constitute a conflict of interest in your NCC regime?

Don’t get excited BayBuzz readers. I have no expectation of a response from the Napier City Council’s Chief Executive or its Mayor. After all, they might be called upon to defend their role in legal proceedings.

But I ask you readers, is this the kind of ‘dual involvement’ you believe is appropriate for salaried local body employees? And what oversight responsibility do you believe the Council/employer holds in the matter?

This is what happens when the same people (elected officials and staff alike) sit in the same seats too long. Accountability suffers.

The full Liquidation documentation can be found here. And for reader convenience I have pasted the Liquidator’s discussion and conclusions about Mr Massey’s involvement in Nature Green below.

Finally, as the Liquidator indicates: “If there is a dispute by any of the parties regarding the conduct set out in the report (specifically the directors), it is a matter for the Courts to resolve.”

Tom Belford

From:
Nature Green (NZ) Limited (In Liquidation) (“Nature Green’)
Liquidator’s Report to Creditors  and Shareholders

David Petterson
Liquidator
Forensic Accounting Services Limited
22 February 2013

Page 17

Ron Massey

106. From my review of the company records it is clear that both Mr Massey and [name] had an active involvement in the development and promotion of Nature Green.

107. Mr Massey tendered his resignation on 25 November 2010. Between 2007 and 2010 the financial performance of Nature Green varied. For the year ended 30 June 2007 the company made a further loss of $17,500. However this position reversed in 2008 when for the first time the company made a substantial profit amounting to $140,000.

108. The change in the company’s fortunes arose through a significant increase in gingko tree sales, achieved primarily through the efforts of Mr. [name]. These increased from $71,000 in 2007 to $436,500 in 2008. The company also returned to a positive balance on its balance sheet, wiping out its past losses carried forward, to report a net asset position of $87,400.

109. However, in the following financial year (ended 30 June 2009) the company again returned a loss this time recording a trading deficit of just over $58,000.

110. A further loss of $52,500 was added for the financial year ended 30 June 2010, resulting in Nature Green again becoming insolvent on its balance sheet [by $23,000] as accumulated losses wiped out the gain made from profitable sales of the ginkgo trees to growers in the 2008 year.

111. When Mr. Massey resigned in November 2010, Mr. [name] remained as the sole director.

112. Mr. Massey has been widely quoted in the media promoting Nature Green over a number of years. Amongst the press releases I have read, he has extolled the virtues of Nature Green and consistently overstated its performance and/or made statements which are inaccurate and/or capable of misleading. Examples of these may be found on the internet and include:

a. A story published in Hawke’s Bay Today dated 20th May 2006 in which statements attributed to Mr. Massey include “…negotiations’ with overseas markets have resulted in securing supply contracts for up to $2.5m of leaf exports-even before a tree had been planted.” In fact no such contract exists, and leaf was not sold overseas until the company was in cash flow crisis in 2011.

b. Fairfax news published a story on 8 November 2010 quoting Mr. Massey stating “…the projected turnover for the coming year was about $3 million; $1.8 million from the sale of dried leaves and $1.2m from the sale of seedlings to growers.” Records of the company indicate that the value of trees projected to be sold over the 2010 year was just over $500,000, while the international dried leaf price would produce around the same value, at its most optimistic.

113. I note that Mr. Massey, in addition to his role as a Nature Green Director and Napier City Council Employee, is also a business mentor and consultant. One would expect that someone with this type of background would understand the importance of getting the “right” advice for a business (something which did not occur in the case of Nature Green, despite the directors’ lack of experience in the industry/sector).

114. As noted, Mr. Massey is also an employee of the Napier City Council. He is engaged as the Economic Development Manager. In that role Mr Massey is charged with identifying and promoting economic development opportunities within the business region addressed by the Napier City Council. In reality his role has become one not only of identifying opportunities but promoting these to foreign investors (particularly members of the Chinese community) thereby bringing investment into the Napier region.

115. This position would appear to be consistent with the sister city relationships the Napier City enjoys with cities overseas and indicates that the Napier City Council is paying more than just lip service to its sister city relationships as it has an active resource dedicated to helping develop and promote investment within the Napier region should that interest come from either local or overseas investment.

116. I have no problem with a local authority promoting and encouraging investment opportunities for either New Zealanders or foreign nationals. In my view however such a role should be independent of any commercial organisation. This would ensure that investment advice given was impartial and those who come to rely upon it are able to make judgments based upon their own investigation or independent external consultants rather than relying upon the advice of local authority employee with a conflict of interest.

117. While the initial development of the ginkgo biloba project was undertaken with support from the Napier City Council and funding from other parties, it was I believe reasonable for Mr Massey to be involved, assisting groups to seek funding and using the resources of his office to bring prospective investors and opportunities together. However, I am also of the view that once those parties had been introduced Mr Massey should have stepped back from that role rather than immersing himself further into it.

118. When Mr Massey had the choice of becoming a director of Nature Green he should have, in my opinion, either resigned from his Economic Development Manager position with the Council or alternatively not taken the position with Nature Green.

119. When I first met with Mr Massey (in the company of [names]) in November 2012 Mr Massey was quick to point out to me that he had resigned as a director in November 2010. Mr. Massey stated he had been asked/instructed to do so by his employer some months prior to actually submitting his director’s “resignation” to the shareholders of Nature Green.

120. However notwithstanding his resignation Mr Massey continued to operate and fulfil the role that he did prior to his resignation and throughout the entire life of Nature Green he has continued in the role of director whether or not he has carried the official title. I base this opinion on four facts.

121. The first is Mr Massey’s resignation letter. This was addressed to Mr [name] of the DTSITB dated 25 November 2010. In that brief two paragraph letter Mr Massey states: “As discussed at the Board meeting last month, please accept my resignation from Nature Green (NZ) Limited and Gingko Green (NZ) Limited effective immediately.

As mentioned, this will be the only change, as indicated I will continue to work and assist [name] in the normal way, subject to the trustees’ approval.”

122. The resignation letter clearly indicates that whilst Mr Massey intended to resign from Nature Green in form, in substance, nothing changed. In other words he would continue to perform the functions and duties he did while he held the title of director.

123. The second fact upon which I base my view of Mr Massey continuing as a director throughout the entire life of Nature Green relates to the documentation prepared for the company post his “resignation”. As he had before, Mr Massey prepared cash flows, budgets, forecasts and funding applications, all of which were sent to financiers and third parties.

124. In addition Mr. Massey consulted with and advised Mr [name] on a continuing basis (as he had prior to his resignation as a director). He recommended Mr [name] as the liquidator (having worked with Mr [name] in the past). Mr Massey attended meetings in May 2012 with disgruntled creditors in Hawke’s Bay and it was Mr Massey who drafted responses to emails for Mr [name] dealing with disgruntled and disaffected creditors, for whom, based upon his email comments, Mr. Massey had a clear distain.

125. The third fact on which I base my view is that of the advice given to me by Mr [name]. In December 2012 I put the question to Mr [name] as to what happened after Mr Massey resigned. Mr [name] responded that nothing had changed. Mr [name] and Mr Massey continued to communicate in the same manner; in the same form as they did prior to Mr Massey’s resignation as a director. In addition the minutes of DTSITB record he attended at and reported to the DTSITB trustee meetings on Nature Green.

126. Finally I refer to a report that Mr. [name] placed before the DTSITB in June 2011, some eight months post Mr. Massey’s “resignation”. In that report Mr. [name] states “…Since Ron’s resignation as a Director in November 2010, Ron continues to work with me and we meet on a regular basis to manage the activities of Nature Green NZ Ltd.”

127. Mr Massey actively sought investors for Nature Green post his “resignation” drawing on his pre-resignation contacts and following through on parties who had expressed an interest in Nature Green.

128. Based upon the foregoing I am of the view that Mr Massey remained a director and/or a shadow director of Nature Green throughout the entire life of the company.

129. During that time Mr Massey has been involved with Nature Green he has communicated (insofar as I can ascertain without exception) using the computer systems provided by the Napier City Council. All but one of his emails have been signed:

“Ron Massey
Economic Development Manager
Napier City Council
ddi +64-6-8344193
fax +64-6-8357574
mob +64-27-4488089”

130. As part of my investigation into the activities of Nature Green I requested from the Napier City Council copies of all emails issued or received by Mr Massey at his City Council email address in relation to the company. In response to that request I was provided with over 15,000 A4 printed pages containing email traffic.

131. In summary, I am of the opinion that Mr. Massey was either a Director or a shadow director of Nature Green throughout the life of the company and as such should bear full liability and responsibility for his actions in that capacity in regard to the losses the company and its creditors have sustained.”

Then, continuing on page 32:

201. I am of the view that a claim should be brought against Mr. [name] and Mr. Massey for breaches of the Companies Act; in particular for trading the company while insolvent; trading recklessly and failing to exercise the duty of care that a prudent director in similar circumstances would have done.

202.  Further, as Mr Massey was at all relevant times that he functioned as a director of Nature Green, a paid employee of the Napier City Council, signing his correspondence in that capacity and operating from his council office, I intend to seek legal advice as to the potential liability of the Napier City Council with regard to the conduct of Mr Massey and any duty of care the Council may have to Nature Green and its creditors.

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6 Comments

  1. I’m at a bit of a loss as to why the name of Mr Massey’s fellow director has been redacted, when a quick glance at the Companies Office website provides that information.

  2. John,
    Appreciate that both names are public. However, simply trying to underscore that BayBuzz’s interest is only in the potential conflict of interest aspect of this affair, not in any person’s business acumen. Mr Massey is a council employee; the other individual is not.
    Tom

  3. Tom, this is a scandal of epic proportions and one that should have been addressed years ago by both the Mayor and the CEO.

    Massey was employed decades ago by Mayor Dick as an economic developement manager. Later, as the Mayor’s “handbag carrier”, while travelling the world to China, Japan and the UK. Every trip becoming more opaque as to the results.

    When I was appointed a director of the council-owned LATE [Local Authority Trading Enterprise] Massey had close ties with the staff. After a period of 6 months I realised that all was not well with their accounting practices and demanded that they be addressed. I was denied such a review and as a result resigned. Only a matter of months later it was revealed that the accountant had misappropriated over $250,000 and was sentenced to 2 years in jail.
    The LATE was subsequently dis-established.

    Mayor Dick and Massey were most unhappy that I had caused this embarrassment to their enterprise.

    The fact that Massey was later able to generate 15,000 [Ed: pages of] e-mails from the NCC site to promote another enterprise is mind boggling. Anyone else would have been summarily dismissed. Indeed others have been in the past for far lesser offences [ and justifiably so].

    As a direct result of his statements farmers have lost $4 million in buying, planting and managing these trees. But that is only the tip of the iceberg. The most vulnerable in our community, the IHC have not only lost their jobs [I understand over 40 positions] but also their buildings as a result of assisting this venture financially.

    Show me another enterprise which has cost so much to so many in Napier over the last 50 years! But try telling that to the Mayor and CEO. In their eyes he was the best thing since sliced bread.

    His so-called resignation as a director was nothing more than a claytons resignation as evidenced from the liquidators file. An absolute disgrace and one which I believe will cost the NCC millions in recompense in near future.

    It is a pity our local paper resiles from employing an investigating journalist to look into these local scandals but leaves the field open to both you and the Dominion Post.

    And what about our highly paid part-time councillors and local political identities showing an interest?

    It seems to me that they are petrified of upsetting our local authority leaders, just as was the case with the LATE’s scandal all those years ago.

    To them all, I say, shame on you all.

  4. I think you are quite correct in asking questions of Napier City Council Tom. Operating a personal business from one’s desk while employed by the City Council, using council facilities and one’s official position to facilitate that business, should be a reason for dismissal. If managers and elected persons knew of and allowed that situation to continue, they should also be dismissed.
    Elected members and council employees are supposed to be working for the ratepayers, not using their positions for personal gain or favouring friends above other ratepayers. The involvement of a charitable trust and its use as a guarantor for loans to the business (as reported in HB Today) adds another layer of unsavoury practice that needs to be fully investigated.

  5. a correction to my last post on Ron Massey, the source of my comment on the charitable trust was stuff.co.nz (Dominion). The trust was the DTS.

  6. Tom, I note in today’s Dominion Post that the liquidator was required to have his lawyers contact the NCC as they had not complied with his request for the attachments to the 15,000 [Ed: pages of] e-mails sent by Massey on the NCC computer.

    It is heartening to read that the liquidator’s committee favoured continuing to explore legal options.

    It is all the more illuminating when the ” business brains” of the NCC, Pipe, Lutter and Wright all felt it was not a mojor issue. Not to be outdone Mr Dalton the spokesman for DAD and the chair of the Finance committee was quoted as saying “I don’t think it’s a major issue.”

    All of these representatives and their comments will be held in contempt, not only by the farmers who have lost nearly $5 million, and Napier’s Disability Training Services who have lost over $1.2million in assets and jobs on this council commercial gamble but by the Napier ratepayers mas a whole.

    Those that have discussed this egregious state of affairs with me are uniformly appalled. Not only with the possible legal action which could well cost the city millions but with the callous attitude of the Mayor and councillors toward our most disadvantaged who have not only lost all their assets but all hope for their future.

    It is in everyone’s interest to have this tested in the courts.

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