Wine exporter Peter Yealands has pleaded guilty to allowing his company to lie to authorities about adding to wine for export to Europe. Cathie Bell reports.
New Zealand’s sixth-largest wine exporter by volume has been convicted for “deliberate, deceptive and sustained breaches of the Wine Act” and its founder Peter Yealands has been convicted of allowing a cover-up of the adding of sugar to millions of litres of wine for export to Europe.
The company, a former director, and two former staff pleaded guilty in the Blenheim High Court on Tuesday to altering winemaking records and making false export certification statements between May 2013 and December 2015, when exporting wine to the European Union, which had sugar added after fermentation.
Yealands Estate Wines Limited pleaded guilty to five charges of making material omissions in written wine records and five charges of making false statements in export eligibility approval applications under the Wine Act 2003. Judge Bill Hastings sentenced the company to a $400,000 fine.
Former company director Peter Yealands, former chief winemaker Tamra Kelly and former general manager winery operations Jeff Fyfe also pleaded guilty to the charges. Judge Hastings imposed fines against Fyfe and Kelly of $35,000, and Yealands of $30,000, and lifted suppression orders preventing media reporting of the case.
The charges were about the deceit and deception involved, Ministry for Primary Industries compliance investigations manager Gary Orr said.
Peter Yealands was charged as he had been told by an employee of the offending, and had done nothing to stop it.
The employee, who later left the company, then contacted the ministry to alert them to the offending.
Orr said he commended the whistleblower, adding that anyone in any industry with concerns about processes or unlawful acts could bring them to the ministry.
The judge emphasised the wine was good quality, acceptable for sale in New Zealand and many other places, but had been made in a way that was not allowed in Europe.
However, the offending had been premeditated, he said.
Once a decision had been made to add sugar to the wine after fermentation, a decision had to be made to make a false statement. Another decision had to be made to alter or falsify winemaking records.
The offences involved conscious and active deception, Judge Hastings said.
It would affect the reputation of Yealands Estate Wines, the individuals, and the New Zealand wine industry as a whole, he said. This is the first sentencing under the law since it was enacted in 2003.
It could potentially undermine the New Zealand Government’s regulatory and assurance systems, and the trust they were held in by trading partners, the judge said.
Yealands is Marlborough’s largest wine producer and New Zealand’s sixth-largest wine exporter by volume. It is owned by electricity lines company Marlborough Lines, which is in turn owned by a community power trust, the Marlborough Electric Power Trust.
The purchase was controversial as it was outside the electricity industry and surprised the community and observers.
Yealands paid $22.8m
Marlborough Lines bought 80 per cent of Yealands Wine Group in June 2015, increasing to 86 per cent in 2016, and 100 per cent on 29 June 2018. Marlborough Lines managing director Ken Forrest told the Marlborough Electric Power Trust annual meeting a fortnight ago that the company had paid Peter Yealands $22.8 million for his remaining shares.
Judge Hastings said he took into account the clean history of all involved, none had criminal records, and all had pleaded guilty.
All three individuals left the Blenheim courthouse without commenting.
MPI’s Orr said it was a significant case which had been the subject of a thorough investigation by MPI investigators and a case which took almost two years to complete.
“Of greater significance is the fact it involves one of New Zealand’s leading wine companies that engaged in deliberate deception through the use of falsified records that were designed to deceive routine audit,” he said.
“The records relate to more than 6.5 million litres of wine, and around 3.7 million litres of affected wine was exported to Europe between May 2013 and December 2015.”
Orr said the outcome demonstrated the system worked and those who breached regulatory requirements would be held accountable.
“The aim of the Wine Act is to give consumers confidence that the products they buy are safe and true to label. These systems are in place to ensure New Zealand’s reputation as a world-leading wine producing nation is upheld.”
He said the offending was historic and significant changes had been made by the new owners of the company.
Yealands chief executive Adrian Garforth said Yealands cooperated fully with the MPI investigation as soon as the errors were brought to their attention in early 2016.
“The company had taken immediate and decisive action to remedy the issues well before any charges were laid.
“Systems we have introduced, training and comprehensive audits mean that our wines are fully compliant, and breaches of this kind will not happen again.”
Garforth said the events, which predated his appointment as chief executive, did not reflect company values and its desire to do everything to the highest possible standard.
“We have taken these charges very seriously. In any business errors can occur; what is important is the response and we believe we have done everything possible to ensure that this could never happen again.”
Peter Yealands was a director of Yealands Wine Group until 29 June this year. The Marlborough Lines annual report says he is a brand ambassador “when required”.
It has been a bad year for Yealands who has also been charged with breaches of the Resource Management Act: some for construction work that breached consent conditions; and others relating to grape marc discharge into water. Grape marc are the solid remains of the grapes after the juice has been squeezed out.
Yealands was convicted and discharged on five construction charges in August while Growco, the company he did the work for and which he is a director of, was fined $14,250, also for five charges. The grape marc charges are still pending.
Cathie Bell is a Blenheim-based journalist and wrote for Newsroom after attending the Blenheim court hearing. She has stood unsuccessfully twice for elected positions on the Marlborough Electric Power Trust.
* The article has been amended to make clear that Yealands Estate lied about exporting wine with added sugar, and that Peter Yealands knowingly allowed the practice to go on to make clear the distinction.
