Where is the line between lavish but legitimate corporate hospitality, and kickbacks for contracts?

Construction/Roading contractor relationships were corrupt

New Zealand’s highest profile corruption case in recent times concluded in early 2017 with a 5-year prison sentence for the recipient of the lavish gifts and hospitality, a senior manager at local Council-owned Auckland Transport, and 5.5 years for the bribe-payer.

The High Court defended trial was a complex case, conducted over 7 weeks with almost 40 witnesses. It exposed a contest between what might be thought of as acceptable commercial conduct to develop business relationships and what was simply corruption of a person in charge of awarding significant roading contracts funded from the public purse.

Mr Borlase was one of two directors of a roading engineering and construction company, Projenz. Mr Noone had known Mr Borlase for a long time, and acted as a consultant to his business, before he then moved into senior Council and related public service roles. It was as the relationship evolved and deepened in those roles that Mr Borlase and Mr Noone came to ultimately each face charges under s 105 of the Crimes Act – bribery and corruption of an official.

The charges spanned a 7-year period, from 2006 to 2013, during which Mr Borlase’s company routinely paid monthly “consulting services” invoices issued by public servant Mr Noone. The Court concluded these were a sham, and there was in substance no consulting service provided.

The Court also analysed and (for the most part) rejected a litany of receipts and invoices for lunches, dinners, hotels, travel and electronic devices, suggested to be no more than “standard industry business expenses”.

As the Crown prosecutor memorably said during sentence submissions, the defendants characterised the conduct as “… over-exuberance and misguided business behaviour, but essentially OK. But this isn’t shoplifting; this isn’t misappropriation; this is offending that goes to the heart of New Zealand’s public service and its ethic”.

During the 7 years in question, Projenz grew from a modest road maintenance contractor barely turning a profit, to a business with $3.8M per annum profit. That was derived largely from Council/Auckland Transport contracts awarded while Mr Noone held those senior roles.

Types of benefits paid to officials

The bribery and corruption charges related to three main types of benefits, totalling around NZ$1.2 million over 7 years:

  1. Payment by Projenz of Mr Noone’s monthly invoices said to be for consulting services Mr Noone provided. The defendants said that genuine consulting services were provided by Mr Noone throughout this period. But these were found to be a “sham” and the payments corrupt.
  2. The provision of benefits to Mr Noone, such as travel, accommodation, computer tablets, phones, meals at fancy restaurants. The Crown said these went beyond the “usual courtesies of life” and were corrupt. The defendants argued these were either normal incidences of marketing and relationship building with Mr Noone (and within a “culture of collaboration” that was being encouraged at the Council and Auckland Transport), or otherwise provided in connection with the consultancy services, and therefore not with Mr Noone’s official role. Some of these elements, such as lunches and travel to attend industry conferences, were found to be acceptable; most were not.
  3. A third set of charges, against Mr Borlase only, concerned provision of similar benefits to another person in the Council department, Mr George. He had earlier pleaded guilty to acceptance of bribes, and as part of his sentencing process agreed to give evidence against Mr Borlase and Mr Noone in this later trial. Mr Borlase said that these were again normal incidences of marketing and relationship building with Mr George (within a culture of collaboration with the infrastructure funding body) or were otherwise provided on compassionate grounds, without any intent to influence Mr George.  The judge decided contrary to that, and it is likely Mr George’s own evidence for the prosecutor was crucial.

The Court noted that “happily for New Zealand’s international reputation, there is a relative dearth of case law under these provisions.”  And clearly, this Borlase case now adds significantly to local anti-corruption jurisprudence.

The Court emphasised that, despite the ordinary meaning usually given to the words “bribery” and “corruption”, the Crimes Act ascribes different, and less pejorative, meanings to them. As a result, the legislative offence is framed in broad terms. In particular, the offence does not require:

  1. any dishonesty on the part of the official receiving the benefit or the person providing it;
  2. any improper action to be carried out on the part of the official concerned; or
  3. that the person providing the benefit intended to influence the official to carry out an improper act.

An earlier Supreme Court case was alive to the fact that the wide scope of s 105 carries a risk of criminalising activity that involves unexceptional token gifts or other benefits. So it allowed a de minimis exception for such minor gifts or “the usual courtesies of life”.

However, the extravagant list of benefits provided by Projenz in this case went well beyond the scope of that exception. Fitzgerald J made a careful analysis of the detailed circumstances of gifts and payments for things such as: attending international conferences, international travel and holidays for families of Mr Noone, iPads/iPhones for family members, presents of wine, whisky, lunches and dinners, payment of personal telephone bills, hotel rooms, and taxi travel.

From looking at the scale and nature of each element, it is possible to draw some guidance from this detailed section of the judgment as to what might be considered acceptable gifts if provided only occasionally. Alternatively, it indicates where to draw the line such that the extensive nature of these benefits meant they were provided by Projenz, at Mr Borlase’s instruction, with the intent to influence the public official in his role.

Consulting services were a nonsense

It was claimed that Mr Noone provided ongoing and substantial “business development” consulting services to Projenz during the period. By far the greater value of the alleged bribes were for regular monthly invoices issued by Mr Noone. Those invoices suggested he was spending 90-110 hours every month working on “consulting” for Projenz – in addition to his full time Council role.

But the Court concluded that Mr Noone did not provide such consulting services; and the defendants’ explanation was implausible and defied common sense.

Fitzgerald J gave six key reasons for those findings on the invoicing:

First, the sheer number and frequency of consulting invoices, rendered every month (bar one) over that 7 year period, and sometimes more than one invoice per month, was inherently implausible. They were for substantial sums, in the range of around NZ$8,000 to $10,000 per month, purporting to cover 90 to 110 hours every month in consulting services to Projenz, when still employed in senior management roles elsewhere.

Second, there was no documentary evidence of any of the output or “work product” of Mr Noone’s purported consultancy services over the whole 7 years. Mr Borlase said that all of the consulting advice was verbal – again, found to be implausible that there would be no documentary record of it.

Third, there were additionally two “standalone” consulting agreements, in 2010 and 2012, resulting in one-off payments of $200,000 (plus disbursements) and later $40,000 (plus disbursements). Those sums were paid in addition to Mr Noone’s regular monthly invoices, which continued in parallel with the payments under these standalone agreements. There was no discernible difference between the advice Mr Noone was said to have provided under these agreements and his regular monthly invoices. Again, there was no documentary evidence of any “work product.”

Fourth, there was a lack of knowledge by others in Council, or in contact with Projenz, of Mr Noone’s consulting service arrangement. A number of witnesses who ought to have known about it gave evidence that they did not. In addition, witnesses who said they were aware of Mr Noone’s consulting services had no first-hand knowledge of them; in fact, their sole source of knowledge was because Mr Borlase had told them. The judge did not find significant aspects of Mr Borlase’s evidence to be credible.

Fifth, Mr Noone and Projenz had both at important times failed to disclose the arrangements between them, including at times when disclosure was plainly required. For example, probity processes during specific contract tender processes would have necessitated disclosure, and Mr Noone in particular repeatedly failed to disclose to his employers his arrangements with Projenz. That was despite numerous opportunities to do so, and knowledge of his employer’s gifting and conflict of interest policies.  The judge felt able to infer from this lack of disclosure that both men knew the arrangements were wrong.

Finally, various examples of work that Mr Borlase said Mr Noone carried out were put forward to support the argument that substantial business development advice was provided to Projenz. The Court found that at the most, they show he may have carried out a very small number of “one off” items of work for Projenz.


Overall, this case has shone a deep spotlight into the details of unacceptable and consistently over-the-top corporate hospitality.  It also comes with two of the familiar themes that pervade many corruption cases: sham “consulting” work being used as a vehicle to make payments, and local government officials at risk in a position to influence significant contractual tender rounds.

The detailed Court judgment over 227 pages makes uncomfortable reading for those who would like to think New Zealand is a bastion of freedom from corruption, but a must-read for those keen to maintain vigilance at all times. New Zealand’s Serious Fraud Office as prosecutor will be pleased with the result, and has shown it remains sufficiently motivated and resourced to take on such challenging cases publicly and powerfully.


Where is the line between lavish but legitimate corporate hospitality, and kickbacks for contracts?
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