A vine mess

Marlborough Lines took full ownership of the business in late June 2018, taking its investment to around $120m, buying out minority shareholders and injecting capital to buy more land.

The company, and Yealands himself, have continued to attract unwanted headlines. Yealands Wines and its founder were prosecuted by the Ministry for Primary Industries for falsifying export records, while Peter Yealands has pleaded guilty to polluting a stream with waste from winemaking, although the offending took place on land unrelated to the company.

The transaction with Yealands is often talked about in New Zealand corporate governance circles, with capital markets figures long scratching their heads at how a local utility company came to own a wine business. Many professional directors question the logic of the deal. Just months before the purchase was announced, Marlborough Lines said the board ‘‘has a strong preference for investing in electricity networks rather than other non-core investment options’’.

Wigley, the principal of Wigley Law, became involved in late 2018 after suppression orders lifted, revealing Yealands, its founder and two senior staff had been prosecuted for fraudulently falsifying export certificates to conceal the addition of sugar to wine destined for the European Union.

While Dew has played down the impact of the guilty pleas as inconsequential to the company, MPI said the charges had put the reputation of the industry at risk.

In early 2019 Wigley’s firm began publishing advertisements in the Marlborough Express, asking those with concerns about Marlborough Lines to come forward. Wigley now claims to be representing a group of mainly Marlborough residents, including experts in the wine, accounting and corporate governance fields.

In an interview with the Sunday Startimes, he said his clients were motivated by extracting good value from Marlborough Lines. They believed Marlborough Lines should not have bought Yealands in the first place, especially given the ‘‘limited’’ due diligence that was undertaken. And despite the claims of Marlborough Lines, the performance of Yealands since the purchase has been ‘‘modest’’; the excellent returns Marlborough Lines claims are rising land prices, while the company is losing money at a cash level.

They point to a payment of more than $330,000 to Marlborough Lines’ managing director Ken Forrest – representing backpay – as highly unusual and say it should be refunded.

Further, a settlement reached with Peter Yealands last year, in which it bought his remaining shares and agreed not to sue him for failing to disclose significant illegal activity before him selling them the company, saw him paid considerably more than he should have been.

Wigley said a plea to MEPT to commission a wide-ranging independent review of the events that led it to its current situation has been rejected.

Marlborough Lines has responded with dismissive comments about Wigley, describing his allegations as ‘‘wild’’.

Forrest told a business audience in Blenheim in March that over three years it had generated an ‘‘internal rate of return’’ of 26 per cent. ‘‘I think all of you, as business people, would agree that 26 per cent internal return is pretty good.’’

Forrest told the group the due diligence undertaken by Marlborough Lines was extensive, and the company’s track record showed its past investments – which also attracted opposition – had been successful. And he should know much about the company’s history; when Marlborough Electric became Marlborough Lines in 1993, he was

already managing director, having previously been general manager of the Marlborough Electric Power Board.

Wigley says he is refusing to name his clients on the basis that they are concerned about repercussions in their local community. For months MEPT used that stance to justify its refusal to release information to him, claiming it would only release the information to one of its consumers. Eventually, Smith attempted to break the impasse, demanding the information in his capacity as a local resident. When the trust took weeks to acquiesce to the MP’S request, he accused it of ‘‘playing silly buggers’’.

Wigley said the documents which MEPT ultimately released to Smith did not ease his concerns.

A lines company, especially one owned by consumers rather than private shareholders, should not have bought the wine business in the first place, Wigley’s clients believe.

‘‘The risk is too great, the businesses are too different. All of the senior professional directors, senior managers, very experienced [people] I’ve spoken to, have all said that [Yealands] was a very unwise investment.’’

He believes steps needed to be taken, including replacing the boards of the lines company and trustees on MEPT.

‘‘There is concern enough that the trustees and the directors should go and be replaced by a fresh set of trustees and directors who can review what’s happened in the past.

‘‘They want to see processes fixed, certainly look at whether the . . . governance structure is what works best for the Marlborough community,’’ Wigley said.