New Zealand’s Auditor-General has confirmed that a Ministry of Business (MBIE) investigation is underway into government contracts signed with Fuji Xerox New Zealand (FXNZ), following the discovery of accounting irregularities in the company’s Australasian subsidiaries that overstated revenues by $450 million.
NZ First party leader Winston Peters welcomed what he describes as a “180 degree turn-around by the Audit-Office” and says that the Auditor-General is now “doing the right thing by examining in detail the contracts that the government has signed with FXNZ.
“Two months ago, the Audit-Office said there was nothing to see over Fuji Xerox NZ but two months on, and the Acting Auditor-General Greg Schollum has done something his suspended boss never did,” says Peters. [NZ Auditor-General Martin Matthews stood down while an independent review is held about his appointment].
Schollum says he’s considering bringing forward a review of government procurement after the discovery of “financial irregularities” at Fuji Xerox, which has an all-of-government contract.
However, he says he will wait for a Ministry of Business, Innovation and Employment investigation into the contracts to be completed before deciding whether he needs to act on the issue.
Japanese parent Fujifilm Holdings last month released a report by an independent committee which revealed "inappropriate accounting" in its New Zealand and Australia subsidiaries had overstated revenues by $A450 million.
Fuji Xerox's chairman Tadahito Yamamoto, deputy president Haruhiko Yoshida and directors, Katsuhiko Yanagawa and Jun Takagi, have all resigned. Neil Whittaker, the former high-profile MD of FXNZ and FXA, was paid more than $A1 million to leave his job after Fujifilm first uncovered the problem.
“They should look at these All-of-Government contracts with Fuji Xerox,” says Peters. “We hope they will get inside the deals to see what they entail and just how Fuji Xerox won its business from the taxpayer.
“One whistle blower told us that Managed Service Agreements signed by schools saw print volumes inflated in something sales staff called ‘hydraulicing’. With Fuji Xerox now doubling its termination fees per machine, it shows a definite hardening of attitude by that company. And if ‘sponsorship’ was a major selling point of Fuji Xerox into schools, the $247m write-down of ‘Sponsorship Cost’ and other matters by Fuji Xerox NZ’s forensic auditors, will likely punch holes in already stretched school budgets.
“Taxpayers want to know if what Fuji Xerox did to win business was both ethical and legal," says Peters. "Certainly, if senior sales personnel for a company that made tax losses could drive luxury European cars and run courses in Paris, it suggests otherwise."
MBIE has been asked to review the contracts with Fuji Xerox, and the auditor-general has met with officials from the ministry about the issue.
Schollum says All-of-government panels reviewing public entity procurement, which had been scheduled for 2018/2019, could now be carried out in 2017/18. "We are liaising with officials about that work and have told them that we intend to actively monitor MBIE’s consideration of the arrangements. We will consider what action we intend to take once we have considered the results of the work that MBIE is doing."
New Zealand’s Serious Fraud Office (SFO) said last month it intends to review the independent investigation committee's report.