More Saudi sheep saga costs likely as legal action threatens

Author
Nicholas Jones, NZ Herald,
Section
Business,
Publish Date
Thursday, 17 May 2018, 11:19AM
 Murray McCully was the National government's minister of foreign affairs when the Saudi sheep deal was reached. (Photo: Getty Images)
Murray McCully was the National government's minister of foreign affairs when the Saudi sheep deal was reached. (Photo: Getty Images)

Taxpayers could fork out more over the Saudi sheep deal – with the Government now facing legal action over the troubled project.

An Auckland-based company has started legal proceedings against the Ministry of Foreign Affairs and Trade (Mfat) in the High Court, the Herald can reveal.

That raises the possibility of more costs related to the controversial, and still unfinished, project.

The company, Laurium Asset Management, helped put the Saudi businessman who now owns the agrihub, Hmood Al Khalaf, in touch with the National Government.

However, it was left out of the eventual deal, and later wrote to Mfat asking why its intellectual property had been used as the basis for the tender.

Laurium has now started early-stage legal proceedings, with a conference scheduled at the High Court at Auckland this month.

An Mfat spokesman confirmed the legal action, but wouldn't comment further given the matter was before the High Court.

Laurium Asset Management director Graeme Leversha also declined to comment, saying company policy was to not confirm or deny any legal proceedings.

Taxpayer spending on the agrihub in Saudi Arabia was approved by the previous National government in February 2013 and the following year 900 sheep were flown over on Singapore Airlines.

The deal was made partly as an effort to secure a free trade deal with the Gulf States. Al Khalaf had lost millions of dollars after New Zealand banned live sheep exports for slaughter over animal welfare concerns in 2003, and ill-feeling over his treatment was identified as an obstacle to an FTA progressing.

Former Foreign Minister Murray McCully also said there was a risk Al Khalaf could take legal action. As a result, the deal saw a $4 million facilitation payment made to the Al Khalaf Group, and a further $6.5m allocated to create a farm on his land.

The project is unfinished because local authorities are yet to sign-off regulatory permits for a state-of-the-art abattoir, despite repeat efforts by the New Zealand Ambassador to get things moving. Progress on an FTA with the Gulf countries has stalled after fallout between Qatar and other council members.

About $10.3m had been spent on the project to date, with the remaining $1.170m relating to the abattoir delivery and installation.

A document dump by Mfat in 2015 included a September 15, 2013 letter from Leversha to then foreign affairs and trade secretary John Allen.

"Laurium Asset Management, Agricultural Estates and our partners have serious concerns regarding the matter of sensitive commercial information being used in the formation of the [agrihub] tender," Leversha wrote.

From September 2010 to December 2012 the group set up a consortium that worked on helping Saudi Arabia with sheep farming, Leversha stated, part of a wider plan to help secure Saudi approval to proceed with the Gulf states FTA.

The group set up meetings between Al Khalaf and McCully in both Wellington and Auckland, and Mfat had insisted the group would be contacted when a person responsible for the Saudi relationship was appointed.

That didn't happen and "we now find a tender process requesting participants to form a consortium and implement exactly what we had designed 17 months prior," Leversha wrote.

"Commercial IP relating to confidential documents and conversations has found its way to your ministry and has been used as the basis for the tender."

In response, Allen told Leversha that since Laurium's 2012 involvement "Government-to-Government-level" conversations had separately taken place.

"The ministry is satisfied that no intellectual property or confidential information belonging to Agricultural Estates or Laurium Asset Management has been used to develop that request for expressions of interest," Allen wrote.

When in Opposition now Trade Minister David Parker released a 2011 letter from Brownrigg Agriculture – a Hawke's Bay company that advocated on Al Khalaf's behalf and later won a tender to set up the farm – to McCully, written on behalf of Al Khalaf and warning he could seek commercial redress if the sheep trade wasn't resumed.

Former National Party president Michelle Boag was copied in, as she "has been in contact with both of us in her capacity as director of Laurium Asset Management".

Boag told media she had never been a director of Laurium, nor had she been contracted by the company or paid any money from it.

She said Leversha approached her and asked her to meet with Al Khalaf's business partner George Assaf. When McCully agreed to hear from Assaf, Boag said she put them in touch, and that was where her involvement ended.

In November 2016 Auditor-General Lyn Provost released her report into the expenditure of public money on the agrihub, finding no corruption but "significant shortcomings", including a lack of clarity around how the Government settled on the amounts to pay Al Khalaf.

Live sheep exports are currently a political issue in Australia, with the Opposition pledging to halt them after leaked footage from an export ship on which more than 2000 sheep died.

Timeline
February 2013: National Government approves proposal to spend millions on a Saudi businessman's farm.

October 2014: 900 pregnant ewes arrive in Saudi Arabia by airfreight.

Now: Abattoir permit still not granted by Saudi authorities, and legal proceedings started by a New Zealand company which says its intellectual property was used without permission.

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