Importer alleges conflict of interest at NZTA
A car importer that faced allegations it flouted conflict of interest rules last year has hit back at the NZTA, accusing the regulator of having its own conflict of interest worries.
At the same time, other companies involved in the vehicle import trade are describing the current rules as, “a total shambles”. Some alleged that the Optimus Group used its heft to give it an unfair advantage over the competition.
The issue came to light last year when Newsroom revealed that companies in the Optimus Group had misled NZTA and the Companies Office about their ownership structure. This meant that neither regulator knew that companies including vehicle certifiers VINZ and JEVIC and importer Nichibo were in fact owned by the same company, going against NZTA rules.
It is international practice for a tester or certifier to be forbidden from having a financial stake in any product that they certify. This is meant to prevent products from passing a certification when they shouldn’t. In New Zealand, it had been legal to have a conflict of interest so long as NZTA was satisfied such a conflict was managed.
But after the Optimus Group controversy, NZTA announced rule changes that would make any conflict of interest impossible, making companies structured like the Optimus Group’s impossible. NZTA sees the “current process as a potential risk to safety”.
The changes were controversial at the time and Optimus hired top public law firm Chen Palmer to push for an extension to submissions on the changes.
Submissions are now closed, and some have been released to Newsroom under the Official Information Act.
A submission from VINZ, one of the companies in the Optimus Group, said it believed NZTA itself had a conflict of interest because a member of its board was also on a director of a company that stood to gain if the rules were changed.
Mark Darrow, who sits on NZTA’s board, had been on an advisory board from the Armstrong Motor Group, which imports new cars, which VINZ alleges would “directly benefit from any interruptions to the export of used vehicles from Japan”.
Darrow was also a director of MTA Group Investments, which owns 40 percent of VTNZ, another testing company and competitor to VINZ. The VTNZ stake is held through another company, Dekra NZ. Both of these conflicts were declared to NZTA.
Communications released to VINZ under the Official Information Act show that Darrow played an active role in pushing for the rule change. An email from Robert Brodnax, NZTA Senior Manager, said that “The Chair [then Michael Stiassny] and the Chair of ARA (Darrow) want this policy changed and changed as soon as possible”.
This email was sent on September, 17 when Darrow was still on the MTA board. The Companies Office said his departure from that board took effect on October 1, 2018.
Another email from Darrow himself said: “the process of certifying vehicles for entry into New Zealand must be free from any conflicts of interest [including] common ownership in elements of the value and supply chains”.
VINZ said this suggests that Darrow himself had failed to manage his conflicts. However, interim NZTA chair Nick Rogers said the agency was satisfied the conflict was managed because Darrow had left these board positions.
“The NZTA board is satisfied that Mr Darrow has declared all of his interests appropriately at all times, and that he took appropriate action to avoid any actual or perceived conflicts, including resigning his directorship of the MTA in 2018”, Rogers said.
In an exit interview with MTA’s magazine, Darrow noted that one of his reasons for leaving was because he “could see emerging conflicts with his NZTA role”.
Transport Minister Phil Twyford backed the NZTA.
"I’m satisfied Mr Darrow declared all of his interests appropriately given he resigned his directorship of VTNZ before joining the NZTA Board and resigned his directorship of the MTA in 2018," he said.
Industry turns on Optimus — and more conflicts of interest
Members of the vehicle industry have raised concerns with the Optimus Group’s structure. They argue that the fact that the Group contains a company at each stage of the import process gives it an unfair advantage on the competition.
A submission from the Magnum group, which owns several auto-firms in Christchurch, said staff working for Fasttrack Compliance had been advising people in Christchurch that vehicles imported by Nichibo needed to have their certifications issued by Fasttrack Compliance centres in order to qualify for set pricing options.
The submission alleges this gives the Optimus Group an advantage as the companies working in concert are able to guarantee a set price for vehicle imports, which other firms were unable to achieve.
2 Cheap cars said Optimus flouted the conflict of interest rules: "It is a total conflict when the person managing the sales company is also the boss of the person running the inspection business."
It said the structure used by the Group “needs to stop ASAP”.
“This is a total shambles in regards to what is being allowed."
For its part, Optimus says vehicle safety has not been compromised. Documents released from NZTA back this up, noting that spot checks carried out between October 2017 and March 2018 failed to identify any safety issues.
VINZ Chief Gordon Shaw told Newsroom, the accusations were baseless.
"These submissions represent the opinions of the submitters, who offer no evidence to back their views up," he said.
Future of changes could be in doubt
Most of these documents relate to a period in which Michael Stiassny was chair of NZTA’s board. Known as a reformer and a disruptor, Stiassny left his three-year appointment as chair after just one year in the job.
Stiassny had been focused on tightening up NZTA’s role as compliance regulator by enforcing rules against companies that failed to meet safety standards.
Emails released under the Official Information Act show this approach was carried over to Stiassny’s approach to conflict of interest rules.
It is unknown how NZTA will respond to the submissions on the rule changes should the focus of the Agency change following Stiassny’s departure.