Steel & Tube admits making misleading and false claims about its seismic steel mesh
Steel and Tube Holdings will be sentenced in the Auckland District Court in March after pleading guilty to 24 charges of false and misleading representations about it seismic steel mesh.
A number of steel companies were charged and Timber King and NZ Distributor have also pleaded guilty and will be sentenced next week.
NBR asked Steel& Tube for comment but the company had not replied by deadline and had also made no announcement to the NZ Stock Exchange, despite pleading guilty in August. It made a stock exchange disclosure when it was first charged. The company had set aside $4.6 million for the case in its accounts.
The Commerce Commission filed the charges against Steel & Tube nearly a year ago after it started an investigation in August 2015 after a complaint was laid about the steel mesh, which is used in housing and driveway construction, not meeting the standards required in New Zealand.
Steel & Tube made misleading representations on its batch tags, batch test certificates, advertising collateral and website that SE62 was 500E grade steel when it was not.
The commission signed enforceable undertakings in late April 2016 with Steel & Tube that the company would only sell SE62 500E grade steel mesh that passed specific independent testing. The undertakings were also imposed on other companies.
The charges were filed under the Fair Trading Act, relating to conduct between March 1, 2012, and April 6, 2016.
Misrepresenting a product as complying with the standard when it doesn't is a breach of the Fair Trading Act for which companies can be fined up to $600,000 per offence.
The commission has also laid charges against another company but a spokeswoman says no further information can be provided as the case as it had not had a first call in court yet and the company could apply for name suppression.
Steel & Tube said in a statement to the Stock Exchange earlier this year it had been co-operating with the commission throughout the investigation and was working with the regulator to reach an appropriate resolution of the charges.
Lawyer Adina Thorn who is preparing a class action against Steel & Tube says the revelation Steel & Tube has pleaded guilty is consistent with what she has been saying for months about steel mesh 500E – it’s a nationwide issue and this is why litigation funder is supporting the action.
Since news broke about the commission’s charges the company’s chief executive, Dave Taylor, has left the company after eight years in charge and two other top managers have resigned.
At the company’s recent annual meeting shareholders approved a $155,000 hike in directors' fee pool to $575,000.
In its advice to members before the meeting, the NZ Shareholders’ Association noted the company has spent $80 million on acquisitions in recent years “for little discernible positive outcome,” that in the past three years revenue is up just 2% and operating earnings are flat while the bottom line has fallen 7%.
“At the same time, return on equity is down 26%, gearing up 30% and dividends down 16%.”
But it also noted the significant changes in management and to the board.
The company is being restructured into two divisions, distribution and infrastructure
As well, the company has had serious quality certification problems resulting in prosecution and inadequate IT systems “and you get a picture of a company on a slippery slope,” the shareholders association said.
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