A company director, Peter Ian Dey, was convicted and fined in the Auckland District Court yesterday when he was sentenced for his part in his company issuing false invoices for advertising.

Judge J. Cadenhead said that he would have fined Mr Dey and the company, PKL Publishing Company Limited, considerably more than the total of $5,000 but for their financial difficulties. The company is in liquidation and Mr Dey is unemployed. Judge Cadenhead said that the fines are not indicative of what is appropriate for such breaches of the Fair Trading Act.

Judge Cadenhead rejected an argument from Mr Dey that he should be discharged without conviction because but for the Commerce Commission's investigation and prosecution, his company would still be in operation.

Commission Acting Chairman Peter Allport said that this was the first of seven false invoicing cases the Commission is taking to go through the courts.

The practice involves salespeople from some publishing companies contacting businesses and falsely claiming that the business had agreed to advertise in a magazine. Such claims breach the Fair Trading Act, which prohibits false claims that anyone, has agreed to acquire goods or services.

If the business disputes the false invoice, some publishers - and this was a tactic used by PKL - employ a debt collector to have the account paid. But the "debt" had either not been incurred at all, or the business had been misled into agreeing to advertising it had not ordered.

PKL sold more than 6,000 advertisements in magazines including the Nelson Marlborough Farmer and the Bay of Plenty Farming Annual. It operated by having its salespeople and Mr Dey telephoning businesses around the country and sending them documents it would call a "confirmation slip/tax invoice" or a "statement of account".

The court found that these documents were representations that businesses had agreed to buy advertising and that where those representations were false, they were breaches of the Act.

Mr Allport said that the Commission will continue with its cases against other publishers allegedly issuing false invoices, and will take further action if necessary.

However, the best protection is for businesses to be aware that such scams exist and to take precautions against them. They must have standard efficient procedures for ordering goods and services, checking that was ordered was received, and approving payments.

When threatened with debt collectors or legal action, there is often a temptation for businesses to pay on false invoices. The cost is usually about $400 to $600, and the time and effort required to deal with the threats is considerable.

However, that is what the companies issuing false invoices rely on to make money. Each individual business loses a few hundred dollars. But the company behind the scam makes that amount again and again.

The Commission has published guidelines explaining the tactics used by false invoicers and suggesting ways of dealing with them. The guidelines are available free of charge from Commission offices.

Media contact: Fair Trading Manager Rachel Leamy

Phone work (04) 498 0908

Communications Officer Vincent Cholewa

Phone work (04) 498 0920

Commission media releases can be viewed on its web site www.comcom.govt.nz