Commerce Commission action against false invoicing resulted in the highest total fine to date under the Fair Trading Act, when a company director and his four companies were fined a total of $130,000 today.

The North Shore District Court had previously found Ashley Guy Rhodes, Zennith Publishing Limited, Debson Holdings Limited, Summit Publications Limited and Pana Publications Limited guilty of breaching the Act. Mr Rhodes and his companies were sentenced today.

The companies were fined $5,000 on each of 22 charges and Mr Rhodes $10,000 on each of two.

Judge Gittos said the fines he imposed on Mr Rhodes were double those he imposed on the companies because Mr Rhodes had been "hiding behind a corporate facade" and engaging in a "carefully contrived deliberate ploy of deception".

Commission Chairman Peter Allport said that he was delighted with the result.

"Mr Rhodes and his companies set out deliberately to make money by issuing false invoices for advertising that had never been ordered.

"The companies were reluctant to disclose their physical location to the public. They used different phone numbers and postal addresses for each of the companies, although they all operated from the same address - Mr Rhodes home. Telephone numbers listed in some of their publications rang only at telephone exchanges, from where they were diverted to Mr Rhodes' home.

"Mr Rhodes and all the companies' sales people worked under false names.

"Mr Rhodes' evidence in Court established that only one of the 11 magazines published by the companies was subscribed to.

"This was a well organised operation that deliberately falsely represented that advertisements had been agreed to when they had not, and then deliberately and skilfully waged a campaign to secure payment."

Examples of the tactics used included an old peoples' home being pursued by debt collectors, small businesses being taken to the Disputes Tribunal, and people being sworn at, personally abused and threatened in attempts to obtain payment for advertising that had not been ordered.

Typically the advertisements had previously been published in other publications, including the Police Association Handbook and the Yellow Pages.

Mr Rhodes would copy the advertisements and distribute them to his salespeople who would then telephone the advertisers. Mr Rhodes would personally follow up these phone calls be either sending a fax or telephoning the advertiser.

"False invoicing costs legitimate publishers as well as advertisers," Mr Allport said. "Advertisers pay out hard-earned money for what is no more than a scam. Once they realise this, they are on guard and reluctant to advertise in legitimate publications."

While the Commission has taken considerable successful action against false invoicing, the best protection is for businesses to not pay for advertising that they did not authorise or were misled into authorising.

"Business people must understand that there are people who will set out to deliberately rip off their businesses," Mr Allport said.

"To counter the threat of false invoices they must have effective systems for ordering goods and services, checking that was ordered was received and authorising payments," Mr Allport said.

Background

Magazines published by Zennith, Debson, Summit and Pana:

1. Alive

2. Community Health & Hygiene

3. Environmental Farmer

4. NZ Road & Child Awareness

5. Safeact

6. Child Safety

7. Construction

8. NZ Kids & Traffic

9. NZ Road & Safety

10. Child Health

11. NZ Education & Safety

From the Court's reserved decision: "The defendants' livelihood is derived from the sale of advertising material in these publications. The evidence did not extend to provide the Court with any reliable information as to the extent of the circulation of any of these magazines, although it was established from the evidence of Mr Rhodes that only one of them, namely the Construction magazine, was subscribed to."

From the Fair Trading Act: "13. False representations - No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods and services

(c) falsely represent that a particular person has agreed to acquire goods or services."

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