Industry Specialist To Help Coles Investigate Meat Department

The Age

Friday December 15, 2006

REBECCA URBAN, RETAIL REPORTER

COLES Group will call on a meat industry expert to scrutinise contracts and practices in its meat department.

The move comes amid concerns the retailer may be wasting millions of dollars tying itself to exclusive contracts with suppliers. As Coles investigates alleged misconduct and kickbacks in the troubled department, The Age has been told that staff had raised concerns with management that several contracts with meat suppliers were not in the best interests of the company and its shareholders.

Contracts under review are expected to include those with Melbourne-based meat processor Tasman Group, Primo Smallgoods and Australian Country Choice (ACC), all of which are believed to have been set up by supermarket executive Peter Scott, now sacked, between five and seven years ago.

One of Coles' more costly arrangements is with dedicated supplier ACC, which Queensland millionaire Trevor Lee owns.

ACC is paid on a cost-plus basis, meaning Coles finances the running of its entire operations - including equipment and capital works - as well as paying for cattle to be raised, killed, processed and packed.

ACC recently spent $85 million upgrading its Cannon Hill meatworks - for which Coles will reimburse ACC over the term of the contract.

Under the arrangement, ACC also receives an additional payment calculated on the equivalent likely return on the value of its assets if they were instead invested on the sharemarket. Sources claim this component of ACC's fee was more than $20 million last financial year.

ACC chief executive David Foote was unavailable for comment yesterday.

Coles insiders are concerned that the investigation, sparked by Mr Scott's sacking, is being handled by auditors without expertise in meat industry contracts.

Coles spokesman Scott Whiffin has repeatedly refused to name an external investigator brought in to help internal investigator Ian Seed.

"All I can say is that we're going through a thorough investigation," Mr Whiffin said. However, the probe is believed to be in an initial phase and Coles will involve a meat industry expert later.

Mr Scott, who ran the merchandise division for supermarkets, was dismissed for breaching Coles' code of conduct.

The Age has since revealed that he acquired a million-dollar bayside apartment from Tasman Group owner Giuseppe Catalfamo. Tasman is Coles main supplier of meat in Victoria and Tasmania.

Other members of Coles' meat department have since been revealed to have had close links with suppliers.

The latest person is a part-time employee in the livestock department.

Investigators are believed to be looking at family links between Debbie Fechner and a Victorian-based transport company, Fechner's Transport, which Ms Fechner's father is believed to own and run.

The company is also believed to have supplied livestock carting services for the supermarket.

© 2006 The Age

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