• Munesh “Max” Kumar was sentenced for cartel conduct after an email revealed price rigging.
• Kumar received six months’ community detention and 200 hours of community work; MaxBuild Ltd fined $500,000.
• This case is the first prosecution under the 2021 law making cartel conduct a criminal offence.

New Zealand’s first-ever criminal court sentencing for “cartel conduct” resulted from an errantly sent email attachment revealing price rigging between two competitor construction industry businesses.

Details of the collusion were made public for the first time today as Munesh “Max” Kumar, the sole director of MaxBuild Ltd, appeared in the High Court at Auckland for sentencing.

If not for the accidentally attached spreadsheet, “it’s unknown how long this conduct could have gone on for”, Justice Michele Wilkinson-Smith said before ordering Kumar to serve a sentence of six months’ community detention and 200 hours of community work.

Kumar was spared a fine but only because the judge applied one instead to his company, which was also charged with and pleaded guilty to the same cartel conduct charges. The company was ordered to pay $500,000.

While cartel conduct has what the judge described as an unfortunately long history in New Zealand, Kumar’s case is the first one to have been prosecuted since a law change in 2021 making it a crime punishable by imprisonment. Before then, such matters were dealt with via financial penalties in civil court.

In a statement to the media released immediately after today’s sentence was announced, Kumar said he was unaware at the time that bid rigging had been made a crime or that what he was doing was even considered such.

“Looking back, I don’t even recognise myself at that time,” he said, describing himself as having “acted foolishly during a period of intense stress and pressure” caused by the 2020 and 2021 Covid-19 lockdowns that temporarily crippled the construction industry. “I have never even considered anything like this before – it’s just not who I am. It doesn’t reflect the values or conduct of either myself or the business prior to this.”

He has offered for his community service to include working with the Commerce Commission to give seminars educating the building industry on the law change - and the potential consequences of violating it.

Auckland businessman Munesh "Max" Kumar, the sole director of construction company MaxBuild Limited, appears in the High Court at Auckland for sentencing. He and his company have both pleaded guilty to cartel conduct via construction project bid rigging. Photo / Craig Kapitan

According to the agreed summary of facts for the case, Kumar colluded with another business to tailor their supposedly competitive bids on two NZ Transport Agency Waka Kotahi endeavours - the Northern Corridor Improvement project and the Middlemore Railway Bridge repair project - from January to May 2022.

His company, which employed 29 and had annual revenue of $5.1 million at the time of the offending, was started in Te Atatū, West Auckland in 2009 and had built a strong reputation over the years in the narrow niche of bridge maintenance and concrete repairs.

Kumar met with the director of the other company and asked him to bid 5-10% higher on the Northern Corridor project so that MaxBuild would get the contract, court documents state. To do so, he gave the other company MaxBuild documents showing what they intended to bid. After two bridge projects were awarded to MaxBuild - resulting in a profit of $161,775 - the two met again and agreed to continue the scheme, court documents state.

Under the new law, Kumar faced up to seven years’ imprisonment and a fine of up to $500,000 for the price-fixing arrangement, while his business faced a fine of up to $10m.

Kumar’s lawyers asked that he receive a sentence of community work rather than imprisonment or home detention. He was prepared to pay $500,000 in his own savings as reparation to the government agency but his offer had been ignored, defence lawyer Gary Hughes said. He asked that the business be convicted and discharged without a fine.

Kumar’s offending was prompted not by a desire for personal financial gain but instead a “desperate” and “foolish” effort to keep his business afloat during an unprecedented time in New Zealand’s history due to the Covid epidemic, the lawyer said, explaining that the main motivation was to help his employees keep their jobs.

He pointed to a letter of support from a past client who detailed how Kumar had alerted him after his company unwittingly overpaid by $62,000.

“That is a signal that this is not a man who has a history of dodgy business practices - in fact, just the opposite,” Hughes said, adding that while his client’s approach to the bids was misguided there was a good chance he would have won the bid anyway given the company’s reputation.

Crown prosecutor John Dixon KC asked for a more strict sentence of home detention for Kumar and a $2m fine for the company. It’s especially concerning, he said, that the bid-rigging was repeated a second time.

The second scheme was thwarted after Kumar alerted authorities to it as they were investigating the first case, according to the agreed facts of the case.

Justice Wilkinson-Smith agreed Kumar did not seem motivated by personal profit or “a desire to over-inflate the prices to a significant degree”. But the anti-competitive behaviour undermined the bidding process, damaged the construction industry’s confidence in the system and undermined the public’s confidence in the integrity of the Government, she said.

“It’s cheating the system,” she said, explaining that the sentence needed to include elements of deterrence and denunciation. “This was a huge error of judgement on your par ... The underlying motivations came from a good place, but the way you chose to deal with it was wrong and I think you now know that.”

The publicity surrounding the case and the damage to his brand will be part of that deterrent, she said. But she declined the defence request to allow the company to be punished with only a conviction and discharge instead of a fine. Kumar had hoped to show future clients that that outcome as a way of explaining that the business itself was less culpable and could still be trusted even if Kumar had made a serious mistake.

“I think that would be a poor precedent,” the judge said. “It is not appropriate that the company can essentially present this offending in a better light that it actually is for the purposes of future engagement with clients.”

At the same time, she said, the fine should not be so overwhelming as to result in the company going out of business.

The judge noted several times during the hearing that she had “seldom seen” such remorse in a defendant before. That sentiment was echoed by Kumar in his press statement after the hearing.

“I entirely regret my actions,” he said. “All I can say is that I acted foolishly, during a period of intense stress and pressure, which I very quickly regretted. I wish I could undo it.”

He added that he takes full responsibility.

“Nothing had prepared me for the situation we faced at that time and, clearly, I got it wrong and will face the consequences of that,” he said.

MaxBuild’s competitor, which has ongoing name suppression, has also been charged with cartel conduct. The company and its director have both pleaded not guilty and await trial.

Craig Kapitan is an Auckland-based journalist covering courts and justice. He joined the Herald in 2021 and has reported on courts since 2002 in three newsrooms in the US and New Zealand.