Press Release – Commerce Commission
Kenneth James Ross, the organiser of the failed air and car show Wings and Wheels over Waikato, was sentenced to nine months home detention and 200 hours community service in the Hamilton District Court today.Wings and Wheels over Waikato organiser sentenced
Kenneth James Ross, the organiser of the failed air and car show Wings and Wheels over Waikato, was sentenced to nine months home detention and 200 hours community service in the Hamilton District Court today.
Mr Ross was found guilty of five breaches of the Crimes Act and five breaches of the Fair Trading Act in Hamilton District Court in November 2009 after a three and a half week defended hearing. The charges were laid following a joint investigation undertaken by the Commerce Commission and the New Zealand Police and related to various false and/or misleading claims made by Mr Ross to Waikato Regional Airport Authority (Hamilton International Airport), corporate sponsors and consumers in the planning and promotion of the proposed airshow.
The false or misleading statements related to claims made by Mr Ross that he had:
secured the exclusive broadcast television screening rights for the mini series Piece of Cake about a spitfire squadron in World War II, when this was not the case;
engaged a high-profile USA-based air acrobat team to be part of the airshow, when the team had not been secured for the event;
membership of the International Council of Airshows (ICAS), when he did not; and
sold more tickets than had actually been sold.
Mr Ross was also charged with misleading consumers by altering the terms and conditions on the airshow’s website relating to refunds.
In sentencing Judge Robert Spear noted that although Mr Ross was genuine in his attempt to stage an airshow, he was out of his depth and had tried to bluster his way through when he got into trouble. Judge Spear imposed what he called a stiff sentence, in part to reflect the damage that Mr Ross’s conduct has caused to public confidence in similar events, but also to act as a deterrent to others. Judge Spear further noted that if refunds had not been made to ticket holders, Mr Ross would have faced a prison sentence.
“Consumers need to be able to trust that claims made in promoting such events are accurate so that they can make their plans in the secure knowledge that the event will take place as described. Many people were excited by the possibility of this large-scale North Island-based event and not only purchased tickets but made other commitments such as accommodation and travel plans. Despite getting their ticket money refunded, many of these people were still left out of pocket by the event not taking place,” said Greg Allan, Commerce Commission Fair Trading Manager, Wellington.
“Likewise, the nature of the New Zealand business community is that many deals are undertaken on the basis of mutual trust and confidence. In this case, a number of businesses, small and large, entered into arrangements with Mr Ross, trusting the claims he made. Those businesses have now lost substantial amounts of money and by imposing this sentence the court has sent a strong message that dishonesty on this scale in business dealings will not be tolerated,” said Mr Allan.
An investigation was initiated by the Commission in early 2008 after consumers raised concerns over aspects of the air show’s promotion. In March 2008, the Commission successfully applied for court orders which ensured that ticketholders’ funds were protected, pending the determination of the court. The court order also prevented Mr Ross and the three associated companies from any further dealings with those assets. Subsequently, approximately $500,000 was repaid to affected consumers.
As the investigation progressed, the serious nature of the offending meant that it was appropriate for the New Zealand Police to become involved.
“The Commission is very pleased with the outcome. This case demonstrates the value of two enforcement agencies working closely together to achieve a successful result. While the Fair Trading Act does allow for significant fines to be imposed on offenders, the possibility of imprisonment if found guilty under the Crimes Act should act as a strong deterrent to anyone contemplating gaining a business advantage based on falsehoods,” said Ms Morrison.
Wings and Wheels over Waikato
Promotion and ticket sales for an event called Wings and Wheels over Waikato began in 2007. The event was set to take place at Hamilton International Airport on 7-8 March 2008 but was postponed indefinitely in late February 2008. It has not to date been held.
In March 2008 the Commerce Commission obtained a court order freezing the assets of three associated companies – Hawker Holding, airshow.co.nz – Media Limited, airshow.co.nz Limited
– and Kenneth James Ross.
The court order also prevented Mr Ross and the three associated companies from any further dealings with those assets, pending the determination of the court.
In August 2008 the Commerce Commission and the New Zealand Police jointly laid Fair Trading Act and Crimes Act charges against Kenneth James Ross in the Hamilton District Court.
In July 2009 the Auckland High Court confirmed that the money paid for tickets to the postponed airshow Wings and Wheels over Waikato was being held on trust by the airshow’s organisers and that the money should be used to pay refunds to entitled ticket holders. This cleared the way to begin a process to refund eligible ticket holders.
In August 2009 following a court ruling on the process, all applications and correspondence regarding refunds for Wings and Wheels over Waikato ticketholders were submitted to Insolvency Management Limited, liquidator of Mr Ross’s companies involved in the promotion of Wings and Wheels Over Waikato, have spent the $500,000 frozen air show funds refunding ticketholders.
On 25 November 2009 Judge RLB Spear in the Hamilton District Act found Kenneth Ross guilty on five charges under the Crimes Act and five charges under the Fair Trading Act.
The charges relate to:
(1) In late 2006 Mr Ross made a false statement with the intention to deceive to Hamilton International Airport that he had secured the exclusive television broadcasting rights to the television mini series Piece of Cake when he had not;
(2) In brochure advertising distributed through newspaper inserts in late 2007, there was an false statement with the intention to deceive that Mr Ross had secured the participation of a US jet aerobatic team when that was not the case;
(3) In an air show update distributed in January 2008, Mr Ross made a false statement with the intention to deceive that he had sold $1.15 million in ticket sales when sales at that time were less than half of the dollar figure stated;
(4) In a January 2008 email to the Good Water Company Mr Ross made false statements with the intention to deceive as to the amount of gold pass and family priced ticket sales; and
(5) From late 2006 through to late 2007, Mr Ross used the International Council of Air Shows (ICAS) logo on letter head and business cards with the intention to deceive as he was not a member and had no association with the organisation.
Mr Ross was convicted of charges under the Fair Trading Act similar to the Crimes Act and one relating to changing the terms and conditions on the website of airshow.co.nz in January 2008, where Mr Ross attempted to mislead ticket holders as to a refund in the highly likely event that the air show would not proceed.
Section 242 of the Crimes Act
False statement by promoter, etc
(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent—
(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or
(b) to deceive or cause loss to any person, whether ascertained or not; or
(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.
(2) In this section, false statement means any statement in respect of which the person making or publishing the statement—
(a) knows the statement is false in a material particular; or
(b) is reckless as to the whether the statement is false in a material particular.
Fair Trading Act
Breaches of the Fair Trading Act may result in prosecution in court. Companies found guilty of breaching provisions of the Fair Trading Act may be fined up to $200,000 for each charge. Where more than one charge is laid, the court may impose a fine greater than $200,000. Only the courts can decide if a representation has breached the Fair Trading Act.
Section 11 of the Fair Trading Act
Misleading conduct in relation to services
No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of services.
Section 13 of the Fair Trading Act
False or misleading 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 or services,—
(b) make a false or misleading representation that services are of a particular kind, standard, quality, or quantity, or that they are supplied by any particular person or by any person of a particular trade, qualification, or skill; or
(f) make a false or misleading representation that a person has any sponsorship, approval, endorsement, or affiliation.