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Invercargill-based Silberhorn (now Gateway Solutions Ltd) and sole director Ian Carline, whose products were endorsed by Sir Bob Charles and the late Sir Colin Meads, came before the Dunedin District Court yesterday after the company admitted 26 charges of misleading conduct under the Fair Trading Act and both parties pleaded guilty to one of failing to supply information to investigators.
The guilty pleas came in 2017 - on the eve of an eight-week trial - but Carline, a former Act New Zealand candidate, disputed some of the allegations made by the Commerce Commission.
More than a year ago, Judge Kevin Phillips heard evidence on those contested points and sentencing hearings have been repeatedly adjourned, until yesterday - four years since charges were laid.
Submissions were not completed yesterday and sentencing is expected to conclude today.
Prosecutor John Dixon QC said the deer-velvet deception was clearly deliberate in relation to 22 batches of the product from between 2011 and 2015.
That involved 11 million capsules with a retail value of $5 million.
The disparity in the deer-velvet content stated, versus what was actually contained in the supplement, could have resulted in a $1.2 million gain for the company.
Carline will apply for a discharge without conviction, which was opposed by the prosecution.
"Senior management ... knew the product was labelled as containing capsules with a certain weight of deer velvet powder when in fact the company was directing its manufacturers to produce capsules with less deer velvet than specified,'' he said.
The shortfall was made up with carob, Mr Dixon told the court.
"Doing so generated an unlawful profit,'' he said.
Sportsvel, as promoted by Sir Bob, was advertised as containing 250mg of deer velvet but sometimes contained as little as 180mg, the court heard.
Despite the mislabelling, Carline said the altered product was twice as effective.
During last year's hearing, he gave evidence about the methods he used for testing his supplements.
The defendant said he and Sir Colin would act as "guinea pigs''.
Carline told the court he varied the dosage until he gave himself nose bleeds.
"Consumers were exposed to an unscientifically-tested product,'' Mr Dixon said.
He also outlined Carline and his company's continued attempts to ``obstruct and frustrate'' the Commerce Commission's investigation, by failing to provide relevant documents for the investigation.
The defendant was originally asked to hand them over before a compulsory notice was served in September 2014.
"It's obvious he took an obstructive and hostile approach to his dealings with the commission,'' Mr Dixon said.
Carline, the court heard, believed there was a high-level conspiracy against him.
In 2015, charges were laid and investigators searched the Silberhorn premises as well as Carline's homes, where they found documents that had been deliberately removed from the business headquarters, Mr Dixon said.
He suggested the court should impose a fine on the company starting at $425,000 and on Carline about $8000, before mitigating factors were considered by Judge Phillips.
Counsel Judith Ablett-Kerr QC said the errors her client made were not deliberate.
The charges that alleged Carline personally intended to mislead the public had been withdrawn, she said, so it was improper the prosecution now asked the judge to infer such a fact.
Silberhorn and Carline must be dealt with separately, she stressed.
Ms Ablett-Kerr will continue to address the court today.
The Commerce Commission is seeking more than $15,000 costs from the defendants, which it said would be a tiny portion of the total bill it incurred.
- 4.5 years of offending
- 22 batches of product involved
- 11 million capsules
- $1.2m potential commercial gain
- $5m retail value of affected batches