The fall, rise and fall of New
Zealand’s world famous tennis string manufacturer has been played
out in the New Plymouth District Court.

Sacked boss Frederick Schwacke is standing trial on 18 counts of
defrauding the Pacific Natural Gut (PNG) company in south Taranaki.

Much of Monday’s evidence at the defended hearing surrounded the
resurrection of the company under Schwacke, after it nearly went
broke in the early 1990s.

Schwacke is credited with saving the company from near bankruptcy
in the five year period from 1997.

He was also lauded for his invention of new machinery which
enhanced production and quality of the world class strings.

But following 2002, when Pacific won New Zealand’s prestigious
Exporter of the Year award, the business again dived to the depths
of insolvency.

Prosecution evidence suggests Schwacke tried to wreck the company
because of the lack of recognition and reward by Pacific Natural
Gut’s German owner, Pacific Entermark GMbH.

The crown also says Schwacke’s creation of shelf company, Serosa
NZ Ltd, was designed to siphon off Pacific Natural Gut’s money.

But counsel Susan Hughes QC said today Schwacke’s spending was
never covered up, nor secreted and her client had nothing to hide.

Ms Hughes said any money deposited into Serosa was either used to
pay PNG bills, or cover expenses.

The purchase of a Lexus (car) and other loans to Schwacke from
Serosa were itemised in company spreadsheets and were open and

Company accountant Brian Busing agreed with Ms Hughes, saying
Schwacke’s remuneration was not a true reflection of his skills.

“I don’t believe it (his salary) was fair compensation for the
work Mr Schwacke did for PNG. I suggested his salary should be more
in the vicinity of $45,000 not the $15,000-20,000 he received,” Mr
Busing said.

Mr Busing said he had initial concerns about Schwacke’s creation
of Serosa.

“He was promised a 25 percent interest in PNG, if he turned the
company around, repaid its loans and improved the quality of
production,” he said.

Schwacke has not yet received the promised share.

“I felt he created Serosa as a mechanism to get his rewards
earlier,” Mr Busing said.

PNG office manager Judith Urlich said shortly after Serosa’s
creation, PNG money began flowing into its bank account and PNG
began going backwards.

Mrs Urlich said she became concerned immediately following
Serosa’s creation.

A cheque from PNG client Aesculap for nearly $80,000 was
deposited in Serosa’s account the day the company’s registration was

She said PNG’s raw material bill (nearly $200,000) had not been
paid because Schwacke had instructed her to transfer most of PNG’s
money to Serosa.

Schwacke told Mrs Urlich it was nothing to worry about as a
credit for two thirds of the debt was to be generated because the
material was unusable.

Mrs Urlich said her suspicions were heightened further in late
2005, when a beef tissue order (pericardium) did not come through
from Germany as expected.

It was subsequently found that the order worth ten of thousands
of dollars had gone to Richmond’s to supply another company owned by

“Richmond’s (now Silver Fern Farms) said they would not supply
any more raw material to PNG until the bill was paid and the order
was sorted out,” she said.

The trial has been adjourned until November 24.