Eight former Toll Group executives have lifted the lid on the levels of corruption at the logistics giant before, and after, Japan Post swooped in with a surprise $6.5 billion buy-out in 2015.
In the first of a three-part investigation, The Australian Financial Review has revealed a string of dodgy contract deals and criminal activities within the organisation.
The report says that no unit illustrated Toll’s problems better than the Global Express division.
The division oversaw the IPEC delivery business, which suffered a serious corruption problem, according to three former managers, who did not want to be named for fear of professional recrimination.
One of IPEC’s major transport contractors was the brother of a floor manager in an IPEC distribution centre. The contractor had changed his surname by deed poll, which meant that Toll executives didn’t realise the two men were related.
The delivery company allegedly charged 30 to 40 per cent above some other delivery companies, according to a former Toll executive.
When the company eventually discovered the relationship they referred the matter to the police, according to several ex-executives.
“The floor manager, who earned less than $100,000 a year, put his house up for sale and moved to Europe. Toll executives checked out the house on a real estate website, which showed it was listed for about $5 million, according to two former employees,” writes the AFR.
The story goes on to say that another delivery company had become an important contractor for Toll over several years and charged the company about $20 million a year.
A subsequent investigation by Toll revealed one of its directors had spent nine years in jail. Another, 15 years behind bars. One had set up the company within three weeks of being released. Their first and only client was Toll.
“Another contractor, which was charging above the regular market price, had subcontracted its deliveries to a motorcycle gang, which used Toll-branded trailers, driven by trucks, to transport drugs interstate, the investigation found.”
The contractor was cancelled on the spot and the police informed. A few weeks later, 23 IPEC-branded trailers caught fire in a paddock on the outskirts of Adelaide.
“You could be in a business a long time and not see that,” said one executive. “Everyone had their side hustles going on.”
Toll executives believed a criminal gang in a Melbourne distribution centre was stealing products to order, figuring the company would write off the relatively small losses.
Another problem discovered was a $5 million pallet ‘deficit’ owed by Toll for lost pallets, finds the investigation.
Every year, Toll rented hundreds of thousands of pallets from CHEP and Loscam. The wooden or plastic trays are used to transport and store goods.
When a truck arrived at a Toll warehouse with pallets, employees would sometimes pay the driver to steal the pallets, an internal investigation found.
When a shortage of pallets was identified on the company’s ledger, the employees would rent replacement pallets from a delivery contractor. Sometimes the same pallets that were stolen were leased back.
The scam could be repeated using the same pallets. The payments were split between the participants in the scheme, according to a former company executive.
The AFR reveals that at the time Toll used a recruitment program called Second Step.
Designed as a philanthropic project, Second Step placed former prison inmates and other people struggling to find stable employment in relatively well paid but low-skilled jobs in Toll warehouses and distribution centres. Some were on day release from prison, according to a former executive.
Meanwhile, Toll has warned that parent Japan Post has only guaranteed its debts until mid-2021 after recent revealing its annual net loss plunged six-fold to $685.3 million.