Ethics on agenda amid Woolworths kickback scandal

On Friday, Bill Harvey, the national buyer for coffee, tea and sugar for Woolworths, was detained by NSW Police at the company's Bella Vista headquarters, while, in Melbourne, a retail broker was arrested by Victoria Police over his involvement in the alleged kickback scheme.

Police are investigating claims that Mr Harvey and the retail broker took a percentage of a "promotional surcharge" of between 15 and 20 per cent to have products stocked by Woolworths.

The investigation into Mr Harvey began after an angry supplier wrote directly to Woolworths chief executive Michael Luscombe to complain about demands for cash payments. That letter sparked an internal investigation at Woolworths, which then contacted Victoria Police.

The company is now co-operating with a police investigation across three states. It is also examining every supply deal that Mr Harvey signed while employed with Woolworths.

BusinessDay has been unable to contact Mr Harvey for comment.

Amid the kickback scandal, Woolworths is demanding that its suppliers take part in a day-long ethical audit to ensure they comply with its policies on corruption, work conditions and pay.

Point one of the Woolworths ethical sourcing policy is titled "Bribery and Corruption" and states: "Suppliers shall not engage in acts of bribery and corruption and shall not falsify documents and records."

A Woolworths auditor can demand that a supplier answer questions and provide documents for review. According to Woolworths documents, at least six staff members from each supplier must be present during the audit.

If the supplier has fewer than six employees, then a majority of staff must attend. Any non-compliance with the audit can result in a company losing its right to supply Woolworths.

Several suppliers yesterday accused the company of hypocrisy, although none wished to be named, fearing their deals with Woolworths would be cancelled.

"This is all well and good, but who is auditing the people at Woolworths?" said one angry supplier to the supermarket chain.

The ethical audits began for Australian meat and poultry suppliers in September last year, while auditing of "private label trade partners" began last month and audits of suppliers to Woolworths' bakery and deli departments will begin in March.

Asked if the timing of the ethical audits was unfortunate, given the allegations of kickbacks, Woolworths spokeswoman Clare Buchanan replied: "Not at all.

"It is precisely because we do have such a strong commitment to ethical behaviour that we have black and white policies and take swift action to deal with any issue," Ms Buchanan said. "The fact that we have systems and procedures in place that help bring issues to light, is evidence of this."

The audit is conducted by a third party. "If the auditor ever uncovered any allegation against Woolworths then it would be escalated and investigated immediately," Ms Buchanan said.