Powershell to add users to custom security groups - getting 0x80070005 error

The following powershell reads an xml file and adds users to custom SharePoint security groups.

If ([bool](([System.Security.Principal.WindowsIdentity]::GetCurrent()).groups -match "S-1-5-32-544")) 
{
  write-host "You are an administrator" 
}

RegisterSharePointSnapin

$xmlUsersFileFullPath = Join-Path (Get-ScriptDirectory) "xml-config/Users-In-Security-Groups.xml"
$xmlUsers = [xml](get-content $xmlUsersFileFullPath)
[System.Xml.XmlElement] $groupRoot = $xmlUsers.get_DocumentElement()
$tab = "`t" 

write-host "Adding users to the following groups..." -ForegroundColor Gray 

# Get the site and group names
$web = Get-SPWeb $inputSite
#$web.Name, $web.Title , $web.Url

foreach ($g in $groupRoot.group)
{
    [string]$groupLabel = $g.Name        

    if ($g.HasChildNodes)
    {

        $groupName = $web.SiteGroups[$groupLabel]

        foreach ($u in $g.user)
        {         
            #$gotUser = !([string]::IsNullOrEmpty($u))

            $user = $web.Site.RootWeb.EnsureUser($u)

            $user
            $groupName

            $groupName.AddUser($user)
            if ($error.count -eq 0)
            {
                Write-Host "$tab $u Added Successfully to $groupLabel" -ForegroundColor DarkGray;
            }
            else
            {
                Write-Host "$tab    $u Failed, not added to $groupLabel" -ForegroundColor Red;
            }

        }
    }
}

It works on 'my' machine but on the test farm I get the following error

Exception calling "AddUser" with "1" argument(s): "<nativehr>0x80070005</nativehr><nativestack></nativestack>"
At D:\Deployment\SharePoint\Deploy-Scripts\Add-Users-To-Security-
Groups.ps1:64 char:31
+             $groupName.AddUser <<<< ($user)
    + CategoryInfo          : NotSpecified: (:) [], MethodInvocationException
    + FullyQualifiedErrorId : DotNetMethodException

            domain\username01 Failed, not added to my-security-groupname

The output from the script confirms its running as an administrator, the $user and $groupName variables hold correct information. The logged in user is a user that has access to Central Admin and successfully runs other deployment scripts that add/remove sharepoint solutions.