Health fraudster had 20 cars
It was too unbelievable – even for Shortland Street – but another case highlights the potential spread of New Zealand's fraud and theft problem – which we choose to hide.
Two men defrauded Otago District Health Board of almost $17 million – averaging $50,000 a week between them over six years.
A few hundred hip replacements must have been lost in that process.
Michael Swann, 47, the health board's chief information technology officer, took about $15m.
His 20 cars, bikes and boats plus two holiday homes were auctioned after an order to repay the Crown almost $9.5m.
He was jailed for nine years and six months. His accomplice friend Kerry Harford, 48, a Queenstown surveyor, got four years and three months. They had used 198 invoices from a make-believe company formed by Harford to charge the board $16.9 million for IT-related work that never happened.
As the bag man, Harford got 10 per cent and paid the rest to Swann-related companies. All this with the health board trying to cut spending.
Health Minister Tony Ryall sacked board chairman Richard Thomson as accountable for the fraud undetected over six years.
That massive rip-off gave a 2011 KPMG barometer of New Zealand fraud in 2011 an authoritative ring to it. The barometer – quoted freely in this column – showed no let-up in large frauds at that stage.
Court and business pages in the 12 months since have been awash with clear evidence that the massive corporate rip-offs continue.
KPMG New Zealand head of forensics Stephen Bell cites "fraud as a constant and serious threat to all sectors of the New Zealand economy, including commerce, governments, non-profit organisations and individuals".
He says the value of fraud committed last year in New Zealand was the highest ever, mainly through Kiwis defrauding financial institutions. New data shows the type of fraud being committed has changed compared to previous years, with super frauds hitting financial institutions as well as investors.
The latest six-monthly report from KPMG accounts and auditors shows the value of large fraud cases in the second half of last year nearly tripled from the same period in 2010 – from $100m to $279m.
Although cases through the courts dropped from 30 to 24, "super frauds" dominated the totals.
Two of five super fraud cases alone topped $100m each.
Experts believe fraud cases yet to reach court will again set records.
Auditing of South Canterbury Finance is said to have uncovered fraud of $1.7 billion. Charges followed against five.
All this after the Government opened its wallet with a huge handout of taxpayers' money to allow the wrecked company and its investors to trade on.
Fraudulent and corrupt Kiwis in high places with secret, lavish lifestyles – and/or serious million-dollar gambling habits – sometimes drag the companies they work for to the brink of receivership.
Lifestyle was frequently marvelled at and gossiped about around water coolers and coffee dispensers in the high rise offices when a young investment banker stole $17.8m from accounts over nine years. He bought a $3.2m Remuera home, a $1.8m bach in the Coromandel town of Whangapoua and spent $500,000 on maintenance.
He also spent $313,000 on wine over a seven-year period. More than $3.3m of bank clients' money went on sex with two prostitutes.
Office chat frequently turned back to that particular spending.
Where the cash came from was obvious but where did he get the energy for what followed?
Stephen Bell disclosed that New Zealanders – ranked as having "one of the lowest rates of corruption in the world" – pocketed and spent $72m by fraud in the previous six months. That was the stage that the Global Economic Crime survey humiliatingly marked New Zealand as having the eighth worst reported fraud levels of 54 countries its experts had studied.
Strangely at about the same time as Stephen Bell of KPMG was turning up the corners of corporate carpets, at least one other authority was praising our low levels of public sector fraud. In her November 2011 report Lyn Provost, controller and auditor-general, painted an image in words and graphs: "New Zealand generally has a `clean' image when it comes to fraud. We consistently rank well in international and domestic surveys that measure public trust in government and the effectiveness of systems and processes that deal with fraud and corruption.
"Our general absence of systemic large-scale corruption in both the private and public sectors is attributed to the integrity of our system, underpinned by strong and shared common values within a small and cohesive society."
And a dinky little graph appeared to show we were first equal with Denmark and Singapore in the elaborately labelled "transparent International Corruption Index".
Sounds all right but can we believe it?
Most New Zealand-based fraud surveys had focused on private sector. For better insight into fraud awareness, prevention and detection in our public sector, she quoted another expensive-sounding source – this time, PricewaterhouseCoopers.
Lyn Provost's office had them survey almost 1500 people working in the public sector seeking the most reliable information sources about perceptions and practices in detecting and preventing fraud in the public sector.
The result: "Overall, our survey confirms a strong commitment within the public sector to protecting public resources. This is pleasing and not surprising."
Right then – everything is OK.
Well actually no. Reading on, there was a significant PS: "However, we cannot afford to be complacent if we are to maintain our good record of keeping fraud at bay.
"Despite our generally `clean' image we project, fraud is a fact of business life in New Zealand.
"According to a 2009 survey, 42 per cent of New Zealand organisations (public and private) suffered from an economic crime in the previous 12 months (August 2008 to August 2009), with an average loss of almost $492,000."
Gross and secret gambling habits are common – but apparently difficult to detect.
Enter SkyCity. The casino is seen by some worried observers as used for large hauls of cash from big crime rings. Inveterate gamblers can't break their twin habits of ripping off their employers and then gambling away the proceeds.
Recent quotes show Problem Gambling Foundation chief executive officer Graeme Ramsey as understandably hot about this obvious scenario: "Millions of dollars from fraudulent activity have ended up in SkyCity's coffers. Why should SkyCity profit from crime?"
A fair question in these times when the Government is more than happy to go along with SkyCity to build itself a massive mid-city convention centre as a neighbour. The swap will give them hundreds more poker machines to join the hundreds they already draw millions from. Is that really a fair roll of the dice? Or run of the green?
Speaking of bowls, a weekend report described a 79-year-old using forged documents – fake quotes and invoices – to rip off community pokie grants in what the Manukau Court judge described as a "very elaborate scam".
Over three years more than $600,000 granted for "greens maintenance" (which was never done) was illegally used to repay loans bowling clubs took out to buy pubs so that clubs get proceeds from pokie machines at those pubs.
Apparently, you're never too old for it.