SCF case lifts fraud to record high

MATT NIPPERT
Last updated 08:13 04/12/2012
fraud
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RECORD: Over $1.7 billion of fraud cases hit the courts in the six months, up from $80 million for the same period last year.

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Fraud hit a record high earlier this year and the pending trial of directors and accountants of South Canterbury Finance is New Zealand's largest-ever fraud prosecution.

According to KPMG's six-monthly fraud barometer, $1.73 billion of fraud cases hit the courts in the six months to June, up from $80 million for the same period last year.

But the figures were skewed by the SCF case, which alleges bad and related-party loans were hidden from investors and the Government.

The SCF collapse triggered a $1.7b taxpayer bailout of investors, but the Serious Fraud Office alleged the company would never have qualified for the guarantee scheme if its true financial position had been declared.

KPMG's forensic services manager, Blair Bulloch, said the scale of the alleged fraud at SCF, nearly 1 per cent of GDP, makes it the largest fraud prosecution the country has seen.

The size of the case swamped the $30.8m of fraud from other sources recorded by the barometer.

"When SCF went into the Crown Retail Deposits Guarantee Scheme, ultimately it is the taxpayer that foots the bill. For everyone in the country, it's very significant," Bulloch said.

Taking SCF out of the equation, the underlying level of fraud in New Zealand appeared to have reached a plateau, he said.

"We have a relatively standard number of frauds in each period, and every once and a while we get one off the charts."

Past supersize frauds included Christchurch businessman Gavin Bennett's $106m loan fraud, and banker Stephen Versalko's theft of $18.6m from his employer.

If the SCF case were excluded from the latest figures, it would have been the lowest reading on the barometer since June 2009. The incidence of fraud, and related prosecutions, rose sharply as the hangover to the global financial crisis took hold.

Most of the cases were management frauds perpetuated against government and financial institutions.

Finance company prosecutions appeared to have wound right down, with the only major one remaining being a Serious Fraud Office decision on whether to prosecute figures involved in Hanover Finance.

However, this return to "normal" levels of fraud did not mean people should let down their guard, Bulloch said.

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- BusinessDay.co.nz

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