'Tastes went up ... with his fraud'

MATT NIPPERT
Last updated 05:00 04/05/2012
Gavin Bennett
Dean Kozanic
IN THE DOCK: Convicted fraudster Gavin Bennett.
gavin
FAIRFAX
BANGED UP: Former Datasouth Finance director Gavin Bennett has been convicted on SFO fraud charges.

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In Sydney, Gavin Bennett lived in a world replete with million-dollar views, beautiful women, champagne and international travel.

But in Christchurch District Court yesterday this world was adjudged a fantasy and the former managing director of IT company DataSouth was jailed for eight years after committing one of the largest frauds in New Zealand history.

Bennett, 54, pleaded guilty in February to eight counts of dishonestly using a document and false accounting, for frauds totalling $103 million. Yesterday, Judge Jane Farish told him: "Your company was your alter ego and your alter ego got away with you."

Serious Fraud Office chief executive Adam Feeley said: "This was a cynical fraud to inflate one man's business ego and allow him to live a life of luxury while his staff struggled to keep the business afloat."

A year ago, DataSouth staff visited their managing director in Australia and became concerned he may have gone out of control.

A lavish "paint the town red" themed 53rd birthday party for Bennett at a company-funded Sydney apartment featured plenty of Dom Perignon and a bevy of attractive women referred to as "Gav's girls".

"It was a surreal situation," said a former DataSouth staffer who attended the party. "We walked away as a management team saying: we're very concerned about Gavin – he's living in a dream world."

According to the Serious Fraud Office, the seed of Bennett's dream was planted in 2005 when he was unable to repay a relatively small loan from Southland Finance. Instead of defaulting on the debt, Bennett manufactured a false loan application and repaid the finance company with its own money.

This trick would be repeated many times over the next six years, nearly 900 times in all, with a total of $64.5m advanced by Southland Finance and later the company's parent, South Canterbury Finance.

Many of these loans were recycled to pay off previous loans but some were used to prop up DataSouth, and much more was siphoned off to Australian bank accounts to pay for a lifestyle that grew exponentially more lavish.

The court heard that Bennett fudged his company's accounts to the tune of $38m to keep the funds flowing in.

It was a Ponzi scheme with only one victim – a finance company that was later bailed out by the taxpayer.

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Former colleagues of Bennett at DataSouth, the Christchurch-based firm he founded, said that in 2003 – before the frauds were committed – their boss would bring beer to after-work drinks. But as time went on Bennett's choice of tipple appreciated, moving from Lindauer to Moet to Veuve and by the end he was a firm favourite of $450 bottles of Dom Perignon. "He'd drink the stuff like it was tapwater," the source said. "His tastes went up along with his fraud."

Someone with knowledge of Bennett's credit card spending said up to $50,000 a month was churned through company credit cards by the managing director.

"If you went through the receipts it would be lunch for $1000, dinner would be an astronomic amount – numerous $450 bottles of Dom Perignon – and he even started cracking into Cristal by the end," the source said.

Bennett grew up in Southland before moving to Christchurch, but began spending more time in Australia as his fraud developed.

In Sydney, he led a lifestyle of wine, women, fancy cars and accommodation, and made the city's social pages attending exclusive parties.

Bennett used A$464,000 of fraudulently obtained funds to rent two apartments in a high-rise with views of the Sydney Opera House.

One, his primary residence, was valued at A$2.5m and is listed in Companies Office records as the Australian office of DataSouth.

These accommodation bills paled next to other living expenses – A$429,000 (NZ$550,000) for food and drinks at expensive Sydney nightspots, A$163,000 on designer clothing, and A$161,000 in international travel – plus generous payments to what were described as "female escorts".

BusinessDay investigations found two of the "female escorts" listed as co-directors of businesses Bennett registered in Australia.

Marlena Davis, a makeup artist and former model, was a co-director of DataSouth Australia. She did not return calls yesterday.

Another, burlesque dancer Mariesa Crowder, said Bennett signed up as a co-investor in her lingerie start-up in late 2010.

The end came for Bennett from the Christchurch earthquake rather than the collapse of South Canterbury Finance, as the receivers had continued to advance DataSouth loans.

Recently appointed DataSouth chief executive Hayley Bryan started poking around the accounts and found irregularities.

She alerted authorities and soon receivers were appointed.

These developments seemed to spook Bennett, who flew out of Christchurch to Sydney just before a High Court order froze his accounts and the Serious Fraud Office began investigating.

The collapse of DataSouth left 42 employees without jobs and South Canterbury Finance with a $23m hole in its accounts.

When BusinessDay talked to Bennett last June he complained about being evicted from his apartment and sought to defend his involvement with Davis and Crowder.

"She's a long-standing friend," he said of Davis.

He claimed the investment in Crowder's lingerie business was "minimal – there's nothing to it at all".

All up, the Serious Fraud Office found A$900,000 was paid by Bennett to a coterie of attractive women.

- BusinessDay.co.nz

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