Monster Christchurch rebuild fraud feared

20:36, Sep 27 2012

Serious Fraud Office officials are investigating a potential Christchurch insurance fraud worth tens of millions and will keep an eagle eye on other potential fraudulent claims within the rebuild.

SFO chief executive Adam Feeley could not give details of the investigation except to say the claim had been brought to his attention by an insurer, and a handful of SFO staff were investigating.

"Yes we do have a case in Christchurch but all we have said in relation to it is it relates to insurance. We don't know at this stage what the scale of it is other than our initial estimate that it appears to run into the tens of millions of dollars ... (That is) the potential level of fraud."

There were other cases of potential wrongdoing that had been brought to the SFO's attention. The office had seen excellent co-operation from the insurance sector in recent months.

Feeley's comments follow those by a visiting disaster relief expert suggesting that a central agency be set up to help keep a lid on fraudulent claims or corruption during the earthquake recovery period.

Canadian-based Deloitte partner Peter Dent has given advice on other large-scale natural disasters including the 2004 Boxing Day tsunami. After other overseas disasters there had been false or misleading claims of between 10 per cent to 15 per cent of the total insurance claims lodged, Dent said.

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Feeley said some insurers had indicated they were concerned that fraudulent claims could be significant. He was suggesting to the insurance companies that they "share data better" to help point out anomalies in the claims process and expose fraud, he said.

One example of how fraud could occur was collusion between damage assessors and the rebuild companies. In theory, inflated assessments could be made in return for a cut from the building work.

"Natural disasters don't create a particular type of fraud, they just create an environment for it to happen for two reasons: one, suddenly a lot of money goes into that region that has the disaster, and two, there's unusual pressure on organisations to solve problems and the best way they solve problems is cutting corners."

The SFO had learned from the failure of finance companies in recent years, and was using that knowledge to keep track of other possible fraud activity.

The response of the public and private sector to those ongoing failures had "not been that great", and these organisations had not worked with the public in the period leading into these failures, he said.

"We don't intend to repeat some of those mistakes, so where Christchurch is involved we are acting quick, we are working very closely with different sectors of the business community and we're making sure that where resources are needed, we're making those resources [available] with other Government agencies.

"Pretty much anything in Christchurch is a priority for us and not just [SFO] case-related, but general intelligence about what is happening in Christchurch."

The SFO wanted to put out the simple message that Cantabrians should unite against fraud.

"You can either ensure that every last dollar goes into rebuilding Christchurch or some of that money lines the pockets of white collar criminals.

"I have no doubt that everyone in Christchurch wants to make sure every last dollar goes into rebuilding the city."

BusinessDay.co.nz