'Huge fraud potential' in Chch rebuild

RICHARD MEADOWS
Last updated 13:34 18/09/2012
Peter Dent
FRAUD POTENTIAL: Deloitte Canada partner Peter Dent says there is a chance of corruption as Christchurch rebuild funds flow in.

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An international corruption expert is meeting agencies involved in the Canterbury rebuild to warn them about the huge potential for fraud as funds start flowing into the city.

Peter Dent, a Deloitte partner from Canada, is in the country to talk to the Canterbury Earthquake Recovery Authority (Cera), the Earthquake Commission, Police Minister Anne Tolley, who oversees the Serious Fraud Office, and insurers.

The message he is bringing is that systems are likely to be overwhelmed by fraudulent claims and pressure on civil servants as billions of dollars flood into the rebuild.

"Whatever processes exist here will be insufficient," he said.

"And, of course, there are people out there who are going to take advantage of this situation."

Construction was a particularly risky industry, with potential for backhanders, price-fixing and cosy subcontracting arrangements on big capital projects, Dent said.

Insurers were at risk of losing out if they failed to manage an increase in fraudulent or "padded" claims.

The Serious Fraud Office has said it is concerned about the Christchurch situation beause of the amount of money being spent, and it is working with other agencies in a prevention and protection role.

Dent's comments are based on his experience in the aftermath of several international disasters.

After the 2004 Boxing Day tsunami he worked with the United Nations Development Programme to strengthen its procurement policies.

The sheer volume of money coming in "paralysed" the UN for over a year before it could spend the money for fear of it being misappropriated, he said.

In 2011, he co-ordinated crisis management and disaster recovery services after the earthquake, tsunami and nuclear disaster in Japan.

The common theme after a disaster was that authorities lacked the infrastructure and systems to deal with the volume of claims and cash coming in, he said.

Last week, Deloitte published a survey of Australasian businesses that found they were poorly prepared to deal with bribery and corruption.

Of the 390 firms surveyed, nearly half of those operating overseas had no formal or compliance programme in place.

That was despite the fact that one in five had had a bribery or corruption incident within the past five years.

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- BusinessDay.co.nz

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