The Swann case

December 9th, 2008 at 1:00 pm by David Farrar

I have been following with interest the case of who stole millions off the Otago District Health Board since 2000.

The information to date was bad enough – there seemed a total lack of internal controls and/or internal audit. With millions paid for non existant software upgrades and licenses etc, it should have been easy to spring the hoax early on.

Add to that the fact Swann was driving luxury cars well beyond his means, and flaunting his wealth – someone should have got suspicious. I remember former SFO Director Chas Sturt once rumbled a fraudster (Hancox) just based on a comment at a dinner party that he seemed to live beyond his means.

But the latest news in today’s ODT (offline) is that the ODHB was warned in 1998 that Swann had “criminal intent”. Appalling. Even if they could not act on the allegations, they should have made damn sure their controls and checks were first class. But hey, when it is just taxpayer money, why bother?

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14 Responses to “The Swann case”

  1. Danyl Mclauchlan (1,066 comments) says:

    I’m curious DPF – have you been following the case of Hanover and other finance companies with similar interest or are free market failures a little less intriguing?

    [DPF: finance companies by their nature were risky investments. You invest in a risky high reward company, and no surprise some fail. That has nothing to do with a total lack of the most basic controls at ODHB. I am a company director, and let me tell you the Directors of ODHB appear to have failed miserably in their duties, as has the CEO. You can not stop all fraud, but this fraud should have been detected much earlier]

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  2. gd (2,286 comments) says:

    This is just the tip of the iceberg how many other cases are there in public institutions.

    Never been impressed with the quality of audit

    There is a culture of OPM Other Peoples Money coupled with a lack of common sense and the ability to apply the smell test.

    This was a doozy thou. the bloody institution was technically insolvent at times during this case and yet noone obviously conducted a simple comparison test. Jeez Who were the Board members and CEO CFO

    All deserve to be names and shamed and struck off the register of any professional body they are a member of.

    But it wont happen the usual arse protection will kick in to cover it all up

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  3. Ratbiter (1,265 comments) says:

    Don’t be like that gd! The socialists are gone and Our Hero Mr John Key’s in charge now. Along with his trusty sidekick Rodney. He’ll sort it out. None of the usual arse-protecting cover-ups on his watch!

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  4. Frank (320 comments) says:

    No surprises here. Typical of the whole regime for the last decade. Much more to come.

    To hell with Ministerial Enquiries. It needs a Royal Commission of Enquiry into the whole machinations of Parliament and associated Public Servants over the last Decade.

    Latest of course is the ACC rort, which is being reported to the Police Commissioner. Action is needed

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  5. gd (2,286 comments) says:

    Danyl The Hanover et al case was a combination of crooked businessmen and incompetent legislators and regulators

    As one who fronted the Minister Dalziel starting back in 2002 and was told my concerns were alarmist to use the words in one of her many letters I feel for the poor smucks who were conned.

    The regulators Rebstock Commerce Commission and Diplock Securities Commission were so hopelessly out of their depth and still are its frightening.

    None of these finance companies could have operated in Australia as none meet their regulations Note the small number of collapses in Oz compared to NZ If they had the same problem they would have lost 100 companies and 25Billion dollars by comparsion

    Do you think these bozos I had to deal with would see the red flashing lights

    No way Jose

    Hopefully the new Minister of Commerce Power and Associate Hide are up to the task

    Early signs indicate they are and arent obsessed with the notion that NZ is different from everywhere else which has been the standard excuse I have had for the past 9 years

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  6. gd (2,286 comments) says:

    Alas ratbiter I hope to be proved wrong but suggest the Sir Humphries will use their considerable skills to delay deny and obstruct the Truth and Retribution process.

    Oh how I would love to get in and roll up my sleeves and deal to these bastards. Nothing like a bit of water boarding to get them to reveal all. The bastards deserve it for the fiscal suffering they have put the good taxpayers thru for the past 9 years.

    Flogging hanging drawing and quartering are also high on my agenda for the Sir Humphries if I ever get the chance

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  7. Chris G (106 comments) says:

    White Collar crime, the crime we conveniently pay little attention to…

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  8. wreck1080 (3,864 comments) says:

    Many government appointed business managers are in government because they simply cannot run a real life business.

    I just want to know how much these fraudsters get to keep??

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  9. unaha-closp (1,157 comments) says:

    I’m curious DPF – have you been following the case of Hanover and other finance companies with similar interest or are free market failures a little less intriguing?

    Core principle – It is not our money, it is not our business.

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  10. Viking2 (11,346 comments) says:

    Hmm, well you might like to ask about the many millions that are unaccounted for in the early days of this Labour Govt. when all the Maori houses were being burnt to the ground and the Govt. of the day told the dept. to fix it. Dissappeared, gone evaporated and no one knows (or will not tell) who where or why.

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  11. freethinker (688 comments) says:

    I wonder if the ODHB had an audit committee and what their responsibilty/accountability will be, so if there is a audit committee and they cannot demonstrate that the fraud was so well concealed no competent person would have discovered it it would be appropriate to sack them for gross incompetence and bar them from public office. QED

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  12. Friend on the Board (30 comments) says:

    Yes there is an audit committee and it is left read faced as are management and the board.

    There are three audits a year.
    Audit NZ – Annual audit.
    Accounting firm – internal audit twice a year.

    The later typically inspects a particular area and is different from the annual audit. eg. payroll, accounts payable etc.
    Whereas the annual audit is more balance sheet focused and more like most people would undertand an audit to be.

    This expenditure was in the top 10 of the ODHB creditors and because it was processed as prepayments it bypassed the whole accounts payable audit procedures.

    The main problem in the ODHB is that the CEO is all powerfull. He sets the majority of the board agenda, attends the whole meeting and even has input in editing the minutes. There is no proper separation of governance between the board and management.

    The ODHB ignored all prior warnings.

    I am told that the CEO

    Stayed in two houses in Wanaka for a week at a time owned by Swann Interests.
    Went fishing on one of the boats.
    Was given a tour over the large boat.
    Ignored the Lambo in the car park.
    Was driven in a Flash mercedes.
    Said to Swann – you are in tight with Rick Armstrong motors and asked him to negotiate a discount when he purchased a Jeep.
    Purchased plumbing supplied on a Swann company account that he denied knowing about in his evidence.
    Gave evidence in court that the Computer in Swann’s room was logged onto and they found shortcuts that pointed to 16 contracts that were not present on the hard disk. Wile he had previously been told by an IT person that it was not Swann’s computer but his after he set up to demo a payroll program while Swann was on holiday. The IT person told the CEO it was his and not Swann’s computer.

    This is the crown entity scandal of the decade.
    I can sense a book in this debacle.

    Another installment tomorrow.

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  13. Chris2 (772 comments) says:

    Just read an item (link below) that Swann faces further charges in February for accepting a $750,000 kick-back. Strange this is not reported elsewhere, and interesting comment in the article about the ODHB’s failures too, as it seems Swann was a recent backrupt when he was employed by the ODHB!

    http://www.verify.co.nz/news-employernz.php#employernz20081205

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  14. reddogthepirateguy (1 comment) says:

    The case of Robin Sewhoy and Mike Swann was in fact in the media before the case of Mike Swann and Kerry Harford.
    Mike has always liked flash vehicles,but he didn’t have a nice little earner like the OHB in the late 80’s early 90’s,so buying late model Rangerovers and general high living meant he went bankrupt back then.

    The Wellington management consultant who employed him,obviously didn’t ask the Dunedin accountants who previously employed him,what they thought of him.If he had then they should not have employed him.

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