An appeal should be lodged

June 13th, 2016 at 7:00 am by David Farrar

Stuff reports:

An accomplished fraudster has now pulled off the ultimate swindle: she’s escaped a jail term after the court failed to see through her fake identities.

Lisa Donnelly pleaded guilty to fleecing a 92-year-old woman of her life savings.

Judge Christopher Field sentenced her to home detention. He cut her some slack because, he said, she had led a relatively crime-free life.

But he was never told of previous convictions she’d racked up under multiple aliases, including a notorious $2 million fraud. 

He was unaware that Donnelly used several aliases, including the name Lisa Clement, when she famously defrauded the Ministry of Social Development of $1.9 million.

She had also racked up more than 40 other convictions between her three aliases. 

The story relates how the Police stuffed up and didn’t tell the Judge of her extensive criminal history.

The case should be appealed. There is nothing to suggest that Donnelly is is any way rehabilitated and won’t be out there defrauding people as soon as possible. If she is in jail, then the public are protected from her while she is inside.

Swney gets 67 months

June 25th, 2015 at 2:00 pm by David Farrar

The Herald reports:

Alex Swney stole more than $4 million because he felt he was being underpaid for his work to improve Auckland, a court has heard.

Well that’s okay then.

The 57-year-old former Heart of the City boss was jailed for five years seven months in Auckland District Court this morning after pleading guilty to charges laid by the Inland Revenue and Serious Fraud Office covering “sophisticated” offending over more than a decade.

That is quite a decent sentence. Good.

Question remain about how he got away with it for so long. One can never be fraud-proof, but the Auckland Council and HOTC Board need to take a strong look at what systems were in place.

Swney in court

October 8th, 2014 at 7:00 am by David Farrar

The Herald reports:

Auckland’s Heart of the City chief executive Alex Swney has been charged with tax evasion totalling almost $2 million.

Swney, 57, who heads the publicly funded organisation, faces 39 charges laid by the Inland Revenue Department alleging he did not pay $1.8 million in tax. Penalties of $1.4 million was also allegedly owed.

He appeared in Auckland District Court today where he denied all the charges and his lawyer David Jones, QC, did not apply for continuation of name suppression.

Mr Jones indicated the matter would progress to a judge-alone trial.

There is obviously a trial to go through, but I note:

It is alleged that from 1994 Swney provided management services as a contractor for the incorporated society while at the same time running it.

Court documents detailed the charges which the IRD said came from a failure to provide income tax or GST returns.

In September 2011, during a routine review of a GST refund claimed by Heart of the City, an invoice under the name of Security Management Specialists was uncovered but the GST number did not match that of the company.

This sparked an IRD investigation into Swney’s tax affairs.

A court summary of facts said Swney admitted falsifying the invoice and others like it but the charges were denied in court today.

If this is correct (noting the trial), then that’s disgraceful behaviour for the head of a business group.

Heart of the City board chairman Terry Gould announced today that Swney’s contract had been terminated.

“The board has already commenced the process for appointing an independent, interim chief executive and an announcement will be made in due course.

“The termination of Mr Swney’s contract last week occurred as soon as the Heart of the City board learned about allegations against him of improper invoicing.

“The board has appointed McGrathNicol which has begun an independent forensic examination of the organisation’s finances and activities.

“Due to the independent investigation, and the continuing judicial process, the board is constrained in what it can say publicly at this time.”

Those actions seem appropriate. But there will be questions about board oversight, if these charges are correct.

Fake invoicing

October 26th, 2012 at 1:00 pm by David Farrar

The Herald reports:

Six people have been arrested over a $1.6 million invoice scam which involved the sale of advertising in magazines that did not exist or were not as widely circulated as claimed.

The arrests follow a five-month operation involving more than 60 staff from multiple agencies – the first of its kind to crack down on invoice scams in New Zealand.

Police arrested six people in Auckland, Port Waikato and Picton after search warrants were executed at more than 25 locations throughout the country.

All are facing charges of participating in an organised criminal group, while five are also facing fraud charges.

The Serious Fraud Office (SFO) alleges the group sold advertising in magazines that did not exist or had “grossly exaggerated” circulation figures.

The magazines had general titles that suggested links with worthy causes like road safety, parenting or drug addiction.

The SFO alleges the invoice scam generated up to $1.6m since 2008.

These sort of scams have been going on for decades. They’re sort of cunning. They rely on the fact that large companies will just pay a $250 bill without bothering to trace down which ad appeared and who authorised it.
Small companies will go back and say they didn’t place an ad, be told it was a mistake, and generally not worth their time to follow up and expose it as a scam, if they even realise it is.

Acting SFO chief executive Simon McArley said high-volume, low-value fraud was particularly difficult to address.

But the operation was completed in a relatively short timeframe because of the multi-agency approach.

“The agencies were able to each contribute specialist skills and achieve a result that none working alone would have been able to,” Mr McArley said.

“Invoicing scams cost New Zealand businesses hundreds of thousands of dollars a year and small businesses and charities are often the target.

Will be interesting to see the names of the accused.


September 29th, 2012 at 8:54 am by David Farrar

Stuff reports:

A celebrity psychic who wants to get in touch with earthquake and Pike River coalmine victims from beyond the grave says she only wants to help families heal, despite criticism by sceptics.

Australian Sensing Murder psychic Deb Webber will hold a free “private reading” on Monday for families of those killed in the February 2011 quake and another for Pike River mine disaster families in Greymouth next month.

NZ Skeptics spokeswoman Vicki Hyde said the sessions were “another sick example” of exploitation by the psychic industry, using vulnerable, grieving families as “a marketing drive” for free publicity.

“It’s as bad as any of those shonky finance companies putting up free investment evenings – and it’s about as useful,” she said. “No doubt at some point she will also be selling her services, which are very highly priced.”

Webber, who is on a “Hope and Heal” New Zealand tour, said she “can’t understand” the criticism.

“People need healing; I never want to cause anyone more grief,” she said.

No, you just want to use their suffering to boost your profile. What a contemptible human being.

And sceptic is not the correct term for those who don’t believe in psychics. That’s like claiming someone who doubts the Tooth Fairy is a sceptic.

She will also hold a free public meditation session and a sold-out public show that seats 150 and costs $70 a head in Christchurch tomorrow.

Webber said those who considered her work a money-making venture should “look at my bank account”. “I’m actually skint,” she said.

$10,500 from one show is pretty good money from the desperate and gullible. And she has 15 – 20 shows lined up in NZ.

If you are of the gullible persuasion, see this episode where she was fooled into claiming she was talking to a dead husband who never existed.

$3.4 million on prostitutes

March 19th, 2010 at 9:47 am by David Farrar

The Herald looks at the case of fraudster Stephen Versalko:

If it wasn’t for Bernie Madoff, Stephen Versalko could still be stealing millions.

The largest employee theft in New Zealand history was discovered only after an ASB Bank client saw a television show about Madoff, America’s US$50 billion fraudster.

In August, a woman who had invested more than $3 million with ASB adviser Versalko became uneasy about the fact he was the only staff member she had dealt with.

If something happened to her, she reasoned, 52-year-old Versalko would be the only person who knew anything about the funds into which her money had gone.

At about the same time, she watched a documentary about Ponzi fraudster Madoff that rang alarm bells. Madoff’s technique of fobbing off his victims reminded her of Versalko.

A phone call to ASB confirmed the investor’s worst fears – her multimillion-dollar investment portfolio was fictitious.

Madoff finally does some good.

Then a Serious Fraud Office inquiry found nearly 30 wealthy clients had been defrauded of nearly $18 million over nine years.

Criminal charges were laid in the week before Christmas, and Versalko pleaded guilty in February.

Yesterday, he was sentenced in the Auckland District Court to six years in prison, with a minimum-non parole period of four years.

I don’t think that is enough, for the scale of his offending. He had ten years of the good life living off his victim’s money.

But one of the more sordid details of the case is that Versalko paid $3.4 million to two prostitutes with whom he had long-term arrangements.

Good God. That is a lot of money for sex!

If one assumes the cost of a normal sexual encounter is $200, then that is 17,000 bonks. Now over 10 years that is 1,700 bonks a year or around five bonks a day.

Now there were two of them, so he may have had threesomes, but that would still be two threesomes a day with change left over.

The Herald understands Versalko took one of the women – instead of his wife – on a business trip to Dubai to stay in the Burj Al Arab Hotel, where the cheapest room costs US$2000 a night.

He was married? Oh yuck. Poor woman.

Banker’s $18 million fraud

February 2nd, 2010 at 11:10 am by David Farrar

The Herald reports:

A former ASB Bank investment banker has admitted fraud charges involving nearly $18 million.

Stephen Gerard Versalko, 51, has today pleaded guilty in the Auckland District Court to three charges laid by the Serious Fraud Office after a three-month investigation.

Meanwhile the Labour Party President is in Auckland investigating a rumour that John Key once worked with someone who had dinner with someone, who knew the ASB executive.

Is this not fraud?

October 29th, 2009 at 9:00 am by David Farrar

NZPA report:

An Australian wine writer’s latest book recommends several New Zealand wines, some of which had not even been bottled when it was released.

While reviewing Matt Skinner’s The Juice 2010 in August, The Listener’s wine writer Michael Cooper noticed the review copy had been released earlier than some of the wines it described.

“So, how could they have been tasted by Skinner, who lives in Australia, chosen as his best buys and gone through the whole writing, editing, printing, promotional process before someone like me in New Zealand has tasted them?” Cooper asked.

Cooper contacted the book’s British publisher and was told previous editions had been criticised for being out of date, so this time they decided to confirm the vintage and price ahead of time.

“Just one problem, Matt: you haven’t tasted the wine,” Cooper wrote.

I think authorities should treat this as a case of fraud. Skinner is selling a book purporting to be based on someone having sampled the wine.

State house fraud

October 8th, 2009 at 9:37 am by David Farrar

The Herald reports:

A man is facing allegations he lived off the taxpayer in state housing while he was a landlord owning two properties.

Allan Wilkins, a beneficiary, allegedly lived in two state houses – first in the city centre then in Orakei – over a period of three years. …

The Crown says during the three years that Wilkins was living in the two Housing NZ Corporation places and receiving big rent subsidies, he also owned 149 Browns Rd at Wiri and 2 Sheehan Ave in Papakura.

The Wiri property is valued at $260,000 and the Papakura house is estimated at $200,000.

Dale Dufty, prosecuting, said more charges would be laid against Wilkins over his tenancies which had defrauded the state of more than $68,000.

Now this is a rare case, but it does highlight one of the problems of providing housing assistance through cheap housing, rather than through income support. It provides an incentive for people to qualify for a state house by not disclosing other property.

I note Wilkins is on a benefit. I presume he was receiving rental income from his other properties, so WINZ may want to be checking that out also.

The Westpac $10 million

May 26th, 2009 at 7:58 pm by David Farrar

Something that has annoyed me about the coverage of the Westpac $10 million error is that Westpac did not accidentally give this couple $10 million. It gave them a $10 million credit facility.

In my mind there is considerable difference between someone finding $10 million in their account and spending it (while still illegal) and someone realizing their credit limit has been set too high, and withdrawing the maximum with no intention of paying it back. The latter is outright fraud.

Do others agree that there is a difference, and that it has not been made very clear?

Now’s that’s an attack

February 12th, 2009 at 4:51 pm by David Farrar

Go to CNBC and watch this video of Representative Gary Ackerman savaging officials from the US SEC over the Madoff Ponzi scheme. Wonderful. No method to embed but is worth a watch.

Why the Otago District Health Board Chair and CEO should be sacked

January 29th, 2009 at 11:27 am by David Farrar

I’ve been meaning to blog about this for some time, and it is topical today as the Herald reports the ODHB Chair is refusing to resign and faces the sack.

The $17 million fraud perpetrated by the former CIO, Michael Swann, is in my opinion a failure of good governance, and that is squarely the role of the Board, with the Chair holding prime accountability. I also include the CEO as they are the Board’s chief advisor, and should have ensured better systems were in place.

Swann is the crook, and of course primarily to blame. Getting away with some fraud for a small period of time is near impossible to stop when a senior official is corrupt.

But the size and duration of the offending removes the excuses from the Board. There were a number of things the Board and/or the CEO could have done to stop the fraud or make it much more difficult to have had it continue.

And this is regardless of the obvious warning signs about a senior official who had around 20 cars and a handful of yachts that should have rung warning bells.

I’m actually a company director myself for a company with around $10 million turnover. Now no company is perfect and fraud proof, but we do have a strong focus on governance and good process. I suspect the ODHB (and part of the problem is they are partially elected) focuses more on stuff like spending the money, rather than the boring side of processes to do with governance and accountability.

I think of all the ways that the CEO and/or the Board should have got some idea there was something wrong:

  1. Was there an internal audit function? External audits generally do not detect fraud. A large organisation should have an internal audit function.
  2. Many of the fake invoices were for software updates that were never done. Was there a policy around independent security checks of the IT system for vulnerabilities that would have exposed these were not done.
  3. Why was the contract for services not competitively tendered? A contract of $17 million over some years should be decided at board or at least CEO level and be a competitive tender. A CIO should not be delegated the authority to decide this alone. A competitive tender would have probably exposed the company was a sham.
  4. Why did the CEO or CFO never get suspicious that they had never met staff from this company they had paid $17 million to? When you are spending that much with a company you should have a relationship with them – you may even have had their Directors come along for discussion.
  5. Did those who signs cheques ever question the invoices? The company I am on is of course much smaller than a DHB, but as a signatory and Director I often question several of the cheques I have to sign. Not in a hostile way, but in a “I don’t know what services this company provided for us, tell me what they did and which approved activity it relates to”
  6. Why did the Board and/or CEO never question the cost of the IT support services? Even if the services this firm was providing was real, they seem to be to be massively expensive. Did no-one have any experience of value for money for such stuff? Did they question the increase in the IT budget? Did they ever say “Let’s tender this out to see if we can reduce it?”
  7. Did the Board have a policy of regular reviews of major suppliers and major contracts? The Board should not do the detailed reviews of course, but they should set the policy and require the CEO to implement it, and make recommendations to them?
  8. Did the Board have a robust financial delegations policy? At what level did expenses have to be approved by the Board, but the CEO, the CFO, Departmental Heads etc? How often did they review this policy?
  9. When a supplier is a major cost (such as $17 million over several years) you expect them to be a well known firm. No one expects the $5,000 a year supplier to be more well known than the ABC computer shop but if you are paying millions to a company you expect it to be well known (especially in a small city like Dunedin), to have a shopfront, be in the yellowpages, have a website. You may even expect to have had some first or second hand dealings with it.

I could go on and on. To be clear – no organisation can ever be so good they fraud is impossible. Corrupt staff can always work out a loophole to some degree. But the size of the scam, the ongoing duration of it, and the fact it would have been so simple to detect, points to a significant failure in policy, process and governance.

Yes there have been changes in Chairs and CEOs during this time. But unless they are brand new into the job, both the Chair and the CEO need to be held accountable for what happened, and not keep blaming it on the corrupt Swann. His scam was not the genius con of the century. It was simplistic and should have been detected far earlier.

The Swann case

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

I have been following with interest the case of Michael Swann 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?