New Zealand Fourth For Internal Organisational Fraud and Theft

New Zealand is perceived as being the least corrupt nation on earth, but perception doesn’t always match up to reality.

Many of New Zealand’s largest businesses listed on the NZX50 don’t pass some fundamental best practice ethics tests and fraud is rife in smaller businesses, government departments are not immune, nor are universities free from “financial irregularities”

About half of New Zealand firms have experienced fraud a respected survey has found.

In 2011 the Pricewaterhouse Coopers Global Economic Crime Survey  found that 49.5% of respondents indicated they had been victims of at least some level of fraud during the last year, up from 42%  in 2009

“New Zealand ranked fourth out of 78 countries as one of the most likely to experience fraud, slightly better than Britain, but worse than Australia and the United States.” source

Another company KPMG has produced a fraud barometer for New Zealand, saying that Fraud is a constant and serious threat to all sectors of the New Zealand economy, including commercial business, governments, non-profit organisations, and individuals

“…the incidence of ’super frauds’ continues to drive the aggregate value of frauds to record annual levels.

Super-frauds are defined as cases where the value is greater than $3m.

KPMG Fraud Barometer – June 2011: – key insights

  •  Value of large fraud cases, defined as over $100,000, totalled $79.8m (down from $100m in the last period)
  • There were 29 cases in total (down from 30 in the last period) Of the 29 cases, three were ‘super-frauds’, these totalling $62.9m
  •  One of the super-fraud cases, a result of a ‘kiting’ scheme valued at $39.6m, accounts for practically half of the value of total large fraud cases in the survey period.

“These figures show that there has been no let up in large frauds continuing to occur and brought before the New Zealand courts. Fraud is a constant and serious threat to all sectors of the New Zealand economy, including commercial business, governments, non-profit organisations, and individuals,” says Stephen Bell, Head of Forensics at KPMG New Zealand…”

The largest employee theft committed in New Zealand was by former ASB investment banker Stephen Versalko, who stole $17.8 million over nine years. source.

The largest (alleged) fraud in New Zealand’s history, amounting to $1.7 billion involves five people in the affairs of South Canterbury Finance.  source

How is it that a country with such a high fraud profile also has a low perception of corruption.

“New Zealand’s high trust society is both a national treasure and an economic asset. Forbes magazine ranks New Zealand first on its most recent list of the Best Countries for Business thanks to a transparent and stable business climate. According to Phil O’Reilly Chief Executive of Business New Zealand “New Zealand’s high trust public sector is it’s greatest competitive advantage.”

Could it be because so few companies have policies explicitly prohibiting bribery and facilitation payments? If the policies don’t exist there’s nothing to contravene, no rules to be broken?

It appears to be that many of New Zealand’s largest listed businesses don’t pass some fundamental best practice ethics testssays Transparency International New Zealand.

”Of the companies on the NZX 50, 44% have policies prohibiting bribery and 18% have policies on regulating facilitation payments. This does not compare favourably with the percentage of companies prohibiting bribery in comparable markets overseas. Of the top 100 companies by market capitalisation in the UK, 72% have explicitly prohibited giving and receiving bribes. In Europe the figure is 57% and in the US it is 69%.”

It’s not just listed companies that are suffering from this problem in New Zealand, its “high trust public sector” has also been blighted by light fingered employees, some of whom go undetected for years and steal vast amounts of money, mostly to fund lavish lifestyles.

A few days ago Hamilton woman Anita Gail O’Connor was jailed for two years and five months after admitting to charges of corruption and tax fraud. Amazingly her criminal activities continued for five years before she was caught.

“An IRD employee allegedly created fake passports, birth certificates, IRD numbers and application forms for her own monetary gain.  Anita Gail O’Connor, 59, of Ngaruawahia, pleaded guilty to 163 fraud-related charges that spanned a five-year period. Her charges included corruptly using information obtained by her in her official capacity, in the names of various people, to obtain a child support refund and working for families tax credits and making false documents to obtain child support refunds.

She was also charged with obtaining information on members of the public to obtain working for families tax credits, creating fake IRD number applications with intention to use them to obtain pecuniary advantage; using the IRD’s computer system to get information to get child support refunds and working for families tax credits. Taking passports from Victoria, New Zealand and Western Australia for pecuniary advantage; making false requests for clients to obtain child support refunds; making false child support refund requests to obtain pecuniary advantage and making false birth certificates to obtain working for families tax credits.” source

Alarmingly this woman cited gang links as one of the reasons why she committed these crimes, raising questions about the effectiveness of staff vetting at the IRD and whether other staff also have these associations. She also admitted to using some of the money to “buy cars, goods and groceries and for gambling”  – in other words a lavish lifestyle, that seemed to go unnoticed.
There have been other government departments tinged by the stench of corruption too. Unfortunately some of the sentences handed down haven’t been much of a deterrent to others, giving the impression that white collar crime goes largely unpunished in New Zealand.
“Following a 2.5 year old investigation by the Serious Fraud Office a former ACC national property manager, Malcolm David Mason, 50, received an 11 month home detention sentence after he pleaded guilty to three charges of bribery and corruption. He admitted to taking a of $160,000 bribe from a property developer and a business class trip to the 2008 Singapore grand prix.-
Even the NZ military and the judiciary has been touched by fraud and dishonesty:
“Four NZ military officers seconded to the United Nation Dept of Operations in New York allegedly made false declarations to obtain overseas allowances. A military court found the allowances had been paid illegally and the Auditor General slammed the culture within the defence force that allowed it to continue…”
“Papamoa Justice of the Peace Martin Elliott has resigned after being convicted of fraud. Elliott, a former principal of Hamilton’s Fraser High School, pleaded guilty in January to two charges of using a document for pecuniary advantage and was last month sentenced to 40 hours’ community work.” Elliott altered invoices to obtain about $6000, including “work done on his personal property that was invoiced as part of a school construction project.” (March 2012) source

How exactly is it that New Zealand is perceived to being a country free from corruption, who influences these decisions and who stands to gain from them?

If you have experienced fraud or corruption in New Zealand we’d like to hear from you, leave your comments at the bottom of this page.

5 thoughts on “New Zealand Fourth For Internal Organisational Fraud and Theft

  1. about 70% of the people in the corporates are dishonest, and in the land with sheep where humans are more like lions and foxes, if you dare to care about ethics and honesty, you would probably be silenced and charged like the guy who founded wikileak instead of the other 70% of people that are crooks.

  2. The NZ Institute of Chartered Accountants has been complaining about too much information being required in meeting international reporting standards. Either they can’t cope with the work, or they don’t want to disclose. It is a widespread attitude in New Zealand, we have noticed. Information seems to exhaust them. We were advised by a U.S. professional familiar with New Zealand to “keep things simple” if we wanted any movement on the Kiwi end of our business.

  3. The problem of crime in New Zealand in general applies here. Crime is either “not defined as what it is” by people, or by the authorities, or on the other hand it is unreported by people and unprosecuted by authorities. It slips under the radar in many ways. But crime and fraud are NOT nonexistent. There is actually quite a lot of it. The definition and reporting of crime affects the perception of how much there is of it.

  4. There is widespread tolerance for dishonesty, such as for example not reporting black market income on taxes, or not having written agreements for arrangements that benefit you. “Sharp” practice is the norm in many areas, but this is not strictly speaking illegal. Because they define dishonesty so much more narrowly, their perception of corruption is different from that in other Western countries. One of the reasons for many of the disconnects migrants have with New Zealand. It comes out and says it is an honest place, blatantly, and you assume it has the awareness to see itself. It actually lacks that awareness. It is unable to measure itself against other countries because it is so far away and behind the times. And if they did measure themselves, they wouldn’t feel good about it. They couldn’t allow that, either. They’d have to improve, then, and they have no money to take it on. Easier to sit on the beach and drink and tell everyone what a beautiful beach it is whilst pickpocketing them.

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