Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

SFO Charges Result In Guilty Plea On $103 Million Fraud

1 March 2012

Former Datasouth Group (Datasouth) director, Gavin Clifford Bennett (53), today pleaded guilty to charges brought by the Serious Fraud (SFO) Office relating to a $103 million fraud involving a Ponzi-style scheme

Mr Bennett was convicted on six representative charges under the Crimes Act relating to approximately 900 separate incidents of dishonestly using a document, and a further two charges of false accounting.

SFO Chief Executive, Adam Feeley, welcomed the guilty plea saying, “The collapse of Datasouth was a significant event in the Christchurch business community and caused widespread losses. Mr Bennett’s guilty plea brings to a satisfactory end one of SFO’s largest investigations in recent times.”

The Datasouth Group offered technology hardware for lease through Datasouth Business Solutions Limited, and provided finance for the technology leasing solutions through Datasouth Finance Limited.

The SFO alleged that between April 2005 and March 2011 Mr Bennett created false documents relating to the lease of IT equipment to fraudulently obtain funds from South Canterbury Finance totalling approximately $65 million.

It was further alleged that Bennett falsified entries in Datasouth Finance financial statements by an estimated $38 million in order to retain the ongoing finance facility.

Mr Bennett used the dishonestly obtained funds to repay earlier false lease agreements in a manner similar to a Ponzi scheme.

Loan funds were also applied to meet business expenses and personal expenses.

Between April 2005 and March 2011 a total of approximately $7.8 million was paid either to personal New Zealand and Australian bank accounts controlled by Mr Bennett or applied to business credit cards that Mr Bennett used for personal expenses, though a small portion of that amount was used for genuine business expenses.

Significant areas of personal expenditure by Mr Bennett include:


• the rental for two luxury residential apartments in the Rocks, Sydney (A$463k);
• Regular payments to various female companions totalling (A$900k);
• Food and beverages (A$429k), a significant amount of which was spent at Hemmesphere bar and restaurant Sydney);
• International air travel for Bennett and on occasions various companions totalling (A$161k) including to Argentina, New York, Hong Kong, Las Vegas, New Caledonia, Rio de Janerio, San Francisco, Paris and London;
• Jewellery and flowers (including purchases at Tiffany & Co) (A$16k);
• Corporate car taxi expenses (A$53k); and
• Clothes and apparel (including purchases at Louis Vuitton, Cartier, Chanel, Giorgio Armani, Barney’s and Bloomingdales New York, Victoria’s Secret, Paul Smith, Gucci, Jimmy Choo, Harrods London) (A$163k).

The resulting financial loss to South Canterbury Finance was at least $23 million.

Datasouth went into liquidation in March 2011, leaving all 31 staff without employment.

Mr Bennett was remanded in custody for sentencing on 3 May 2012.

Mr Feeley said that while the guilty pleas in the Datasouth case avoided the time and cost of a trial, the SFO still faced the prospect of an extraordinarily busy year of fraud trials.

“We currently have 28 cases before the Courts, with a further 31 cases under investigation.”

“The volume of cases underscores the need for SFO to continue to work closely with other agencies and receivers and liquidators to ensure that the public has confidence that fraudsters are being brought to account.”

*********

Notes

1. Background to investigation

In the mid-1990s Mr Bennett established a business which came to be known as the Datasouth Group. It was made up of a number of companies, including Datasouth Finance Limited (Datasouth Finance). The Datasouth Group of companies was owned by Mr Bennett alone.

The group was based in Christchurch and provided a variety of IT related services, including network design and integration; data management solutions; consultancy; and hardware leasing. The latter was the area of focus for the SFO’s investigation.

Customers of the Datasouth Group wishing to lease IT equipment would enter into a “Hire Agreement” with Datasouth Finance to acquire specific equipment. The purchase of the equipment to be leased was then financed by South Canterbury Finance Limited (South Canterbury Finance) and was arranged pursuant to a finance agreement between Datasouth Finance and South Canterbury Finance.

Mr Bennett falsified agreements between Datasouth Finance and its customers, and then presented these, as if genuine, to South Canterbury Finance in order to secure funding.

In addition, Mr Bennett prepared and submitted false financial statements to South Canterbury Finance in order to retain the ongoing finance facility.

2. What is a Ponzi Scheme?

A Ponzi scheme is typically an investment fraud that involves the payment of purported returns to existing investors from funds that have been contributed by new investors, rather than genuine returns from the investment scheme.

In a lending scenario, it involves soliciting new, larger loans from new or existing funding sources to pay off earlier loans that have fallen due, along with using a portion of the funds for personal expenses.

3. Crimes Act offences

Section 228: Dishonestly taking or using document
Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,—

(a) dishonestly and without claim of right, takes or obtains any document; or
(b) dishonestly and without claim of right, uses or attempts to use any document.

Section 260: False Accounting
Every one is liable to imprisonment for a term not exceeding 10 years who, with intent to obtain by deception any property, privilege, service, pecuniary advantage, benefit, or valuable consideration, or to deceive or cause loss to any other person,—

(a) makes or causes to be made, or concurs in the making of, any false entry in any book or account or other document required or used for accounting purposes; or
(b) omits or causes to be omitted, or concurs in the omission of, any material particular from any such book or account or other document; or
(c) makes any transfer of any interest in a stock, debenture, or debt in the name of any person other than the owner of that interest.

4. Role of the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.
The SFO operates three investigative teams:


  • Fraud Detection & Intelligence;

  • Financial Markets & Corporate Fraud; and

  • Fraud & Corruption.

The SFO operates under two sets of investigative powers.

Part 1 of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part 2 of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
The SFO’s Annual Report 2011 sets out its achievements for the past year, while the Statement of Intent 2011-2014 sets out the SFO’s three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz

*******

ENDS

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

New Reports: Flood Risk From Rain And Sea Under Climate Change

One report looks at what would happen when rivers are flooded by heavy rain and storms, while the other examines flooding exposure in coastal and harbour areas and how that might change with sea-level rise.

Their findings show that across the country almost 700,000 people and 411,516 buildings worth $135 billion are presently exposed to river flooding in the event of extreme weather events...

There is near certainty that the sea will rise 20-30 cm by 2040. By the end of the century, depending on whether global greenhouse gas emissions are reduced, it could rise by between 0.5 to 1.1 m, which could add an additional 116,000 people exposed to extreme coastal storm flooding. More>>

ALSO:

 
 

Gordon Campbell: On The Commerce Commission Fuel Report

The interim Commerce Commission report on the fuel industry will do nothing to endear the major oil companies to the New Zealand public... More>>

ALSO:

Emergency Govt Bill: Overriding Local Licensing For The Rugby

“It’s pretty clear some clubs are having difficulty persuading their district licensing committees to grant a special licence to extend their hours for this obviously special event, and so it makes sense for Parliament to allow clubs to meet a community desire." More>>

ALSO:

Leaving Contract Early: KiwiBuild Programme Losing Another Top Boss

Ms O'Sullivan began a six-month contract as head of KiwiBuild Commercial in February, but the Housing Ministry has confirmed she has resigned and will depart a month early to take up a new job. More>>

ALSO:

Proposed National Policy Statement: Helping Our Cities Grow Up And Out

“We need a new approach to planning that allows our cities to grow up, especially in city centres and around transport connections. We also have to allow cities to expand in a way that protects our special heritage areas, the natural environment and highly productive land." More>>

ALSO:

Ombudsman's Report: Ngāpuhi Elder 'Shocked' By Conditions At Ngawha Prison

A prominent Ngāpuhi elder is shocked to find inmates at Ngawha Prison are denied water and forced to relieve themselves in the exercise yard... Chief Ombudsman Peter Boshier has released a report highly critical of conditions at the Northland prison. More>>

ALSO:

Promises: Independent Election Policy Costing Unit A Step Closer

The creation of an entity to provide political parties with independent and non-partisan policy costings is a step closer today, according to Finance Minister Grant Robertson and Associate Finance Minister James Shaw. More>>

ALSO:

School's In: Primary And Intermediate Principals Accept New Offer

Primary and intermediate school principals have voted to accept a new settlement from the Ministry of Education, which includes entrenched pay parity with secondary principals. More>>

ALSO:

IPCA On 'Rawshark' Investigation: Multiple Police Failings In Hager Searches Confirmed

The Independent Police Conduct Authority has found that the Police's unlawful search of Nicky Hager's property in October 2014 resulted from an unwitting neglect of duty and did not amount to misconduct by any individual officer... More>>

ALSO:

Broadcasting Standards: Decisions On Coverage Of Mosque Attacks

The Authority upheld one of these complaints, finding that the use of extensive excerpts from the alleged attacker’s livestream video on Sky News New Zealand had the potential to cause significant distress to audiences in New Zealand, and particularly to the family and friends of victims, and the wider Muslim community. More>>

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels