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

Gordon Campbell: On Our Local Responses To The Global Problems Of Inflation


In the United Kingdom, inflation is running at its highest rate in 30 years. In the US, inflation hit 7% during 2021. You wouldn’t want to be in Estonia, where inflation has just hit 12%. Across the Eurozone – the measurement methods vary – inflation is averaging out at 5%. In Canada, inflation is running at its highest level in 30 years. Inflation is not simply a problem afflicting developed countries. In a developing country like Brazil inflation is running at its highest level in seven years...
More>>



 
 

Government: Building And Shaping A City: Future-proofing Auckland Transport Infrastructure
The Government is bringing Auckland’s transport infrastructure into the future by moving forward with an additional Waitematā Harbour crossing, progressing light rail from Auckland’s CBD to the airport, and creating a linked-up rapid transport network as part of a 30-year plan... More>>

The Treasury: Financial Statements Of The Government Of NZ For The 5 Months Ended 30 November 2021
Interim Financial Statements of the Government of New Zealand for the 5 months ended 30 November 2021... More>>

ALSO:


Government: Announces Three Phase Public Health Response To Omicron
The Government has announced a three phase Omicron plan that aims to slow down and limit the spread of an outbreak, Associate Minister of Health, Dr Ayesha Verrall announced today. “Through the course of managing Omicron, we will be taking a phased approach. As case numbers grow both testing and isolation approaches will change in response... More>>



Ministry Of Transport: Have Your Say On The Future Of Road User Charges
Te Manatū Waka Ministry of Transport is inviting New Zealanders to submit their views on improving the Road User Charges system, says Secretary for Transport, Peter Mersi... More>>


TradeMe: New Zealand Rents Climb $40 Per Week In One Year

New Zealand’s national median rent climbed $40 a week in 2021 to reach $560 in December, according to Trade Me’s latest Rental Price Index. Trade Me Property Sales Director Gavin Lloyd said last month’s national median weekly rent showed an 8 per cent annual increase... More>>


Transparency International: New Zealand Retains Top Ranking In Annual Corruption Perceptions Index
New Zealand is once again ranked least corrupt in the world by Transparency International’s annual Corruption Perceptions Index. This year New Zealand’s score of 88 out of 100 is unchanged resulting in it being first equal with Denmark and Finland... More>>

 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels