Two people who corruptly attempted to profit from the Christchurch rebuild were sentenced today after being found guilty on Serious Fraud Office charges.
Former Canterbury Earthquake Recovery Authority (CERA) and Ōtākaro Limited employees Gerard Gallagher and Simon Nikoloff were sentenced at the Christchurch High Court today after being found guilty on corrupt use of official information charges in March.
Mr Gallagher was sentenced to 12 months’ home detention and 200 hours of community work.
Mr Nikoloff was sentenced to seven months’ home detention.
At sentencing, the Court identified the harm caused by the offending to their colleagues and employers, and the potential harm to New Zealand’s reputation and trust in the public sector.
In their roles at CERA Mr Gallagher and Mr Nikoloff were tasked with attracting investors to central Christchurch, including through connecting landowners with potential purchasers to facilitate and speed up the inner city rebuild.
The pair had access to official information including how much landowners were willing to sell for, what investors were willing to pay and what was planned for the city.
They used this information to secure a sale and purchase agreement for their own company and then try and set up private business deals through which they would personally profit by hundreds of thousands of dollars.
Mr Gallagher was later employed at Ōtākaro Limited and managed the team responsible for finding buyers for surplus Crown land.
While in this role, he used and disclosed commercially sensitive information about a developer’s plans for a multi-million dollar piece of Crown land in an attempt to broker a deal which would see him personally profit, at the expense of the Crown.
Ultimately the developer withdrew when Mr Gallagher's offending came to light, leaving a large empty plot still undeveloped today.
“Despite being unsuccessful in their efforts, the offenders’ actions were corrupt and caused real harm to the city’s rebuild efforts,” says Serious Fraud Office Director Karen Chang.
“Mr Gallagher's offending contributed to missed opportunities in the city’s regeneration, including a potential new retirement village on an inner city site that remains undeveloped today.
“Their offending was particularly egregious given how much Christchurch had already suffered. They exploited their roles as public servants employed to help in its recovery.
“In emergency situations or during recovery the need to deliver funding urgently can mean reliance on high trust, quick distribution mechanisms, which are more vulnerable to exploitation.
“It is important that organisations have robust internal controls, particularly when administering public funds, and that these are considered at the outset.
“A reminder of the need for these controls is particularly relevant as New Zealand faces another post-disaster rebuild following Cyclone Gabrielle and the flooding.
“When CERA needed to get off the ground quickly following the earthquake, a number of other Government departments came together to help implement key policies.
“This included ensuring there were clear guidelines around conflicts of interest. Ultimately this helped to hold the defendants accountable for their actions by showing they knew they were acting corruptly.
“Misappropriation of targeted government funding, including emergency recovery or rebuild funding, is a focus area for the Serious Fraud Office.”