SFO still concerned of risks of fraud in Christchurch

SFO still concerned of risks of serious fraud in Christchurch

The Serious Fraud Office (SFO) has announced today that it has completed and closed one investigation relating to the Christchurch rebuild. However, SFO continues to warn of the potential risks of fraud and corruption in the city.

The investigation began in July last year following a complaint that raised some specific concerns in relation to repair ‘scope of work'. This work is done to provide insurers with an estimate of likely repair or rebuild costs, prior to settling claims. The concern raised related to suspicions that these estimates were being inflated and resulting in more lucrative repair contracts once claims were accepted. Having previously highlighted concern for the potential for serious financial crime during a rebuild period, SFO wanted to minimise or eradicate any risk of fraud with early intervention.

Ultimately no evidence was identified in this case to support that suspicion. Rather this case has highlighted some of the difficulties facing all organisations and individuals in Christchurch, given the post-earthquake aftershocks, the on-going reclassification of land and buildings and the divergence of opinions on rebuild technical requirements. All of these factors contribute to a changing and difficult financial and commercial environment.

Acting Chief Executive for SFO, Simon McArley says the rebuild of Christchurch is an opportunity for law enforcement agencies, along with other agencies involved in the private sector, to work collaboratively to prevent any further losses to the people of Christchurch.

"We intervened early in this case to quickly address concerns. We believe that that early intervention in itself will have had a deterrent effect."

"Industry cooperation is paramount to addressing these emerging risks and SFO will continue to provide support to the construction and insurance industries to ensure positive and genuine activity surrounds investment back into the city," he said.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Role of 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.

SFO operates three investigative teams:

• Evaluation & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

SFO operates under two sets of investigative powers.

Part I 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 II 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..."
SFO's Annual Report 2012 sets out its achievements for the past year, while the Statement of Intent 2012-2015 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz(external link)