Fraud involves the deliberate practice of deception to receive unfair, unjustified and unlawful gain. It covers many different dishonesty offences and includes bribery, forgery, extortion, corruption, conspiracy, embezzlement, misappropriation, false representation, concealment of material facts, collusion and money laundering. A Treasury estimate from the early 2000s put the annual cost of fraud at $1.17 billion. Nationally, police dealt with 9,037 fraud offences in 2014, down from 17,084 in 2004. Fraud carries a maximum jail term of seven years. Many frauds are exposed by whistleblowers (colleagues who suspect inappropriate behaviours), audits or staff changes.
Benefit fraud is the deliberate claiming of benefits from the state to which claimants are not entitled. Fraudulent benefit claims of $30.5 million resulted in 868 successful prosecutions in 2013/14. Given that the Ministry for Social Development was allocated $18.5 billion in the 2013/14 government budget for benefit payments, proven losses to the New Zealand government due to benefit fraud were a very small proportion of total yearly benefit costs. Welfare fraud has been estimated as 0.001% of total benefit costs, including national superannuation.
The Ministry instituted data-matching techniques in the 2000s, sharing information with other government agencies to catch those engaging in benefit fraud. Fraudulent claims to the Accident Compensation Corporation by individuals and health professionals have also been identified and in 1994 the corporation established its own fraud unit.
Making false insurance claims or inflating insurance claims is viewed by many people as a victimless crime, yet those who commit insurance fraud raise the premiums of other policy holders. The Insurance Council of New Zealand estimate that the cost of fraudulent insurance claims is $615 million per annum.
Since the arrival of the internet in the 1990s many New Zealanders have been caught out by scams. One of the most infamous involved variations on emails from Nigeria, in which bank-account details were asked for, supposedly in exchange for a percentage of millions of dollars.
A government estimate in 2010 put the number of people scammed a year at around 20,000 – each losing on average $2,500, with a total bill of $487 million. Police advise people never to give personal details or bank details over the phone or internet. The New Zealand government recommends people protect themselves from internet scams by using hard to guess passwords on mobile phones and computers, not responding to unsolicited emails or texts and never opening email spam.
Rethinking our archetype of the thief
Michael Swann was convicted of stealing $16.9 million while working for the Otago District Health Board. In 2009 detective Neville Aiken of the Dunedin police questioned commonly held perceptions of property criminals: ‘They're not covered in tattoos and unemployed. These are the “pillars of society” and for greed or gambling or whatever reason, they find a way to obtain funds dishonestly.’1
Embroidering a curriculum vitae (CV) may not seem like a crime, yet it can be classified as a dishonesty crime if false pretences are used to gain a higher salary. Canadian John Davy was appointed the first head of Māori Television before he was exposed as a fraud for claiming false qualifications. Sentenced to eight months imprisonment, he served just three months before being deported in 2002. Several high-ranking government advisors have been exposed for CV fraud. In March 2010 Mary Anne Thompson, former head of the Immigration Service, was sentenced to 100 hours of community service and fined $10,000. She had claimed to have a doctorate from the London School of Economics, of which there was no record. The head of an Auckland company specialising in background checks estimated that a third of people omit, add or embellish important information on their curriculum vitae.
New Zealand’s most infamous con artist was a woman. Tasmanian Amy Bock settled in Auckland and engaged in a variety of dishonesty offences around the country in the 1880s and 1890s. In Dunedin in 1909 she even managed to marry a young woman by pretending to be a wealthy man before being charged with false pretences and forgery and being declared a habitual criminal.
Stolen driver’s licences, birth certificates or passports are often used to open bank accounts. A thief utilises the credit limit and then discards the identity. Accounts taken from people’s rubbish may also be used to help prove an address. Risks can be minimised by closing all accounts when identity theft occurs and keeping personal documents secure. Victims of identity theft have to spend a lot of time restoring their reputation and creditworthiness with financial institutions. In some cases identities that are stolen are those of deceased people and this can be particularly traumatic for the families involved.
While there are few cases of confidence (con) men (or women), they achieve notoriety and the press elevates their stories so that some enter folklore. Con artists rely on their charm to dupe people, usually convincing those who trust them to invest money. In the 20th century con artists operated by passing bad cheques or obtaining credit from gullible shopkeepers, but the use of automatic teller machines and internet banking has ensured that this form of fraud is seldom practised in the 21st century. Con artists are often recidivists and well-known to police.
Pyramid or Ponzi schemes are another way in which fraudsters acquire money illegally. These schemes involve using capital paid into finance investment schemes by new investors to pay returns to earlier investors rather than the capital being invested to generate profits. When the rate of new investments slows, there is no money to be paid out, and investors lose their money. Ponzi schemes are an offence under the Fair Trading Act of 1986.
New Zealand's largest Ponzi scheme was run for several decades by Ross Asset Management director, David Ross, whose fraudulent investment practices led to charges by the Serious Fraud Office and the Financial Markets Authority. In 2013 he pleaded guilty to fraud associated with a multimillion-dollar Ponzi scheme that lost $115 million invested by over 600 investors. He was sentenced to over 10 years in prison. Many older investors lost their life savings. A High Court decision in August 2018 supported the position of the liquidators of Ross Asset Management to pay out the remaining $17.5 million in assets to creditors and investors on equal terms, meaning different groups of investors will receive very different rates of return on their original investments. In 2018 the government was exploring fairer ways of winding up Ponzi schemes, which currently benefit investors who withdraw money from the scheme before it collapses.