Click photo to enlarge
Michael Swann's vessel 'Townsend Cromwell' when it was
seized at the Birch St wharf in Dunedin. Photo Peter
McIntosh.
Otago Daily Times business reporter Simon
Hartley investigates the background of possibly the largest
fraud perpetrated against a government institution - a
vulnerable hospital already in financial crisis.
Greed, a passion for cars and boats, and southern business
interests, were the undoing of Michael Swann, of Dunedin, who
along with business friend Kerry Harford, of Queenstown, was
last night found guilty of defrauding the cash-strapped Otago
District Health Board (ODHB) of almost $17 million over six
years until late 2006.
The compelling question was how Swann, without arousing
suspicion, received on average $43,000 a week from fraudulent
ODHB "contracts", gave his $145,000 salary to his then wife
Anna Devereux, and went about spending almost $11.6 million
on a fleet of luxury cars, boats and properties.
There were more than 100,000 pages of documents involved and
49 witnesses appeared during three weeks before Justice
Stevens and a jury in the High Court at Dunedin.
During cross-examination by the Crown prosecutor, which
prompted an objection by Swann's Auckland QC John Haigh,
Swann was asked if the licences referred to in a multitude of
invoices tendered to the ODHB, reaping him millions of
dollars, was "meant to read licences to print money".
Swann, as the ODHB's chief information officer, was an
acknowledged expert in computer technology and denied the
charges.
However, his crime was simply a 21st-century version of the
centuries-old scam of supplying fake invoices, which
delivered him the lion's share of almost $17 million from the
stressed ODHB coffers.
He contended the invoices of Sonnford Solutions Ltd were a
form of "risk mitigation" insurance, should the hospital IT
system ever need fixing, while the Serious Fraud Office (SFO)
said that situation was already covered by agreements with
the supplier of the hospital's three main computers, IBM.
At the time of the frauds, the ODHB was trading in deficit,
grappling with the transition from the government-appointed
Healthcare Otago to a new elected health board model.
Amid the large deficits, ring-fenced funding issues and major
employment problems, the ODHB was being further constrained
by the introduction of unpopular population-based funding,
with the spiralling cost of patients' treatment always under
the microscope.
Before the trial, not only were local lay people affronted by
Swann's apparent callousness to defraud a struggling
hospital, staff, too, were appalled at the loss of $17
million, with many people asking "just how many heart or hip
operations was that worth?".
The relevance of potential operations may over-simplify the
case. However, the Dunedin court heard during the past three
weeks that the work undertaken on the computers, if carried
out by supplier IBM, would have cost less than $3 million,
against Swann's invoicing of $16.9 million.
That is an apparent difference of almost $14 million which
could have offset or at least cushioned health board losses
elsewhere.
Long before Swann's sacking and the subsequent trial just
over two years later, discreet questions were already being
asked around Dunedin's tight business community about
ex-bankrupt Swann's lifestyle, seemingly so at odds with his
$145,000 a year salary.
