Bank fraud spent millions on sex workers

A former bank investment adviser who stole nearly $18 million and then spent $3.4 million of it on two sex workers will spend at least four years in jail.

Stephen Gerard Versalko, 51, last year admitted stealing $17.76 million - the country's largest employee theft to date - over nine years from 30 wealthy ASB Bank customers after advising them to invest in non-existent high-return finance schemes.

He paid them back $4.6 million of their own money in "returns'' on their investments, but then spent $4 million on properties and $3.4 million on the two escorts.

Of this, $800,000 went to one sex worker and about $2.6 million to the other, of which $1 million was used to buy a property which has subsequently been repossessed.

Versalko's lawyers said $1.2 million of the $2.6 million paid to one of the sex workers came as a result of the sex worker blackmailing him and his family over a lengthy period, something the Serious Fraud Office (SFO) made no mention of in its summary of facts.

The money on property went toward a $3.2 million Remuera residence, a $1.8 million bach in the Coromandel town of Whangapoua, and $500,000 on maintenance. He also spent $313,000 on wine over a seven-year period.

Today, Judge Christopher Field sentenced Versalko in Auckland District Court to six years imprisonment, with a minimum non-parole period of four years.

Versalko's guilty plea on three charges involving $17,763,108 relating to 123 transactions made him the largest employee thief in New Zealand history, surpassing the $16.9m fraud by former Otago District Health Board chief information officer Michael Swann and business associate Kerry Harford.

Judge Field put the starting point for Versalko's sentence at 10-1/2 years, the same as was used for Swann.

But his reduction for mitigating factors was much larger than for Swann, whose final sentence was 9-1/2 years jail with a minimum non-parole period of 4-1/2 years.

Judge Field said this reflected his guilty plea at the first opportunity, his co-operation with SFO investigators and his efforts to recover some of the money he stole. About $4 million has been recovered to date.

He said victim impact statements revealed the investors felt a sense of shock and betrayal that Versalko used their money to fund his lifestyle.

The SFO summary of facts said Versalko began the fraud in 2000, when he had a credit card debt of about $30,000.

He secured the money by telling clients, mainly elderly women living outside of New Zealand, that he had investments available with higher than normal interest rates, no tax or fees and a long term government guarantee.

They were usually clients who did not make online account searches, though he did send them statements and made payments.

The names of the clients have been suppressed.

SFO prosecutor Patrick McCann called it a classic "Ponzi'' scheme - where a swindler pays earlier investors from their own money or with money provided by later investors.

Mr McCann said Versalko was not exposed until one client saw a British documentary on Wall Street Ponzi scheme operator Bernard Madoff and noticed similarities with her dealings with Versalko.

She then rang another ASB staff member seeking information about the investments. Soon afterwards Versalko was approached, at which stage he admitted the scheme.

He later told investigators that he had felt he was "Mr Invincible''.