Hospital fraud costs top $18m

Legal expenses and costs related to protecting assets have added another $1.3 million to the fraud bill incurred by the Otago District Health Board so far.

Figures released to the Otago Daily Times by the board following an Official Information Act request show that legal fees from September 2006 to January this year made up the bulk of the increased costs incurred.

Former board employee Michael Swann and his friend and business associate Kerry Harford will be sentenced in the High Court next month after being found guilty last year on three charges each of defrauding the board over a six-year period.

While the direct fraud loss was $16,902,145, once the legal fees, the board's lawyers' office expenses and disbursements and costs associated with protecting frozen assets is added, the cost to the board rises to $18,211,932.88.

If the amount of time spent by staff on matters related to the fraud could be established, the costs would be much higher.

The legal fees bill totalling $867,772 covered all matters relating to the fraud.

This included preparation of the case for the Serious Fraud Office investigation and subsequent assistance, preparations for civil court proceedings and criminal trial, legal matters related to the protection of assets, and ongoing investigation regarding the whereabouts of allegedly concealed assets.

The legal fees also covered matters related to disputes with Swann over land, vehicle and vessel assets, and negotiations over the release of funds to him for legal fees and living expenses.

Attempts by the Otago Daily Times to find out how much money was released to Swann have not yet been successful.

A further $21,997 was spent on the board's lawyers' office expenses and disbursements.

Other quantifiable external costs total $420,018 so far.

These include costs associated with the detection, storage, security, maintenance and valuation of assets which are subject to a High Court consent order, court-related fees, consultancy fees for forensic investigations and information technology system analysis, and review and insurance costs.

Part of the these costs are described as vessel-related expenses, which include the securing of Swann's yacht the MV Townsend Cromwell in Fiji, its crewing and return to New Zealand and berthage, security and maintenance.

The board has also reached a confidential settlement with Harford for his part in the civil claim.

The civil claim, which was lodged in the High Court at Dunedin in 2006, has yet to be heard.

 

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