The Central Otago District Council has released legal advice sought in 2018 after $1000 was added to an altered council invoice from DM Property Solutions Ltd (DM).
The company was directed by Dave McKenzie, who was elected as councillor in the Vincent ward on Saturday following preliminary election results.
Official documents show police and the council’s legal advisers considered the matter civil, not criminal, and further legal advice warned engaging a forensic accountant could cost more than any amount recovered.
The matter was made public in a social media post on Sunday by Rachel Kerr — widow of council property and facilities manager at the time Mike Kerr — alleging Mr McKenzie altered contractors’ invoices for personal gain.
Mr McKenzie responded with a lengthy public statement outlining his view of what happened. He said he had made mistakes and learned lessons, but maintained there was fault on both sides. He said he intended to continue on as a councillor.
A March 2019 report to the council’s Audit and Risk Committee said DM’s contract with the council was cancelled after subcontractor repairs for Cromwell Hall in March 2018 were found to have been altered.
"Council staff met with the owner of DM Properties to discuss the matter. He admitted altering the subcontractor invoice to match the claim by adding $1,000.00," said the report, written by then planning and environment executive manager Louise van der Voort.
A subsequent audit found across one month, 14 of 17 (82%) subcontractor invoices from DM Properties were altered.
"The total of the subcontractor’s invoices was $4,754.08; however, Council was charged $6,464.06 being an additional $1709.98 (35.9%)," the report said.
In legal advice given to the council in October 2018 and detailed in the report, Anderson Lloyd associate Jenna Riddle said a "murky contractual position" meant the firm did not consider DM’s additional mark-ups to meet a criminal threshold for fraud.
"The absence of a formal contract document makes it inherently more difficult to see a claim of breach of contract succeeding."
Ms Riddle said the firm understood the council had reported the matter to police, whose response was in line with previous legal advice — "that this is a civil matter, rather than a criminal one".
"In our opinion, CODC should have sufficient evidence of criminal intent and criminal action before reporting this matter to the police in good faith," she said.
"Engaging a forensic accountant to identify further payments DM may not have been entitled to . . . would unlikely be an efficient use of ratepayer money in the absence of clear evidence of a breach of contract."
Costs could exceed the amount recovered, she said.
The report said unless the committee considered otherwise, the matter had concluded.
Ms van der Voort, who resigned from her council role this year, stood for election in the Vincent ward and is the next highest polling candidate after Mr McKenzie.
In a statement accompanying the document release, council chief executive Peter Kelly said after the 2019 report the matter went no further.
Council procurement processes had improved since then, he said.
"A procurement audit was carried out in 2022 that had further strengthened policies and processes.
"These improvements would help lessen misunderstandings between council and its contractors."
On Monday, he said a "thorough review" of a 2018 investigation was under way and the outcome would be shared publicly.
