A really good article on the impact of fraud in the Taranaki region. Not for Profits (NFP) appear to be exposed to Employee Fraud more than they should, which seems worse given that these organisations are set up to do good in the community. The impact on NFP is different to a commercial organisation. The trust lost when the funds you receive are from public donations, but then diverted to fraudsters, impacts the ability of the Not for Profit to continue, and repairing the loss of trust takes a significant amount of time. Watchful Eye offers a discounted price for Not for Profit organisations.
December 2 2016
Economic crime is estimated to cost New Zealand billions of dollars each year. Photo / Thomas Busby
Workplace fraud is widespread in New Zealand and can threaten the very survival of its victims. Deena Coster investigates.
It still radiates off him. The anger.
Saddled with $280,000 in losses fraudulently created by a former employee, New Plymouth supermarket owner Robert Dowman feels the fall-out from the crime keenly.
Owner/operator of New Plymouth’s City New World Robert Dowman is still angry about how Clare Strachan’s fraud put the livelihoods of his employees at risk. Photo / ANDY JACKSON/FAIRFAX NZ
It’s been six years since Dowman uncovered his former personal assistant Clare Strachan’s deceit yet workplace fraud remains an ongoing and costly issue.A global survey, completed in 2016 by KPMG International, says 65 per cent of people who commit fraud are employed by the organisation they rip off, often motivated by personal gain or greed.
Clare Strachan was a former personal assistant at City New World in New Plymouth when she ripped the business off to fund her methamphetamine habit. Photo / CAMERON BURNELL/FAIRFAX NZ
In New Zealand, the estimated cost of economic crime to the country is believed to be in the billions, a large chunk of which is connected to tax evasion.This year alone in Taranaki, five different offenders have been put before the courts on fraud charges involving significant sums of money.
Most recently, Nikau Hohaia pleaded guilty to stealing $100,000 from Opunake’s Te Kura Kaupapa Maori O Tamarongo in her role as its administrator, cash she used to fund her own lifestyle.
Massey University’s Dr Mei Williams says fraudsters show little remorse for their actions. Photo / Supplied
In other high-profile cases this year, Hawera Bizlink was defrauded of $25,000 by treasurer Cushla Fevre, Michael Talane Foster is alleged to have taken $231,000 from Taranaki Medlab, while Powerco lost $700,000 to a fraudulent employee.It took Dowman weeks of 20-hour work days, meticulously going through records, searching the system for signs of something amiss, to get to the bottom of why his supermarket was struggling financially.
“It went all the way through the business and back to the office where she sat,” Dowman says.
Former Surf Life Saving Taranaki district manager Alison Douglas was jailed after she stole $200,000 from the organisation. Photo / BRADLEY AMBROSE/FAIRFAX NZ
In 2011, Strachan was jailed for two years and nine months for the fraud, offending motivated by her methamphetamine addiction.Once considered a trusted employee and friend, Strachan had paid herself extra wages and stole gift card money over the four years she worked at the Courtenay St business.
However, as no reparation order was made against her, Strachan did not have to pay a cent back to Dowman.
David Lean says a lot of work was done to rebuild the surf club’s reputation after Douglas ripped it off. Photo / ANDY JACKSON/FAIRFAX NZ
It was a decision which not only put the livelihoods of 210 supermarket employees at risk, but the lack of accountability also created a deep sense of injustice in Dowman, a man who used to serve the community as a police officer.”I have no faith in the judicial system full stop,” he says.
Instead, he took the financial burden onto his own shoulders and boxed on. It hasn’t been easy.
The whole affair has shaken his trust in other people. It has only been in the last six months he felt ready to take the leap and hire a new assistant, filling the vacancy left by Strachan once her betrayal was revealed.
LITTLE EMPATHY FOR VICTIMS While the KPMG report identifies weak internal controls as the common denominator in workplace fraud, if someone is intent on committing company theft, policy or practices can mean little.
“There are always going to be some people who will take their chances, even if the controls are tight,” the report says.
This risk-taking and a lack of remorse are characteristic of people who prey on others for financial gain, says Massey University senior psychology lecturer Dr Mei Williams.
While their charm and personality are reasons why people trust them in the first place, it’s in short supply after offenders get caught out, she says.
They often show little empathy for people affected by their offending, which has its roots in a sense of entitlement.
“Sometimes people will steal from their employers as they feel hard done by.
“They may see this as a way to get back at their employer – that somehow they’re due or owed the money they are stealing,” she says.
Some people just live beyond their means, revelling in the status going on a fancy holiday or driving a new car gives them with friends or family.
She says this was also a common way fraudsters justify the crime to themselves.
“Once they realise how easy it is and they are not detected, it almost takes on a life of its own,” Williams says.
“The longer they get away with it, the fear and anxiety that they might get caught subsides.
“It is very rare that people stop it on their own,” she says.
A recent PricewaterhouseCoopers survey highlights how economic crime, such as workplace fraud, represents the biggest threat to New Zealand companies.
Of those who responded, 40 per cent had experienced some kind of financial loss in the last two years. While 42 per cent of fraud was uncovered after a tip-off, a surprising 18 per cent was found out by accident.
A similar survey completed by BDO New Zealand focused on not-for-profit organisations, where about 52 per cent of respondents see fraud as a problem for the sector overall. However, only nine per cent believed it was an issue for them.
The report points to the potential for complacency to develop in the charity sector and the “immense” impact fraud could have on smaller groups with less cash.
REPUTATIONS HURT The threat convicted fraudster Alison Douglas posed to a Taranaki surf life saving club is a case in point.
In 2009, it was revealed Douglas had stolen $200,000 from the Fitzroy Surf Club over the 10 years she worked as district manager for Surf Life Saving Taranaki.
She overpaid herself by $198,764.68 and also spent up large on unauthorised domestic and international travel. To cover up the fraud, she forged audit reports but the deceit was discovered after the club was sent a demand notice from the Inland Revenue Department for unpaid taxes.
David Lean, who was acting district manager of Surf Life Saving Taranaki in the wake of the scandal, says the organisation had little choice but to bite the bullet and face up to what had happened.
The biggest consequence from Douglas’ fraud was the attack on the club’s reputation. Lean says it was something club management had to re-build, knocking on doors and re-assuring its members that the organisation had a future.
“You’ve got to re-prove that you’re worthy of continuing community support,” he says.
In Lean’s opinion the surf club was too big to fail but other, smaller businesses or groups who did not enjoy the same level of support might not be able to survive substantial losses which occur through fraudulent behaviour.
“When somebody lobs a bomb in the office space, there’s a good chance it’s going to disintegrate,” he says.
“Any situation like that has the potential to destroy a business or any community organisation.”