SFO charges result in guilty plea on $103 million fraud

Former Datasouth Group (Datasouth) director, Gavin Clifford Bennett (53), today pleaded guilty to charges brought by the Serious Fraud (SFO) Office relating to a $103 million fraud involving a Ponzi-style scheme.

Mr Bennett was convicted on six representative charges under the Crimes Act relating to approximately 900 separate incidents of dishonestly using a document, and a further two charges of false accounting.

SFO Chief Executive, Adam Feeley, welcomed the guilty plea saying, “The collapse of Datasouth was a significant event in the Christchurch business community and caused widespread losses. Mr Bennett’s guilty plea brings to a satisfactory end one of SFO’s largest investigations in recent times.”

The Datasouth Group offered technology hardware for lease through Datasouth Business Solutions Limited, and provided finance for the technology leasing solutions through Datasouth Finance Limited.

The SFO alleged that between April 2005 and March 2011 Mr Bennett created false documents relating to the lease of IT equipment to fraudulently obtain funds from South Canterbury Finance totalling approximately $65 million.

It was further alleged that Bennett falsified entries in Datasouth Finance financial statements by an estimated $38 million in order to retain the ongoing finance facility.

Mr Bennett used the dishonestly obtained funds to repay earlier false lease agreements in a manner similar to a Ponzi scheme.

Loan funds were also applied to meet business expenses and personal expenses.

Between April 2005 and March 2011 a total of approximately $7.8 million was paid either to personal New Zealand and Australian bank accounts controlled by Mr Bennett or applied to business credit cards that Mr Bennett used for personal expenses, though a small portion of that amount was used for genuine business expenses.

Significant areas of personal expenditure by Mr Bennett include:

·                 the rental for two luxury residential apartments in the Rocks, Sydney (A$463k);

·                Regular payments to various female companions totalling (A$900k);

·                Food and beverages (A$429k), a significant amount of which was spent at Hemmesphere bar and restaurant Sydney);

·                International air travel for Bennett and on occasions various companions totalling (A$161k)  including to Argentina, New York,  Hong Kong,  Las Vegas,  New Caledonia,  Rio de Janerio,  San Francisco, Paris and London;

·                Jewellery and flowers (including purchases at Tiffany & Co) (A$16k);

·                Corporate car taxi expenses (A$53k); and

·                Clothes and apparel (including purchases at Louis Vuitton, Cartier, Chanel, Giorgio Armani, Barney’s and Bloomingdales New York, Victoria’s Secret, Paul Smith, Gucci, Jimmy Choo, Harrods London) (A$163k).

The resulting financial loss to South Canterbury Finance was at least $23 million.

Datasouth went into liquidation in March 2011, leaving all 31 staff without employment.

Mr Bennett was remanded in custody for sentencing on 3 May 2012.

Mr Feeley said that while the guilty pleas in the Datasouth case avoided the time and cost of a trial, the SFO still faced the prospect of an extraordinarily busy year of fraud trials.

“We currently have 28 cases before the Courts, with a further 31 cases under investigation.”

“The volume of cases underscores the need for SFO to continue to work closely with other agencies and receivers and liquidators to ensure that the public has confidence that fraudsters are being brought to account.”