Six people have been arrested, and search warrants or other activities undertaken at over 25 locations in the North and South Islands, in a major joint enforcement agency operation lead by the Serious Fraud Office (SFO) with support from the New Zealand Police, the Organised and Financial Crime Agency of New Zealand, the Commerce Commission, New Zealand Customs, and Inland Revenue.
The joint operation, named Operation Edit, targeted an advertising invoice scam allegedly operated by the group. It is alleged that the group sold advertising in magazines that were either, never printed, or the number of magazines that were printed and circulated was grossly exaggerated. The magazines were generally titled in a way that suggests worthwhile causes in subjects such as road safety, parenting or drug addiction. It is alleged that the scam has generated up to $1.6 million since 2008.
The five-month investigation followed initial coverage by TV3’s ‘Campbell Live’, and involved covert investigation, detailed analysis of banking records and numerous victim interviews. While more than one of the agencies involved had been aware of the group’s activities for some time, the joint agency approach enabled a detailed and multi-faceted investigation to be completed in a relatively short space of time.
Simon McArley, acting SFO chief executive, said this was an excellent example of government agencies working together to prevent crime. “The agencies were able to each contribute specialist skills and achieve a result that none working alone would have been able to. High volume/low value fraud is particularly difficult to address effectively, and this is a good example of agencies bringing together their skills from within their existing resources to address this.”
Five accused have been charged with multiple fraud offences and with participating in an organised criminal group. A sixth accused has been charged with participating in an organised criminal group. The arrests were made in Auckland, Picton and Port Waikato with over 60 staff from the various agencies involved in the operation.
“Invoicing scams cost New Zealand businesses hundreds of thousands of dollars a year and small businesses and charities are often the target” said Mr McArley. “While the dollar amount of alleged offending is not huge, taking action in relation to high volume/low value fraud is important. Overall there can be a significant impact on the economy.”
“By tackling this problem we build the business community’s confidence in the market and enhance legitimate economic activity”, said Mr McArley.
The prosecution for Operation Edit will be undertaken by the SFO.
Note to editors
Background to investigation
A multi-agency taskforce combining the Serious Fraud Office (SFO), the New Zealand Police, the Organised and Financial Crime Agency of New Zealand (OFCANZ), the Commerce Commission, New Zealand Customs, and Inland Revenue was created in May 2012 to combat invoicing scams.
Operation Edit is the first joint investigation of its kind.
Crimes Act Offences
Section 98A Participation in organised criminal group
(1) Every person commits an offence and is liable to imprisonment for a term not exceeding 10 years who participates in an organised criminal group—
(a) knowing that 3 or more people share any 1 or more of the objectives (the particular objective or particular objectives) described in paragraphs (a) to (d) of subsection (2) (whether or not the person himself or herself shares the particular objective or particular objectives); and
(b) either knowing that his or her conduct contributes, or being reckless as to whether his or her conduct may contribute, to the occurrence of any criminal activity; and
(c) either knowing that the criminal activity contributes, or being reckless as to whether the criminal activity may contribute, to achieving the particular objective or particular objectives of the organised criminal group.
(2) For the purposes of this Act, a group is an organised criminal group if it is a group of 3 or more people who have as their objective or one of their objectives—
(a) obtaining material benefits from the commission of offences that are punishable by imprisonment for a term of 4 years or more; or
(b) obtaining material benefits from conduct outside New Zealand that, if it occurred in New Zealand, would constitute the commission of offences that are punishable by imprisonment for a term of 4 years or more; or
(c) the commission of serious violent offences; or
(d) conduct outside New Zealand that, if it occurred in New Zealand, would constitute the commission of serious violent offences.
(3) A group of people is capable of being an organised criminal group for the purposes of this Act whether or not—
(a) some of them are subordinates or employees of others; or
(b) only some of the people involved in it at a particular time are involved in the planning, arrangement, or execution at that time of any particular action, activity, or transaction; or
(c) its membership changes from time to time.
228 Dishonestly taking or using document
Every one is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,—
(a) dishonestly and without claim of right, takes or obtains any document; or
(b) dishonestly and without claim of right, uses or attempts to use any document.
Role of the SFO
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.
The SFO operates three investigative teams:
• Evaluation & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.
The SFO operates under two sets of investigative powers.
Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part II of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
The SFO’s Annual Report 2011 sets out its achievements for the past year, while the Statement of Intent 2012-2015 sets out the SFO’s three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz