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The Serious Fraud Office is investigating allegations that funds intended for Maori social services were invested in a South Auckland gay sex venue.
The inquiry follows the December sacking of Ngapuhi Iwi Social Services chief executive, Arapeta Hamilton, dismissed after a six-week independent financial audit of the Far North group's financial accounts.
Kaikohe police decided the matter should be passed on to the SFO because the suspected fraud, alleged to have occurred between 2000 and 2005, exceeded their scope.
The Herald on Sunday has learned that aspects of the police and subsequent SFO probes relate to the private business interests of Hamilton, who had held office at NISS since the mid 90s. Sources close to the investigation which led to Hamilton's dismissal have confirmed that the NISS accounts showed the Kawakawa man was the owner of the failed Southside Cruise Club, a sex venue in a Manukau City warehouse where gay men would pay $10 to have sex.
Math Enterprises, the owners of the Ash Rd premises, said they are owed $10,000 in rent and had enlisted a debt collector to chase Hamilton. The Whangarei District Court issued a judgment against Hamilton in March but he has not been found. Owner Barbara, who did not want her surname used, said Hamilton was upfront about his intentions to convert the large warehouse. "It was a night operation - he even painted over the skylights. We were told it was going to be a homosexual men's club...
"The impression we got was that he was from a well-to-do family and we were told the club was funded with family money," she said.
Documents leaked to the Herald on Sunday show how Whangarei private investigator Brian Nalder randomly retrieved 94 cheques issued by the social services organisation, funded mainly by Child, Youth and Family to carry out programmes for "at risk" Maori youth.
Nalder was paid more than $20,000 by Ngapuhi's Runanga and NISS to see whether there was a case of financial misappropriation or illegal conduct.
The series of cheques, totalling $44,445.69, bore the sole signature of Hamilton and there were allegedly no invoices to support the payments. Some cheques were allegedly issued personally to Hamilton, others were cashed by the senior iwi staffer at the Kamo branch of Westpac Bank. Some were deposited into the account of Southside Limited, which was never incorporated by the Companies Office. The audit report noted a cheque for $3,208 to McQuinn Pumps - "Enquiries have established this cheque paid for repairs to a pump at the chief executive officer's mother's home." .
Nalder said in his view, his investigation "revealed prima-facie evidence of very serious fraud involving NISS funds being used for inappropriate purposes".
Runanga chairman Sonny Tau last week denied knowing specific details about the gay sex club but conceded that there were "serious problems" with the accounts from the period that Hamilton managed the social services arm of Ngapuhi. "All you should write is that there is an investigation, no need to put that other gay stuff in," Tau advised. A source close to the iwi, the country's largest, said Ngapuhi had tried to keep the details of the investigation secret. "This is a huge embarrassment... government money and gay sex, by crikey it's bad," the source said. Tau said there were "no problems" with how NISS delivered services on behalf of CYF.
Last week Hamilton said he had "nothing to say" about the cruise club.
Northland MP John Carter has welcomed the SFO investigation and suggested the Ministry of Social Development also launch its own inquiry. "Clearly there wasn't enough monitoring from the Ministry," said Carter, who intends grilling the Government in parliament when the house resumes in a fortnight.
In a statement, CYF said it commissioned an independent review of Ngapuhi's financial performance in 2006. "While there were areas where remedial action was required around Ngapuhi's governance, management and financial practises, Child, Youth and Family was satisfied that Ngapuhi had delivered and completed on time their contract obligations and that issues regarding its management had all been addressed."
