KEY POINTS:
The country's biggest known benefit fraudster was caught by a banker, calling into question the ability of the welfare bureaucracy to detect such crime.
Wayne Patterson, 47, last week admitted multiple fraud and forgery charges relating to more than $3.4 million he received using 123 fake identities.
Welfare Minister David Benson-Pope and Ministry of Social Development chief executive Peter Hughes moved swiftly to assure the case was unique and that any suggestion of holes in the system was wrong.
The Weekend Herald has learned the ministry missed a chance to catch Patterson soon after his offending began three years ago and that it was an alert banker that provided the lead that led to his arrest.
Patterson's frauds began in March 2003 and ran until his arrest last month. They netted him up to $54,000 a fortnight more than the so-called celebrity drug ring kingpin John Waterworth.
The Social Development Ministry had stopped payment of a benefit to one of Patterson's identities because of a discrepancy, the Herald was told. It was thought stopping payments would prompt the beneficiary to come in, enabling the discrepancy to be resolved. Unusually, the beneficiary failed to make contact but no investigation was done.
A tip-off from Kiwibank was Patterson's undoing. A banker noticed a pattern of unusual transactions relating to some apparently unrelated accounts into which benefits were paid. It is understood investigation of internet transactions on these accounts showed they came from the same internet protocol address. Further investigation linked Patterson's physical address to the IP address.
When a search warrant was executed on Patterson's home - a rented property with a plain exterior but lavish interior - investigators found an office containing a sophisticated computer system to track the numerous bank accounts, $355,000 worth of gold ingots, $685,000 cash hidden in the garden and another $185,000 in the house and his car.
Also found were 137 automatic teller machine access cards, 125 Inland Revenue cards, 102 forged birth certificates, 79 superannuation cards, 56 community service cards and a range of disguises.
The Herald asked the ministry to explain how Patterson, who was jailed in Australia 20 years ago for fraud, was detected, why the public should have confidence in its detection systems, or in the minister's assertion that Patterson's case was unique, and to explain why a lead that may have exposed Patterson three years ago was not followed up.
Chief media adviser Bronwyn Saunders said the ministry's legal advice was to wait to discuss such issues lest it jeopardise sentencing or recovery of the $2.2 million outstanding.
Ms Saunders declined to explain how providing such information might affect asset recovery but said the need to be accountable was understood and full disclosure of information was planned for after sentencing.
"The ministry does have a strong record of accountability on fraud. If you remember the Lisa Clement internal fraud, we fronted up and explained how it occurred ... [what] might have been done better and what controls had been improved and we will do exactly the same in this case.
"We are just not at a point where we can do it at this stage."
Clement, who worked for WINZ, used three names in frauds of $1.9 million. The ministry implemented a range of recommendations by accountancy firm Deloitte. The ministry said Deloitte had acknowledged it was unrealistic to expect any system of internal controls to detect elaborate fraud.
