The man has denied stealing $1.3 million from an Auckland rest home in an elaborate fraud spanning seven years. Photo / NZME
A man charged with defrauding an Auckland rest home of $1.3 million rang the company's director in hysterics saying, "I f***ed up, I f***ed up" as the alleged ruse first came to light, a court has heard.
During the call the man admitted he hadn't filed the rest home's IRD returns and the directors were about to receive a "letter of demand".
The letter arrived later that day confirming the rest home company owed north of $300,000 in tax obligations and penalties.
But it was just the beginning.
A trial in the High Court at Auckland today heard that the revelations triggered a detailed forensic investigation of the company's finances that revealed the extent of the man's alleged deception spanning seven years.
But when the directors went to retrieve the company's financial records from secure storage in the facility's basement as part of the audit, "We'd been beaten to the punch - they were gone."
A large number of boxes containing company receipts, cheque stubs and supplier invoices had disappeared.
The court heard there had been enough boxes to fill a medium-size truck.
The director hastily arranged a meeting at the man's house.
"The obvious issue on the table was how on earth had we got into this position.
"I was expecting I would get total co-operation. That proved not to be the case."
The man immediately resigned and a subsequent police investigation eventually saw him charged with 49 dishonesty offences which, if found guilty, could see him sent to jail.
The man was employed alongside his wife to run the aged-care facility from 2001 until 2012 and was responsible for overseeing the payroll, paying suppliers and the company's financial records.
He is on trial this week before Justice Timothy Brewer.
Crown prosecutors say he fraudulently used up to 1100 cheques to siphon more than a million dollars from the rest home accounts, and overpaid his and his wife's salaries by hundreds of thousands of dollars to fund the pair's upmarket lifestyle and new build of their luxury city-fringe home.
Taking the witness stand on day two of the trial, one of the rest home's directors described how concerns first emerged in 2012 when the rest home's accountant realised two payments had not been made to IRD.
The director said the man then rang him in a frantic state.
"He sounded hysterical. He said, 'I f***ed up, I f***ed up. I haven't filed the Inland Revenue returns. You're going to get a letter of demand'."
Following the man's resignation, the director set about trying to trace and reconstruct years of the company's financial records and expenditure, which involved reviewing thousands of cheque payments to suppliers.
After discovering the company's financial records had disappeared from the basement, the director sought copies of statements and cheque receipts from the bank.
He then created detailed schedules of creditor and expense payments to track where the money had gone.
He told the court he created an account coded "staff fraud" for the numerous illegitimate transactions which he claimed had not been signed off by the company.
"I identified a large number of cheques and payments made without authority.
"[The man] coded payments obstinately for things like repairs and maintenance which were actually for his own house."
The investigation focused on the period from 2005 to 2012.
"By going through and looking at every cheque we got a more accurate figure of ... just how much fraud had gone on."
Financial statements in the two years after the man resigned showed a "significant turnaround" in the company's profitability, and by 2014 there were zero expenses coded as "staff fraud", the court heard.
The jury were also told that a document discovered during the investigation had been "twinked out" and the man's salary figure altered.
Buried in a box of papers, the company's directors discovered a historic copy of the man's management agreement.
The man's agreed annual salary had been $40,000 which the court heard did not change during the entire period of his employment.
However the director said the document had been altered without authority from the company directors.
"This document had twink on it.
"The document which originally had $40,000 on it had been altered to $41,500."
Asked if he recalled the document being changed to increase the man's remuneration, the director replied: "We would never use twink, firstly, and secondly, any amendment would have been initialled by all the parties."
The trial continues.
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