Pair jailed for defrauding Otago DHB

Two men who defrauded Otago District Health Board of almost $17 million were today handed jail terms totalling nearly 14 years between them.

Michael Swann 47, former chief information technology officer of the DHB, was sentenced to nine years and six months, while his friend Kerry Harford, 48, a Queenstown surveyor, was jailed for four years and three months.

They were found guilty of fraud, which they both denied, in December last year.

The pair showed no emotion when they appeared for sentence before Justice Lyn Stevens in the High Court in Dunedin today.

Justice Stevens described the case as being without peer.

He said the offending was on a grand scale and there was no established benchmark for sentencing in such a case.

It had affected the DHB, its patients and the wider Otago community.

There was no order for made for reparation.

Harford has already reached a confidential settlement with the board, which is taking civil action against Swann, the Otago Daily Times website reported.

During the men's trial, the Crown said they had used 198 invoices from Sonnford Solutions, a company formed by Harford, to charge the board $16.9 million for IT-related services that were never provided.

Prosecutor Robin Bates said any maintenance work on the three hospital servers was "minimal" and carried out by paid employees of the hospital, including Swann himself.

When outside computer engineers checked the servers in late 2006 and early 2007, after they crashed, they found the servers were still running on the original software and programs installed by IBM.

The servers had been kept running by patching up and cannibalising parts from other computers.

But Swann and Harford billed the board for maintenance and program upgrades and were paid $16.9 million of which Harford retained 10 per cent and immediately paid the other 90 per cent to Swann-related companies or entities.

Swann received about $15 million, much of which he spent on cars, boats and property - and all this during a time when the health board was trying to keep spending down because of its financial position, Mr Bates said.

The fallout from the case has already been extensive.

Immediately after the end of the trial Health Minister Tony Ryall called for urgent confirmation that systems had been put in place at district health boards throughout the country to prevent fraud.

Mr Ryall said he was determined "that this should be not allowed to happen again".

Last month Mr Ryall sacked DHB chairman Richard Thomson from his role, after holding him accountable for the fraud which took place over six years.

- NZPA