A man whose company charged the Otago District Health Board millions of dollars over six years was acting as a "buffer" so the board would not realise 90% of the money paid to the company was ending up with one of the board's own employees, chief information officer Michael Swann, a court has heard.
Senior Serious Fraud Office investigator David Osborn told Justice Stevens and a High Court jury that, on the basis of records he saw, Kerry Harford's company, Sonnford Solutions, provided no services to the hospital.
And it appeared Harford received 10% of the $16,902,145 because of his role as a buffer between his friend, Swann, and the board.
Swann (47) and Harford (48) both deny dishonestly and fraudulently obtaining the money from the board between August 2000 and 2006 by using Sonnford Solutions invoices to charge for contracted services which were never provided.
In evidence on the 10th day of the trial before Justice Stevens and the jury, Mr Osborn said he began investigating the Sonnford Solutions case in September 2006.
His view, after considering documentary evidence including business and banking records, was that a system had been in place whereby Harford (Sonnford) provided invoices to the board for services he did not, and could not, provide.
Swann, a senior board employee, authorised payment and the proceeds were shared between the two, 90% going to Swann and 10% to Harford.
Swann received his share from Sonnford in three main ways, Mr Osborn said.
Payments were made into a trust account with the law firm Checketts McKay, to a bank account in the name of Computer South Ltd and to creditors such as car sales company Armstrong Prestige.
Peter Ibbotson was the sole director of Computer South and he and Swann's wife, Anne Devereux, were signatories, as was Swann.
But Computer South provided no invoices to Sonnford for anything, had no employees, owned no assets, and was really just a bank account for Swann who was not operating a personal account as far as he could see, Mr Osborn told the court.
Based on his analysis, Swann spent almost $8 million of the $15.116 million he received on boats and cars.
He paid $262,000 on a Porsche in November 2005, later trading it in for $216,00 on a Merecedes Benz, before paying $250,000 to buy back the Porsche in his wife's name.
Swann also spent $3,677,000 on real estate, transferred $25,000 to personal accounts, paid $1,101,000 on personal and credit cards, and made cash withdrawals totalling $1,118,000.
He made no IRD or accountancy payments.
Harford spent $324,000 of his $1.784 million on vehicles and boats, $388,000 went to the IRD, $51,000 went on real estate, $550,00 was transferred to personal accounts, $352,000 went to personal and credit card payments, he withdrew $$3,000 cash and paid $23,000 for accounting services.
Sonnford was incorporated in November 2000, Mr Osborn said.
That was after invoices had already been submitted to the ODHB in the company's name.
It was also well after about half of the 16 purported contracts had been entered into between Sonnford and the board.
They dated back to February 2000.
Mr Osborn said he looked for evidence of Sonnford providing services or owning, either directly or through any rights, anything it could provide to the ODHB, but found no records anywhere that would suggest the company owned anything or could have provided anything at all.
And, after looking at the Sonnford records, including a letter from Harford telling the IRD Sonnford was a broking company holding New Zealand licences for computer software, Mr Osborn said he found nothing to support that claim.
He also found no evidence of any arrangement between Sonnford and any other entity for provision of any other service of any kind.
Evidence in the trial is likely to be completed today.
