Assessment

New Zealand consistently tops international lists for honesty and we like to see ourselves as a pretty straightup bunch. Matt Nippert tries to dig the dirt on our reputation for integrity.

THERE IS no corruption in New Zealand, says Transparency International. Each year the Berlin- based organisation ranks the world by honesty, from cleanest to dirtiest. In nine of the past 17 years its Corruption Perception Index has been published, including 2011, New Zealand ranked No 1.

Is this ranking an honest assessment of our world-leading lack of corruption? Or is the claim akin to Blam Blam Blam’s satirical 1981 claim that New Zealand is free of depression?

Since 2010 our courts have dealt with three cases that belie this claim to cleanliness. New Zealand courts convicted an MP who solicited bribes in return for promises to grease the immigration wheel; a senior civil servant who took $160,000 to rent over-priced office-space for the public sector; and a prison guard who accepted cash in return for smuggling drugs to inmates.

These three caused Kiwi economist Suzanne Snively to hesitate in taking up the reins at Transparency International New Zealand. ‘‘I did so reluctantly. I started with a sense of disbelief, questioned how it was measured. I kicked the tyres,’’ she said of her own organisation’s index measuring confidence in the public sector.

Now, two years into her role, Snively is convinced. These three cases – respectively of MP Taito Phillip Field, ACC national property manager Malcolm Mason and Rimutaka Prison guard Johan Clarke – didn’t just represent the worst examples of corruption to hit the courts in the past couple of years, they were the only cases.

Otago University law professor Andrew Geddis says the Field case was unusual – not because it lifted the lid on widespread corruption among the legislature, but because it took 156 years for the first MP to be convicted for corrupt behaviour while in office.

‘‘ It just doesn’t happen very much, and those rare occasions where it is uncovered, it gets dealt with – it’s not given a settlement and hushed up, never to be spoken of again,’’ he says.

Geddis says New Zealand’s ranking for clean government is still well-deserved. ‘‘Just because we’re no longer a virgin doesn’t mean we’re now a whore.’’

Nick Paterson, the Serious Fraud Office general manager of corruption, isn’t prepared to disestablish his job despite having a workload that would be the envy of his international peers.

‘‘Corruption exists in New Zealand. It’s a fact of life. We’ve just got to stop it becoming a part of life,’’ he says.

Paterson says the MPs’ expenses scandal that gained widespread publicity both here and in the United Kingdom is an illustrative example. ‘‘On the surface we had the same problems but, when you get down to the details, the UK MPs were buying castles and cleaning moats. Our guys were buying a bottle or two and drinking it personally.’’ They’re hardly comparable, he says.

Normally the SFO tackles crimes involving $5 million or more, but in the case of corruption Paterson’s office has had to lower the bar and almost plead for tips from the public.

‘‘If there are corrupt practices going on, I want to know about them,’’ he says.

‘‘When it comes to corruption and bribery, particularly of our public officials, we’ll look at some pretty low levels – the financial thresholds sort of go out the window.’’

While our public service may be the envy of the world, the honesty of our private sector and society at large is shaded more grey than lily white. Condemnation of official bribery may be universal, but New Zealanders are more nuanced in their approach to lies when their own money is involved.

The value of fraud prosecutions – the telling of lies for financial gain – this year hit a record high. Evidence is emerging that the billions of dollars in cash flowing into Christchurch for the earthquake rebuild is germinating hitherto rare seeds of corruption.

And although New Zealand has one of the smallest hidden economies in the world – a quarter of that in countries such as Greece – transactions taking place untaxed and under the table comprise an estimated 9 per cent of our economy. Each year billions of dollars worth of taxes are dodged by tradies, hospitality workers and corporate tax practitioners.

Raju Budhia, group manager of compliance at Inland Revenue, says most people comply with tax law. ‘‘But at one level we will have people who don’t pay their fair share and basically they are cheating others who are doing the right thing,’’ he says.

Budhia’s department prosecuted 513 cases of tax evasion involving $83m in the year to June, and he acknowledges cases that come to court are just the tip of the iceberg. ‘‘We look at the severity of the issues, and there’ll be a lot more cases that we don’t prosecute,’’ he says.

Christchurch’s The Press reported in December the Christchurch rebuild had sparked two corruption investigations, with a contractor accused of overpricing and invoicing for work that was never completed, and large- scale insurance fraud.

Former Scottish policeman and now private investigator Ron McQuilter is also generally optimistic about New Zealanders. ‘‘I don’t know whether we’re number one, but certainly I find the majority of people are pretty honest,’’ he says.

That changes, though, when it involves either faceless institutions or perceived slights, McQuilter says.

Insurance fraud, estimated by the industry to exceed $ 150m annually, forms a big part of his workload. ‘‘People don’t see it’s a crime – people see that it’s what you do when you submit a claim,’’ he says.

Deloitte

Canada

partner

Peter Dent said last year that, based on overseas experience, one-fifth of the estimated $ 20 billion in insurance claims for the Christchurch earthquake could be tainted by fraud or corruption.

Another big part of McQuilter’s workload is employee theft. Typically he’s dealing with first-time offenders who have had a trigger that led them to be dishonest.

‘‘We dealt with one guy who stole more than $1m because he thought he was entitled to a company car. The guy across the office got one, and he thought ‘I should too – that’s not fair.’ That’s how it started,’’ he says.

Our national character may help propel us up the Transparency International rankings, but also leaves us open to exploitation. McQuilter says honesty can often be substituted for naivete.

‘‘New Zealanders are a lot more trusting than anywhere else. You couldn’t go overseas and do half the things I see done here.’’

Our trusting nature may be why those few who do decide to tell big lies are racking up record hauls of illicit cash. Although overall convictions for fraud are on the decline, the total value of such crimes is skyrocketing with an increasing number of ‘‘ super frauds’’.

The likes of Gavin Bennett, who lost $23m running a Ponzi loan scheme while spending millions on champagne and women in Sydney, and Stephen Velsalko, who defrauded clients of his bank of $17.8m and spent the proceeds on a lavish lifestyle, would once have been a rare phenomenon.

And the laying of $1.7b in fraud charges in February against figures involved in South Canterbury Finance give us an alleged fraud equal – on a per capita basis – to an Enron or a Bernie Madoff.

Despite the boggling fraud and tax evasion numbers, once compared to the rest of the world New Zealand comes out well. So well, in fact, the SFO’s Paterson says our lack of corruption is itself a busi- ness drawcard.

‘‘We gain tourism off the 100% brand, but we are fairly confident saying we get inward investment and trust for New Zealand businesses going overseas off the TPI ranking. It’s a reputation we deserve and we need to do our best to maintain it,’’ he says.

But there are risks on the horizon. Just as local fraudsters can take advantage of our trusting nature, individuals from less scrupulous parts of the world are keen to cash in on New Zealand’s reputation.

Locally registered shell companies, exploiting now- closed loopholes that allowed New Zealand companies preferred access to international banks, have long been used as conduits to launder drug money, loot government treasuries and even ship arms to North Korea.

The vast majority of these illicit shell games involve funds from countries occupying the other end of Transparency International’s index: Latvia, Ukraine, and Kyrgyzstan.

A new law progressing through parliament will make life more difficult – but not impossible – for these operators to trade on New Zealand’s reputation.

And although Transparency International ranks us top of the charts for our lack of corruption, we get zero marks from the same organisation for cracking down on bribery abroad by New Zealand corporations.

Australia, the United States and the United Kingdom have prosecuted their companies for such behaviour, but Paterson concedes he hasn’t started a single investigation despite acknowledging Kiwi corporations operate in the same regions as our peers.

‘‘Our corporate and private sector organisations must – no debate – must be paying bribes in some countries. Not all, but a degree will be paying bribes, facilitation payments or greasing the wheel. We’d expect to have a handful of these cases to investigate, but at the moment we’ve got none.’’

Despite his occasionally frustrating role finding corrupt needles in New Zealand’s haystack, Paterson remains cheery about his adopted homeland. Two years ago he took a long drive south, after filling up his car with petrol in central Auckland. After stopping for a coffee in Hamilton, he discovered he’d left his wallet on the car roof before setting off on his journey from Auckland.

‘‘It had $60 in it. I hoped it might turn up, but I didn’t expect the money to still be in it,’’ he says.

The wallet was returned to the Auckland Central police station, cash intact. ‘‘That wouldn’t have happened the UK,’’ he says.

in