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Case A: Consequences of poor employee screening

Mr B provided a false history as part of that recruitment. His CV falsely claimed tertiary qualifications he did not have and falsely stated that he received a number of awards in New Zealand. He did not declare that he had a criminal record for theft in New Zealand in 1999, that he was wanted for questioning over fraud offences believed to have been committed in 2003, or that he had changed his name in 2001.

Over the next couple of years Mr B worked in various finance-related roles. In September 2007 he began performing higher duties as Principal Finance Officer, with reporting and monitoring responsibility for QHealth and ministerial grants cost centres. Within days of beginning at this level he established The Muse, a business registered to his neighbours, as a QHealth vendor, signing the set-up form himself as authorising officer. The following day he authorised the first of several fraudulent payments totalling $77,000 to The Muse.

His colleagues noted that his lifestyle appeared to exceed his income. He told them that he was a member of the Tahitian Royal family but needed a job to access his trust fund.

In 2008 he set up another of his own businesses, HIC, as a QHealth vendor. HIC was registered to him at his home address as the individual operator and owner. Between 2008 and 2011 he authorised fraudulent payments to HIC totalling over $4 million.

Numerous complaints about Mr B's conduct and work performance were made by other staff, over a period of years. Those complaints included that:

  • the quality of his work was often poor and he often missed deadlines
  • he gave other employees gifts (these included airline tickets valued at several thousand dollars and a ten thousand dollar cash payment)
  • he would often arrive late to work, attending anywhere from 10 am to midday, and didn't complete timesheets or leave forms.

Despite recurring performance and conduct issues, Mr B was permanently appointed as a Principal Finance Officer in May 2009. In December 2010 he was placed on higher duties as the Governance Manager, Finance Branch.

QHealth had several other opportunities to identify Mr B as a risk:

  • In 2010 an anonymous email complaint was received alleging that Mr B was defrauding QHealth and was due to leave Australia to start a new life. The ethics unit investigated and, on being told by Mr B's manager that there was nothing amiss, dismissed the complaint.
  • In December 2010 a random audit of his credit card use revealed a number of troubling issues. These included numerous instances of transactions exceeding his $1000 limit, payment 'splitting', where a payment exceeding the $1000 limit was split into multiple transactions, each under the $1000 limit, and a number of suspicious payments.
  • In January 2011, QHealth found that he had failed to return an official vehicle and used it over a weekend without authority; that he had travelled about 213 kilometres and incurred a speeding fine; and that he then falsified a log book entry to cover up his misuse.

It was not until December 2011, after making a single fraudulent transaction of $11 million, that his pattern of fraud was detected. Over nearly five years his fraudulent activities totalled over $16 million.

In March 2013, he pleaded guilty to a number of fraud-related offences and was sentenced to 14 years imprisonment.

The Queensland Crime and Misconduct Commission1 concluded that the factors enabling the fraud
to continue for so long included:

  1. low levels of compliance with existing policy and procedures by other staff
  2. failures of financial management and accountability
  3. failures in supervision and management
  4. inadequate change management processes that failed to identify risk and failed to provide an effective follow-up review process
  5. low awareness of the risk of fraud among staff at all levels
  6. failure to properly investigate information provided in audits and complaints and evaluate it in a wider context.

Lessons

  • Any agency can harbour a high risk employee.
  • Proper pre-employment checks, including verification of CV details, can be important.
  • Misconduct or poor performance can be an indicator of more serious problems.
  • Effective risk management procedures can solve small problems before they become big ones.

'Although the investigation found that Mr B acted alone in committing the fraud, it also found that a number of QHealth officers failed to comply with existing policy and procedures and, in so doing, defeated a number of internal controls which may have otherwise prevented Mr B's offending or led to it being identified much earlier.'

Queensland Crime and Misconduct Commission Media Release, September 2013


1 Queensland Crime and Misconduct Commission, Fraud, financial management and accountability in the Queensland public sector