SFO alleges $17m fraud by Wellington gas supplier; two men face 82 charges

Report from BusinessDesk
The directors of failed natural gas retailer E-Gas under-reported gas by some 950,000 gigajoules of consumption to commit frauds worth $17 million in total, the Serious Fraud Office alleges in charges filed in the Wellington District Court.

Wellington-based E-Gas went into liquidation without warning in October 2010, leaving other gas retailers to purchase its approximately 7,000 customers.

The SFO alleges former managing director Ronald Peter Rosenberg and former general manager Sydney Lio Hunt under-reported gas consumption to the value of $8.74 million, and avoided penalties of about $8.67 million.

They face a total of 82 charges – 41 charges each – under the Crimes Act relating to the dishonest use of documents between April 2005 and October 2008. The charges carry a maximum sentence of seven years in prison.

At the time of its failure, liquidators at chartered accountants BDO said the company had faced “increasingly difficult trading conditions together with other non-recoverable increasing operational costs.”

Rosenberg and Hunt will next appear in the Wellington District Court on Sept. 27.

Press Release – Serious Fraud Office
The Serious Fraud Office (SFO) announced today that it has laid 82 criminal charges in an investigation into retail gas supplier E-Gas Limited.

Former Managing Director, Ronald Peter Rosenberg (71) and former General Manager, Sydney Lio Hunt (44) each face 41 charges under the Crimes Act relating to the dishonest use of documents. The charges carry a maximum sentence upon conviction of seven years imprisonment.

The SFO alleges that between April 2005 and October 2008 Mr Rosenberg and Mr Hunt deliberately under-reported the quantity of gas supplied to its retail customers in order to obtain a pecuniary advantage.

The charges allege that E-Gas under-reported its gas consumption by approximately 950,000 gigajoules worth approximately $8.74 million, and penalties were avoided to the value of approximately $8.67 million.

SFO Chief Executive, Adam Feeley said “Much of the focus of the past few years has been on finance companies. However, this case illustrates the diversity of other sectors we investigate, and companies need to be mindful that the risk of fraud exists in whatever industry they operate.”

The SFO investigation into the affairs of E-Gas commenced as a Part I inquiry in December 2010 and was upgraded to a Part II investigation in February 2011.

Mr Rosenberg and Mr Hunt will next appear in the Wellington District Court on 27 September.

Background to investigation

Ronald Peter Rosenberg was the Managing Director/CEO and shareholder of E-Gas Limited. Sydney Lio Hunt was the General Manager and shareholder of E-Gas Limited. E-Gas was established in 2000 to supply gas to the retail market.

In December 2010 the Serious Fraud Office received a complaint concerned about possible inaccuracies between the amounts of gas E-Gas supplied to its customers compared to the amount of gas reported as being used, to gas wholesalers.

Under Gas Industry rules, retailers such as E-Gas are required to book in advance the amount of gas they expect to use in the coming year. Throughout that year, they are required to report actual usage. This is done by submitting data relating to the volume of gas retailers have charged their customers If actual usage exceeds booked amounts, the retailer will be subject to penalties.

The SFO alleges that persons in control of E-Gas deliberately under-reported the quantity of gas supplied by E-Gas to its retail customers, and that they obtained a pecuniary advantage as a consequence. In this case the pecuniary advantage allegedly obtained includes gas sold but not paid for, and benefits in the form of avoided penalty payments.

Crimes Act offences
228 Dishonestly taking or using document

Everyone is liable to imprisonment for a term not exceeding 7 years who, with intent to obtain any property, service, pecuniary advantage, or valuable consideration,—

(a) dishonestly and without claim of right, takes or obtains any document; or

(b) dishonestly and without claim of right, uses or attempts to use any document.

Role of the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO operates three investigative teams:

• Fraud Detection & Intelligence;
• Financial Markets & Corporate Fraud; and
• Fraud & Corruption.

The SFO operates under two sets of investigative powers.
Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”

Part II of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”

The SFO’s Annual Report 2011 sets out its achievements for the past year, while the Statement of Intent 2012-2015 sets out the SFO’s three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz

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