Covid 19 wage subsidy fraud: Department of Social Development targets seven more for prosecution
Last week, the Department of Social Development said it had recovered $798.9 million in wage subsidy repayments. Photo / 123rf
Sixteen people are now charged with defrauding the government’s multi-billion dollar Covid-19 wage subsidy scheme, while the Department of Social Development (MSD) is preparing to prosecute five more.
As a member of
The government’s response to the financial effects of the pandemic, the program paid nearly $14 billion to companies that could prove revenue loss above a specific threshold due to the pandemic and related restrictions.
The “high confidence” model, however, was susceptible to abuse and the Auditor General warned against abuse while encouraging further prosecution if illegality was detected.
Now the Herald can reveal that MSD has indicted 16 people for alleged abuse of the wage subsidy program, involving $681,693.60 in public money.
He is also preparing criminal charges against five other people and has initiated civil proceedings in two cases.
Last month, there were 14 active criminal cases involving nearly $630,000, up from seven cases and nearly $370,000 in May.
A total of 13 civil recovery action decisions were also taken. For the remaining 11 cases, MSD has reached an agreement or continues to commit to reimbursement.
MSD’s George van Ooyen, the group’s managing director for customer service, told the Herald that there would be further lawsuits to come as ongoing investigations into individuals and businesses are completed.
The department also referred 10 cases involving larger sums of money and complex investigations to the Serious Fraud Office (SFO) last year.
An SFO spokeswoman said all 10 investigations were ongoing.
Last week, MSD said it recovered $798.9 million in wage subsidy refunds.
It conducted 15,066 pre- and post-payment audits of wage subsidy claims, resolved 5,553 allegations of wage subsidy abuse, and completed 543 wage subsidy investigations.
“Our integrity work to date has given us confidence that the vast majority of companies that have received wage subsidies have done so honestly,” van Ooyen said.
“Often, when wage subsidies have been wrongfully claimed, it was an honest misunderstanding of eligibility rather than a deliberate attempt at deception.”
van Ooyen said MSD continues to review and investigate claims in which potential fraud or incorrect payment has been identified, as well as to respond to allegations of wage subsidy misuse.
An Auckland man believed to be the first to face criminal court over wage subsidy fraud was due to be sentenced last week.
Saleem Abdul has pleaded guilty to three counts of receiving stolen property over $18,745 in wage subsidies claimed during the 2020 shutdowns.
Abdul, who is described in the charging documents as a “senior technical consultant”, will now be sentenced in October after an administrative court delay.
Data released in May showed the wage subsidy program supported 47% of jobs in the country.
In 2020, 69% of male and 54% of female employees received a wage subsidy. This figure fell to 54% and 41% in 2021.
A review by Auditor General John Ryan, released in May last year, called on MSD to toughen its approach to possible misuse of the wage subsidy program.
The report urges MSD and other departments to prosecute companies they believe wrongfully accessed the program.
“Because this approach presents greater risks of fraud and error, strong post-payment checks are essential to verify that those who received money were eligible,” Ryan said.
He also criticized the work done by MSD to check whether employers were following the rules.
“After payment, MSD notices consisted primarily of verbal confirmation of information by employers,” Ryan wrote.
“Although the Department of Social Development has publicly described these reviews as audits, in my view they are not audits. In most cases they did not involve proving facts with information independent, or at least documented.”
Ryan also noted that the departments running the program had identified “a number” of applicants who they believed may have acted illegally.
“In my opinion, it’s important to pursue the prosecution of these candidates. It’s because it’s important to maintain public confidence in government programs,” Ryan said.
The Auditor-General praised the services that managed the scheme, especially MSD, given the short time they had to implement it.