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Huge fraud potential in Chch rebuild

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  • Huge fraud potential in Chch rebuild

    An international corruption expert is meeting with agencies involved in the Canterbury rebuild to warn them about the huge potential for fraud as funds start flowing into the city.

    Peter Dent, a Deloitte partner from Canada, is in the country to talk to the Canterbury Earthquake Recovery Authority (CERA), the Earthquake Commission, Police Minister Anne Tolley (who oversees the Serious Fraud Office), and insurers.

    The message he's bringing is that systems are likely to be overwhelmed by fraudulent claims and pressure on civil servants, as billions of dollars flood into the rebuild.

    "Whatever processes exist here will be insufficient," he said.

    "And of course, there are people out there who are going to take advantage of this situation."

    Construction was a particularly risky industry with potential for backhanders, price fixing and cosy subcontracting arrangements on big capital projects, Dent said.

    Insurers were also at risk of losing out if they failed to manage an increase in fraudulent or "padded" claims.

    The Serious Fraud Office has said it is concerned about the Christchurch situation beause of the amount of money being spent, and it is working with other agencies in a prevention and protection role.

    Dent's comments are based on his experience in the aftermath of several international disaster events.

    After the 2004 Boxing Day tsunami he worked with the United Nations Development Programme to strengthen its procurement policies.

    The sheer volume of money coming in "paralysed" the UN for over a year before it could spend the money, for fear of it being misappropriated, he said.

    In 2011 he coordinated crisis management and disaster recovery services following the earthquake, tsunami and nuclear disaster in Japan.

    The common theme following a disaster was that authorities lacked the infrastructure and systems to deal with the volume of claims and cash coming in, he said.

    Last week Deloitte published a survey of Australasian businesses which found they were poorly prepared to deal with bribery and corruption.

    Of the 390 firms surveyed, nearly half of those operating offshore had no formal or compliance programme in place.

    That was despite the fact that one in five had a bribery or corruption incident within the past five years

  • #2
    EQC's 'arrogant' engineer-

    The Earthquake Commission has committed to improving its complaints process, while continuing to back a controversial engineer and admitting it does not know the extent of complaints against him. A Christchurch Press investigation has brought to light more than 30 cases where the engineer's assessments have been challenged by householders, who in most instances allege he:
    • Has a bias toward finding damage is historical rather than caused by the earthquakes.
    • Has an arrogant, overbearing and sometimes offensive approach.
    • Does cursory assessments, often without tools, because he is convinced he is right.

    The Press is not naming the engineer for legal reasons, has been used by the EQC for 30 years and has done more than 1000 assessments - about 20 a week - in Christchurch in the past year, was called in "when we need to know we have got everything exactly right from an engineering perspective", the commission said.

    He was also hired to advise on EQC liability, often in disputed claims.Despite defending the engineer, the EQC conceded it did not know how many complaints he had generated because "to determine how many of [the engineer's] assessments resulted in disputes or complaints would require examination of each claim and this is not feasible".

    The engineer had done "well in excess of 2000 assessments in recent years", it said. EQC chief executive Ian Simpson said he would not answer questions about the engineer, but said the commission's recording of complaints "needed to improve". In later clarification, EQC communications said it had had a central complaints register "for some time", but "we have been undertaking a complete restructuring of our complaints process and this has included putting the independent mediation service in place".

    Simpson said he would not discuss the engineer because some EQC frontline staff were targeted as individuals. "It's my accountability to make sure the organisation is working well and I don't want to talk about specific frontline staff."

    He did not know whether the engineer was a staff member or a private contractor, although in a letter to The Press he referred to the engineer as staff. The EQC refused to say how much the engineer had been paid in the past 12 months. EQC customer services general manager Bruce Emson said the EQC had received complaints about the engineer from "time to time, including a few where the customer feels the approach to communicating his work was not handled well".

    "These are handled as part of the normal complaints process," he said. The engineer was entering situations that were likely to be tense. "He is, in effect, self-selecting the most difficult claims to be involved with and is tasked with delivering what may be unwelcome news in a matter-of-fact way," Emson said.

    "In the context of over 1000 such assessments completed, these handful of complaints are not unexpected and certainly do not indicate that [the engineer] ‘often' distresses clients." What did the EQC do when such complaints were lodged? "He is made aware when such complaints arise," Emson said.

    "He is usually accompanied by another EQC field team member skilled in dealing with customers in a high state of anxiety. It is primarily that person's role to interact with the customer, leaving the engineer to use his expertise to examine damage and assess EQC's liability."

    Most of the 32 homeowners whose cases have been documented by The Press have commissioned alternative professional reports that contest the engineer's conclusions, and seven homeowners have laid complaints with the Institution of Professional

    Engineers New Zealand. About 20 of the homeowners have complained to the EQC about the engineer. In several cases he has left already anxious homeowners in tears and some now refuse to have him on their property. "His visit was distressing for us, not least because of what we perceived to be the intimidating, reactive and inflammatory manner in which he conducted himself," a professional couple, who asked not to be named, said.

    The engineer's name is well known to Christchurch MPs and many have fielded complaints about him, including Canterbury Earthquake Recovery Minister Gerry Brownlee, who did not reply to specific written questions from The Press. Port Hills Labour MP Ruth Dyson said she had noticed a spike in people complaining to her about the EQC ruling damage to their houses was historic. "Around 20 in a very short space of time." "Time after time" the same engineer had overturned lengthy and thorough previous assessments, she said.

    "It reminded me of when ACC brought in their new assessment team where I had a sudden spike of ACC claimants who were deemed to have ‘pre-existing' conditions - suddenly," she said. The cases documented by The Press reveal major differences between the expert and other engineers. In several, alternative assessments have essentially written off houses while the EQC engineer thought they could be repaired quite cheaply.

    A Christchurch engineer involved in one of the EQC engineer's cases said he believed the engineer had performed an "inadequate assessment" of the property. "I read his report and definitely got the sense he was trying to minimise the claim and he was not that professional in the way he was doing it," he said. "An engineer should be impartial and not try to minimise the damage that's been done in the quake for the financial advantage of EQC."

    Although the house was old and had sustained historical damage before the quakes, he had "no doubt there was recent quake damage [the EQC engineer] didn't say anything about in his report". It appeared the engineer had "chosen to ignore" certain damage and filed a "pretty puzzling and minimal report" on the house, he said. Christchurch architect Paul King, whose house in St Albans was assessed by the engineer, said the engineer was a controversial figure in the repair industry in Christchurch.

    King said the outside foundation wall of his house had cracked in the quake and the EQC proposed fixing the cracks with epoxy. "To me and my engineer, that meant the suggested repair was in breach of the present building code and would mean the house wasn't as strong as it was before."The EQC engineer maintained the cracks pre-existed the quake, "essentially calling me a liar", King said.

    When he took issue with the engineer, he ended the inspection saying "I had questioned his professional integrity". He and other architects were concerned repairs such as those recommended by the engineer were breaching the building code and in 10 years many of the repairs would need to be done again, King said.

    The EQC said its engineer was highly respected in the industry for his knowledge and expertise, with one commission spokesman describing him as a "world authority". It has gone to the extent of commissioning a prominent law firm to pressure consumer groups to remove the engineer's name, and those of other EQC staff members, from websites complaining about him. The Press asked the engineer to comment on 13 specific cases in which homeowners made allegations against him.

    He refused, sending the questions to the EQC. EQC media liaison manager Iain Butler said the engineer was required to give advice on "the factors involved in the damage" and he was "not required to inspect all damage . . . only the damage at issue".

    "His advice is valued and respected and his services continue to be used by EQC," he said. Butler said a minority of householders had been "overtly or covertly threatening to EQC staff". Waimakariri District councillor John Meyer, a former automotive engineer, said he figured in a bizarre incident in which his presence was perceived by the engineer, who was assessing his Kaiapoi house, as threatening.

    During the assessment, he and the engineer were alone in a hallway while other assessors were on the other side of the door. "He started sort of yodelling at the top of his voice: ‘He's threatening me, he's threatening me'. It was absolutely amazing."Meyer said the engineer virtually called him a liar when he pointed out damage caused by the quake. "It takes a lot to get me upset. I said: ‘Look, I'm sorry, but I got out of bed and the damage was done'."

    Despite the negative indications, he was happy with the report produced by the engineer, Meyer said. The Press investigation shows those claimants who challenge the engineer's conclusions face a difficult battle.Archie and Kay Green, in their 70s, thought they were over the worst until the EQC engineer visited their Pines Beach house in February and stopped repair work on foundations under the sloping lounge of their house because he judged the sinking was pre-existing.

    The Greens reacted strongly, locking out the contractors, and eventually two other engineers were commissioned to review the damage.Both disagreed with the EQC engineer's assessment.

    The EQC then agreed to fix the foundation in accordance with a repair strategy recommended by an independent engineer. "It was very stressful. Once we decided to fight, it just went on and on. No-one would talk to us. We were stuck," Kay Green said. As a result of deciding to fight they lost their rental compensation and a storage container and had to move back into their damaged house.

    The EQC said the engineer's inspection showed a previous attempt to level the house, leading him to conclude the sloping was historical. The commission had decided to fix the foundation because of "the history of communication with the Greens and their own circumstances". Stephen and Sasha Bell's house in Woolston was under repair when the engineer attended the property to advise on a structural issue relating to the upstairs.

    The couple were living in their garage while they waited for the repairs to be completed, but the engineer decided a sloping upstairs floor was pre-existing and told the Bells they had simply not noticed humping and sloping in the floor before the quakes. He did not remove the carpet to inspect the floor. He ruled structural strengthening of the upstairs to make it comply with the building code would be betterment and therefore not covered.

    "He pooh-poohed what our engineer said," Stephen Bell said. "But he didn't take any measurements and just walked around with our engineer's report. You couldn't tell him anything." He wondered how many other EQC clients gave up in the face of having to dispute an assessment by the engineer.

    "We felt litigated into submission," Bell said. The EQC said an earlier commission assessment and an insurer's assessment of the Bells' house noted the upper floor was not "built to standard". "The Bells' insurer has requested a joint review which may or not involve revisiting the upper floor." EQC communications staff seemed unaware the commission had reassessed the Bells' house, including the upstairs, in early October. The Bells' experience is mirrored by a farming family in Leeston (they asked not to be named because of potential repercussions from the EQC) whose house was inspected by the EQC engineer last November.

    He concluded damage to foundations that put the house out of level was historical and therefore not covered by the EQC. He dug some holes around the foundation with a spade and said the pre-existing settlement happened because the ground was soft. The couple claim he blamed a builder for damage to the roof of the house and missed the fact that the roof was on new trusses which, they said, should have altered his conclusion.

    The couple commissioned their own report, which disputed the engineer's findings, and said the EQC had now appeared to have agreed to conduct work that the engineer said was not covered. "He acted more like a policeman than an engineer," the couple said. "He challenged us to find another engineer saying: ‘I wrote the book on earthquakes for New Zealand'."

    The EQC said the couple's report did not record "significant ground movement".However, the report says: ". . . the house is out-of-level and although some of the settlement may be historic we believe some is earthquake induced and will require relevelling of the floor and exterior walls."

    To contact the reporters email: or
    “The citizen's job is to be rude - to pierce the comfort of professional intercourse by boorish expressions of doubt”
    -John Ralston Saul-


    • #3
      This engineer now works backstage as their senior engineer in the EQC offices I understand. Everyone I have spoken to about him says he has wreaked havoc with their lives by declaring in sweeping statements things like, its all historic damage and the customer is trying to gain betterment. There are many complaints about him to EQC, To IPENZ etc but to date NO ACTION. I have found that NZ is rife with senior people in authority who are never held to account. The finger is always pointed elsewhere. Look at CTV building for example, the design may have been poor but it was inspected and passed by government engineers and architects so presumably it must have met the standard! The building inspectors inspected the building process and saw to it that the approved plan was followed did they not? Then why are they scapegoating the architect Alan Reay? He may have produced a poor design but the council authorities PASSED it! and INSPECTED it. No one has been held to account but all the fingers are pointing away from the true culprits. Leaky building syndrome is the same principle, the designs may be poor but they were in the main, adherent to the BRANZ standards and passed by the council planning dept and inspected by the council building inspectors. When leaky building syndrome was later revealed the authorities first tried to blame the architects and then the builders when in fact it is those government institutions who penned the woefully inadequate building standards who should be questioned. Are we about to see the same thing occur in the justice system with regard to Earthquake litigants entering the high court or will we see justice served against the large corporate insurance companies. will it be a victory for the small man or just another example of true justice squashed underfoot. There are certainly many thousands waiting in the wings and two new high court judges recently appointed to help out with the matter!?!?!?!?!?!?!?!
      Last edited by dibblegrub; 12-04-2014, 10:01 AM.