Feature: scandal of the year: the Swann case

Former Otago District Health Board CIO Michael Swann found guilty of defrauding the DHB of $16.9 million

The media are often accused of muckraking and deliberately seeking out scandals, but there’s been one story this year that the nation’s media — both IT specialist and mainstream — couldn’t have dreamed up if they’d been told by some divine entity “invent any scenario you like, and I’ll make it come true so you can have it as a story”.

This is of course the case of former Otago District Health Board CIO Michael Swann and his business associate Kerry Harford, who were found guilty of fraud in the Dunedin High Court on December 5 of defrauding the DHB of $16.9 million over six years, by using invoices for non-existent IT services ostensibly provided by Sonnford Solutions, which Harford owned. Sonnford took 10% of the revenue, with the rest being passed on to Computer South, which Swann controlled.

The details of the case have been reported in the print and online versions of the Otago Daily Times and in other media; so rather than go through the whole saga again in this final print edition of Computerworld for 2008, here are some selected aspects of the case:

• In 1998, shortly after Swann was employed, two anonymous Dunedin accountants sent the Otago DHB a letter claiming they’d had negative past dealings with Swann. According to a copy of the letter posted on the Otago Daily Times website, the letter states “from our past experience, we are of the view that he is an improper person to hold a position of responsibility, particularly where he has access to capital expenditure, normal revenue and expenditure flows and sensitive personal information”.

The letter went on to describe Swann as someone “we believe has criminal intent”.

• According to pre-employment screening provider Personal Verification Ltd, Swann was “a recent former bankrupt” before he joined the DHB.

• The guilty verdict on the fraud charges isn’t the end of Swann’s legal woes — he faces a charge under the Secret Commissions Act of accepting a kickback of $757,685 from Innovative Systems, a firm run by Dunedin businessman and longtime friend Robin Sew Hoy. Innovative provided contract IT helpdesk services to the DHB between 2000 and 2006.

The DHB ran an in-house helpdesk until 1998, with Innovative providing a small amount of services. After 1998, according to an NZPA report, the crown alleges there was a “significant increase” in the work carried out for the board by Innovative.

The work done by Innovative between 2000 and 2006 was charged out at $95 per hour, “which the crown contended was excessive and above industry standards”, according to NZPA.

During the six year period, the DHB paid $4,743,167 to Innovative. Of that amount, $757,685 went to Swann-controlled Computer South, despite no invoices being generated by Computer South.

• In an editorial on the case, the Otago Daily Times succinctly summed up the cult-of-the-expert status that IT still occupies in some organisations. The ODT said: “Most people will know that ‘IT’ is a mystery unto itself, fully understood only by very clever people who speak in a language beyond ordinary human understanding.

“There is some reason for more than usual reliance on ‘experts’.”

The ODT’s conclusion: “Couple that with a charismatic, domineering figure as Swann was said to be, and there exists potential for risk.”

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