Auckland man gets almost 6 years prison for $1.7m COVID-19 fraud

In one of the largest fraud cases of its kind to date, Luke Daniel Rivers (aka Mai Qu) was sentenced in the Auckland District Court to 5 years and 11 months imprisonment.

Rivers pleaded guilty to 29 charges, including Wage Subsidy and Small Business Cashflow Scheme fraud, and money laundering.

The charges were brought jointly by the Ministry of Social Development (MSD) and Inland Revenue (IR).

Large-scale fraud

MSD Group GM Client Service Delivery George van Ooyen says this is an example of large-scale fraud which was premeditated, sophisticated and solely for personal financial gain.

"This case involved wage subsidy fraud, money laundering and the use of forged documents. The volume of fake documents and the repeated nature of the conduct, point to a significant degree of premeditation and sophistication," van Ooyen says.

"What he did is an abuse of the COVID-19 relief schemes, solely for personal financial gain.

"The wage subsidy was a high trust scheme providing rapid payments up front for businesses to keep their employees in their jobs and provide some form of financial security."

Inland Revenue Customer Segment Leader Small to Medium Enterprises Bernadette Newman says Rivers used forged documents to get IRD numbers for people who had never set foot in New Zealand, let alone worked here during the pandemic.

"Rivers used his specialist knowledge as an accountant to game the system. And he used the identities of more than 200 other people to carry out his scheme - all to maximise the amount of funds he could apply for," Bernadette Newman says.

"He abused both the public trust in the accounting profession and his clients’ trust in him to keep their information private.

"His tax offending is effectively ongoing as he hasn’t remedied his failure to file GST and income tax returns for his four companies."

What’s to come?

Van Ooyen said the case represents MSD’s ongoing enforcement work to uphold the integrity of the $18.8b in COVID-19 wage subsidy payments made in 2020 and 2021.

"We have active investigations ongoing. Court outcomes and debt recovery will continue beyond this."

"As of today, 46 people have now been sentenced with a further 49 people still before the courts.

"We’ve also made civil recovery decisions in relation to 52 businesses. More than 25,000 repayments have been made, totalling $830.4 million."

Bernadette Newman says Inland Revenue has already prosecuted 14 people for fraud involving the SBCS, the Covid Support Payment (CSP) and Resurgence Support Payment (RSP).

"Eleven cases are progressing through the court system, 5 cases where defendants are awaiting sentence, and a number of active investigations around other COVID-19 support fraud cases.

"Increased funding this year means IR can do more audits and debt collection work, and investigations into specific sectors can continue.

"It also means the great majority of New Zealand taxpayers who meet their obligations can continue to be confident that IR will find those who aren’t."

Background:

COVID-19 relief

The Wage Subsidy scheme was administered by the Ministry of Social Development, and used a high trust approach to provide rapid payments up front to businesses affected by COVID-19 restrictions so employers could continue to pay their employees.

The SBCS loans scheme was administered by Inland Revenue, also under a high trust model. The amounts available under the scheme were determined by the number of employees employed by a business.

Wage subsidy fraud

Rivers made 28 wage subsidy applications on behalf of eight companies, with 12 of those applications being fraudulent. He got $906,818.40 in wage subsidy funds and tried unsuccessfully to get another $724,106.60.

To make the applications look real, Rivers made fraudulent IRD number applications using forged documents (including bank statements, a passport, and Immigration New Zealand documentation) and fake contact details.

He also used the details of innocent individuals that he had obtained as a tax agent and accountant to inflate the wage subsidy payments.

All the money he obtained went into bank accounts he controlled.

More information about wage subsidy cases is available here.

SBCS fraud

Rivers obtained $29,800.00 following a successful SBCS loan application. He made failed SBCS loan applications for a further $41,600.00. Rivers was not entitled to these loans for the same reasons he was not entitled to the wage subsidy funds.

Three other applications were made by Rivers on behalf of companies who he had done accounting work for. He was supposed to have deregistered two of them but instead used their details to apply for the SBCS loans.

Money laundering

When Rivers received money from MSD and IR he transferred large amounts from his New Zealand accounts to bank accounts in Singapore. One of these accounts was in the name of Lei Zhang, Rivers’ fake identity, and another was in the name of Mai Qu, his previous name.

Child Support fraud

Rivers came to New Zealand in February 2001 as Mai Qu and applied for an IRD number in April 2001. He changed his name to Luke Daniel Rivers by statutory declaration in June 2004 but continued to use both names. He applied for a new IRD number under the name Rivers in 2006, while retaining his IRD number under Mai Qu as well.

As a result of holding the two IRD numbers, Rivers was able to misrepresent his total income over seven years, enabling him to pay $45,588.90 less than he was supposed to towards the care of his child.

Income tax and GST

Between March 2020 and March 2023 Rivers failed to file income tax and GST returns for the companies he controlled.

The charges

29 charges, brought by the Ministry of Social Development ( MSD) and Inland Revenue Department ( IRD):

Knowing provision of false information to the Commissioner of Inland Revenue in relation to a matter under the Child Support Act 1991 ( representative);

Using forged documents, in respect of the IRD number application forms, bank statements and a letter from Immigration New Zealand ( representative) (x 2);

Dishonestly using a document, in respect of Wage Subsidy applications, false electronic employment information returns and Small Business Cashflow Scheme ( SBCS) loan application and IRD number applications (x 17, including six representative charges);

Money laundering ( representative) (x 2);

Aiding and abetting another person in knowingly not providing information to the Commissioner when required to do so by a tax law ( representative) ( x 7).