A NZ firm's 'money go round' claimed $17.4M in GST refunds — all 39 charges proven

Between July 2014 and July 2018, BEL Bracken — the merchandising and exporting arm of Matawai farmer John Richard Bracken's business, selling timber and other goods to the Pacific Islands — filed GST returns built on purchases that never happened. Over four years it claimed $17.4 million in refunds it was not entitled to, which a New Zealand High Court judge would later confirm as the country's biggest ever tax fraud; the next largest was $3.5 million.

The mechanics were what Justice Graham Lang called 'crude but effective': Bracken withdrew cash or bank cheques and rebanked the money into the same account, keeping the balance effectively unchanged — a 'money go round' simulating payments for purchases. Accountants Bain and Sheppard, preparing BEL's GST returns in good faith, found no anomaly because the bank records matched the false invoices. Two automatic IRD verification checks, triggered when refund claims exceeded $1 million, also failed to detect anything.

The scheme's paper trail was manufactured: false invoices came from a bank teller at Bracken's ANZ branch and a woman who claimed to be his lover, plus pro forma invoices from real suppliers who had only ever received initial enquiries. Bracken purported to have purchased over $133 million of product and exported virtually all of it — over $132 million — which zero-rating would exempt from output tax; Customs records showed BEL had actually exported about $478,000. After an eight-day trial at which he represented himself, Bracken was convicted on all 39 charges.

Circular transfers made the bank records agree with the fake invoices, defeating the one control most bookkeepers and two IRD checks relied on.

Zero-rating exports meant the fraud needed no sales side — claiming input credits on fictitious purchases was pure refund harvesting.

The supplier 'confirmations' came from real companies that had only ever sent pro forma invoices, lending false legitimacy to the purchases.

The scheme survived four years and two regulator checks until one of the two women creating the invoices reported it to the Serious Fraud Office.

Documents that match are not documents that are true: verifying that goods exist, not just that the paper trail is internally consistent, is the only control a circular scheme cannot pass.

Justice Lang found Bracken was the architect who arranged the invoices and executed the banking transactions; suppliers called as witnesses said they had never met or traded with him. He was warned imprisonment was inevitable and was to be sentenced on 11 May 2023. His Matawai farming operation itself was found to be operating legitimately.