Two found guilty of $100k fake ad scam

File photo / NZ Herald

Two people have been found guilty today on charges relating to an advertising scam worth more than $100,000.

Johannes Middledorp and Noelene Banton were found guilty on seven charges each and not guilty on four charges after an earlier judge-alone trial in the High Court at Wellington.

Justice Jill Mallon released her 305-page verdict decision today.

Middledorp and Banton faced nine charges of reproducing a document with intent to obtain a pecuniary advantage and alternative charges of dishonestly using a document.

The charges arose out of advertising, which the defendants endeavoured to sell, and in many cases did sell, to mainly small and medium-sized businesses across the country.

Each charge related to a different named publication, made up of community magazines, a calendar, and business directories, in which the advertisements were supposed to be placed, the decision said.

The Crown said those publications were not genuine. It argued that they were not printed and distributed in any meaningful way, and that there was never any intention that they would be.

The scheme involved using "fax proofs", Justice Mallon said in the decision.

The Crown said there were 951 individual fax proofs sent by the defendants to their victims during this period. These were used to seek payments that amounted to approximately $480,000.

"Not all the businesses from which they sought payment agreed to pay, or there is no proof that they did.

"The Crown says that the defendants received payments totalling approximately $116,000 which it has been able to trace back directly to specific fax proofs," the decision said.

The defence for Middeldorp was that printing and distribution of the publications was to occur when all the advertising for that publication had been sold.

The defence said that as it transpired, Middeldorp was not in a position to print the publications on any significant scale. However, at the time the advertising was being sold, it was intended that the publications would be printed, Justice Mallon said in her decision.

The defence for Banton was that she was just doing some of the sales for Middeldorp. She did not intend that there would be no printing or distribution of the publications and did not know that this was the way Middeldorp was running the business, the decision said.

The charges followed a joint enforcement agency operation with Organised and Financial Crime Agency (Ofcanz) and the Commerce Commission and led by the Serious Fraud Office (SFO).

SFO director Julie Read said the scheme attempted to obtain more than $1 million from about 1000 victims.

"The SFO is committed to coordinating activities with those of other agencies to maximise our impact. Successful, effective prosecutions such as Operation Edit, clearly demonstrate the benefit of this approach."

Two other defendants who have pleaded guilty were respectively sentenced to home detention and community work. One other defendant who pleaded guilty was yet to be sentenced.

Banton and Middledorp were remanded on bail and will reappear for sentencing on June 12.