Phillip Smith swindled thousands from taxpayers while in prison

hillip John Smith stands in handcuffs outside the Cidade Maravilhosa Hostel after his arrest by federal police in Rio de Janeiro, Brazil . Photo / AP / Cidade Maravilhosa

Convicted murderer and paedophile Phillip John Smith swindled thousands of dollars from the taxpayer, using false documents when studying in prison.

The Ministry of Social Development (MSD) today confirmed Smith, also known as Phillip John Traynor, received living costs totalling $26,700 from 2003 to 2008 while receiving a student loan.

Smith was prosecuted in 2012 for fraudulently claiming over $47,000 from Inland Revenue.

He also outraged his victims' family and friends when caught running a business from prison in 2011, although this was legal at the time.

The ministry said that after the Government announced an inquiry into Smith's escape from New Zealand earlier this month, it reviewed all involvement it had with him.

Watch: PM announces Smith inquiry

The ministry today said Smith provided false documents to acquire the money from taxpayers.

The ministry said measures imposed in 2008 ensure prisoners received only government assistance they were entitled to.

"MSD expanded and enhanced a data match with the Department of Corrections which allows MSD to match the entire prison population with current students and beneficiaries on a daily basis," the ministry said in a statement.

Yesterday, Smith's lawyer Dr Tony Ellis told NZME. News Service the captured fugitive presumably hadn't spent all of the money he got from Inland Revenue and StudyLink in earlier scams.

So Smith was thought to have enough money for a Brazilian lawyer, but only if he could access his savings.

"The money he did have was seized and is in the custody of the New Zealand embassy by order of the Brazilian court," Dr Ellis said.Smith remains in a Rio de Janeiro jail.