An Auckland foreign exchange broker forged 80 documents over two years as he desperately tried to keep his deteriorating company afloat.
It left his clients out of pocket for millions of dollars. But the true scale of the fraud may never be known, liquidators say and court documents show.
Russell Maher was this month sentenced to three years and four months' imprisonment.
The 53-year-old had been charged and later pleaded guilty in July last year to 47 representative counts of using forged documents.
The charges came after an investigation by the Serious Fraud Office (SFO) into activity at Forex Brokers Limited (FBL), through which Maher provided foreign exchange services.
Maher operated FBL from 1995 until 2017 and was the founding and sole director. Shares in the company were held by Maher and his wife.
Now, despite opposition from Maher's legal team, the Herald has been granted access to the court's file on the case by Judge Russell Collins, and can publish extensive details of Maher's criminal fraud and deception for the first time.
Maher's firm, which had an office in the Dingwall Building on Auckland's Queen St, initially had clients which included tourists, tour companies and gift shops.
They would sell their foreign currency to him in return for Kiwi dollars. Initially, Maher used banks to convert the currency with FBL - making a small profit on each transaction.
He would go on to develop a relationship with Tuatara Management Ltd, which he used as his main wholesaler for foreign currency transactions.
By the end of 2008, however, Maher had to increase his margins to stay profitable.
At first he did this by taking small positions in the currency market with Tuatara and by entering into small forward exchange contracts (FEC) for the purchase or sale of foreign currency.
To try to earn greater margins, he began entering into more and more FECs.
Over the following years, Maher sought "retail" clients such as car yards and other importers who required foreign exchange services.
He also had "investment" clients who deposited money with FBL in return for a fixed interest rate, and traded currencies on behalf of some of them.
Then, in 2014, the Kiwi dollar weakened significantly against the US dollar, leaving Maher in a hole.
Forex Brokers Ltd was plagued by large "out of money" FEC positions, which Maher didn't want to close as he desperately attempted to avoid turning paper losses into real ones.
As these FECs reached their maturity date, Maher would also ask Tuatara to roll the contracts over, instead of closing them and taking a loss. As each contract continued, the exchange rates remained unfavourable and the potential amount owed to Tuatara grew.
In October 2016, Tuatara was acquired by exchange service HiFX Ltd, which became Maher's main wholesaler.
Court documents show that from October 2016, FBL was already experiencing cashflow problems.
That meant FBL was unable to settle more and more transactions on the dates it had agreed with its clients - leading to increasing payment complaints.
HiFX wasn't going to allow FBL to continue with the same level of out of money contracts that it held with Tuatara because of the risk involved if FBL could not cover the losses.
To reduce that risk, HiFX required FBL to sign a letter of guarantee in April 2017.
On April 10, HiFX asked whether FBL could pay the unrealised loss linked with its open positions - it was about $916,000.
Maher, who once claimed on his website that he had an "extremely high level of business integrity and customer service", placed FBL into liquidation that day.
He would tell liquidators the firm's failure was because of "too many 'out of money' contracts" and competition which forced him to adopt an overly-large position.
"I had tried to devise a plan to start returning investor funds and start scaling back the company until I could close it down, but I ran out of time and cash flow," Maher said.
What was later to be revealed was Maher's criminal response to his growing financial problem.
In a bid to recover his position, Maher decided to turn to forgery.
He started altering transaction confirmations in an attempt to maintain client confidence, continue to operate and to avoid publicising FBL's true position.
Between April 2015 and April 2017, Maher altered 78 transaction confirmations from foreign exchange intermediaries, court papers read. They purported to confirm that payments had been made, or at least ordered, on behalf of FBL's clients on a certain date.
Maher, meanwhile, was pooling his clients' funds.
Where he had an earlier client's trade pending, he would use deposited money to complete that client's transaction.
Once the currency exchange had been completed or ordered - on a date after the agreed settlement date - Maher would then obtain a confirmation sheet from the wholesaler, usually as a result of the client asking why the payment had not been completed.
But he would amend the date of the transaction in an astonishingly simple fashion - by cutting and pasting the dates, giving the impression the transactions had occurred earlier.
He then altered the confirmation to the client, leaving the client unaware their funds had not been paid as expected.
On two occasions, in December 2016 and January 2017, Maher also cut and pasted information from bank correspondence about certain transactions concerning anti-money laundering checks.
He changed the reference numbers and forwarded the correspondence to clients in an attempt to provide a legitimate explanation for the delay in a settlement.
Several of FBL's clients have told the Herald that payment delays with the company seemed to accelerate from late 2016, while Maher offered high-risk investment services.
In all, Maher's fraud included the use of 80 false documents for 46 retail clients. The SFO would later describe Maher's crimes as "arrogant" as he tried to maintain the facade of a successful business.
A precise calculation of the scale of losses arising from Maher's conduct, however, is not possible and may never be fully known, court documents reveal.
One measure was generated by considering the value of non-completed transactions entered by each of the 19 customers during the period after they were individually offered a forgery. In total, those 19 people entered $1.55m in transactions.
Another measure court documents provide is by considering the value of losses suffered on liquidation by clients who received forged documents. In total, those 19 customers claimed some $3.18m.
And when considering the value of non-completed transactions entered by 72 of FBL's retail customers after October 2016, then $4.95m had to be claimed in liquidation.
Maher's lawyers had disputed with the SFO the scale of a loss to an associated business known as GJS, arguing that it was $20,000 less than the SFO's estimate of $617,000.
However, Judge Collins said the difference was not material when he sentenced Maher to prison.
The bent businessman had also argued this money shouldn't be included in the calculation of the total loss. Rather, it should be excluded because there was a sufficient evidential foundation to cause the SFO to further investigate the origin of the funds.
However, in a February minute released to the Herald, Judge Collins said: "I do not accept that there is such an evidential foundation. The suspicion that may exist is not sufficient here to say that there should be an onus on the particular prosecutor here to go out and further investigate that."
The judge said even if he was to consider the money was all the proceeds of crime, he would not exclude the GJS funds from the quantification of loss and said it "is to be rightly taken into account".
At a hearing last September in the case, Judge Noel Sainsbury had already alluded to Maher's impending fate and commented on the world of financial crime.
"Prison doesn't work, except perhaps for white-collar criminals," the judge said.
"Society is of the view for the financial community, 'pull your head in and lock up white-collar people'. Because I don't think the meth dealers give a toss, it's just a calculated risk of the job for them."
Judge Sainsbury added: "There is a school of thought out there that if [the financial crime is] bad enough, lock 'em up."
'We believe that the company's debts were higher'
The latest and seventh liquidators' report from May this year, obtained by the Herald, says the liquidators have received 96 claims from unsecured creditors, totalling $12,834,504.
"At this stage, the liquidators do not anticipate there will be sufficient funds recovered to make a distribution of significant value to unsecured creditors," it reads.
The report, prepared by Christopher McCullagh and Stephen Lawrence of accounting group PKF, also reiterated the view that Maher breached his duties as a director under the Companies Act 1993 and should therefore be held personally liable for FBL's debts.
In August 2018 the liquidators had issued a demand letter to Maher for $4m and in October that year he responded and said he did not have means to settle.
In November 2018, the man who owned million-dollar properties in Havelock North and Auckland's Mt Eden was made bankrupt.
A little more than two months later, the liquidators filed a claim for $5,041,476 in Maher's bankruptcy.
Two FBL employees submitted preferential creditor claims totalling $11,385. These preferential claims have been paid in full.
While the liquidators' investigations have concluded and all known assets have been realised, aside from the proceeds of the liquidators' claims against Maher, the liquidation will continue pending the outcome for creditors in Maher's bankruptcy.
"Bearing in mind the complex nature of the company's affairs, the poor state of the company's records, the ongoing legal proceedings between Mr Maher and the SFO, and Maher's bankruptcy, we are unable to give an accurate estimate for the date of completion of this liquidation," the May report reads.
Commenting on the report, McCullagh told the Herald: "The report records the current level of creditor claims. We believe that the company's debts were higher, but some creditors have not claimed in the liquidation."
In a statement after Maher's sentencing, SFO director Julie Read said the broker's offending was "dishonest, repetitive and premeditated".
"He abused his position of trust to create the illusion that his business was successful when it was not," she said.
"Such deceitful behaviour damages New Zealand's reputation as a safe place to invest and do business."
Last year after Maher pleaded guilty, Rajesh Chhana, the then acting director of the SFO, also said Maher decided to conduct business through his "arrogant and, ultimately, criminal actions".
"He used his clients' money to maintain the facade of a successful business. Significant losses to client funds could have been avoided if Mr Maher had behaved honestly and accepted that his business had failed."
Half-a-million in bullion found in FBL's safe
After FBL's collapse there was also a dispute over a cache of gold and silver bullion - estimated to be worth $500,000 - which was inside a locked safe in the Dingwall Building office.
An investor with the company had arrived with a key to the safe, revealing the gold and silver, and claiming ownership, the Herald understands.
A fourth liquidators' report from November 2018 read: "A quantity of gold and silver bullion was secured at commencement of liquidation. A third party claimed ownership of the bullion, but the liquidators were provided with insufficient evidence to satisfy themselves as to the third party's ownership."
The investor filed an application in the High Court to determine ownership.
"After obtaining legal advice from a Queen's Counsel and extensive negotiations, the liquidators settled proceedings in September 2018. The liquidators received $260,771 in full and final settlement, and the bullion was handed over to the third party," the liquidators report reads.