David Rae was involved in defrauding United States Medicare insurance and laundered money into New Zealand bank accounts. Photo / DepositPhotos
An international fraudster convicted of money laundering has been ordered to forfeit more than $10 million in New Zealand bank accounts.
In 2020, David Charles Rae was sentenced to 10 months’ imprisonment in the United States after admitting charges of money laundering in connection with the Medicare fraud schemes.
It was alleged he had transferred proceeds of the fraudulent activity to New Zealand bank accounts.
The New Zealand Commissioner of Police went on to successfully seek an order in the High Court for a restraining order of the money.
The commissioner applied to the same court for civil forfeiture orders under the Criminal Proceeds (Recovery) Act 2009 of funds of more than $10m, alleging it was connected to the money laundering activities.
Justice Helen McQueen has now made an order that $10,074,000 be treated for the purposes of forfeiture.
The forfeiture application was heard in May last year and a judgment made on February 20.
Under the legislation, the money is to be directed into a New Zealand Government consolidated fund that provides a range of targeted interventions that reduce crime.
Rae opposed the commissioner’s application and after a refusal from Justice McQueen to adjourn the hearing, failed to participate in a substantive hearing.
The restrained funds were the proceeds of schemes that defrauded the United States Medicare insurance system through the provision of medical equipment and genetic cancer screening tests.
Kickbacks and bribes were paid to telemarketers and medical professionals involved in schemes.
The commissioner said Rae laundered proceeds from the schemes into New Zealand bank accounts.
In the recently released decision, Justice McQueen said Rae hadn’t advanced any positive case explaining the money in the accounts.
Rae is a British citizen who has never resided in New Zealand but travelled here to set up companies and trusts.
The commissioner alleged Rae either had a nominal interest in, or effective control over the accounts.
After the proceeds of the schemes were brought into New Zealand through his money laundering activities, they were available to him for his own use.
The commissioner alleged Rae exercised effective control over the accounts in that he had shown to be using, controlling and disposing of assets in the accounts as if they were his own.
Rae had maintained his claim to the funds and stood to be the ultimate beneficiary should they be released from restraint.
Evidence showed the accounts appeared to have been under his direct authority and control for his personal use between 2018 and 2019.
A summary of outgoing transfers showed funds being paid to accounts associated with Rae for “expenses”.
Rae had made an application to the Court of Appeal for leave to appeal an earlier High Court decision declining his application for a non-party discovery order against the United States Government.
In March last year the Court of Appeal released its decision, which detailed the grounds on which he proposed to defend the commissioner’s forfeiture application, including that he was not guilty of the money laundering and was unaware of the underlying criminality of the schemes.
Rae sought a non-party discovery order to support the defence, appealing to have his testimony, documents and other evidence that had been provided to the grand jury in the United States, as well as documents relating to its prosecution decisions and investigations, released.
When Rae previously applied to the High Court, it found the documents sought were not “material and necessary” and therefore did not meet the test for non-party discovery.
Rae also claimed the commissioner had acted in bad faith, but the High Court found there was nothing to indicate that and labelled the claim a “fishing expedition”.
The High Court noted that even if it was wrong on whether the documents were material or necessary, it would have used discretion to decline the application for discovery.
Putting aside the jurisdictional issues, granting the application would “require the court to embark on a relitigation of the United States proceedings and the decisions made by authorities in the context of criminal proceedings”, the High Court ruled when dismissing the earlier application.
In applying to the Court of Appeal for leave to challenge that decision, Rae proposed five grounds of appeal, including that the High Court failed to consider the relevance and necessity of the documents and disregarded the fact the forfeiture application was based on an international investigation, making foreign discovery necessary.
But the Court of Appeal disagreed, finding the proposed grounds “did not identify any error capable of bona fide or serious argument, let alone one of general or public importance”.
Rae had confirmed in 2021 the forfeiture application was ready for hearing, and no concerns were raised then regarding the adequacy of discovery.
Justice McQueen was satisfied Rae had unlawfully benefited from the “significant criminal activity of money laundering”.
Al Williams is an Open Justice reporter for the New Zealand Herald, based in Christchurch. He has worked in daily and community titles in New Zealand and overseas for the last 16 years. Most recently he was editor of the Hauraki-Coromandel Post, based in Whangamatā. He was previously deputy editor of the Cook Islands News.