9 Oct 2014

Financial scrutiny of Heart of the City

4:40 pm on 9 October 2014

The Auckland Council is moving to protect millions of dollar of ratepayers' money after the head of the city's downtown promotion agency was sacked over tax evasion charges.

Heart of the City's board members determine each year what the budget will be, and that sum is raised by Auckland Council through rates.

Aerial view of Auckland City Photo: PHOTO NZ

Heart of the City chief executive Alex Swney was sacked last week from the agency which he founded 20 years ago. It is largely funded by ratepayers and this year received $4.2 million dollars.

Mr Swney has denied 39 charges of tax evasion. Inland Revenue alleges tax of almost $1.8 million was unpaid, and a further $1.3 million is owed in penalties and interest. Some charges involve allegedly fictitious invoices.

Firm requirements

Auckland Council chief executive Stephen Town has written a firmly-worded letter, requiring Heart of the City to confirm in writing that it has engaged forensic accountants to go through its books and to give a timeframe for that work and any other investigations.

He also wants details of the agency's financial position and cash-flows and is seeking clear assurances about its management processes.

Mr Town said it has been told its future could be in question if it does not respond appropriately.

The Auckland Council building.

The Auckland Council building. Photo: RNZ

Auckland Council has appointed a management team to work with Heart of the City and plans to exercise its right to attend its Annual General Meeting scheduled in a fortnight.

Coincidentally, the latest quarterly installment of $1 million of ratepayers' money was transferred to Heart of the City the day before the council was notified of Mr Swney's dismissal.

The council's letter to the agency underlines its dependence on council support and concludes: "Council will be reviewing this matter formally, including Council's rights under the Business Improvement District Policy, and Partnering Agreement, and implications for arrangements going forward."

Board compliance

Chair of Heart of the City's board Terry Gould has accepted the council's requirements.

"Absolutely, it's what we'd expect," he told Radio New Zealand.

"We are receiving support from the council in terms of action we've have taken to date. We think it is very reasonable, and will be addressing the issues raised."

Mr Gould said McGrath Nicol, the firm of forensic accountants it has hired to go back through accounts for the past 15 years, was keeping in touch with the Serious Fraud Office.

"We felt given the seriousness of some of these allegations, that we needed to inform them," he said.

"The forensic team has had a conversation with the Serious Fraud Office which is standing by to receive information from them, depending on the outcome of the forensics."

Other roles lost

Mr Swney's other public roles were removed from him swiftly when name suppression was lifted in court last Monday. By mutual agreement he has stood down from being on the Pathway Trust, a group promoting the Skypath cycle and walkway proposed for the Auckland Harbour Bridge.

The Auckland Children's Christmas Parade Trust also decided to end his role as trustee and Mr Swney will no longer represent Heart of the City on the council's City Centre Advisory Board.

Who knew what when?

Mr Gould has outlined the sequence of events covering five months, which led to Mr Swney's sacking.

Mr Gould said he first became aware of trouble on 30 April 2014, when Alex Swney told him he faced a personal tax matter unrelated to Heart of the City.

"I took him at his word, that he was negotiating with Inland Revenue, and I was given no sense of the scale or complexity of the allegations."

Mr Gould said in conjunction with the agency's deputy chair, he agreed to arrange for Heart of the City's lawyers to provide a letter supporting Mr Swney's bid for interim name suppression, which was granted on 2 May. He said because it was then considered a personal matter, it was not elevated to the agency's 11-member board.

On 26 September, Mr Gould said Alex Swney and his lawyer came to him and outlined that the allegations were more than just personal, and included allegations of improper invoicing to Heart of the City.

"I was shocked, in disbelief, and gravely concerned with what was transpiring."

Mr Gould said he called a full board meeting on 29 September, when the decision was taken to terminate Mr Swney's contract, seek an interim CEO, and bring in forensic accountants.

He met formally with Auckland Council several days later, but no statements were made until the lifting of name suppression covering the case, after Mr Swney's court appearance the following Monday.

Auckland's Queen Street

Auckland's Queen Street Photo: PHOTO NZ

Swney's email

Mr Swney has sent an email to a large number of personal acquaintances, following that court appearance. In it he refers to "a sad end to a journey" with Heart of the City and reflects on what he considers to have been agency's contributions to downtown Auckland.

Mr Swney will defend the tax evasion charges, which come back to court next month.

Terry Gould said the Heart of the City board is committed to looking forward, and he doesn't believe the circumstances surrounding the departure of Mr Swney, endanger its future.

The CBD-targetted rate on downtown properties, which largely funds Heart of the City, will be reviewed as part of the council's Long Term Plan process next year.

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