BoQ EDS fraud: Blow by blow

The nation has heard about former EDS employee Reecson Wentworth Denford's audacious theft of $2.9 million dollars from Bank of Queensland, but what were the motives behind the sweeping fraud and what has it done to the man who committed it?

ZDNet.com.au has obtained transcripts of the trial and has pulled together a number of other sources to provide readers with this comprehensive overview of the events surrounding the fraud, and Denford himself. However, we do not have access to the judge's sentencing remarks.

Who was Denford?
He was only 21 when he first discovered the loophole which allowed him to siphon off funds from the bank, with no criminal history in his home state. Married at 20 to a "much older" wife, he lived in a unit in the very ordinary looking Hopetoun Street in Ascot, Brisbane.

He worked for EDS (Now known as HP Enterprise Services) which provided back-room functions on behalf of the bank. His duties were clerical, processing mortgage documents the bank entered into with its clients, making sure they were registered and that the stamp duty was paid to the office of state revenue.

According to a psychological evaluation mentioned in court documents, he had no mental disorder or personality problems, but he did have low self-esteem and a need to purchase friends and impress with wealth.

How it happened
The team that Denford was part of were trained and employed by EDS, but they were based at the bank's offices and had access to the bank's computer records. They could generate records to transfer money and process account entries.

Denford's wife Yvette was the treasurer of the body corporate for the unit block where the pair lived. The body corporate had two bank accounts with the Bank of Queensland. Denford completed processing documents which allowed money to be transferred from the Bank of Queensland's general register to either of the body corporate accounts, making out receipts which said the money was a duty refund. He then transferred sums from the body corporate to an account of his.

Because the transfers that he made were under $10,000 they didn't ring any alarms with the bank. He made hundreds of transactions in this manner. Later on, he also needed to bring a unsuspecting fellow employee's identity and initials into his fraud, because the rules were changed, requiring the signature of two employees. Over the period from 14 November 2006 to 2 August 2008 he transferred $2,935,247.63 to the body corporate's accounts.

The splurge
The just-under-$3 million Denford stole made his lifestyle "lavish". The prosecution lawyer, Julie Aylward, said during the trial that he spent cash like it was monopoly money. No property or long term investments were bought. "It was all items that really probably lost half their value as soon as they walked out of the shop," Aylward said.

He spent $450,000 on forming a "collection" of French champagne, $23,500 on jewellery, and $370,000 on seven luxury cars (Mini-Coopers and BMWs with personalised plates). A million dollars was put onto his credit card for items such as travel, including accommodation at Dubai's seven-star hotel for $11,000 and watches for $14,000.

How did he get caught?
August 2008 was the doom month for Denford. He was discovered by EDS, according to Aylward, because the company was getting concerned about his lifestyle and had put systems into place to check things. As a result, he resigned, but was caught before his month's notice was up.

He said he thought he would take the money and return it with a flourish to the CEO, yet contradicting that, he admits that he used part of that first transfer to buy a suit to make an impression

Prosecution lawyer Julie Aylward

Defence lawyer Tim Ryan said in the trial that Denford had told him that "things had got completely out of control". When EDS uncovered the fraud and confronted him, he immediately confessed. Ryan said that Denforth was genuinely remorseful. Denford revealed how he had stolen the money and provided the fraud investigator with a list of assets the company could expect to recover.

He told EDS and Bank of Queensland where the wine collection and cars were and gave them the pass-codes to collect them. He handed over jewellery belonging to his wife. He catalogued the wines in the collection for the companies and also retrieved credit for a $26,500 cheque he had given his travel agent.

The bank of Queensland took the money still in his account (around $280,000). The cars have been sold: what Denford bought for $370,000 only fetched $190,000. There was also $27,000 of retrievable funds on Denford's Amex. Only around half of the $23,500 spent on the jewellery was recovered when it was sold.

Denford reportedly said he felt that he could gain financial independence via his purchases, and that the expensive items he bought were considered as investments, a belief Aylward considered fanciful considering their nature.

EDS has to meet the losses of the bank, Aylward said in the trial. It had insurance to cover the money, but will have to pay a million dollar excess. It is still in possession of the wine collection, but the highest value the company is expected to regain is $190,000. "On my calculations, taking into account everything they've recovered and at that highest valuation for the wine, including what they've had to expend, the loss would still be in the vicinity of $2.8 million," Aylward said. "It seems that he just spent everything that he had."

On top of this, Ayward said, EDS spent a large amount of money on follow-up audits. Deloittes carried out two audits for the company which cost half a million dollars: one to quantify the amount of the fraud and another to make sure there was no further fraud being committed. This amount, added to storage of the wine and cars as well as legal fees tipped the money spent on the fraud to $630,000.

The motive
The psychological evaluation conducted for the trial indicated that Denford's low self-esteem and a need to purchase friends was the major reason behind Denford's offending, Aylward said in court. Denford had married his older wife only months before his fraud began, Ryan added: "It seemed at the heart of it was a desire to impress his new wife."

Another self-confessed reason for Denford's action was the wish to expose the flaws in the bank's systems. Ryan believed his client truly had meant to reveal the flaw in the system and had just succumbed to temptation, but Ayward was not convinced.

An interesting fact, Aylward said, was that Denford's criminal activity started only a short time after he was told he wouldn't be placed on a mentoring program. "Even [the psychologist] suggests that was probably the trigger for the offending rather than any... altruistic motive," Aylward said.

"He said he thought he would take the money and return it with a flourish to the CEO, yet contradicting that, he admits that he used part of that first transfer to buy a suit to make an impression," she added.

The consequences
Whatever his reasons might have been, Denford has not ended up with much for his crimes, and has gone under much personal strain, according to Ryan. "The consequences of his offending for him have been disastrous," Ryan said. "His marriage ended upon the disclosure of his offending to his wife. She sold the unit that they lived in and refused to give him any part of the proceeds."

The upshot of it all is this: that he has nothing to show for any of all of this. Given the magnitude of the amount taken he has nothing left at all

Defence lawyer Tim Ryan

He was also excommunicated from his church and has experienced difficulties with his family, Ryan said. He was living with his grandparents who were supporting him. His grandmother had been diagnosed with bowel cancer and had undergone an operation for the condition with no long life-expectancy. His grandfather was also not well.

"The upshot of it all is this: that he has nothing to show for any of all of this. Given the magnitude of the amount taken he has nothing left at all," Ryan said. "The tragedy of this case from his point of view is that it's inescapable that he's an intelligent young man who, after completing school, worked his way into positions which suggested that he had a very promising career ahead of him. Unfortunately he has succumbed to temptation, as I say, in a substantial way," he continued.

Aylward said the number of transactions and the amount of money concerned meant that a long sentence was required, despite Denford's cooperation. It was needed as a deterrent to other employees considering fraud, she said.

Denford's motives could not be ignored, according to Aylward. "The reason for the theft is also an important consideration for your Honour, and in this case it was sheer greed," she said. "The prisoner can't blame a less reprehensible motivation such as drug addiction and gambling."

Ryan, on the other hand pointed to Denford's young age, his remorse, and that the psychological evaluation showed it unlikely he would attempt to commit an offence of that kind again. "To his credit he accepts full responsibility for his conduct, there's no attempt made by his to blame others or to blame alcohol or drugs for his offending," Ryan said. Denford had helped the investigation and had pleaded guilty to an ex-officio indictment and had thereby saved tax payers a lot of money, according to Ryan.

The verdict
Denford was sentenced to nine years jail and will be eligible for parole in three years. The maximum term would have been ten years. Ryan said Denford intended to use his time in prison to undertake further studies.