Former TZ chief executive to stand trial over $8.7 million fraud: How to fraud-proof your business

Sydney businessman Andrew Sigalla was yesterday ordered to stand trial on allegations he breached his duties as a director in an $8.7 million fraud.

The former chairman, director and chief executive of electronic locker company TZ Limited was arrested at the Intercontinental Hotel last year before being charged on 16 charges of dishonestly using his position to funnel cash from the business.

The Australian Securities and Investments Commission alleges that on 16 occasions between March 2008 and March 2009, Sigalla took money from TZ’s bank accounts and used the majority of the cash to repay bookmaker Tom Waterhouse and pay off his mortgage.

ASIC also alleges that, on top of fraudulently taking the money, Sigalla failed to properly record the payments in his accounting books and TZ’s records, did not obtain shareholder approval for the payments, and did not disclose the payments in any published accounts and company annual reports.

The maximum penalty for each offence is five years’ imprisonment and a $220,000 fine.

Sigalla has not yet entered a plea to the charges.

The trial comes as KPMG’s fraud barometer recorded a three-fold increase in major fraud during the past 15 years, with $373 million lost in 2012 and 2013.

Gary Gill, KPMG’s national head of forensic, told SmartCompany when a fraud involves senior people in a business, like Sigalla, the fraud is usually a lot larger because it takes much longer to detect.

“That is because senior people usually have the ability to get around the controls and conceal the payments,” he says.

“When people in the business processing payments come across this thing, the difficulty is that when it is somebody as senior as that, how do you blow the whistle?”

Gill says businesses need to have a proper whistleblowing system in place for when staff see something dodgy.

He recommends an external whistleblowing facility which can then report back to the business.   

Gill also says business should have established controls around payment processes.

“Make sure there are proper controls around the set up of those payments,” he says.

“Do some periodic reviews to make sure there is nothing dodgy going on.”

Sigalla’s time at TZ was rocky and in 2009 he was replaced in the chairman’s role by Mark Bouris.

Under Bouris’ leadership, TZ launched a $7.5 million legal action against Sigalla, which was settled out of court.

In July 2010, Sigalla was made bankrupt by Tom Waterhouse in the Victorian Supreme Court, as he owed the bookmaker $2.6 million.

Sigalla has also been in trouble with ASIC before, with the NSW Supreme Court convicting him of contempt of court in 2012 after he breached a court order by failing to disclose to ASIC almost $30,000 in credit card payments to escort agencies. He was ordered to complete 120 hours of community service.

The matter will return to court on December 18, 2014.

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