Groote Eylandt Aboriginal Trust sues auditor for failing to detect millions in alleged fraud

One of Australia's oldest and richest Aboriginal land trusts is suing its auditor and accountants for failing to detect millions of dollars in alleged fraud.

The Groote Eylandt Aboriginal Trust (GEAT) said community members running the trust were allegedly spending millions in trust money on cars, boats and real estate for themselves and friends.

GEAT receives tens of millions of dollars in royalties every year from a manganese mine on the island, located 50 kilometres off the coast of the Northern Territory in the Gulf of Carpentaria.

The royalties are managed by GEAT as trustee for the benefit of Aboriginal traditional owners on Groote Eylandt and nearby Bickerton Island.

In a statement of claim lodged in the Supreme Court this week, GEAT accuses international firms Deloitte Touche Tohmatsu and KPMG of failing to detect "substantial" irregularities in the trust's accounts from 2010-2012.

The irregularities included salaries paid to GEAT committee members "that were grossly excessive and had not been approved", GEAT said.

"Trust money [was allegedly used] for gambling at casinos in Darwin and Cairns" and the purchase of 156 cars and trucks, a four bedroom house in Queensland and a dozen boats, in 2012, the statement of claim said.

Rosalie Lalara to face court on theft charges

The GEAT employee most heavily implicated in the alleged fraud is the former public officer of the trust, Rosalie Lalara, who will defend theft charges in Darwin Magistrates Court in October.

In claiming Deloittes and KPMG failed their duty of care to the trust, GEAT's court documents detail numerous ways in which Ms Lalara and her associates allegedly defrauded the trust.

They include payments from the trust for funeral expenses "which were not genuinely for the purpose of funeral costs," a large number of cash cheques authorised by Ms Lalara for which there was little or no information on the purpose of the withdrawal, and a practise of inflating the price GEAT paid certain dealers for boats and cars.

Ten boats bought but not required

In one instance, GEAT alleges that Ms Lalara bought 10 small boats with trust money at a cost of $350,000 "in circumstances where GEAT had no requirement for them," to convince the owner of the boat yard to sell her a 6.7m boat the dealer was not inclined to sell.

In claiming unspecified damages against Deloittes and KPMG, GEAT said a four-fold increase in funeral costs in the space of a year, a doubling in the salary paid to Ms Lalara and a five-fold increase in the salaries paid to two other committee members, plus the purchase of $2.4 million worth of vehicles in one year, should have raised alarm bells.

GEAT claims its financial advisors did nothing to alert the trust or relevant authorities to these issues.

In March 2012, beneficiaries of the trust to whom the royalty money was due wrote to the Northern Territory Government asking that the management of the trust be investigated.

Their concerns included the possibility Ms Lalara was gambling trust funds at Skycity Casino in Darwin, where she held a platinum membership.

The Northern Territory Government passed this information to the Licensing Commission and Ms Lalara was later banned from the casino.

According to GEAT's statement of claim, when contacted by the Licensing Commission in 2012, a representative of Deloittes said the company's most recent audit had shown "no evidence of fraud or wrong intent" in the management of the trust.

Casino ordered to provide gambling records

GEAT obtained evidence that Ms Lalara may have gambled money in excess of $1 million at the casino.

In separate legal proceedings the Supreme Court ordered Skycity Casino to hand GEAT documents concerning Ms Lalara's gambling at the Casino. Skycity is seeking to appeal the ruling.

The NT Government appointed a statutory manager to take control of GEAT's finances in October 2012.

Most of the fraud GEAT alleges was committed against the Groote Eylandt Aboriginal Trust is thought to have occurred in 2011 and 2012.