CDirector of Public Prosecutions v Toffoletti
[2019] VCC 677
•15 May 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CRIMINAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CR-17-01201
CR-17-01202
| COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS |
| v |
| SAMANTHA TOFFOLETTI & SULEYMAN ERDOGAN |
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JUDGE: | HER HONOUR JUDGE M. SEXTON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 March 2019 | |
DATE OF SENTENCE: | 15 May 2019 | |
CASE MAY BE CITED AS: | CDPP v Toffoletti & Anor | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 677 | |
REASONS FOR SENTENCE
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Subject: Criminal Law
Catchwords: Use position as an employee dishonestly with the intention of gaining advantage – dishonestly causing a loss to the Commonwealth – dishonestly obtaining a gain from the Commonwealth
Sentence: TES: Erdogan – 6 months imprisonment. Toffoletti – 2 years Recognisance Release Order
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APPEARANCES: | Counsel | Solicitors |
| For the CDPP | Ms S. Thomas for plea Ms D. Middleton for sentence | CDPP |
| For Toffoletti | Mr P. Smallwood | Galbally & O’Bryan |
| For Erdogan | Mr D. Porceddu for plea Mr Condello for sentence | Condello Lawyers |
HER HONOUR:
1 Samantha Toffoletti, you have pleaded guilty to a charge of using a position as an employee dishonestly with the intention of gaining an advantage for someone else, an offence under the Corporations Act (C’th) with a maximum sentence of 5 years’ imprisonment.
2 Suleyman Erdogan, you have pleaded guilty to two charges of dishonestly causing a loss to the Commonwealth, and to a charge of dishonestly obtaining a gain from the Commonwealth. All the offences are under the Criminal Code (C’th) and have a maximum sentence of 5 years’ imprisonment.
3 I sentence you both on the basis of the prosecution opening[1], which is an agreed summary of your offending. I will summarise your offences, deal with the factors that apply to you both, and then turn to the personal circumstances of each of you.
[1] Exhibit A
4 Between 2003 and 2011, you Mr Erdogan operated profitable labour hire firms (including “Sunraysia”) that arranged for workers to perform farm work in various locations. In 2011, you wanted a new business structure that would reduce your wages bill. You were a client of SME’s R Us. They devised a structure whereby you would still operate Sunraysia, but that business would purport to sub-contract services to a shell company, including the payment of the workers’ wages, and so you would avoid paying tax for those workers.
5 In June 2011, you Ms Toffoletti arranged for the incorporation of a shell company called Danood P/L in your employment with SME’s R Us. You Mr Erdogan, were the client for whom this company was set up. You Ms Toffoletti arranged another person to be the sole director and shareholder. This person was on a disability pension and could not read or write. Nevertheless, you paid him for signing papers that were put in front of him. He played no other part in the company. Danood was wound up and de-registered in 2013.
6 In September 2012, you Ms Toffoletti arranged for the incorporation of a shell company called Jameron P/L in your employment with SME’s R Us. You Mr Erdogan, were the client for whom this company was set up. You Ms Toffoletti arranged another person to be the sole director and shareholder. This person was an acquaintance of yours and played no other part in the company. Jameron was wound up and de-registered in 2014.
7 Danood and Jameron were purportedly to sub-contract the operations of your labour hire firm Mr Erdogan, and take on the liability to pay tax for those workers. In fact, you Mr Erdogan continued to employ the workers and pay the wages, and no PAYGW[2] tax was remitted to the Australian Tax Office (ATO) on the workers’ behalf.
[2] Pay As You Go Withholding
8 Between June 2011 and September 2012, you Mr Erdogan arranged for the employment of workers by Danood and failed to remit the PAYGW tax on wages paid to those workers with the intention of dishonestly causing a loss to the Commonwealth (Charge 1 on your indictment).
9 Between September 2012 and July 2013, you arranged for the employment of workers by Jameron and failed to remit the PAYGW tax on wages paid to those workers with the intention of dishonestly causing a loss to the Commonwealth (Charge 2 on your indictment).
10 The total amount of tax not paid, and therefore the loss to the Commonwealth, across both charges, is $664,711.
11 You Ms Toffoletti knew that the two shell companies that you were involved in setting up were incorporated for the purpose of using them to avoid the payment of tax, and thereby used your position as an employee of SME’s R Us dishonestly with the intention of gaining an advantage for Mr Erdogan by arranging the incorporation and use of the shell companies Danood and Jameron (Charge 1 for your indictment).
12 Between July 2012 and July 2014, you Mr Erdogan arranged for the lodgement of 136 false income tax returns for 49 people. You provided payment summaries to your accountant to prepare the returns, which he did without meeting with any of the people or receiving signed declarations. The payment summaries falsely represented that PAYGW tax had been withheld by either Danood or Jameron as employers for each of the workers. In fact, no such PAYGW tax had been withheld or paid to the ATO from Danood or Jameron.
13 You Mr Erdogan caused the lodgement of those false tax returns to dishonestly obtain income tax refunds in relation to Danood and Jameron. You dishonestly gained the amount of $187,994.30 in tax refunds which were paid in circumstances where no PAYGW tax had been remitted to the ATO (Charge 3 on your indictment).
14 Mr Erdogan, your offending is very serious. Over a period of three years, you defrauded the Commonwealth in a total amount of $852,705.30, and in doing so, received to your own benefit the sum of about $188,000. Your counsel submitted that you had received no ‘unjust enrichment’, but the money was paid by the ATO to you unjustly on the false tax returns, whether or not in the circumstances you were made ‘richer’. The fact is that these funds were available for you or your firm to use, and you were not entitled to any of that $188,000.
15 While you were not the architect of the scheme for Charges 1 and 2, and did not necessarily understand how it would work, you were clear that the goal was to minimise your tax and when you discovered that really meant avoiding paying the tax, you continued with the scheme, doing whatever was required of you. As to Charge 3, you fraudulently used many names of some workers who had previously worked for you on working holiday visas, and had left Australia when you caused the lodgement of the tax returns using those false identities, and using the same shell companies to obtain tax refunds to which you and the companies you controlled were not entitled.
16 Ms Toffoletti, the offending with which Mr Erdogan is to be sentenced could not have taken place without your input. In assessing the gravity of your offence of dishonestly using your position as an employee, I take into account that although you knew that the shell companies were to be incorporated to avoid the payment of tax, you did not know the precise amount involved or the kind of tax to be avoided; you personally received no benefit from the fraud[3]; and as an employee, you were acting on the instructions of your employer’s client Mr Erdogan, and under the direction of your employer. However, you did arrange for ‘sham’ directors who were known to you personally, and arranged all the necessary documents and bank accounts as well as later de-registering the companies, in order to write off any liabilities. By your plea you have accepted that you were acting dishonestly.
[3] SME’s R Us was paid about $250,000 for services rendered
17 For both of you, I take into account that by my sentence, I must seek to deter others from committing serious fraud on the Commonwealth, which is called general deterrence, and my sentence must denounce criminal behaviour of this kind. The integrity of the Australian revenue system must be protected, and courts have a significant responsibility in this protection, when sentencing in cases of deliberate and sustained fraud.
18 Tax fraud is not a victimless crime, as the avoidance of tax or fraudulent payment of refunds is not only stealing from the whole community, but also affects the whole community, there being less revenue to provide services. The tax system relies heavily on self-assessment and because of this, is open to abuse, which, when discovered, must be punished. Detection of tax fraud is often difficult, and makes investigation and prosecution often complex and time-consuming. In this case, the use of shell companies and workers’ false (but previously genuine) identities did make detection more difficult. It was an audit by the ATO begun in March 2014 which eventually uncovered all the offending.
19 There are a number of factors that I must take into account for both of you in deciding the appropriate sentence.
20 First, you have each pleaded guilty, and that is a factor that I take into account in your favour. I accept that it shows your contrition, and your willingness to facilitate the course of justice. Further, by your pleas, each of you has saved the community the time and cost of a trial. I take into account that although the pleas were indicated not long before the trial date, in both cases the charges to which you have pleaded guilty are different to the original charges and so the pleas of guilty to the charges on which you are to be sentenced have been indicated at a comparatively early stage.
21 Next, although you Mr Erdogan have been dealt with by a court for an offence before today’s sentence, that offence occurred after the offending for which I am sentencing you, and it is not alleged by the prosecution that it is a relevant offence for today’s sentence. I agree, as it is a completely different type of offence, and I have no other details about it.
22 Ms Toffoletti, you have no criminal history.
23 That means that you are each to be sentenced as a person who has not committed any offence before the events for which I am sentencing you.
24 Since you both committed the offences, there has been some considerable time pass before today’s sentence. While part of that is attributable to the difficulties in detecting, and prosecuting these matters, and to the time waiting for trial when the original charges were contested, I do take into account in mitigation that it is now almost six years since the offending ceased, and I accept that you have both lived with the stress of this case in that time. I also take into account that your case was not heard last year when a judge was unable to be allocated, and also take into account the delay from the plea date to sentence today. For you Ms Toffoletti, I also note that you have not offended in any way since 2013, and for you Mr Erdogan, that you have not offended in any relevant way since then.
25 I will now deal with the matters that relate to each of you personally, including your prospects for rehabilitation.
26 Turning to you first Mr Erdogan, you are now aged 52. You were born and raised in Turkey and completed the equivalent of Year 12 there. You came to Australia in 1990 to marry a Turkish-Australian woman as arranged by your father. You have a strong work ethic, established while still a student in Turkey, and began working in Australia despite having limited opportunities, as you spoke no English and had no qualifications. You moved into labouring work and that took you to Mildura as a seasonal fruit picker. In 1997, you were encouraged to open your own labour hire business and eventually in 2003, you did so, arranging that through the same accountant who later did the tax returns the subject of Charge 3. Between 2003 and 2011, the firm was successful, with a large number of contracts, and you complied with your obligations as an Australian taxpayer.
27 However, your personal life had taken a downturn. By 2005, you had three children in your marriage, but spent long periods away from them when working in Mildura. Tragically, in 2005, your 4 year old son was killed in a car accident as a passenger in the car you were driving. You are described as having "lost your way" after that. You spent three months in Turkey, and on your return to Australia, you were unable to focus on your business and became actively religious, re-engaging with your Islamic faith. Although you and your wife had another child, eventually your marriage broke down.
28 I heard evidence and received a report[4] from a psychologist who assessed you in June 2018. As would be expected, the death of your son had a devastating effect on you and on the psychologist’s assessment you have lasting trauma, and your initial anxiety has deepened to depression. The level of your depression has varied over the years, but the current diagnosis is of Major Depressive Disorder, in partial remission. You have not had any medical treatment for this, so far instead speaking to religious leaders, and have said that you did not want professional treatment. The psychologist has offered to treat you, and you may have changed your mind about this. I will return to this aspect when I discuss your prospects for rehabilitation.
[4] Exhibit E1 – Plea Book
29 On the basis of the psychologist’s opinion, which I accept, I find that because of your depression and ongoing trauma, if sentenced to a term of imprisonment, that will be harder for you than for someone undergoing a sentence of imprisonment without the burden of mental ill-health. I also find that there is a serious risk of a term of imprisonment having a significant adverse effect on your mental health.
30 Returning to your personal circumstances, in 2011 and 2012, due to your depression, you were unable to keep up with supervision of the workers and administration of the firm, and it is in this context that you were put in touch with SME’s R Us, and Ms Toffoletti, and later, the offending began. It is not suggested that the trauma and depression from your son’s death is a factor in your offending, but it is clearly relevant to the background and to your personal circumstances. Apart from the amount you paid SME’s R Us for their services[5], you apparently paid an enormous sum to lawyers challenging an ATO ruling. In 2017, you declared yourself bankrupt.
[5] SME’s R Us was paid $250,000 for services rendered
31 In 2015, you began another relationship and together you have a daughter, aged almost 2 years. Your partner provided a reference indicating her support for you, despite the strain this case has had on you both, and she was present in court to further show that support.
32 I take into account that as well as having no previous convictions, you are a person of otherwise good character. I received a number of references attesting to your character, and to your generosity to the community, demonstrated by the various sponsorships your firm provided to community organisations. I also take into account that you offered to assist the prosecuting authorities, and I accept that there were reasons beyond your control which meant that a statement was not taken from you.
33 I ordered that you be assessed for a community correction order, and you were found suitable. It is of course still for me to decide whether that is an appropriate sentence. In that report, you express a belief that you would benefit from engaging in mental health treatment. That is an important change in your outlook, and is to be encouraged, whatever the outcome of today. Your prospects for rehabilitation will be greatly improved if you engage in professional treatment for your depression and ongoing trauma. I accept that given your otherwise good character and lack of relevant convictions and subsequent offending, your prospects are reasonably good in any event, and you are unlikely to re-offend in the same way.
34 However, I am aware that factors such as good prospects for rehabilitation, otherwise good character and low risk of re-offending may carry little weight against an admission of offending over a period of years, in your case, three.
35 The prosecutor submitted that you should be sentenced to a term of imprisonment to serve immediately. Your counsel submitted that on the basis of all the matters in your favour, you should be released on a community correction order. I will return to sentence you at the end.
36 Turning to you Ms Toffoletti, you are now aged 56. Your parents were born in Italy and migrated to Australia where you and your brother were born. Sadly your mother and your brother both died in the years during which you were awaiting the outcome of this case.
You are supported in court by your partner, and I received a number of references[6] attesting to your good character. I also received a resume of your qualifications and work experience. From that I accept that you had a long and successful career in TV production, both in Australia and overseas. It was following a downturn in that area that you took on any other work you could find, which according to one of your referees, included cleaning houses and gardening. You gained employment with SME’s R Us in March 2010. I note that this was only a year before the beginning of your offending, and further note that you had no training, expertise or qualifications in company structuring. While your administrative skills appear strong from your resume, I accept that you did not have the capacity to be the architect of the scheme devised for Mr Erdogan. I accept that you were receiving instructions from your superiors.
[6] Exhibit T3 – Character References
37 You remained working with SME’s R Us until June 2018, under new owners from 2015. You now manage an Air B & B with a friend, which you find a much less stressful occupation.
38 I accept that as you are otherwise of good character, with no previous or subsequent offending, your prospects of rehabilitation are excellent and you are highly unlikely to re-offend. I also accept that your passage through the criminal justice system will have already acted as a deterrent to any offending in future.
39 The prosecutor submitted that you should be sentenced to a term of imprisonment but be released immediately on what is called a recognisance. Your counsel submitted that on the basis of all the matters in your favour, you should not be sentenced to imprisonment but be released on a different form of order. I will return to sentence you after I sentence Mr Erdogan.
40 For both of you, I must impose a sentence that is of a severity appropriate in all the circumstances of the offence, and take into account all relevant considerations under s.16A(2) of the Crimes Act (C’th), many of which I have mentioned.
41 Although I was supplied with authorities, I did not find them to be comparable to Mr Erdogan’s situation. There were none in respect of Ms Toffoletti.
42 A sentence of imprisonment is ordinarily required for the principal offender in cases of sustained and deliberate cheating of the revenue system, because it is considered unlikely that mitigating factors will be of sufficient significance to outweigh the primary purpose for imposing sentence in a tax fraud, namely general deterrence.
43 Mr Erdogan, I find that there has been sustained and deliberate cheating by you, over a three year period, involving a large amount of public funds. However, in some respects you are not the principal offender as you were not the architect of the scheme. However the scheme was designed by others to meet your illegal requirement to avoid tax.
44 I have decided that a term of imprisonment is a sentence of appropriate severity for Charges 1 and 2, even taking into account your mitigating factors. That means I will be sentencing you to a term of imprisonment on Charges 1 and 2. However, in all the circumstances of your case, I have decided to sentence you to a term of imprisonment of less than 12 months and then release you on a recognisance release order for Charges 1 and 2 and release you on a community correction order for Charge 3 under s.20AB Crimes Act (C’th).
45 Because you must agree before I can release you on a community correction order, I need to tell you what the conditions are. The core conditions attached to every community correction order are, that you must report to and receive visits from Corrections Victoria; must notify Corrections Victoria of any change of address or employment; must not leave Victoria without permission of Corrections Victoria; and must comply with any direction given by Corrections Victoria to ensure compliance with the order.
46 I will also order that you comply with other conditions during the period of the order: that you be under supervision by Corrections Victoria; that you undertake 100 hours of unpaid community work over the period of the order; and be assessed for and if found suitable undertake treatment for your mental health. I order that any hours of treatment and rehabilitation be counted towards your hours of unpaid work.
47 Mr Erdogan, do you agree to being released on a community correction order on Charge 3 with those conditions attached?
48 ACCUSED ERDOGAN: I do.
49 HER HONOUR: Thank you. You are convicted and sentenced as follows;
50 You are convicted and sentenced on Charge 1 to six months’ imprisonment. That sentence starts today.
51 You are convicted and sentenced on Charge 2 to six months’ imprisonment. That sentence starts today. That makes a total effective sentence of six months' imprisonment.
52 You are convicted and released on Charge 3 after the term of imprisonment, on a community correction order for 18 months with the core and special conditions I have outlined.
53 If you do not complete any condition of the community correction order, you will be brought back before me to be re-sentenced and also be dealt with for not complying with the community correction order. Mr Erdogan, do you understand what will happen if you do not complete any condition of this order?
54 ACCUSED ERDOGAN: Yes.
55 HER HONOUR: I should also tell you the community correction order can be changed or removed by the court if your circumstances change. To do that, you should get legal advice.
56 Yes, just take a seat for the moment. There will be a document for you to sign.
57 Ms Toffoletti, if you could stand up please.
58 You are convicted and released under Section 20 Commonwealth Crimes Act, on a recognisance release order on conditions that you give security by recognisance of $800 to be of good behaviour for a period of 2 years. If you do not re-offend in that period, you will hear no more about it. If you do offend, you will forfeit $800, you will be re-sentenced by me, as well as sentenced for not complying with the court order. Do you understand what will happen if you do not complete any condition of this order?
59 ACCUSED TOFFOLETTI: Yes.
60 HER HONOUR: Yes, just take a seat. There will also be a document for you to sign.
61 Now, just before I have the documents signed, Ms Middleton, does there appear to be any problem with the orders that I am proposing to make?
62 MS MIDDLETON: No, Your Honour, that sounds fine, Your Honour.
63 HER HONOUR: Thank you.
64 MS MIDDLETON: I have bond forms here, Your Honour.
65 HER HONOUR: Yes, thank you. All right, well I have the document for Ms Toffoletti, so Mr Smallwood, you can accompany my associate if Ms Toffoletti has any questions.
66 MR SMALLWOOD: If the court pleases. Your Honour, Ms Toffoletti has signed that recognisance.
67 HER HONOUR: Yes, thank you. Ms Toffoletti can step out of the dock now.
68 MR SMALLWOOD: If the court pleases.
69 HER HONOUR: Mr Erdogan, I will now have you sign your community correction order and Mr Condello, you can accompany my associate in case Mr Erdogan has any questions.
70 MR CONDELLO: May it please the court. Thank you, Your Honour, that has been signed.
71 HER HONOUR: Thank you. I will now sign that order, and a copy will be provided to you Mr Condello.
72 MR CONDELLO: Thank you, Your Honour.
73 HER HONOUR: Finally, I will not indicate what my sentence would have been for the charges but for the plea of guilty, until legislation specifically requires it for Federal offences, or an authority binding on me states that it is required.
74 MS MIDDLETON: Yes, Your Honour.
75 MR SMALLWOOD: If the court pleases.
76 MR CONDELLO: May it please the court.
77 HER HONOUR: So Mr Erdogan, you will begin your six month sentence of imprisonment and now be taken out into custody, after which you will be on your community correction order. Yes, thank you.
78 MR CONDELLO: Thank Your Honour.
79 MR SMALLWOOD: If the court pleases.
80 MS MIDDLETON: If the court pleases.
HER HONOUR: Yes, thank you Mr Interpreter for your assistance, and once again I thank everybody for their patience and waiting to the end of the day for this sentence. Yes, thank you, Mr Erdogan can be taken out.
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