Director of Public Prosecutions (Cth) v Couper
[2012] VCC 875
•29 June 2012
IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for PublicationAT MELBOURNE
CRIMINAL DIVISION
Case No. CR‑11‑01678
CR‑11‑01679
DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH) v PETER JOHN COUPER ---
JUDGE:
HER HONOUR JUDGE GAYNOR
WHERE HELD:
Melbourne
DATE OF HEARING:
7 and 8 June 2012
DATE OF SENTENCE:
29 June 2012
CASE MAY BE CITED AS:
DPP (Cth) v Couper
MEDIUM NEUTRAL CITATION:
[2012] VCC 875
REASONS FOR SENTENCE
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Catchwords: CRIMINAL LAW – Sentence
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APPEARANCES:
Counsel Solicitors For the Commonwealth Director of Prosecutions Mr M. Gibson Solicitor for the Commonwealth Director of Public Prosecutions For the Accused Mr J. Moore Mills Oakley Lawyers HER HONOUR:
1 Peter John COUPER, you have pleaded guilty before me to two charges of engaging in conduct that resulted in the falsification of books effecting or relating to a company contrary to sub-s.1307(1) of the Corporations Act 2001, one charge of authorising or permitting the making available or giving of misleading information to an auditor contrary to sub-s.1309(1) of the Commonwealth Corporations Act 2001 and one Charge of giving false or misleading evidence to the Australian Securities and Investments Committee (ASIC) contrary to s.64 of the Australian Securities and Investment Commission Act 2001.
2 The maximum penalty for Charges 1 and 2 is 100 penalty units or two years imprisonment or both. The maximum penalty for Charge 3 is 200 penalty units or five years imprisonment or both. The maximum penalty for Charge 4 is 100 penalty units or two years imprisonment or both.
3 The facts underlying your offending were fully outlined in an agreed Statement of Facts, which is annexed to these sentencing remarks. I will therefore summarise your offending only in the briefest of terms.
4 In very short compass, in 2007, as Chief Financial Officer of the On Q Group, the parent company of Bill Express (BXP), you arranged for the false documentation in BXP company books of a non existent purchase of stock, and then its sale for considerable profits to two other entities, when in fact, that sale never took place.
5 These actions by you underlie Charges 1 and 2. You then authorised the provision of false information in relation to these spurious transactions to the company auditor, resulting in an inflation in the company's financial position for the financial half year, ending December 2007. These facts underlie Charge 3.
6 Finally, on three separate occasions you gave false evidence at ASIC hearings, where investigations into market manipulation, false trading, market rigging, and artificial maintenance of a trading price in relation to BXP shares was undertaken.
7 Essentially, you denied contact with two persons, a trader, Newton Chan, and a company director, Enzo De Denato, who were engaged in buying BXP shares with the purchase price being funded by BXP, as a means of artificially keeping up the BXP share price in an effort to avoid a margin call by its creditors, an activity in which you were very much involved.
8
Two brothers, Hal and Ian Christiansen, were On Q company directors.
Hal Christiansen, who had been the managing director of BXP, died in July 2000. His brother, Ian, was the CEO of BXP from 2005. The On Q Group was placed in receivership in 2008 and eventually wound up.
9 The offending took place in the context of the adverse financial effect of the global financial crisis on the On Q group of companies, in particular, BXP, which had borrowed heavily to finance a large expansion in its activities in the early 2000s.
Personal circumstances
10 You are 58 years of age and have no prior convictions. You are the eldest of four children, born to your parents. Your father was a serviceman who eventually worked for Australian Customs for 38 years. You grew up in Glen Waverley, completing Year 12, but failed all your subjects, apart from accounting, a subject you had undertaken by correspondence in which you obtained a distinction. You were then employed as an accounting cadet at Mercedes Benz Australia where you worked for three years whilst attending night school classes at Box Hill Technical School for two years, eventually obtaining a Matriculation pass. At the same time you studied a Diploma of Business Studies four nights a week at Prahran Tech, which you obtained after five years. In the following two years you completed a Post Graduate Diploma in Accounting and Finance at Caulfield Tech, and then obtained a Certificate of Business Studies in Customs from the South Melbourne Tech.
11
You worked then as an accounting cadet with NEC Australia for two years, and for the next ten years worked as an accountant, then group accountant and then chief accountant for a wine and spirit merchant, Taylor Ferguson, in Clayton. You were offered a redundancy package in your early thirties.
You then worked as an accountant for a family company, Medos, which imported medical equipment, and then for two and a half years worked as an accountant with the company, Active Leisure, in Clayton, but left because you were stressed and overworked. For the next six years you worked as an administration and finance manager at Knox Private Hospital and for Northpark Private Hospital in Bundoora. You then worked as an administration and finance manager for Linacre Hospital in Brighton and other hospitals in the Mayne Nickless Group for two years. Finally, you then worked for a small family business, Farm House Smallgoods, in Knoxfield as an accountant and then for two years after that for another small family business, Zaganite Industries in Dandenong.
12 You then began work with Australian Pure Fruits Limited, a company which made cordial, tomato juice and fruit juice. This company was largely owned by Peter McDougall and was then taken over by the On Q Group Limited, of which Peter McDougall became a director, along with brothers Hal and Ian Christiansen. Hal Christiansen, who died in July 2008, was a joint managing director of BXP from 1999 to 2005 with Peter McDougall, Ian Christiansen being appointed the Chief Executive Officer of BXP in 2005. On Q’s business interests included telephone technology, essentially via Bill Express of which it was a major shareholder, which sold pre-paid mobile phone credit in addition to operating bill payment facilities. Eventually it expanded to 14,000 outlets around Australia. It was floated on the Australian Stock Exchange in 2004.
13
Your counsel described you as a man who had spent his life as an accountant for small family concerns, who eventually found himself in a high powered stressful situation, and who was given the title of Chief Financial Officer for
a large, public, high-tech company with a staff of over 3,000.
14 In regards to your personal life, you met your first wife when you were 20 and you married in 1975 when you were 22. You have three children aged 32, 30, and 28. Your eldest son is an accountant in public practice. Your second son is a landscape gardener and your daughter is a registered psychiatric nurse. All are in relationships and have children and none have ever been in trouble with police.
15
You have engaged in a great deal of community service over the years.
You joined the Glen Waverley Tennis Club in 1974, serving there as treasurer for five years and 30 years as auditor on a voluntary basis. You and your wife bought a house in Wantirna in 1975, where you still live, and in 1978 you joined the Templeton Tennis Club, becoming a committee member and serving as both treasurer and president. You were joint convenor of the club for 14 years. Your children played tennis there and you continued on in the convenor role well after they had finished competing and were eventually awarded a life membership and an annual award, the Couper Award, named after you, is given to the junior player of the season.
16 You were involved in your children’s kindergarten and primary school committees involving yourself in working bees and fundraising as well as the Scouting Association when your sons were Cubs.
17
In 1988 you joined the Freemasons Lodge and were involved in the finance committee and supported the Freemasons Hospital as treasurer, also voluntary positions. In 2003 you and your wife separated, a move initiated by your then wife, Rosemary McCracken, who wrote in her reference to the Court that your workload once On Q took over Australian Pure Fruits and was immense, that you worked abnormally long hours which apparently impacted adversely on your relationship. Your wife moved out and subsequently
re-married. You then met your current partner, Christine Hall, through mutual interest in ballroom dancing and have been in a relationship with her for the past seven years.
18 Your former wife, Rosemary McCracken, worked as an integration aide and Ms Hall worked at the administration office of Southern Cross Care. Neither of them has ever been involved in any trouble with police.
19 The Charges to which you have pleaded guilty essentially arose, as I have said, from the financial difficulties the On Q Group got into the years leading up to and during the Global Financial Crisis. The company had borrowed heavily to expand and, according to your counsel, at the time you committed these offences, was “haemorrhaging money.” Ultimately it was placed into administration in July 2008.
20
Since mid 2008 to the present time you have been working with the Australian Private Network (APN) as an accountant, an organisation which has about 30,000 customers connected by satellite to a telecommunications network. The directors at APN are apparently aware of your legal situation, are supportive of you and wish you to continue employment with them.
Your father is now in his 80s, as is your mother, and they live in a retirement village in Wantirna. They have never been in trouble with the law, and are apparently religious, and regularly attend the Church of England.
Similarly, none of your brothers have ever been in trouble with police.
21 It appears that at the time of this offending you were enduring an amount of stress in your personal life. In 2007 your partner Christine was diagnosed with the condition Cystomegalovirus, a condition similar in its effect to Chronic Fatigue Syndrome. Ms Hall gave evidence on the plea that the virus had attacked her liver and spleen and robbed her of all energy so she had to give up her employment and spent most of her time in bed. She said that you cared for her as best you could whilst at the time dealing with the demands of your employment. She said you were contacted by the directors at all hours of the night, often when you were in bed, and overall described your workload as an overbearing one. Her condition has improved to the point where she has good days and bad days, but she is regularly exhausted and confined to bed for periods of time.
22
During your time at On Q you never held the position of director, nor did you hold any shares in the company. At all times you were a paid employee. During 2007 a dispute erupted between Peter McDougall and the Christiansens, who took out a Writ against Mr McDougall in the Supreme Court. He responded by way of a counterclaim in which he joined you as
a defendant. Your counsel informed me that at this time you were not covered by directors’ and officers’ insurance and stood to lose everything.
It was your counsel’s submission that what you did was done essentially at the behest of the Christiansens, in particular Ian Christiansen. Certainly I note in the prosecution opening (and this was borne out by various exhibits to which I was taken by both prosecution and defence), that on 22 December 2007 Ian Christiansen emailed you with a list of tasks to complete, one of which was headed “Simix stock sale ($5 million sale where stock will cost $1 million)”, entailing that you invoice for the sale of stock and obtain a supply invoice for the purchase. This you duly did. That task related to the purchase of non existent stock and then a non existent profitable sale to other entities.
23 In relation to Charge 3, on 2 January 2008, Ian Christiansen provided BXP’s auditors, KPMG, with a report relating to BXP’s financial results for the half year ending 31 December 2007, which referred to the sale of Simix stocks to the company, APS, for $5.4 million.
24 I was also referred to the judgment of his Honour Mr Justice T Forrest delivered on 13 July 2010 in relation to his sentencing of Newton Chan[1] for stock market manipulation in relation to BXP shares. In his sentencing remarks, he noted that Mr Chan’s share purchases were “purchased at the behest of and for the benefit of Ian and Hal Christiansen”. The purpose of the exercise was to keep up the price of BXP shares so that no margin call would be made on them. This was, of course, an activity which directly benefited the Christiansen brothers.
[1] R v Chan [2010] VSC 312
25
It was submitted on Mr Chan’s behalf that he had been blinded by Mr Ian Christiansen’s “charismatic personality” although this was not accepted by His Honour as a satisfactory or complete explanation for Mr Chan’s offending.
His Honour then finding it more likely that Mr Chan had been influenced by other factors, such as personal financial gain, although ultimately his Honour was not able to conclusively determine Mr Chan’s motivation for his offending.
26
His Honour's remarks however, that the trading activities engaged in by
Mr Chan were for the benefit of the Christiansens and carried out at their behest, in my view has a direct bearing on your involvement in the offending underlying Charge 3.
27
It appears that you were told by Ian Christiansen in early to mid 2006 that BXP shares would be purchased by Chan. Most significantly, on 14 July 2008, Chan attended Ian Christiansen’s house where he was given
a computer memory stick with a script for answering questions to be put to him by ASIC investigators. His Honour also referred to a meeting attended by Chan, yourself, Ian Christiansen and Enzo De Denato, a director of 3D Sales Force Pty Ltd, which was also involved in the purchase of BXP shares under the scheme, at which His Honour said you all agreed on the story “that would be presented to ASIC as the truth. The story was designed to protect Christiansen, yourself (Chan) and the other two men”, they being you and
Mr De Denato.
28 According to psychologist, Jeffrey Cummins, whose report dated 16 April 2012 was tendered on the plea and who gave evidence on the plea, at the time of this offending you were overwhelmed by the situation. Ultimately, later in 2008, you were included in insurance coverage in relation to the suit being pursued by Mr McDougall, but you told Mr Cummins:
“There was this dispute between Peter McDougall and Howard Christiansen.
Mr Ian Christiansen was appointed CEO of BXP in 2005. This all became
a nightmare. I was working like a workaholic. I was trying to work out where all the money was going. I was concerned these directors were trying to strip the companies of funds and I felt overwhelmed, is there money being siphoned out of the companies and other services being charged to these two companies.”
29 Your counsel pushed the point that you were ill-equipped, professionally and emotionally, to work in this high pressure, sophisticated commercial environment given your fairly modest background as an accountant for small family companies. It was Mr Cummins’ view, as a result of psychological testing he conducted upon you, that you have a passive personality –
“… in fact he was assessed as being quite interpersonally passive. He was also assessed as having a low-level interpersonal dominance. In my opinion, his interpersonal passivity and low-level interpersonal dominance indicates he is likely to be easily influenced and indicates he is likely to be relatively easily manipulated.”
30 Significantly, in my view, in April 2008, you organised a meeting with Victor Dye, a registered liquidator and a principal in the insolvency practice, Dye & Company Pty Ltd, and provided him with an overview on 29 April 2008 of the Bill Express Group, the On Q Group and the Technology Business Group involving a total of 38 companies. In a letter to the Court dated 6 June 2012, Mr Dye stated:
“I recall that PJ Couper left the meeting in an endeavour to persuade some of the directors of the Bill Express Group to join in the discussions and to advise on the future funding requirements of the technology business group.”
31 Your counsel informed me that you initiated the meeting with Mr Dye because of your concerns over the state of the On Q Group and returned to the directors after the meeting but were given short shrift by them.
32 Also of significance, in my view, amongst a vast array of references tendered on your behalf, was a reference from David Webb, a director of PPP Advisory, which from 1 July 2008 to 30 June 2010 was responsible for the daily management of the Bill Express administration and liquidation. In his reference, dated 4 June 2012, Mr Webb stated that during the course of the liquidations you provided assistance to the liquidators and their staff which included obtaining data about Bill Express Management information systems in relation to various financial transactions, providing details as to intercompany relationships between the various companies in the Bill Express Group and most significantly, providing the liquidators and their staff “assistance with securing a pre-appointment GST refund of circa $1.2 million”. It was his view that your assistance –
“… in collating the necessary supporting documentation, completion of the statutory forms required to obtain a refund and liaising directly with representatives of the Australian Tax Office was invaluable to liquidators who, in my view, would not have been able to secure the GST refund without
Mr Couper’s assistance.”
33 In her evidence, Ms Hall stated that during the period of your offending you were particularly distressed over what you perceived to be a deliberate exclusion of you from meetings, a failure to be given full details and a high-level of concern over Mr McDougall's actions. It was Mr Cummins’ view that you were suffering from Depression as a result of these various factors in 2007 and 2008. Ultimately, it was submitted by your counsel that the reason for your offending lay with the Christiansens, that essentially all the offending that took place was ultimately for their benefit and for the survival of the company of which you were a paid employee. Mr Cummins, in his report, noted that you at that stage had a package worth about $200,000 a year, but apart from that, there is no evidence of enrichment as a result of your offending activity.
34 Ultimately, you did cooperate with ASIC, although not before committing perjury on three occasions. And I accept that you were the person who informed ASIC that the purported purchase of Simic stock by BPX was in fact a sham. (I note that the director of ILT, the developer of Simic, told ASIC that the sale was genuine).
35 You also gave an undertaking on oath during the hearing to give evidence against Mr De Denato who has been charged, but is apparently contesting those charges laid under the Corporations Act.
36
On balance, I do accept that what you did must have been done at the behest of the Christiansens, in particular, Ian Christiansen. It is not disputed that he sought to write the script for Mr Chan’s attendance upon ASIC and that logically he was the chief beneficiary of both your offending and that of
Mr Chan, given the parlous financial state of the On Q Group. Further, your position as employee with no interest in the companies for which you worked meant that the only real benefit to you was a continuation of your employment. Given that you have subsequently been able to obtain employment which it appears from Mr Cummins report, carries with it similar remuneration to that which you received from On Q, I do not regard it as a particularly compelling motivation for you to behave as you did.
37 As I have said I received an extensive raft of references from family, friends and former work colleagues, all attesting to your otherwise honest character. References from friends of yours in the accounting business routinely expressed the view that this behaviour was out of character for the person they knew professionally and often opined that you did not have the professional capacity to carry out the duties required of you by the On Q Group, particularly once that group fell into financial difficulties.
38
You are a man of mature years who has, I am satisfied, demonstrated
a genuine commitment to community welfare, as evidenced by your involvement in the various organisations, to which I have referred, on
a voluntary basis.
39 You come from an entirely law-abiding background.
40 You have been of certain assistance to the ASIC authorities, although the point was made by the prosecution that your failure to reveal the Christiansens’ activities, in particular the actions of Mr Ian Christiansen in seeking to script the answers given by yourself and Mr Chan at the ASIC hearings prevented earlier investigation of Mr Christiansen, who is yet to be charged, and very much weakened the position of the prosecuting authorities. The point was made quite fairly that the value of yourself and Mr Chan as witnesses against Mr Christiansen has been severely undermined by the fact that each of you have now admitted to lying under oath to ASIC.
41 My concern is that you have been presented to me as a man of otherwise impeccable morals who under a particular situation of pressure abandoned those principles and engaged in behaviour which had the potential to deceive large numbers of persons in the community, that is actual or potential investors in a public company, that is BXP. In one sense your previous honest and good character tells against you insofar as this offending is concerned. You would have known very well that what you did was entirely wrong.
42
You perjured yourself on three occasions during the ASIC investigations.
This was extremely serious and utterly dishonest behaviour which represents a betrayal not only of your personal values, but the professional standards which are designed to protect members of the public who are invited to invest in organisations such as BXP. It is rightly held that sentencing in such cases must have an overwhelming regard for the need to protect the community from such activity, to denounce dishonesty such as yours and to send out
a message that those who behave, as you have done, and who have betrayed the principles of your profession, as you did, will not be treated lightly by these courts.
43 It is also the case that whilst not totally without weight, issues of previous good character have less sway in the exercise of a court’s discretions in cases of this kind. The prosecution have urged upon me that the only way I should deal with you is by way of a sentence of imprisonment to be immediately served. And let me tell you I have given that very serious consideration.
44 I have considered the various authorities referred to me by both sides. Ultimately, I have decided not to gaol you. But you have come very close, indeed, Mr Couper, and you should leave this court with an acute sense of the disgraceful behaviour you have engaged in, and the fact that you will carry with you for the rest of your life a conviction in those terms against your name.
45 Most significantly, as I have said, you received no gain from your activities which, in my view, from the authorities that I was referred to, has particular weight in the sentencing exercise.
46 I accept that your employment history left you ill prepared for the position that you found yourself in, being part of a sophisticated company set-up which expanded rapidly.
47 Unlike Mr Chan, who had experienced a stellar career as a trader and who stood to gain financially from his wrongdoing, in my view, you were, as I have said, a fairly ordinary person suddenly elevated to a position you probably never expected when you began working for Mr McDougall.
48 I accept Mr Cummins' analysis of you as a man of passivity and as a follower. In all other respects, as I have said, you have been a hardworking man, who has led a fairly exemplary life, involving yourself considerably to the benefit of the community.
49 The fact that you were able to garner the support you did from family and friends, the fact that I was able to be the recipient of such a vast array of references, also speaks very much to your credit.
50 However, as I say, you should be utterly ashamed of yourself. Your actions were weak and dishonest. You may have been overwhelmed by the high powered situation you found yourself in, but you still had your own moral and ethical code, and as I have said, this you utterly abandoned. You simply collapsed under pressure.
51 Ultimately, you were a weak man, out of your depth. I regard the prospect of you re-offending in the future as negligible. In my view, a sentence of imprisonment does need to be imposed to mark the seriousness of this offending. As I have said, the community is entitled to rely upon the rules surrounding the representation of the financial position of companies in which they are invited to invest. You have betrayed the community, as well, by your actions.
52 Nevertheless, the considerable mitigatory factors and the particular position that you were in at the time have led me to the conclusion that a wholly suspended sentence will ultimately serve the purpose. I propose also to fine you. Can you stand up please.
Sentence
53
In relation to Charge 1, you will be sentenced to a term of imprisonment for
12 months. You will, however, be released forthwith upon you entering into
a recognisance on the sum of $1000 for a period of three years.
54
In relation to Charge 2, you are sentenced to 12 months imprisonment.
You will be released, forthwith, upon you entering into a recognisance in the sum of $1000 for a period to be of good behaviour for three years.
55 On Charge 3, you are sentenced to 12 months imprisonment. You will be released, forthwith, upon you entering into a recognisance to be of good behaviour for a period of three years, with a recognisance of $1000.
56
In relation to Charge 4, you are sentenced to a term of imprisonment of
12 months. You will be released, forthwith, upon you entering into a recognisance in the sum of $1000 for a period of three years.
57 The recognisance in relation to Charge 1 will begin today. The recognisance on Charge 2 will begin on 29 September 2012. The recognisance on Charge 3 will be dated to begin from 29 December 2012 and the recognisance in relation to Charge 4 will be dated to begin on 29 March 2013.
58 The total effective sentence, therefore, is 21 months and the suspended period or the period of which you are to be of good behaviour will last for three years.
59 If you commit any offence in the next three years, Mr Couper, you will have breached that undertaking. You will be brought back before me and I will restore that sentence.
60 Pursuant to s.6AAA, I declare that if you had not pleaded guilty I would have sentenced you to a term of 21 months imprisonment of which 18 months would have been suspended for a period of three years.
61
In relation to Charge 4, I also fine you $10,000. Thank you. You can have
a seat.
62 Now does that cover everything?
63 MR GIBSON: Your Honour, would Your Honour give us just a few minutes while we have a look at it, and I think it does, Your Honour, but it is better to be sure.
64 HER HONOUR: Yes. Sure. That is fine, Mr Gibson.
65 MR GIBSON: The fine was with conviction.
66 HER HONOUR: Yes. Everything is with conviction.
67 MR GIBSON: If Your Honour pleases.
68 HER HONOUR: Thank you. I will just wait while you work that out and the proper documentation has to be prepared.
69 I should have added, and I forgot to mention. The plea of guilty was entered after a contested committal was conducted involving the cross‑examination of 11 witnesses.
70 And in sentencing you I do take into account that plea of guilty, which I do regard as a genuine expression of remorse. I am particularly confirmed in that view by the fact that you appear to have spoken to so many people about what you have done, and so many of the references referred to the remorse that you expressed.
71
I also take into account your undertaking for what it is worth to give evidence against Mr De Denato, for which you are entitled to have a discount.
There has been some delay in this matter, some of it of your own making, which in my view also has an effect on my decision not to impose an active term of imprisonment upon you.
72
MR GIBSON: Just while the paperwork is being prepared by my instructor,
I note that it is commonplace, and I note Justice Forrest did this in Chan to give a separate "but for" indication in terms of the s.21E undertaking. Now that may - - -
73 HER HONOUR: What do you mean?
74 MR GIBSON: Your Honour has indicated that I think you said that, "But for the plea of guilty the sentence would have been".
75 HER HONOUR: Yes.
76 MR GIBSON: And that is fine. But there is another element to it, that is - - -
77 HER HONOUR: Do I have to express it in terms of - - -
78
MR GIBSON: "But for the undertaking pursuant to s.21E the sentence would have been." Now it may require Your Honour just to re-jig it slightly to
also - - -
79 HER HONOUR: What do you mean, "But for the plea of guilty."?
80
MR GIBSON: No, no. For the s.21E undertaking to give evidence against
Mr De Denato. In Commonwealth matters there has to be a separate, "but for" sentence.
81 HER HONOUR: Yes.
82
MR GIBSON: So for example, in Justice Forrest's sentence he says this,
p. 11, "I am required to quantify the discounts, plural, you have received for your plea of guilty and for your s.21E undertaking." So all I am saying, Your Honour, is that - - -
83
HER HONOUR: The discounts that I have given, essentially, relate to
a decision not to impose a sentence of imprisonment, apart from which would be immediately served. So the quantification is somewhat difficult.
84 MR GIBSON: Yes.
85 HER HONOUR: I have not reduced the actual term that I would have imposed. I have simply decided not to require that Mr Couper serve any part of it, which is why I have not entered into that exercise.
86
MR GIBSON: Yes. I will just check the wording, Your Honour, because
I think - - -
87
HER HONOUR: I will simply say, "But for the undertaking given to give evidence in relation to Mr De Denato, and but for the mitigatory factors that
I have outlined, and but for the plea of guilty, I would have ordered an effective term of 21 months; three months of which I would have ordered to be served. "
88 Now I do not really see how I can express it in any other terms.
89 MR GIBSON: The wording of s.21E(1) requires Your Honour to actually descend into a quantification of months or years.
90
HER HONOUR: Very well. In relation to Charge 1, I would have sentenced
Mr Couper to 12 months, the sentence to have commenced on 29 June 2012. In relation to Charge 2, I would have sentenced Mr Couper to a term of
12 months, the sentence to commence on 29 September 2012.
91 In relation to Charge 3, I would have sentenced Mr Couper to 12 months imprisonment, the sentence to commence on 29 December 2012.
92
In relation to Charge 4, I would have sentenced Mr Couper to a term of
12 months, which would have commenced on 29 March 2013. In relation
to - - -
93 MR GIBSON: Section 21E.
94 HER HONOUR: In relation to s.21E I declare that but for the plea of guilty and the undertaking to give evidence - - -
95 MR GIBSON: Just the 21E, Your Honour, not the plea of guilty.
96 HER HONOUR: Just 21E.
97 MR GIBSON: Yes. Because they need to be separately identified.
98 HER HONOUR: All right. That is almost impossible for me to do. All right? Because I have not, as I said, essentially I have decided not to make him serve any of it.
99 MR GIBSON: Yes.
100 HER HONOUR: Now what that means is, in terms of the order that I would have made him serve a three month minimum term, that means that essentially I would have ordered that of that 12 months, 11 months and one week - - -
101 MR GIBSON: There is another way of doing it, Your Honour.
102 HER HONOUR: In relation to each of them, it would have been - he would be released after serving three weeks of that sentence, he would have been released.
103 MR GIBSON: Your Honour could say that but for the s.21E undertaking, the sentence would have been something in excess of the 20 months, 24 months, or whatever term Your Honour thinks appropriate for the 21E discount.
104 Your Honour has correctly said that, "But for the plea of guilty the sentence would have been 20 months." And Your Honour could go on and - - -
105 HER HONOUR: Yes. 21 months.
106 MR GIBSON: 20 months Your Honour said, did you not?
107 HER HONOUR: 21 months.
108 MR GIBSON: Very well.
109 HER HONOUR: You have got 12 plus nine, is 21.
110 MR GIBSON: Yes. Your Honour could say that, "But for the 21E undertaking the sentence would have been 24 months", or three months or two months, or whatever. But that is what Your Honour needs to do under s.21E(1) - - -
111 HER HONOUR: All right.
112 MR GIBSON: Yes.
113 HER HONOUR: But for the undertaking, the ultimate effective sentence would have been 24 months, the total effective sentence.
114 MR GIBSON: If Your Honour please. That paperwork has just been prepared now.
115 HER HONOUR: Thank you for that, Mr Gibson.
116 MR GIBSON: That is all right.
117 HER HONOUR: I thought I had actually conquered the way I was meant to.
118 MR GIBSON: Look, they are very difficult, these Commonwealth sentences, so - - -
119 HER HONOUR: Yes, I know, but I have been doing them for a long time. You would think I would do a bit of a better job. All right.
120
MR GIBSON: Now I will just check the handiwork of my instructor here.
That is fine. Just before Mr Couper signs this, Your Honour, I will hand it up to Your Honour.
121 HER HONOUR: Thank you. All right. This does not have to express the details that I have given in relation to each of the - - -
122 MR GIBSON: No, Your Honour, it does not.
123
HER HONOUR: All right. There is the $10,000 fine. Now I understand that
I have to indicate where that has to be paid, the Commonwealth entity that must be paid to.
124 MR GIBSON: I am not aware of that, Your Honour, that Your Honour has to stipulate that. I thought it was automatic, myself. But if Your Honour is aware of some provision, I am not aware of it.
125 HER HONOUR: No. That is fine, thank you. All right. No, I have not in particular. Yes?
126 MR MOORE: Your Honour, might I just seek some instructions about time to pay?
127 HER HONOUR: He is getting three months.
128 MR MOORE: Thank you, Your Honour.
129 HER HONOUR: Thank you. I think I have to sign this first. Yes, thank you. Yes, thank you.
130 MR GIBSON: It is obviously one recognisance order in relation to the three sentences, Your Honour. Obviously it is one document.
131 HER HONOUR: Yes. The four sentences.
132 MR GIBSON: In relation to the four sentences, and if Your Honour would just click on p. 2, the effect of breaching such recognisance - - -
133 HER HONOUR: I thought I had already explained that. Let me have another look. I thought I had made it fairly clear to Mr Couper that if he breached this order he will be back in front of me, and I will gaol him. All right.
134 MR GIBSON: Thank you, Your Honour.
135 HER HONOUR: Thank you. Yes. Very well.
- - -
(Statement of Facts attached)
IN THE COUNTY COURT CASE No: CR-11-01678
OF VICTORIA INDICTMENT No: A12456808
AT MELBOURNE
THE QUEEN
-v-
PETER JOHN COUPER
PROSECUTION OPENING
1.The Accused Peter John Couper (“Couper”) has pleaded guilty to four charges comprising:
· two charges of falsification of books affecting or relating to a company while an officer of Bill Express Limited (“BXP”) (charges 1 & 2);
· one charge of authorising or permitting the making available or giving of misleading information to an auditor while an officer of BXP (charge 3); and
· one charge of giving information that was false or misleading in a material particular in the course of an examination (charge 4).
I.OFFENCES RELATING TO FALSIFICATION OF COMPANY BOOKS / SIMIX STOCK
2.In relation to the first three charges, Couper engaged in conduct which resulted in a series of false transactions and the associated entries being recorded on BXP's accounting system sales of Simix stock. Simix stock is a pre-loaded SIM card technology.
3.The existence of these transactions in BXP's accounting system resulted in the company:
· recording an additional profit of $3.525 million for the financial year ended 30 June 2007 by BXP in relation to the Simix stock transactions when in fact no profit had been made; and
· recording an additional profit of $3.525 million for the half year ended 31 December 2007 by BXP in relation to the Simix stock transactions when in fact no profit had been made.
Background
(a) The Accused
4. Couper was the Chief Financial Officer (“CFO”) of On Q Group Limited A.C.N. 009 104 330 from early 2001 until 28 July 2008. ONQ was the ultimate holding company of Bill Express Limited.
5. Couper described himself as the “Group CFO” to Bill Express staff and would regularly give instructions to Bill Express staff (including to the CFOs of Bill Express Limited Marc Lichtenstein, and from 19 November 2007 Sean Slattery) in relation to entries to be made in the Bill Express company books and provide background to various transactions.[2]
[2]M00600607 Kanthasamy Paras 9-11, M00600605 Lichtenstein Paras 9-13, M00600614 Moloney Paras 9-18, M00600606 Nadarajah Paras 6-10, M00600615 Slattery Paras 5-10
(b) Bill Express Limited
6. Bill Express Ltd (“BXP”) was incorporated under the name of Dialtime Pty Ltd A.C.N. 090 059 564 on 21 October 1999. It converted to an unlisted public company and changed its name to Bill Express Ltd in September 2004. Later that year it was listed on the Australian Securities Exchange (“ASX”).[3]
[3]H00061033 - BXP Limited Historical Company Extract
7. BXP was placed into administration on 8 July 2008. At that time, it operated an electronic network of approximately 14,000 terminals throughout Australia. The network provided the platform for the delivery of bill payment services, delivery and distribution of prepaid telephony products, in store digital media and advertising, along with a prepaid visa card called “bopo”.
8. Harold (Hal) Christiansen was a director of BXP from 21 October 1999 to 30 June 2008. Hal Christiansen passed away on 1 July 2008. He was the joint Managing Director of BXP from 1999 to 2005 with Peter McDougall. Following a dispute with McDougall, Hal Christiansen stepped aside from that role in 2005. However, until 1 July 2008 Hal Christiansen continued to have a role at BXP being responsible for new IT opportunities and international business. He was said to be the 'driving force' behind the creation and development of many of the technology based products.
9. Ian Christiansen, Hal's brother, was appointed Chief Executive Officer of BXP in 2005.
(c) The BXP accounting system
10. The accounting system of BXP was known as “End2End” and included the general ledger, invoicing and payment systems.[4] Entries were made into the system by various officers and employees of BXP, either by manually entering the journal entry or entering the journal entry into an excel spreadsheet and then importing the spreadsheet into End2End.[5]
[4]M00600614 Moloney Paras 19 – 22
[5]M00600614 Moloney Para 40
(d) Simix Stock and its purchase from ILT
11. The Simix product was designed to be a preloaded SIM card technology that allowed the users to control the amount spent on SIM cards per user per day. The exclusive rights in Australia and New Zealand to Simix were held by Inter Linear Technology Pty Ltd (“ILT”).[6]
[6]M00600617 Curtain Paras 5 – 9
12. On or about 13 June 2006, Tom Curtain, the Director of ILT signed a memorandum of understanding for the supply to BXP by ILT of Simix enabled sim cards.[7] Subsequently, BXP purportedly agreed to purchase from ILT 25,000 Simix enabled SIM cards at $75.00 each. ILT issued an invoice dated 27 September 2006 (Invoice No 270906) to BXP for the total amount payable of $2,062,500.[8] Couper was involved in these transactions.[9] The invoice was marked to his attention.
[7]H00068528
[8]H00068531
[9]H00068530, M00600617 Curtain Paras 19-22
13. Pursuant to the purchase agreement, payment was arranged through a loan facility BXP had with a company called CCH Europe GmbH (“CCH”). Couper would manage the facility through CCH representative Charles Ridley, and would provide BXP accounting staff with details on all CCH transactions.[10] On 1 December 2006 ILT received AUD$2,022,849.02 from CCH in payment for Invoice No. 270906.[11]
[10]M00600605 Lichtenstein Para 13; M00600615 Slattery Paras10-12
[11]H00068843
The next footnote is 17.
14. Subsequent to his committal, Couper has said that the intended purpose of the purchase agreement between BXP and ILT was to raise funds for both BXP and ILT rather than to purchase stock. Couper has said the funding was intended to allow ILT to develop the Simix product. The funding would be obtained from CCH. CCH’s practice was to provide funding for stock purchases, but not for product development. Couper has said that he advised Hal and Ian Christiansen that CCH would not fund product development. Simix was a product still in development.
15. Couper has also said the purchase agreement was intended to provide capital funding for BXP. It was intended that the greater portion of the funds obtained from CCH by ILT would be received by BXP.
16. Couper has said that in hindsight, he shouldn’t have allowed the transaction because he knew CCH only funded stock and not product development. Couper has said that he knew there was no Simix stock in existence and that he knew no Simix stock was ever delivered to BXP.
(e) Identification of Simix stock on BXP books
17. In February 2007, BXP accounting staff identified an amount of $1,875,000 worth of Simix stock recorded as inventory in the general ledger balance sheet of BXP. In March 2007, this item was also identified by KPMG who were the auditors of BXP.
18. When BXP CFO Marc Lichtenstein asked Couper about the stock, Couper said:
Don’t worry about it, it will be gone by June.
Couper provided Lichtenstein with a similar assurance the following month.[18]
[18]M00600605 Lichtenstein Paras 29-37
19. In a KPMG report entitled “Internal Controls Review” dated May 2007, it was noted in relation to the Simix stock that: “There is potential that the stock does not exist, is understated, is wrongly valued or incorrectly classified as stock held for sale”.[19]
[19]H00070143 Szentirmay Para 10-12, M00753784 p31
Charge 1: Sale of Simix stock to ETT and subsequent assignment of sale to APS
1.Sale of Simix Stock to ETT
20. On Sunday 5 August 2007 at 11:31pm, Couper sent an email to BXP CFO Marc Lichtenstein with a subject line entitled “BXP June Results”. The email contained a list of instructions for Lichtenstein to attend to in relation to journal entries for the 30 June 2007 financial statements of BXP. It included the following instruction:[20]
[20]H00040609
Invoice ETT for the sale of the Simmex stock of $1.8m for $5.4m plus GST This ties in with the subsequent event in the Annual Report for March 2007, where the company has developed the platform for processing.
21. The following day, Lichtenstein forwarded the email to BXP finance team members Rosey Moloney and Anpu Kanthasamy, requesting that they attend to the items inter alia to this item.[21]
[21]H00040609
22. On 7 August 2007, Moloney processed a number of journal entries into the accounting system of BXP pursuant to these instructions,[22] so as to:
[22]H0063610, M00600614 Moloney Paras 39-51
·record a sale of $5.4 million worth of Simix stock to a company called ETT Limited with the effective date of 30 June 2007; and
·transfer the stock to the 'cost of goods sold account' with an effective date of 30 June 2007, the cost of Simix stock sold being recorded as $1.875 million.
23. Finally, Moloney made entries so as to generate customer invoice 16378701[23] to ETT in the sum of $5,400,000 plus GST, with an invoice value of $5,940,000.
[23]H00040551
24. As the transaction was backdated to 30 June 2007, the value of the transaction was shown in the BXP financial accounts for the year ending 30 June 2007. Accordingly, when on 15 August 2007, Lichtenstein prepared a draft file note for BXP's board and executive staff in relation to the significant items in BXP's consolidated profit for the year ending 30 June 2007, [24] he was able to state:
[24]H00063611
At 30 June 2007 Bill Express has sold its Simix stock to ETT Limited for $5.4 million. This stock was carried in the books of Bill Express at $1.8 million. Accordingly Bill Express has made a profit of $3.6 million from this transaction.
25. However, the Chairman of ETT, Larry Shutes and ETT’s CFO, Aliceson Rourke, refused to confirm and make book entries relating to the purchase of Simix stock from BXP.
26. On 7 August 2007, Moloney sent an email to Shutes, in relation to the purchase of Simix stock by ETT.[25] Attached to the email was a copy of the Simix stock customer invoice to ETT, the email also requested that Shutes return a "clean email" agreeing that ETT owed BXP $5.94m as at 30 June 2007. Shutes did not reply to the email or provide the confirmation as requested as ETT had never purchased Simix stock from BXP. He spoke to Couper and told him this.[26]
[25]H00040602
[26]M00600616 Shutes Paras 11 & 16
27. On 27 August 2007 at 5:25pm, Lichtenstein sent Shutes an email requesting that he complete a debt confirmation letter for the outstanding debt and loan balances as at 30 June 2007.[27] Shutes forwarded the email to another director of ETT, Gordon Tudor. He then telephoned Tudor to ask if he had any knowledge of the Simix debt amount of $5.94 million. Tudor responded by saying that ETT had not bought any Simix stock, and said, inter alia, words to the effect of:[28]
[27]H00040547
[28]H00063987 Tudor Para 21
…You deal with it, I know nothing about this, …we are a listed company, and as directors we cannot be doing things like this…
28. On 30 August 2007, Shutes sent an email to Couper[29] in which he stated:
[29]H00040547
Hi Peter
I said I would attend to this and send you a copy, (sorry it went into yesterday I forgot file). Mate I want to help as I will again need your help as we go forward and run into our half year accounts in the next month. However I am not fond of porridge. Give me an easy way forward and will try and help.
Regards
Larry
29. Couper subsequently re-presented the invoice to ETT. On 1 October 2007, the CFO of ETT Aliceson Rourke sent an email to Couper and requested copies of the invoices issued by BXP to ETT for the period June 2007 to September 2007. At the time she was in the process of collating material for ETT's financial report for the half- year ended 30 September 2007.[30] Couper replied to Rourke’s email on 4 October 2007 attaching invoices from BXP for the relevant period, including the invoice to ETT for $5.4 million of Simix stock.[31]
[30]H00061027 Rourke Paras 7 – 9
[31]H00040561
30. This was the first time Rourke became aware of a product called Simix. She discussed Couper's email with Shutes,[32] and sent an email to Couper on 5 October 2007[33] which stated:
[32]H00061027 Rourke para 16
[33]H00040568
Thank you for the invoices, however I will not be booking the $5.9m sale of Simex stock as I know full well that Larry did not agree to accept that charge.
31. Couper replied by email:[34]
[34]H00040568
That’s fine.
2.Assignment of ETT Sale / Crediting ETT / Re-invoicing APS
32. Subsequently, on 18 February 2008 at 4:38 pm, Couper sent an email to BXP CFO Sean Slattery instructing him to arrange entries on BXP's accounting system to credit the sale to ETT and re-invoice APS for $5.4 million of Simix stock.[35] APS (“Alternate Payment Solutions”) is a Dubai based company and Charles Ridley was its principal at the time of Couper’s offending. Ridley was also involved with CCH
[35]H00063586
33. Slattery by email requested that Moloney arrange the credit of the ETT invoice and re-invoice the sale to APS.[36] These entries were made on 19 and 20 February 2008 by BXP accounting staff Moloney and Jessica Jonathon.
[36]H00063487
34. This involved Jonathon generating in the accounting system of BXP: [37]
[37]M00600604 Jonathon Paras 6-12, H00040607
· Credit Note 7227 to ETT dated 19 February 2008;[38] and
[38]H00063837
· Invoice 19169796 to APS for the sale of $5.4 million of Simix stock;
thereby transferring the sale from ETT to APS.[39]
[39]H0063856
35. On 20 February 2008 Moloney processed further journal entries in the accounting system of BXP to backdate the transaction to 31 December 2007. The effect of these entries was that the transaction would be now recognised in the BXP financial accounts for the half-year ending 31 December 2007.[40]
[40]H00063481, M00600614 Moloney Paras 78-87
Charge 2: Sale of Simix Stock to APS (Charge 2)
36. On 22 December 2007, Ian Christiansen sent an email to Couper and company solicitor, Leath Nicholson, that contained a list of tasks to complete for that month.[41] One of the tasks was headed “Simex Stock sale ($5m sale where stock will cost $1m)” and entailed that Couper invoice for the sale of the stock, and to obtain a supplier invoice “for the purchase”. This was achieved as follows:
[41]H00040618
37. First, on 24 December 2007, BXP's accounts receivable supervisor, Erin Kennedy, processed an invoice in the BXP accounting system for the sale of Simix stock valued at $5.4 million to APS. The invoice generated was invoice number 18389913 addressed to Alternative Payment Solutions, dated 24 December 2007.[42] The Chief Financial Officer of BXP at the time, Sean Slattery, believes that the instructions came from Couper.[43]
[42]H00068785
[43]M00600615 Slattery Paras 12- 13
38. Second, on 24 December 2007, Couper by email instructed BXP accounting staff member Ajit Nadarajah to process on BXP's accounting system a supplier invoice, described by Couper as “Invoice Number 201207”, from ILT for $1.875 million worth of Simix stock.[44]
[44]H00063768
39. Nadarajah did not see an actual supplier invoice from ILT.[45] However, pursuant to these instructions, on 27 December 2007, he processed a supplier invoice from ILT for a purchase of $1.875 million of Simix stock. On 27 December 2007 Nadarajah replied to Couper's email of 24 December 2007 to say that he had carried out the instruction.[46]
[45]M00600606 Nadarajah Para's 11-12
[46]H00063765
40. ILT did not make any sale of Simix stock to BXP other than the sale already outlined.
41. And finally, on 14 January 2008, Couper had dicussions with Anpallakan Kanthasamy, a Financial Accountant with BXP, in relation to the $1.875 million worth of Simix stock which appeared on the BXP Balance Sheet as at 31 December 2007.[47] Couper directed Kanthasamy to transfer the Simix stock on the accounting system to 'Cost of Goods Sold'.[48]
[47]M00600607 Kanthasamy Paras 33-36
[48]M00600607 Kanthasamy Paras 34-36
42. On 14 January 2008 Kanthasamy processed a journal entry to transfer the $1.875 million worth of Simix stock to the “Cost of Goods Sold” account. On Couper's instructions Kanthasamy backdated the entry to be effective on 31 December 2007 (allowing the amount to be recognised as an expense in the accounts for the half- year ending 31 December 2007.).[49]
[49]M00600607 Kanthasamy Paras 34-36
43. The recording in the accounting system of the sale of Simix stock to APS for $5.4 million on 24 December 2007 and subsequent recording of a purchase of Simix stock for $1.875 million on 27 December 2007 resulted in BXP recording an additional profit of $3.525 million for the half-year ended 31 December 2007 in relation to that transaction.[50]
[50] M00600609
Charge 3: Authorising or permitting the making available or giving of misleading information to an auditor
44. On 2 January 2008, Ian Christensen by email provided to BXP’s auditors KPMG a report in relation to BXP’s financial results for the half-year ended 31 December 2007, which referred to a sale of Simix stock to APS for $5.4 million.[51]
[51]H00070143 Szentirmay Para 61, H00063852
45. On or about 7 February 2008, a meeting was held between KPMG and BXP in relation to the review prepared by KPMG of the interim consolidated report of BXP (‘the 2007 review”).[52] At that meeting, Ian Christensen advised that the sale of Simix stock recorded in BXP's report was a “standard sale transaction” and “no formal contract existed”. KPMG noted that it would require confirmation of the debt as at 31 December 2007.[53]
[52]H00070143 Szentirmay Para 68
[53]H00074252
46. On 13 February 2008, Melissa Choon (Senior Accountant with KPMG), emailed BXP CFO Sean Slattery and requested that BXP obtain confirmation from ETT and APS of the debts to BXP for the Simix stock.[54] Choon’s email attached draft letters of confirmation for both ETT and APS.[55]
[54]H00070143 Szentirmay Paras 70-71, H0040537
[55]H00040540, H00040541
47. On 14 February 2008, Couper told Slattery that the $5.4 million worth of Simix stock purchased by ETT had been transferred to APS along with the obligation of the debt to BXP[56].
[56]M00600615 Slattery Para 31
48. On 15 February 2008, Slattery emailed Couper in relation to ETT's debt, and having stated that information was required for the auditors, KPMG, asked Couper for details of the assignment of the debt to APS.[57]
[57]H00063588
49. On 18 February 2008 Couper responded by email and advised:[58]
[58]H00063587
·ETT had purchased Simix stock from BXP in 2007;
·ETT provided full confirmation of the debt for the FY2007 audit as per the attached acknowledgement letter;
·Late in 2007 ETT indicated that they no longer had a need for the stock;
·Couper negotiated for APS to take the Simix stock and to have the $5.4 million debt assigned from ETT to APS;
·An acknowledgement of the debt would be made from APS directly to KPMG ; and
·APS had committed to pay $3 million to BXP
50. This information was subsequently verbally discussed and confirmed by Couper to Slattery.[59] However, although referred to in the email, no acknowledgement letter was attached to the email; and despite numerous requests to Couper, Slattery was not provided with, nor sighted, a copy of the letter.[60]
[59]M00600615 Slattery Para 42-43
[60]M00600615 Slattery Paras 40, 51, 57 & 59
51. In fact, ETT never assigned the debt to APS as it says that the debt never existed for it to assign.
52. It was subsequent to the sending of this email on 18 February that Couper emailed Slattery instructing him to arrange entries on BXP's accounting system to credit the sale to ETT and re-invoice APS for $5.4 million of Simix stock as referred to in charge 1.
Purported Confirmation of Debt by APS
53. As a result of the transactions outlined above $11.34 million was now recorded in the accounting system of BXP as owed by APS for sale of Simix stock. Following the processing of the credit note to ETT and re-invoice to APS, KPMG formed the view that it no longer required a confirmation of the $5.4 million recorded in the accounting system of BXP as owed by ETT to BXP, as confirmation from APS of the entire debt of $11.34 million would be sufficient evidence of the assignment.
54. Accordingly KPMG as part of their half-year review of BXP's accounts for the period ending 31 December 2007 required a confirmation from APS of this debt.[61].
[61]H00070143 Szentirmay para 77
55. On 19 February 2008 Slattery requested that Couper obtain confirmation of the debt from APS and he followed up that request with a further email on 24 February 2008.[62]
[62]H00063594
56. On 28 February 2008 Ridley of CCH emailed KPMG and Couper a copy of a signed confirmation letter from CCH.[63] However, although the letter stated that APS would make payments to BXP, the letter was unclear as to whether APS’ liability to BXP would be extinguished in relation to the payments or alternatively whether CCH was simply providing a finance facility to BXP
[63]H00063494
57. At the BXP Audit Committee meeting of 29 February 2008, KPMG asked Slattery to ensure that a confirmation be sent to CCH/APS “outlining the fact that payment via the Bill Express Payments entity would not create any liabilities for Bill Express”.[64]
[64] H00074264
58. On or about 6 March 2008, a payment of approximately USD$2 million was received from CCH, via Bill Express Payments. Slattery, advised various members of the BXP Audit Committee of this by email.[65] However, APS made no subsequent payments.
[65]H00074263
59. On 29 February 2008, the financial statements of BXP for the half-year ended 31 December 2007 were approved. The financial statements showed a net loss before tax (“NLBT”) for the half-year of $3.041 million for the BXP consolidated entities.[66]
[66]M00600609, M00600615 Slattery Para 72
60. Without the recorded profit on the sale of Simix stock of $3.525 million, the loss for the half-year would have been more than double than that recorded for the BXP consolidated entities for the period, amounting to a loss of $6,566,000.[67]
[67]M00600615 Slattery Para 74
II.OFFENCE RELATING TO ASIC EXAMINATIONS
Charge 4: Giving information that was false or misleading in a material particular in the course of an examination
Background
a)ASIC's investigation into the trading of BXP shares
61. On 21 May 2008, ASIC commenced an investigation ("the investigation") in relation to suspected contraventions of sections 1041A (market manipulation), 1041B (false trading and market rigging – creating a false appearance of active trading), and 1041C (false trading and market rigging – artificially maintain trading price) of the Corporations Act in relation to trading in BXP shares.
62. As noted, BXP was a publicly listed company and its ordinary securities were traded on the ASX.[68] BXP shares were allocated the unique ASX code "BXP".
[68]023219810 - BXP Limited Historical Company Extract
63. The parent company of BXP was on Q Group Limited and both companies operated from the same premises.[69]
[69]023219811 – On Q Group Limited Historical Company Extract; 023219810 - BXP Limited Historical Company Extract
64. At all relevant times, Couper was the Chief Financial Officer of OnQ. Ian Christiansen was the Chief Executive Officer and Director of BXP, and Harold Christiansen was a Director of BXP, and Chief Executive Officer of OnQ.[70]
[70]023219816 - On Q Group Limited Annual Report for the year ended 30 June 2006, and 023219817 – On Q Group Limited Annual Report for the year ended 30 June 2007
65. Sandro Di Donato was the sole director of Technology Business Systems Pty Ltd ("TBS")[71]. TBS provided services to BXP, which included the provision of administration, payroll, call centre and banking services.[72] As part of this service agreement, TBS operated a bank account which both BXP and OnQ shared - St. George Business Cheque Account number 333-030 700352795 ("the TBS Account").[73]
[71]023219813 – Technology Business Systems Pty Ltd Historical Company Extract
[72]M01352355 – Statement of Sandro Di Donato
[73]M01409464 – Statement of Mark Allingham, St George Bank Limited; M01352355 – Statement of Sandro Di Donato
66. ASIC's inquiries in the course of the investigation identified the following:
a.) Couper was the Chief Financial Officer of OnQ[74] and operated as the quasi Chief Financial Officer of BXP;
[74]023219816 - On Q Group Limited Annual Report for the year ended 30 June 2006, and 023219817 – On Q Group Limited Annual Report for the year ended 30 June 2007
b.) As such, Couper had authority to direct certain staff (including but not limited to Tracey Wegener ("Wegener") Michelle Creighton ("Creighton") Tania Bianchin ("Bianchin")) to make payments from the funds held in the TBS Account.[75]
[75]M01352356 – Statement of Tracey Wegener; Schedule D – Email Schedule attached to Statement of Nathan Grogan
c.) 3D Salesforce Pty Ltd ("3D Salesforce") was identified as holding a share trading account with Macquarie Equities Limited ("MEL") in the company's name, account number 2638688 ("the MEL 3D Salesforce trading account");
d.) 3D Salesforce operated from the same premises as OnQ and BXP;[76]
[76]023219812 - 3D Salesforce Pty Ltd Historical Company Extract
the MEL 3D Salesforce trading account had been engaged in trading in BXP shares;
e.) Enzo Di Donato ("Di Donato") was the sole director, secretary and shareholder of 3D Salesforce Pty Ltd; [77]
[77]023219812 – 3D Salesforce Pty Ltd Historical Company Extract
f.)
MEL's records indicated that Di Donato is recorded as the sole authority for the MEL 3D Salesforce trading account;[78]
[78]M01377407 – Statement of Brad Veale
Winwood Mac Productions Pty Ltd ("Winwood Mac") was identified as holding a share trading account with MEL in the company's name, account number 2628058 (“the MEL Winwood Mac trading account”);[79]
[79]M01377407 – Statement of Brad Veale
g.) the MEL Winwood Mac trading account had been engaged in trading in BXP shares;
h.) Ian Winwood McKenzie ("McKenzie") is the sole director, secretary and shareholder of Winwood Mac;[80]
[80]023219815 – Winwood Mac Productions Pty Ltd Historical Company Extract
i.) MEL's records indicated that McKenzie is recorded as the sole authority for the MEL Winwood Mac trading account;[81]
[81]M01377407 – Statement of Brad Veale
j.) McKenzie was also identified as holding a share trading account with Macquarie Equities Limited in his own name, account no 2482050 (“the MEL McKenzie trading account”);
k.) the MEL McKenzie trading account had been engaged in trading in BXP shares;
l.) MEL's records indicated that McKenzie is also recorded as the sole authority for the MEL McKenzie trading account
Anthony ("Eastwell") was identified as holding a share trading account with MEL , account number 2777512 ("the MEL Eastwell trading account");[82]
[82]M01377407 – Statement of Brad Veale
m.) the MEL Eastwell trading account had been engaged in trading in BXP shares;
n.) MEL records indicated that Eastwell is recorded as the sole authority for the MEL Eastwell trading account;
o.) Newton Chan ("Chan") was the nominated client adviser for his personal share trading account, the MEL 3D Salesforce trading account, the MEL Winwood Mac trading account, the MEL McKenzie trading account and the MEL Eastwell trading account (collectively, "the relevant accounts");[83] and
[83]M01377407 – Statement of Brad Veale; M01377456 – Statement of Ian Winwood McKenzie
p.) Chan had been engaged in trading in BXP shares on his personal MEL share trading account.
b)The Notice
67.On 12 June 2008 and 13 March 2009, ASIC served Notices on Couper under section 19(2) of the Australian Securities & Investment Commission Act 2001 ("the Notice") requiring him to attend for examination ("the s19 examinations") in relation to the investigation.[84]
[84]M01259392, and M00849669 – Notices under s19 ASIC Act served on Couper
68.Couper was a person who could provide information relevant to the matters ASIC was investigating to assist in the investigation because:
OnQ was the parent entity of BXP;
a.)Couper was the Chief Financial Officer of OnQ;
b.)OnQ was BXP's major shareholder (OnQ held 150,000,000 BXP securities);[85]
[85]M01048961 – Bill Express Limited Annual Report 2006/2007 at page 118
c.)Couper had authority to direct payments be made from the TBS Account;[86]
[86]M00930793 – Transcript of s19 examination of Peter Couper 20/06/2009 at page 31; M01352356 – Statement of Tracey Wegener at paragraph 16
e.)Utilising 149,500,000 of these BXP securities as collateral, the directors of OnQ had entered into three separate margin loan arrangements with Chimaera Capital Limited, Opes Prime Stockbroking Limited, and Tricom Securities Lending & ShortInvest respectively. The total funds provided to OnQ across the three margin loans was approximately $9.3m;[87] and
[87]023219816 - OnQ Annual Financial Report for the year ended 30 June 2006 at page 54; 023219817 - OnQ Annual Financial Report for the year ended 30 June 2007 at page 51
f.)BXP and OnQ shared the TBS Account[88] and Couper had authority to direct certain staff to make payments from the funds in the TBS Account.[89]
[88]M01409464 – Statement of Mark Allingham, St George Bank Limited; M01352355 – Statement of Sandro Di Donato
[89]M01352356 – Statement of Tracey Wegener; Schedule D – Email Schedule attached to Statement of Nathan Grogan
c)The s19 examinations
69.On 20 June 2008, 26 March 2009, and 30 March 2009 Couper, accompanied by his solicitor George Morgan, attended the s19 examinations at ASIC's offices 120 Collins Street, Melbourne.[90] The purpose of the examinations was to obtain information in relation to the investigation.
[90]M00930793, M01479597, M01479598 – Signed transcripts of examination
70. During the course of the s19 examination on 20 June 2008 Couper provided the following responses, among others, when answering questions relating to:
· people communicating with him as to purchases of BXP shares;
· providing funding for BXP shares; and
· the providing of instructions to Chan or any other MEL staff to enter BIDS onto the market for BXP shares.
Responses to questions relating to communications as to purchases of BXP shares
71.During the course of the s19 examination on 20 June 2008 Couper provided the following responses, among others, when answering questions in relation to people communicating with him as to purchases of BXP shares.
| a.) Question: Does anyone communicate with you in relation to their purchases of Bill Express shares? Answer: Privilege. No b.) Question: Does anyone communicate with you specifically about their purchases of Bill Express shares? Answer: Privilege. Quite a few of those people I know who have got shares in Bill Express and On Q. Question: Do they report back when they purchased shares? Answer: Privilege. No, no. Privilege. I am aware because I do see the Computershare share listing. c.) Question: Does anyone in that line, just for clarity, report to you or advise you of shares they may have purchased in a company name? |
72.Analysis of email records, telephone records and the evidence of Chan and others indicates that this information provided by Couper is false or misleading. For the period 15 June 2006 to 27 March 2008 Couper received a number of email notifications from both Chan and Di Donato of their respective BXP share purchases. In these emails Chan advised Couper of BXP shares purchased on his personal account and Di Donato advised Couper of BXP shares purchased on the MEL 3D Salesforce trading account. Many of these emails also requested funding for the share purchases of which Couper was being notified, outlined below.
Responses to questions relating to providing funding for BXP shares
73. During the course of the s19 examination on 20 June 2008 Couper provided the following response when answering a question in relation to providing funding for BXP shares.
a.)Question: And do you have any involvement whatsoever in funding of other people or other parties purchases of Bill Express shares?
Answer: Privilege. No
74. Analysis of email records, financial records, and evidence of Chan and other MEL employees indicates that this information provided by Couper was false or misleading. Couper had the following involvement in the funding of BXP share purchases:
i.Funding BXP purchases on the Chan account;
ii.Funding BXP purchases on the 3D Salesforce account; and
iii.Was involved in the use of funds acquired from the sale of BXP shares and rectifying amounts that were dishonoured.
i. Couper's role in funding Chan's BXP purchases
75. Between 14 June 2006 and 3 July 2006 Chan purchased BXP shares on his account and Couper arranged funding for each purchase. There are 5 emails from Chan to Couper in which Chan communicates his purchases of BXP shares and requests Couper transfer funds to his personal bank account to pay for these purchases.[91]
[91]M00507441, M00507440, M01352241, M01048626, M00507446, M00507451 – Emails from Chan to Couper; M01479057 – Statement of Newton Chan
76. Chan confirms Couper arranged funding for all of his purchases of BXP shares.[92]
[92]M01479057 – Statement of Newton Chan
77. On occasions in this period Chan was not in his office at the end of the trading day and was therefore unable to email details of his BXP purchases to Couper. On these occasions Chan instructed his MEL colleague Rani Walsh ("Walsh") to do so on his behalf. In these emails Walsh advises Couper as to the number of BXP shares Chan has purchased and the total cost. [93]
[93]M00390595 – Statement of Rani Walsh
78. After receiving these emails from Chan and Walsh Couper then arranged funding of Chan's BXP share purchases by directing accounts payable staff to transfer the precise amount needed to fund each purchase to Chan's bank account.
79. Based on the email evidence, the evidence of Chan[94] and Walsh,[95] and financial records[96] the arrangement by which Couper organised funding for Chan's purchases of BXP shares can be summarised as set out below:
[94]M01479057 – Statement of Newton Chan
[95]M00390595 – Statement of Rani Walsh
[96]M01354992 – Statement of Candice Best at page 22
i.Chan would purchase BXP shares during the day;
ii.Chan would then email Couper (or arrange for Walsh to do so) detailing the volume of BXP shares he purchased on that particular day and the dollar amount to be credited to Chan's personal bank account to pay for the shares; and
iii.Couper would in turn then email the relevant accounts payable staff and direct them to transfer this amount from the TBS Account to Chan's personal bank account.[97] Via the arrangement between Couper and Chan, between 14 June 2006 and 3 July 2006 Couper arranged a total of $525,805.72 to be transferred from the TBS Account into Chan's personal bank account to fund all of Chan's purchases of BXP shares.[98]
[97]M00507436, M00507438, M00507444, M01048708, M01048710, M01048446, M00507452, and M00507453 – Emails from Couper to Tracey Wegener referred to by Tracey Wegener in her statement (M01352356)
[98]M01354992 – Statement of Candice Best at page 22
ii.Couper's role in funding 3D Salesforce's BXP purchases
80. The system by which Couper managed the funding of 3D Salesforce's purchasing of BXP shares operated in a similar fashion to his arrangement with Chan. MEL would email Di Donato with trade confirmations ("contract notes") detailing the volume of BXP shares purchased and the total cost payable to MEL for the purchase, and Di Donato would send on these details to Couper in one of two ways:
i.By emailing Couper a typed summary of the contract note including the volume of BXP shares purchased, the price per share, the settlement date, and the total consideration required to pay for the share purchase, or
ii.By attaching the actual image of the contract note to the email enabling Couper to see the volume of BXP shares purchased, the price per share, the settlement date, and the total payment required for the shares purchased. This arrangement commenced from the first purchase of BXP shares on the MEL 3D Salesforce trading account on 12 July 2006 to the accounts final purchase on 27 March 2008.
iii.Monies realised from sales of BXP shares and dishonours - Couper's knowledge of these events and involvement in the related funds
81. Couper was also involved in the sales of BXP shares by Chan and 3D Salesforce and the re-use of the funds realised to fund further BXP share purchases on the MEL 3D Salesforce trading account.[99]
[99] M01255431, in Schedule D of Statement of Nathan Grogan
82. On 27 November 2006 Chan arranged for the MEL 3D Salesforce Trading account and the MEL Winwood Mac trading account to sell parcels of BXP shares by way of off-market transfer. The sale of the BXP shares on the MEL 3D Salesforce trading account realised $697,393.72. On 29 November 2006, a short time after three telephone conversations between Couper and Chan lasting a total of 2 minutes and 54 seconds, Couper provided details of how to distribute these funds. [100]
[100]M01255431 – Email from Couper to Chan; M01354992 – Statement of Candice Best
83. In January 2008 Couper had conversations with Di Donato regarding dishonoured trades that occurred when funds had inadvertently been paid to the incorrect 3D Salesforce bank account.[101]
[101]M01353010 – Series of emails between Di Donato and Couper in Schedule D of Nathan Grogan's statement M01255431
84. In March 2008, Couper had conversations with Di Donato regarding the funding of a sale of shares by way of a crossing to an an overseas-based company Ipay Express Pte Ltd ("Ipay Express").[102]
[102] Emails M01353018, M01353020 - 21, M01353025 - 27 in Schedule D of statement of Nathan Grogan M01351097
85. Consistent with the established process of the funding arrangement, between Couper and Di Donato, between 15 July 2006 and 27 March 2008 Couper arranged total funding of $2,136,190.00 to pay for 3D Salesforce’s purchases of BXP shares.[103]
[103]M01354992 –Statement of Candice Best at page 27
Responses to questions about providing instructions to Newton Chan and MEL staff
86. During the course of the s19 examination on 26 March 2009 Couper provided the following responses, among others, when answering questions about the providing of instructions to Chan or any other MEL staff to enter BIDS onto the market for BXP shares.
a.)Question: Did you ever communicate with Newton Chan, by any means, about the manner of purchasing Bill Express shares --- ?
Answer: Privilege. No
Question: -- by any entity?
Answer: Privilege. Nob.)Question: Did you ever discuss with Newton Chan or anyone else at Macquarie about purchasing shares at a particular price?
Answer: Privilege. No
c.)Question: Did you ever provide instructions to Newton Chan or anyone else at Macquarie to place bids in Bill Express shares at a particular price?
Answer: Privilege. No
87. Telephone records, evidence provided by Chan and other MEL staff, and analysis of emails indicates this information provided by Couper is false or misleading.
88. Analysis of call charge records and reverse call charge records of telephones belonging to and used by Couper and several other people including Chan, McKenzie, Anthony Eastwell, and Di Donato indicates the following:
a. Couper with Ian Christiansen were the parties in telephone contact with Chan during and proximal to Chan arranging for orders to be entered for BXP shares on the account in both Chan's and his mother’s name, the MEL 3D Salesforce trading account, the MEL Winwood Mac trading account, the MEL McKenzie trading account, and the MEL Eastwell account. The majority of orders placed during and a short time after telephone calls from Couper to Chan increased the share price of BXP.[104]
[104] Schedule B and B2 to the Statement of Nathan Grogan
b. The telephone records indicate that Di Donato, the only party authorised to place orders on the MEL 3D Salesforce trading account, at no time contacted Chan by telephone to place orders.
c. In relation to the other accounts both McKenzie and Eastwell have confirmed they never placed orders with Chan or provided any instruction to him in relation to their respective MEL trading accounts.[105]
[105]M01048226 – Statement of Anthony Eastwell, M01377456 – Statement of Ian Winwood McKenzie
89. Further, Chan confirms Couper and Christiansen gave all trading instructions on his personal account and the MEL 3D Salesforce trading account.[106]
[106]M01479057 - Statement of Newton Chan
90. In January 2008 Chan went on an overseas trip, and advised another colleague MEL client advisor Matthew Cryer ("Cryer") that Couper was the contact for the MEL 3D Salesforce trading account. Whilst Chan was on holidays, Couper provided trading instructions to both Cryer and Jessica Makin of MEL to place orders for BXP shares on the 3D Salesforce account.[107]
[107]M01352096 – Statement of Matthew Cryer, M01353150 – Statement of Jessica Makin
Subsequent section 19 examinations
91. On 26 March 2008 Couper was again examined under s19 ASIC Act and admitted he had some involvement in processing funds for the relevant accounts. The examination was adjourned early as Couper advised he had a funeral to attend.
92. On 30 March 2008 the examination was reconvened during which Couper answered questions put to him by his solicitor Mr Morgan only, at the conclusion of which Morgan requested ASIC adjourn the examination so he could speak to Couper in private. A short time later Couper and Morgan returned to the examination room and Couper advised he was feeling ill and as a result the examination was adjourned. ASIC did not ask Couper any questions at this examination.
93. Couper was offered the opportunity of participating in a record of interview in relation to his s19 examination responses. He advised ASIC (via Morgan) that he would consider on the basis that ASIC provide him certain documents in advance. ASIC advised this would not occur and Couper has not been interviewed.
III. CHARGE AND COMMITTAL
94. Charges were issued in relation to the section 64 charge on 25 August 2010 and in relation to the “Simix stock” transactions on 31 August 2010.
95. On 8 September 2011, after cross examination of eleven witnesses at a committal hearing in the Magistrates’ Court of Victoria at Melbourne, Couper pleaded guilty to the charges as outlined in this Summary.
Commonwealth Director of Public Prosecutions
26 March 2012
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