Director of Public Prosecutions v Cologna
[2013] VCC 2005
•20 November 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CRIMINAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No.
| THE QUEEN |
| v |
| DAVID ANTHONY COLOGNA |
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JUDGE: | HER HONOUR JUDGE HOGAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 November 2013 | |
DATE OF SENTENCE: | 20 November 2013 | |
CASE MAY BE CITED AS: | DPP v Cologna | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 2005 | |
REASONS FOR SENTENCE
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Subject: Five charges of falsification of books contrary to s1307(1) Corporations Act 2001 (Cth) – defendant was subordinate offender and took direction from sole director of company – no personal gain – co-operation with investigating authorities – early and remorseful pleas of guilty – undertaking pursuant to s21E Crimes Act (Cth) to co-operate with law enforcement agencies in the future – no prior or subsequent offending – good character – good prospects of rehabilitation – total effective sentence 12 months to be released on recognisance release order in the sum of $2,000 to be of good behaviour for two years – discounts pursuant to s6AAA Sentencing Act 1991 (Vic) and s21E Crimes Act 1914 (Cth).
Catchwords:
Legislation Cited:
Cases Cited:
Sentence:
APPEARANCES: | Counsel | Solicitors |
| For the Crown | Ms D Middleton | Commonwealth Director of Public Prosecutions |
| For the Accused | Mr N Papas SC | Gabriel Kuek, Access Law |
HER HONOUR:
1 David Anthony Cologna, you have pleaded guilty to five charges of falsification of books contrary to s1307(1) of the Corporations Act 2001 (Cth). Each of these charges carries a maximum penalty of two years’ imprisonment and/or 100 penalty units.
2 The circumstances of your offending are set out in detail in the summary of Crown opening (Exhibit “A”).
3 At the time of offending you were employed by S Central Pty Ltd, a company operated by Peter Mavridis. S Central Pty Ltd had five related companies. The six companies which comprised the S Central group of companies were managed and controlled by Mr Mavridis. He was the sole director of each company. You were employed in an assistant financial role which bore the title of “financial controller”.
4 Each of the companies in the S Central group had a Debtor Finance Facility (DFF) with the National Australia Bank Limited (NAB). This enabled the companies to sell trade debts owed to it by customers to NAB and receive an advance of 80 per cent of the value of those debts.
5 Your offending occurred over a seven and a half month period between 15 January 2009 and 31 August 2009. Under the direction of Mr Mavridis, you falsified invoices which were submitted to NAB. The details which were falsified included altering the name of the debtor, inflating the amounts on the invoices by tens of thousands of dollars, and changing dates so as to represent that the debt was due in less than 90 days. You falsified a total of 23 invoices for the purpose of obtaining credit for the S Central group of companies. The total value of the invoices was $4,834,513.38. Of this figure, $2,262,142.93 comprised fictitious debts. The Crown concedes that the latter figure does not represent the actual loss to NAB. This is because the S Central group of companies had a total DFF of $8 million with NAB, and the amount of that fluctuated from month to month. Thus, the Crown is not able to quantify the direct amount of the loss to the bank associated with your offending. The S Central group of companies ceased to trade in November 2009 when a liquidator was appointed to manage their affairs.
6 You are presently aged 37 years, having been born on 26 September 1976. You come before the court with no prior convictions. Nor is there any subsequent offending alleged against you.
7 In a plea on your behalf, Mr Papas told the court that you grew up in a close family. After completing your VCE at Maryland Secondary College, you completed an Associate Diploma in Accounting at Victoria University. For a time you travelled around Australia and worked at various jobs. Your longest period of employment prior to commencing with S Central involved you working for a lighting manufacturing company.
8 Mr Papas told the court that, when you applied for a sales job in 2005, you were surprised and delighted to be given an accounting role, as you had minimal accounting experience. Initially, you were employed to deal with accounts payable and receivable. Mr Papas stated that you saw this as an opportunity to learn something about accounting and looked up to Mr Mavridis, who seemed to you to be very knowledgeable and powerful. You apparently got on well with him and, within a matter of months, he appointed you to a job which he called “financial controller”. It would appear, that in practice, you simply did what Mr Mavridis told you to do and had little understanding of the overall accounts system which was operating, particularly as the number of companies associated with S Central increased.
9 In the Record of Interview with ASIC investigators conducted on 7 March 2011, you described that as your role expanded the chaos expanded.[1] You stated that it was “a very messy time” and you had no real idea of your defined role and very little guidance from Mr Mavridis. You described him as being very autocratic and stated that you had no autonomy and did what he told you to do in the way that he showed you.[2]
[1]T 11
[2]T 14-15
10 Mr Mavridis controlled the bank accounts and you were never a signatory. You explained in the interview that Mr Mavridis signed off on all reconciliations[3] and stated:
“It was very difficult to understand the systems, to understand who could give me what to submit, who could help me with the reconciliations. At the end of the day Peter was instructing me to make it – ‘just do it’.”[4]
[3]T 25
[4]T 27
11 You stated that, in your experience, there had never been a full reconciliation with every ledger item and “Peter controlled the S Central ledger. I never really was allowed to have much to say with the balance sheet…”. You told the interviewing investigators that Mr Mavridis had led you to understand that it was just a loan facility for $8 million and not to worry about the debtor finance side of it. You stated, “I didn’t have the banking knowledge or understanding really of the intricacies of it.”[5]
[5]T 28
12 Mr Cologna, although prior to commencing work with S Central you were not very highly qualified in accountancy and had little experience, it should have been abundantly clear to you that falsifying invoices in the way that you did was a dishonest activity designed to deceive NAB in order for the S Central group to obtain a financial benefit. As you stated in your record of interview:
“I know there were things that went on that weren’t right. I know things that, you know, he made happen that weren’t right but again, the explanations were ‘don’t worry, it’s all good. The NAB or – the NAB’s on our side, the banks are on our side’, you know, and that was it.”[6]
[6]T 18
13 What you did was to close a blind eye to something that you knew lacked proprietary. It is difficult to understand how someone who prides themselves on being a moral person could do that. Your counsel stated that, to this day, you are unable to explain it to yourself, save to say that the personality and charisma of Mr Mavridis, the trust he had reposed in you, and the pressure that he put upon you to “just do it” overwhelmed your better judgment.
14 The amounts of money involved and the fact that there were multiple transactions spread over a period of seven and a half months, renders the offending of such a grave nature, that emphasis must be placed upon general deterrence and denunciation of your conduct. A court must impose a sentence that is of a severity appropriate in all the circumstances of the offending. In all of the circumstances, including the matters which a court must take into account pursuant to s16A of the Crimes Act 1914, and having considered all other available sentences, I have formed the view that there is no sentence that is appropriate other than a term of imprisonment. However, I consider that there are multiple factors in your favour which make it just and desirable for that sentence to be wholly suspended. They are as follows.
(i)It is conceded by the Crown that your role was a subordinate one and that, at all relevant times, you acted under the direction of Mr Mavridis. He was some years older than you, a man in his 40s, and I accept that you, somewhat naively, looked up to him as someone who was powerful, successful and knowledgeable. I also accept that he had something of an overbearing personality and a dictatorial management style.
(ii)Although your starting salary of $40,000 increased to $70,000 when you were appointed to the role of so-called “financial controller”, this had taken place some years before your offending. There is no suggestion that you received any financial benefit, personally, from your wrongdoing.
(iii)From the time that an investigation into the irregular conduct of the S Central group of companies began, you co-operated. The investigation initially involved an audit being conducted by Deloitte, then there was a field interview with yourself conducted by ASIC investigators on 24 February 2011. In my view, your naivety is manifested in that interview in which you express your shock and enquire as to whether you could personally be in trouble and say that you do not have the money to spend on a lawyer but are happy to come in for an interview. Subsequently, you made yourself available for a lengthy interview which was conducted on 7 March 2011. This interview took approximately two hours and you gave full and frank answers to all questions put to you.
(iv)You were initially charged with some offences in November 2012. By this stage, you already had offered to assist the ASIC investigation into the affairs of the S Central group of companies. Between March and August 2013, you reviewed a large number of documents which ASIC sent to you. These comprised a pile of documents approximately two inches in height and you examined the documents and provided ASIC with a series of notes describing the aspects of the documents that were falsified. You attended upon ASIC’s investigators on five occasions in order to draft a comprehensive statement. In addition, on two occasions you responded to a series of questions which were sent by email to you from the senior investigator, Mr Colin Moffitt. You subsequently attended upon ASIC with your solicitor and made a very detailed statement comprising 22 pages on 26 August 2013. This statement set out, in elaborate detail, the actual methodology employed by S Central in relation to the invoices, with particular reference to specific invoices. It is plain from Mr Moffit’s letter to the court, dated 31 October 2013 (Exhibit “C”), that the assistance given to ASIC has involved considerable time and effort on your part. Mr Moffit’s letter makes it plain that the case which ASIC has mounted against Mr Mavridis relies substantially on the information which you have provided to it. Moreover, by identifying a significant number of intercompany invoices that had been submitted to NAB under false company names, you provided ASIC with the basis for recommending a number of additional charges against Mr Mavridis in relation to matters hitherto unknown to ASIC. The considerable assistance given by you to investigators to date is clearly something which is very much in your favour and I take it into account, along with other relevant matters, pursuant to s16A of the Crimes Act 1914 (Cth).
(v)Following a period of negotiation, the subject charges were formally filed on 31 July 2013 and you entered a plea of guilty on that date, which originally had been the date for a contested committal hearing. The matter proceeded by way of straight hand-up brief. I accept that your pleas of guilty are early pleas and that they are also remorseful pleas. In addition, you have facilitated the course of justice and spared the time and cost of a potentially lengthy trial. Your remorse was evident from an early stage when you agreed to openly cooperate with investigators. It is apparent from a report from Mr Ian MacKinnon, forensic psychologist, dated 16 November 2013 (Exhibit “I), that you are deeply ashamed of your conduct and have suffered from significant reactive depression.
(vi)Prior to the plea hearing you indicated to the Crown that you were prepared to cooperate with law enforcement agencies pursuant to s21E of the Crimes Act (Cth). In particular, you indicated that you were willing to give evidence on behalf of the Crown against Mr Mavridis in accordance with your statement dated 26 August 2013, as well as to provide any further necessary statement or confer with law enforcement agencies as required. At the plea hearing you formally entered into an undertaking pursuant to s21E of the Crimes Act in these respects (Exhibit “B”). In my view, you are entitled to a significant discount on the sentence which would otherwise have been imposed by reason of this undertaking. The prosecutor, Ms Middleton, acknowledged that, regardless of what course the proceedings take against Mr Mavridis, your co-operation has been genuine and of considerable assistance. Ms Middleton stated that your assistance was of high utility as you are the only person in the S Central company structure who could give evidence of the alterations made to invoices submitted to NAB. Your counsel mentioned that you are somewhat afraid of repercussions from Mr Mavridis, whom the Crown stated had made a threat to another witness. In the light of this, a Suppression Order was made, by consent, in relation to your residential and work addresses.
(vii)I accept that, prior to this offending, you were a person of good character. Evidence was given at the plea hearing by the Executive Director of the company which has employed you as a financial controller for the past four years. This evidence took the form of a written reference, dated 8 November 2013 (Exhibit “6”), as well as oral evidence. This witness clearly regards you very highly as he took time to come to court on your behalf, even though he is the chief executive of a company which employs approximately 120 people. He made it plain that when you were first interviewed for the position with the company, you drew to their attention that there had been an issue with your former employment which may impact upon their decision as to whether to employ you. He stated that he did not know much of the detail at that stage and, of course, then you had not been charged with any offences. His reference states that he has always found you to be exceptionally ethical and moral and extremely diligent, reliable and trustworthy. The confidence which he has in you is reflected in the fact that you are not only the financial controller but also company secretary. He stated that in recent weeks, preparatory to him coming to court to give evidence, he had become more fully acquainted with the detail of your falsification of invoices and stated that he was shocked because this was inconsistent with the person whom he has seen working for him for the past four years. He confirmed that you had expressed remorse to him and been in tears while doing so.
There was also a written reference from another executive of the company, dated 7 November 2013 (Exhibit “5”), who described you as “respectful, loyal, dedicated, diligent, competent and having the utmost integrity”. He said that the esteem in which you were held is indicated by the fact that the Board had agreed for you to become a shareholder in the company last year.
Character references were also tendered from your wife (Exhibit “2”), your father (Exhibit “3”) and your sister (Exhibit “4”). Each of these people were in court to support you. In their references they spoke of you as being a respectful, loyal and caring person. They described you as being deeply ashamed and remorseful for what you had done and stated that your offending was not in keeping with your upbringing and beliefs.
Your wife, who has been your partner for over 10 years, stated in her letter that you were very excited and enthusiastic when you started at S Central and felt that you were “getting somewhere in life” as you went interstate, attended corporate dinners and were part of million dollar acquisitions. She said you believed in Peter Mavridis and thought that he knew what he was doing because he was so successful. She described how, in the last few months at S Central before the companies went into liquidation, you were extremely stressed and worked long hours. She stated that, in the years that have passed since that time, you had punished yourself and become unsociable, depressed, overweight and suffered sleeping difficulties, regular headaches and self-loathing for what you had done.
Your wife’s evidence confirms the content of the psychological report from Mr MacKinnon. Mr MacKinnon took a history that your weight over the last four years had increased from 90 to 122 kilograms and that you were smoking approximately 30 cigarettes (“rollies”) per day. He stated that you were so ashamed of what you had done that you had not yet been able to tell your mother and were worried about the impact that your depression was having upon your relationship with your wife and others.
15 Mr Cologna, I am in no doubt from all the material that has been placed before me, that you now fully appreciate the extent of your wrongdoing, which you have acknowledged and for which you have expressed contrition. I am satisfied that this offending occurred in the context of you being inexperienced in the world of accounting and finance and somewhat dazzled by the power and success of Mr Mavridis who was apparently both charismatic and autocratic. I accept that your serious lack of judgment in committing these offences was made out of a misguided sense of loyalty to him and that you personally derived no benefit from your wrongdoing.
16 It would appear that the financial dealings of S Central were chaotic and you simply did what you were directed to do by Mr Mavridis on the assumption that he was backed by a company Board full of older and experienced people who, like you, seemed to be captivated by Mr Mavridis. This is the way you have described your offending in a thoughtful and frank letter to the court (Exhibit “1”).
17 I have expressed that your offending warrants a term of imprisonment, particularly to denounce such conduct and deter others who may engage in acts of dishonest, wilful blindness. However, I accept that you have done all that you can to try to atone for your wrongdoing by way of your past assistance to ASIC, your undertaking to give future assistance if required in the prosecution of Mr Mavridis and your pleas of guilty. Although the repeated nature of the offending over a seven and a half month period, would generally call for emphasis to be placed upon specific deterrence, in your case, I consider that that emphasis should be minimal in the light of the circumstances of the offending and your exemplary behaviour since, not only by assisting law enforcement authorities, but by behaving in a responsible, diligent and trustworthy way in your accounting role with your present employer over the last four years.
18 I take into account that you have felt your wrongdoing keenly and suffered depression and anxiety and that, pursuant to s206B of the Corporations Act, a conviction for these offences will disqualify you from holding a managing role in a company, such as company secretary, for a period of some years.
19 The evidence as to your remorse and good character is appropriately described as very strong and, in all of the circumstances, I consider that you are well on the way to being rehabilitated and unlikely to offend again.
20 In sentencing you I take into account that Charges 1, 3 and 5 are rolled up charges. Charge 1 involved multiple invoices for a total amount of $182,383.90. Charge 3 involved multiple invoices for a total amount of $1,371,596 and Charge 5 involved multiple invoices totalling $619,866.47. Charge 2 involved one invoice for $43,104.98 and Charge 4 involved one invoice for $45,191.50.
21 On Charge 1, you are convicted and sentenced to be imprisoned for a period of four months.
22 On Charge 2, you are convicted and sentenced to be imprisoned for a period of two months.
23 On Charge 3, you are convicted and sentenced to be imprisoned for a period of 12 months.
24 On Charge 4, you are convicted and sentenced to be imprisoned for a period of two months.
25 On Charge 5, you are convicted and sentenced to be imprisoned for a period of seven months.
26 Charge 3 is the base sentence of 12 months. I direct that all other sentences be served concurrently with that sentence and with each other.
27 The total effective sentence is, thus, 12 months’ imprisonment. I direct that such sentence, and each sentence on the individual charges, be commenced today, 20 November 2013. Pursuant to s20(1)(b) of the Crimes Act (Cth), I order that you be released immediately upon you providing recognisance in the sum of $2,000 to be of good behaviour for a period of two years.
28 Mr Cologna, this Recognisance Release Order is a term of suspended imprisonment. You do not have to pay the sum of $2,000 now, but you will have a term of imprisonment hanging over your head for a period of two years. In the event that you breach this suspended sentence by committing another offence punishable by imprisonment, then you will be brought back before the court and would most likely have to pay the $2,000 which is like a bond, and you may well be ordered to serve an actual sentence of imprisonment. If you remain of good behaviour during the period of two years, then your sentence will have been completed, although you will have convictions for the offences to which you have pleaded guilty. Do you understand that?
29 Are you prepared to enter into a recognisance release order which requires your signature?
30 The aggregate head sentence I would have imposed, but for your undertaking to co-operate pursuant to s21E of the Crimes Act (Cth) and your pleas of guilty, is two years and six months’ imprisonment, commencing today, with release pursuant to s20(1)(b) of the Crimes Act (Cth), after serving one year and three months’ imprisonment commencing from today, upon you having given security by recognisance of $2,000 to be of good behaviour for a period of two years commencing today.
31 The combined reduction in sentence which I have given to you because of your undertaking to co-operate and your pleas of guilty is one year and six months from the total effective sentence. In addition, the period which you would have been required to serve in prison before being released under s20(1)(b) of the Crimes Act (Cth) has been reduced by one year. The latter factor is demonstrated by the fact that I am releasing you immediately, today.
32 But for your undertaking to co-operate pursuant to s.21E of the Crimes Act (Cth), I would have added nine months to the total effective sentence of 12 months’ imprisonment and set six months as the period of imprisonment to be served before you would be released pursuant to s20(1)(b). Thus, the sentence which I would have imposed, but for the reduction given for your undertaking to co-operate, would have been one year and nine months’ imprisonment with you to be released pursuant to s20(1)(b) after you had served a period of imprisonment of six months commencing from today, upon you giving security by recognisance of $2,000 to be of good behaviour for a period of two years commencing today.
33 But for your pleas of guilty, I would have added nine months to the total effective sentence of 12 months and set a period of nine months’ imprisonment to be served before you would be released pursuant to s20(1)(b). This would have resulted in a sentence of one year and nine months’ imprisonment with you to be released after you had served nine months.
34 In summary:
· The undiscounted sentence would have been two years and six months’ imprisonment to be released after serving one year and three months.
· The discount for your s21E undertaking to co-operate is nine months from the head sentence and six months from the period which you would have been required to serve prior to you being released.
· The discount pursuant to s6AAA of the Sentencing Act 1991 for your pleas of guilty is nine months from the head sentence and nine months from the period which you would have been required to serve prior to being released.
· The total effective sentence imposed this day is 12 months’ imprisonment commencing today. You are to be released immediately upon a recognisance release order in the sum of $2,000 to be of good behaviour for a period of two years from today.
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