Director of Public Prosecutions v Jacobs

[2021] VCC 371

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

CRIMINAL DIVISION

Revised
Not Restricted
Suitable for Publication

Case No. CR-20-00342, CR-20-00343

DIRECTOR OF PUBLIC PROSECUTIONS

v

DAVID JACOBS

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JUDGE:	Her Honour Judge Hassan
WHERE HELD:	Melbourne
DATE OF HEARING:	7 September 2020 and 22 March 2021
DATE OF SENTENCE:	31 March 2021
CASE MAY BE CITED AS:	DPP v Jacobs
MEDIUM NEUTRAL CITATION:	[2021] VCC 371

REASONS FOR SENTENCE
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Subject:CRIMINAL LAW

Catchwords:              Sentence — theft — obtain property by deception — plea of guilty — early plea — full restitution — remorse — breach of trust — prior good character — physical health — age — mental health — depression — burden of imprisonment — low risk of reoffending — prospects of rehabilitation — parsimony — community correction order

Legislation Cited:      Sentencing Act 1991 (Vic)

Cases Cited:Director of Public Prosecutions (Vic) v Bulfin [1998] 4 VR 114; Director of Public Prosecutions (Vic) v Caulfield [2019] VSCA 131; Dyason v The Queen (2015) 251 A Crim R 366; Maddock v The Queen [2020] VSCA 271; R v Verdins (2007) 16 VR 269

Sentence:                  Community correction order of three years.

Section 6AAA declaration: three and a half years’ imprisonment with a non-parole period of two years.

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APPEARANCES:	Counsel	Solicitors
For the DPP	Mr M Cookson	Office of Public Prosecutions
For the Accused	Mr D Grace QC	Singer Law

HER HONOUR:

1David Jacobs, you have pleaded guilty to two charges of theft, for which the maximum penalty is 10 years’ imprisonment. You have also pleaded guilty to one charge of obtaining property by deception, for which the maximum penalty is 10 years’ imprisonment.

2You have no prior criminal history.

3Tendered on the plea as exhibit 1 was a ‘Summary of Prosecution Opening’ which sets out in some detail the facts and circumstance of your offending.

4In brief, the circumstances of your offending are as follows.

5You were a tax agent and accountant who operated as a sole practitioner based in Collins Street, Melbourne. You were a registered tax agent from October 2011 until 2014, when your registration was cancelled.

6Between May 2013 and November 2016, you stole large amounts of money from two of your longstanding clients. Your victims were Russell Cornehls and Alexis Alexander. Mr Cornehls had been a client of yours for approximately 15 years until your offending was uncovered in 2016. Mr Cornehls ran and operated a tennis coaching business called ‘Tennis in Stages’, which operated out of the Bulleen Tennis Club. Alexis Alexander had been a client of yours from 1984 until the offending was uncovered in 2016. Mr Alexander owns the business ‘Daidal Systems Software’.

7Mr Alexander is the victim of charge 1. Mr Alexander would provide you with cheques to forward to the Australian Taxation Office (‘ATO’) to settle his tax bills. Between 15 May 2013 and 29 September 2016, Mr Alexander provided you with $91,819.30 to pay the ATO. Of this money, only $34,916.13 was forwarded to the ATO. The balance of $56,903.17 you retained for your own purposes. You paid Mr Alexander’s cheques into your own business account. This occurred over the period of the offending and comprised 14 transactions as set out in Schedule A annexed to the prosecution opening, and this is charge 1 of theft.

8Mr Alexander was unaware that any theft had occurred until October 2016, when he received a call from the ATO. Mr Alexander was directed to the online ATO portal and then discovered that business activity statement (‘BAS’) payments had not been made since May 2013.

9Mr Alexander contacted you on 11 November 2016 and told you he required you to pay the money that you had stolen from him. Mr Alexander requested that you confirm with him by the close of business on Monday 14 November 2016 that you could commence repayments as of 8 December 2016.

10You responded by email on 16 November 2016, saying you would be willing to pay $1000 every fortnight from 8 November and would increase it to $1500 a fortnight from February onwards. A single payment of $1000 was made on 14 December 2016.

11Mr Alexander notified the bank of the theft and they were able to recover $10,000 from your account to pay the ATO a portion of the outstanding bills. Mr Alexander also had $15,643.22 in fines waived by the ATO on account of him being unaware that you were not a registered tax agent.

12Mr Cornehls had been your client since 1997. You prepared his business and personal tax returns, and those of his wife Vivienne. Like Mr Alexander, Mr Cornehls provided you with cheques to forward to the ATO. Between the dates of 13 February 2014 and 22 November 2016, instead of forwarding the cheques from Mr Cornehls to the ATO, you retained for yourself $165,630.55 over the course of 24 transactions, as set out in Schedule B annexed to the prosecution opening, and that is charge 2 on the indictment, a charge of theft.

13You would charge Mr Cornehls $250 for your services, payable to ‘David Jacobs & Associates’. The amounts were charged under the false pretence that you were carrying out your duties as a registered tax agent. Between the dates of 13 February 2014 and 1 August 2016, you obtained a total of $2,750 from Mr Cornehls over 11 transactions, set out in Schedule C annexed to the prosecution opening, and that is the basis of charge 3, which is obtaining property by deception.

14Mr Cornehls regularly requested documentation from you, such as statements and correspondence with the ATO, but you managed to consistently fob him off.

15In 2014, Mr Cornehls received a letter from the ATO informing him that his taxes had not been paid in some time and that immediate payment was required. Mr Cornehls thought that the letter must be a hoax, as he had always paid his taxes. Approximately one year later, Mr Cornehls received a further letter from the ATO and at this point realised the letters were genuine.

16He contacted you to demand an explanation. You denied any knowledge of the ATO request or the reasons behind it, but in any event, Mr Cornehls terminated your services.

17Towards the end of 2016, Mr Cornehls requested his new accountant bring him up to date with his tax situation. Mr Cornehls then learnt that you had not forwarded any of the cheques he had written as payments to the ATO for the previous seven years.

Investigation and Recorded Interview

18Initial enquiries with the ATO revealed that you commenced registration as a tax agent on 13 October 2011. Your registration as a tax agent was cancelled by the ATO on 5 May 2014 and was not renewed.

19Further enquiries with the ATO revealed that no tax returns pertaining to Russell Cornehls had been lodged with the ATO between 2012 and 2018. No tax returns pertaining to Vivienne Cornehls had been lodged with the ATO since 2011. Enquiries with Westpac Bank revealed that the funds provided to you were deposited into the account ‘Day, Jacobs & Associates’, usually within 24 hours of having been received by you. The statements revealed that funds were debited sporadically.

20You were interviewed by police on 14 June 2018 in relation to the Alexander offending and you made the following comments:

(a)   that Mr Alexander had been a client for many years;

(b)   that some of the money that was for the Tax Office did not go to the Tax Office, but went to your account;

(c)   that your registration as a tax agent was cancelled in 2016;

(d)   that you did pay some money back to Mr Alexander but were unable to continue payments as your business fell apart;

(e)   that you believed the amount of money taken was around $50,000;

(f)    that you were going to pay Mr Alexander $1500 a fortnight and that some payments went through;

(g)   that you heard nothing from Mr Alexander since then; and

(h)   that the reason you kept the money was your mounting personal debts and failing business.

21You were interviewed by the police on 12 December 2018 in relation to the offending in respect to Mr Cornehls and you made the following comments:

(a)   that Russell Cornehls had been a client of yours for 15 years;

(b)   that you had prepared the tax returns for individual and quarterly BAS for Russell and Vivienne Cornehls;

(c)   that in recent years, you had taken cheques that were payable to the ATO and banked them into your account;

(d)   that your original intention was to account for Mr Cornehls’ fluctuating income;

(e)   that you used the funds to pay your rent, bills and other expenses;

(f)    that your business ‘kept going downhill and then it became a vicious cycle where [you] kept retaining his cheques that were for the Tax Office’;

(g)   that you were deeply remorseful for having done it;

(h)   that the bank account you transferred the money into was named ‘Day, Jacobs & Associates’ at the Westpac Bank;

(i)    originally you requested the correct amount of payment from Russell Cornehls, but then later you ‘tweaked’ them;

(j)    that you estimated you took approximately $150,000 to $180,000 from Mr Cornehls, including your fees;

(k)   that you led Mr Cornehls to believe that you were a registered tax agent and were lodging the returns on his behalf;

(l)    that if Vivienne Cornehls’ tax returns were not forwarded to the ATO, that was an oversight, as she would not have earned much;

(m)     that the money ‘basically just went on paying my office and to some extent, personal bills. I was up to my neck in credit card debt’ and other expenses;

(n)   that you and your wife were ‘living beyond our means, not absolutely extravagantly but clearly living beyond our means’;

(o)   that you had made one payment of $200 to Mr Cornehls at that point;

(p)   you acknowledge that what you did was wrong and you wanted somehow to make it good;

(q)   that there were demands from the ATO to lodge returns, but you did not pass these on to Mr Cornehls;

(r)   that the reason that you did not pass the demands on was that it would cause the situation to ‘blow up’ before you could ‘fix it’ yourself; and

(s)   you said, ‘I’m obviously sorry for what I’ve done, I know it was wrong. I intend somehow eventually to fully repay Russell, but at the moment I have no assets. I’m being chased left, right and centre’.

22You made full and frank admissions to police. You have always indicated a preparedness to plead guilty and you entered a plea of guilty to the charges on the indictment on 7 September 2020. This is an early plea. It has utilitarian value in that it has saved the victims, the witnesses and the community the cost and trauma of a trial. This is of heightened value in the context of the COVID-19 pandemic, given the considerable difficulties and delays running jury trials. I also accept that your plea, in conjunction with your admissions to police, is indicative of remorse on your part.

23You have also written letters of apology to Mr Alexander and to Mr Cornehls and, most significantly, you have made full restitution to both your victims. Your son Paul paid this money just before your plea was due to commence on 7 September 2020, but as Mr Grace, who appeared on your behalf, explained to me, this is a debt that you owe your son, and will repay, in all likelihood out of an inheritance that you will receive from your stepmother. In all the circumstances, I accept that you are sincerely and genuinely remorseful.

24Both Mr Cornehls and Mr Alexander have made victim impact statements.

25Mr Cornehls says,

To say that I feel totally betrayed by a person I trusted, is an understatement. The stress involved with the prospect of paying off what could amount to $200,000 is extreme, given that I run a small business, and am the sole earner in my family. My health has also suffered as a result of the emotional stress caused.

26Mr Alexander says that because of your offending he was saddled with a large debt to the ATO that left him struggling to pay day-to-day expenses and his mortgage. He said he contemplated suicide on many occasions, but this would have only left his wife with the debt.

27Both these statements were made before restitution was made. No further statements have been taken from the victims. I am sure they are greatly relieved to have had their money repaid in full, but the suffering and the stress that you have caused them since the detection of your offending until the moneys were recently repaid cannot be undone, and despite having repaid your victims in full, you should be under no illusions, Mr Jacobs, that your offending has seriously and deleteriously impacted on the health and well-being of your victims and their families over many years.

28In considering the objective gravity of your offending, its first aggravating feature is the appalling breaches of trust it involved. Mr Cornehls and Mr Alexander were both longstanding clients who trusted you completely. You betrayed their trust. Your offending was not sophisticated, but it involved stealing a significant amount of money from both Mr Cornehls and Mr Alexander and, moreover, it lasted many years and involved multiple transactions in respect of each victim.

29Your offending took place when your business was floundering. You had concentrated your business on tax work, and this became steadily less lucrative as people increasingly lodged their returns themselves online. Your client base diminished, and you yourself struggled to keep up with technological developments in business and accounting practice.

30You stole to keep afloat financially, both professionally and personally. You were not motivated by greed in the sense that you stole to achieve a lavish lifestyle, but your motivation for offending does not excuse your behaviour, nor is your offending to be regarded as less serious.

31You were hitherto a person of good character and your prior good character, though still a mitigating factor, carries less weight in a case of this kind, because it was your good character that you were able to rely upon to build your business and to betray your clients.

Personal Circumstances

32I turn now to your personal circumstances. You were born on 31 October 1948 and you are 72 years old. You were an only child. You lived in St Kilda, in Elwood and in Caulfield.

33You had a very difficult and at times tragic childhood. Your parents were both Holocaust survivors who came to Australia in 1947. After you were born, the family organised to live with a great aunt, but it was on the condition that there were to be no children in the house, so you were placed in an orphanage. You lived at the orphanage from the age of around 18 months for two years. Your parents did not visit you because they thought that this would be too distressing for you.

34Your parents separated when you were eight years old. You mainly lived with your father. Your mother committed suicide when you were only 10 years old.

35Your father remarried in 1961 when you were about 12 years old. You have a good relationship with your stepmother and your two younger half-brothers.

36Your father was an austere parent who expected you to achieve. You did well at school and were accepted to study medicine at Monash University, which pleased your father, but when you failed your first year, your father confiscated your savings and insisted upon you repeating and pursuing a medical career. You, however, went against your father’s wishes and trained as an accountant at RMIT. You also obtained a Bachelor of Science majoring in mathematics from Monash University.

37You worked in insurance and in 1983 went into an accountancy business with a friend until 1995. You then started your own firm.

38You married your wife Shirley when you were around 24 years old. You have a daughter, Nikki, who is 44 years old, and a son, Paul, who is 41 years old. At present, you and your wife live in a rented property. Your wife works in aged care and you are trying to get work as an Uber driver.

39You feel you have failed your family and are ashamed of your offending and its effects on your family. You did not tell your family you had been charged and were pleading guilty until only hours before your plea hearing was scheduled to commence. This shocked and distressed them immensely but they were understanding and, moreover, they have rallied to help you. As has been discussed, your son Paul has made full restitution on your behalf.

40A number of impressive character references were tendered at your plea, many from people who have known you for over 50 years, as well as from family members, who all describe you as an honest and caring person.

41You are not in robust health. You have recently been treated for cellulitis of the right foot and a leaking mitral valve. You underwent surgery to your mitral valve on 30 October 2020. This procedure was a success with only a minor residual leak. You are required to take aspirin and warfarin, which is an anti-coagulant medication. Your cardiologist, Dr Victor Wayne, provided a report to the Court in which he stated that despite the residual leak through the mitral valve, you should be able to carry on an essentially normal life and he regarded you to be in ‘pretty fine physical shape’.

42Notwithstanding Dr Wayne’s positive assessment, it remains the case that your physical health, in combination with your age, and in the present difficult conditions in the prison system necessitated by the COVID-19 pandemic, prison would be a very difficult place for you.

43Your mental health is a more pressing consideration than your physical health, and was a topic of some dispute between the parties at your plea.

44I begin with the report of Dr Aaron Cunningham, psychologist, dated 7 August 2020. You met with Dr Cunningham on 29 July 2020. As well as speaking with you, Dr Cunningham conducted testing intended to provide information on personality traits and psychopathology, including specific psychiatric disorders. He concluded that you did not meet the DSM–5 criteria for mental illness. Dr Cunningham reported that at the time of his assessment you were worried about being incarcerated, but were eating and sleeping in accordance with your normal patterns.

45You were examined by way of a video conference with Dr Lester Walton, consultant psychiatrist, on 22 September 2020. Amongst the materials provided to Dr Walton was Dr Cunningham’s report. It was Dr Walton’s view that you were exhibiting a level of despondency consistent with clinical depression, and that previous psychologists had underestimated the severity of your depression. He was of the view that you were genetically predisposed to depression on the basis of your maternal family history. He found you to be despondent, excessively fatigued, suffering insomnia and reporting significant weight loss, all indicative, in his view, of a major depressive disorder.

46It was Dr Walton’s view that your depression was longstanding and a factor in your offending, in that it deprived you of the capacity to think clearly and make effective decisions. He was also of the view that you would benefit from a referral to a treating psychiatrist, with a view to introducing mood-stabilising medication, if possible. Dr Walton stated that you would not receive the kind of counselling you require in custody and stated that imprisonment would risk a deterioration in your mental health.

47I also had reports dated 5 October 2020 and 11 January 2021 from Dr Heather McCormack, clinical psychologist, who has seen you on a regular basis since 5 October 2020. Dr McCormack says in her 11 January 2021 report that she found you to be both physically and mentally fragile at your last consultation with her. She found you to be suffering depression, anxiety and stress in the severe range. Your general practitioner, Dr Sue Cohen, was prescribing you antidepressant medication to stabilise your mood.

48On the basis of the reports of Dr Walton and Dr McCormack, Mr Grace submitted that Verdins principles 4, 5 and 6 were engaged.[1] That is, your depression was causally linked to your offending and therefore moderates your moral culpability, and your depression would make any time in custody more onerous for you than for a prisoner in robust mental health, and imprisonment risked worsening your depression.

[1] R v Verdins (2007) 16 VR 269 (‘Verdins’).

49I accept the opinion of Dr Walton, to the extent that it finds support in the reports of Dr McCormack, that you are presently suffering severe depression and that Verdins principles 5 and 6 are applicable in sentencing you.

50However, I reject his opinion that your moral culpability is moderated because of the effects of longstanding depression. I accept the submission of the prosecutor, Mr Cookson, that the evidence lacks the cogency to establish, in the first place, if indeed you were suffering depression at the time you offended between 2013 and 2016, and secondly, even if I could be satisfied that your depression was longstanding, that it was causally linked to your offending.

51Both Dr Cunningham and Dr Walton found you to be remorseful and to present a low risk of reoffending, given your age, your prior good character and your family support. I accept this assessment and agree you pose a low risk of reoffending. I accept that your prospects of rehabilitation are good. You have not re-offended since the offending for which you now fall to be sentenced occurred, and you have no matters pending before this Court or any other court.

Application of Sentencing Principles

52Both parties referred me to cases from the Court of Appeal, both as comparator cases and as cases which discuss the relevant sentencing principles in cases of white-collar crime.

53The prosecutor referred me to the cases of Director of Public Prosecutions (Vic) v Caulfield[2] and Maddock v The Queen.[3]

[2] [2019] VSCA 131 (‘Caulfield’).

[3] [2020] VSCA 271 (‘Maddock’).

54Director of Public Prosecutions (Vic) v Caulfield was a successful Director’s appeal to the Court of Appeal. The offender had been sentenced to a sentence of nine months’ imprisonment in combination with a community correction order of two years. She was re-sentenced in the Court of Appeal to a head sentence of two years and six months with a non-parole period of 18 months. In that case, the amount stolen was $463,028.80. The offending involved what the Court of Appeal described as an ‘egregious breach of trust’, as the offender stole from her employer, who was also her friend, and whose business she understood was failing. No restitution was made by the offender.

55In the case of Maddock v The Queen, the offender stole $216,801.15 from four victims. One victim was repaid. The offending involved what were described as ‘appalling breaches of trust’. The Court of Appeal held a sentence of two years with a non-parole period of one year and three months was clearly within range.

56In my view, the objective gravity of your offending is less serious than in the cases of Caulfield and Maddock, and your moral culpability is not as high as that of the offenders in those cases and, unlike the offenders in Caulfield and Maddock, you have made full restitution.

57These cases, and indeed the authorities of Dyason v The Queen[4] and Director of Public Prosecutions (Vic) v Bulfin[5] to which I was taken, have been of some assistance in formulating what is an appropriate sentence for you.

[4] (2015) 251 A Crim R 366.

[5] [1998] 4 VR 114.

58There was no dispute between the parties that the authorities make it clear that general deterrence is the predominant sentencing principle, and to give effect to the principal of general deterrence, a period of actual custody is usually required. Mr Grace, however, pointed out that none of the cases preclude the imposition of a community correction order.

Submissions of Prosecution and Defence Counsel

59Turning now to the submissions of the parties, the prosecution submitted that to give proper effect to all the various sentencing principles, and in particular, general deterrence, a sentence of imprisonment that involved a head sentence and a non-parole period or a sentence of imprisonment combined with a community correction order was required.

60Mr Grace acknowledged the importance of general deterrence and the gravity of your offending, but submitted that a community correction order was an appropriate disposition in your case in light of your plea of guilty, your remorse, the fact that you had made full restitution, your previous good character, and the burden of imprisonment upon you at your age with your physical difficulties and your psychological difficulties, engaging the application of Verdins limbs 5 and 6.

61I had you assessed by Corrections and you were assessed as suitable.

62It is clear that a community correction order has a punitive element and that it can, in appropriate cases, achieve all sentencing purposes, including denunciation and general and specific deterrence.

63I have concluded, taking into account all the matters that I am required to under the Sentencing Act 1991 (Vic), and your personal circumstances, and mindful of the principle of parsimony (that is, a sentence of imprisonment should only be imposed as a last resort), that I can give effect to all the various and often competing sentencing considerations, including general deterrence, by means of a community correction order alone.

64Mr Jacobs, I now intend to sentence you.

65You are convicted and sentenced on all charges to a three-year community correction order, the conditions of which are as follows. You are to report to Dandenong Community Correctional Services within two working days. Because of the Easter holiday, that is 8 April. So you are to report to Corrections before 8 April. It is my understanding that in the present circumstances this can be done by way of a phone call.

66You are to perform 200 hours of community work under the order. I am going to impose conditions of treatment and rehabilitation, and 50 hours of treatment and rehabilitation satisfactorily undertaken may be counted as community work hours for the purposes of the order.

67You are to perform 200 hours of unpaid work. The mandatory conditions of the orders are this, Mr Jacobs. You must not commit another criminal offence, that is any criminal offence, not necessarily a serious one such as the ones you are being sentenced on now, but any criminal offending. You have got to comply with all obligations imposed under the order. You are to report to and receive visits from the Secretary. You must report to Corrections within two clear working days. I have explained that. You must let Corrections know about any change of address or job within two working days of that change having occurred. You must not leave Victoria without getting permission from the Secretary. You must obey all lawful instructions and directions of the Secretary.

68Two hundred hours of unpaid work. You are going to be under the supervision of a Community Corrections officer for a period of three years. You must undergo any medical assessment and treatment, that may include general or specialist medical treatment in a hospital or a residential facility, as directed. You must undergo any mental health assessment and treatment, which may include psychological or neuropsychological or psychiatric treatment at a hospital or a residential facility as directed, and you must participate in any programs or courses to address factors relevant to your offending as directed.

69There will be a judicial monitoring condition. You must appear at this Court before me on 30 June 2021 at 9:15am.

70Pursuant to s 6AAA of the Sentencing Act 1991 (Vic), had you pleaded not guilty, you would have been sentenced to a term of imprisonment of three and a half years with a non-parole period of two years.

71Pursuant to s 18(4) of the Sentencing Act 1991 (Vic), I declare you have served nil days of the sentence I have imposed upon you and I direct that that is entered into the records of the Court.

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