Director of Public Prosecutions v Sadhai
[2021] VCC 1851
•17 November 2021
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
CRIMINAL JURISDICTION
CR-21-01103
| DIRECTOR OF PUBLIC PROSECUTIONS |
| v |
| RUKESH SADHAI |
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JUDGE: | HIS HONOUR JUDGE MAIDMENT |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 November 2021 |
DATE OF SENTENCE: | 17 November 2021 |
CASE MAY BE CITED AS: | DPP v Sadhai |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1851 |
REASONS FOR SENTENCE
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Subject:Plea – sentencing
Catchwords: Obtaining financial advantage by deception
Legislation Cited: Sentencing Act 1991 (Vic)
Cases Cited:
Sentence:28 months' imprisonment, non-parole period of 16 months' imprisonment
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APPEARANCES: | Counsel | Solicitors |
| For the Director of Public Prosecutions | Mr D. Brown | Office of Public Prosecutions |
For the Accused | Mr P. Dunn QC | Melasecca, Kelly & Zayler Lawyers |
HIS HONOUR:
1 Rukesh Sadhai, you have pleaded guilty to four charges of obtaining financial advantage by deception. The maximum penalty for each charge is imprisonment for 10 years.
2 You have no prior criminal history and you have not been charged with any criminal offences since.
3 The offending occurred between 13 March 2012 and 2 May 2013. It involved
36 separate dishonest transactions in which you exploited your position of trust as an executive officer in the compliance section of your employer company. By your offending you misappropriated a total of $838,779.56. The circumstances of your offending are described in a summary of prosecution opening dated 8 March 2021. I proposed to recite parts of it in some detail, so that the nature of your offending can be understood and a proper context given to the sentences that I intend to impose.
4 At the commencement of the offending period, you had been employed by a company named CoInvest Limited as an executive officer in its compliance department for about six years. CoInvest is a company limited by guarantee, which administers and acts as the trustee for the portable long service leave scheme for the construction industry in Victoria. Their office is located in Albert Street, East Melbourne.
5 The portable long service leave scheme was established by the ConstructionIndustry Long Service Leave Act 1997 and was implemented in order to preserve long service entitlements which would otherwise be lost, given that construction industry workers frequently move from one employer to another on project-based assignments. All members of the construction industry, including employers, workers, working subcontractors, working directors and apprentices, are required to be registered with CoInvest for the purposes of the scheme.
6 Upon registration, CoInvest keeps a record of how many days of eligible service a construction industry worker accrues in Victoria and collects a contribution from their employer, which is paid into the long service leave fund. CoInvest acts as the trustee of the fund and administers the payment of long service leave entitlements to the construction industry workers once they have accrued enough days of eligible service and have made a claim for their entitlements.
7 At the conclusion of each quarter year, employers of the construction industry workers are required to lodge with CoInvest the details of days worked and wages paid to each of their workers during that quarter. The process is referred to as the worker days and wages process.
8 In ordinary circumstances CoInvest will validate this information and issue an invoice to the employer for the prescribed contribution rate of the total wages paid to their workers, which is paid into the fund. An adjustment process is used to deal with new or revised information, which is received by CoInvest outside the quarterly worker days and wages process. The adjustment process can deal with situations where several workers’ service details must be corrected at once. For example, if an employer has failed to comply with their worker days and wages obligations for several years, CoInvest can initiate a single adjustment in order to bring the relevant details up-to-date rather than re-issue multiple worker days and wages. It is essentially that part of the system which you exploited, with your particular knowledge and responsibilities within the company, in order to perpetrate these fraudulent transactions.
9 When a worker wishes to claim a payment for long service leave, the process requires that they submit either a hard copy claim form or make a claim via the CoInvest website. Since 2010, CoInvest has operated a custom IT application named Nova which was developed in-house. All long service leave related transactions for employers and workers are recorded and carried out using Nova. CoInvest staff login to Nova with their own individual username and password.
10 Once a claim is made, the first step is that the claim will be electronically validated for compliance with certain business rules - for example, this process will check whether all mandatory fields have been completed. The second step is that the claim will enter an automated work pool and will be allocated on a random basis to a claims processor. If the claim is in order the processor completes the processing and Nova will record the claim as processed and the username will be recorded automatically by the Nova system.
11 Once processed, a claim is returned to an automated work pool where it is made available to a claims approver. The claims approver will effectively double-check the same matters that have been reviewed by the claims processor to supervise that process and ensure quality control. CoInvest makes payments in a single batch once per week. Once claims have been approved for payment, the claims to be paid in a particular week are reviewed by members of the CoInvest finance team.
12 In your role as Executive Officer, Compliance, your responsibilities included: providing advice to the executive and the board on the development of compliance policy and procedure and the administration of the long service leave scheme; liaising with clients as required and conducting investigations and negotiations on complex issues; managing the compliance function from strategy development through to implementation and execution; and lastly, managing the compliance team, including field staff.
13 You misappropriated the amount of $838,779.56 by using your position to process 36 falsely inflated claims purportedly made by workers within the construction industry. The 36 fraudulent transactions were detected in April 2016, when CoInvest auditors conducted an audit. The auditors discovered that 30 of the 36 claims were paid into five bank accounts. The bank accounts were held in New South Wales but the workers resided in Victoria and multiple different account names were given for the same bank account. Also, seven common tax file numbers were used for the 36 claims. The 36 claims were also spread over different claim periods, so that the common bank accounts and tax file numbers were not noticed by the claims processing staff.
14 The workers in each case were employed by companies that had been put into liquidation, making it more difficult to verify the information provided to justify the adjustments and making it less likely that CoInvest staff would seek to verify the information. Also, all the workers in whose names those claims were made had been dormant in the CoInvest system for between six and twelve years.
15 The audit logs for CoInvest's IT system showed that you accessed each of the 36 workers’ records. You retrieved each worker's customer record between 15 and 73 times. The methodology of your offending can be illustrated by reference to Charge 3 as an example, which essentially was the same in respect of each of the four charges. In relation to Charge 3, on 20 July 2012 you authorised adjustments in respect of an employer company which involved crediting the long service leave accounts of 19 workers. They are named in Schedule 2 to the indictment. The adjustments were authorised following an email purportedly sent by a particular employee of CoInvest on 30 August 2011, recommending that the adjustments be approved. That employee of CoInvest was a field officer, who reported directly to you. That employee ceased employment with CoInvest on 25 January 2012. So, it was unlikely that any CoInvest staff would consult her regarding the details of her recommendations when processing the claims.
16 You created the email chain recommending the approval of the adjustments and then authorised the adjustments yourself. You subsequently lodged claims for long service leave entitlements totalling $385.400.71. You subsequently lodged claims for long service leave payments totalling that sum in the name of the 19 workers set out in Schedule 2 to the indictment and CoInvest paid the funds into the nominated bank accounts. You employed similar methods with slightly different particulars in respect of Charges 1, 2 and 4.
17 After the misappropriations were detected, CoInvest applied to the Supreme Court of Victoria for a freezing order over the bank accounts into which the misappropriated funds had been paid. After the freezing order was granted arrangements were made to serve the freezing order upon you at the CoInvest offices on Friday 22 July 2016. At this time, it was explained to you that it appeared a fraud had been carried out on the CoInvest fund, involving a misappropriation of funds by means of unauthorised claims. The freezing order was served on you. You claimed that you did not know anything about the misappropriations.
18 The evidence was explained to you, including the fact that you were involved in approving each of the fraudulent adjustments and claims. You were provided with copies of the affidavits and invited to take them home and read them over the weekend. A short time later you were spoken to about your future employment with the company and you continued to deny the allegations. You were invited to take the paperwork home, seek advice and meet again on Monday, 25 July 2016 to explain why you should not be dismissed. You were escorted from the premises by the security guard.
19 On 25 July 2016, you emailed the Chief Executive Officer of CoInvest, stating that you were not currently in a position to respond to the allegations but were willing to attend a meeting, along with a legal representative. At 4.00 pm on 25 July 2016, such a meeting was held with you and your legal representative at the offices of the solicitors acting for CoInvest. During this meeting you denied the allegations but indicated that you may be prepared to make some repayment through your family.
20 On 26 July, the Chief Executive Officer received an email from you in which you tendered your resignation from CoInvest, effective immediately. The next meeting between parties occurred on 22 August, where you attended and discussed generally the fraud and the potential for your family to provide some repayment. You apologised and gave some background and reasons for the events that occurred.
21 Over the course of the next several months CoInvest's insurer negotiated with you and your family over the repayment of the misappropriated funds. These negotiations were finalised shortly before Christmas in 2016 and a confidential deed of settlement was agreed. Under the deed you agreed to pay CoInvest $100,000 and your mother agreed to pay $500,000.
22 CoInvest did not report the matter to Victoria Police at that time, as they did not want to jeopardise the insurance company's chances of recouping some or all of the loss and CoInvest's ability to recover from the insurance company. You and your mother made repayments to the insurer in early January 2017 and CoInvest was subsequently paid by the insurance company under the terms of its insurance policy.
23 On 17 January 2017, the CEO of CoInvest received an email from you, apologising for what had occurred and for putting him and CoInvest in that situation. After you confirmed with the insurer that to do so would not breach the terms of the settlement deed, CoInvest's lawyers then reported the matter to Victoria Police on 19 January 2017.
24 On 15 August 2018, you attended the West Melbourne Police Station by appointment. A recorded interview was conducted where you made no comment to the questions put to you. You were not charged until 6 January 2021, that is, four and a half years after the offending was detected and almost four years after the matter was reported to Victoria Police. No satisfactory explanation was provided during the course of the plea hearing for the delay in the police action. There has been an overall delay of more than five years since the offending was first detected.
25 Turning to matters personal to you. Your counsel provided me with a written defence plea document headed ‘Defence Plea Submissions’ dated 26 October 2021, together with a chronology of relevant events, a psychological report dated 14 October 2021 from psychologist Luke Armstrong, a psychiatric report dated 11 October 2021 from psychiatrist Dr Manawadu, a letter dated 3 September 2021 from a Dr Lolatgis and 19 letters of character reference. I shall return to aspects of those documents in due course.
26 You were born in South Africa in June 1972 and are now 49 years of age. You were 38 years of age when your offending commenced. You were until then of unblemished character. You have not been charged or convicted of any offence, other than these, since the offending ceased.
27 The detailed chronology provided by your counsel helpfully identifies the key features of your family background, your schooling and your tertiary education. You come from a strong family. Your father was a medical practitioner. Your parents, Hindus of Indian descent, brought you and your older brother to Australia in 1977, when you were five years of age. They migrated to escape the apartheid system in South Africa. You have a younger brother and sister, who were born in Australia.
28 In 1994, whilst you were studying law at Bond University in Queensland you met a woman of Fijian/Indian background and in 1996 the two of you moved to Sydney where you entered and practised in the legal profession for two years. The two of you married in 1999. In that same year you left the legal profession and obtained work in the share trading arm of the Commonwealth Bank.
29 In 2004, you and your then wife moved to Victoria where you obtained employment as a national compliance manager for the finance arm of a major Australian bank. You joined CoInvest Limited as Executive Officer, Compliance, in 2006. By 2008 your marriage was under stress. You sought psychiatric help and underwent psychotherapy for anxiety, depression and mood disorders. Treatment continued until 2016.
30 In August 2011, your father was diagnosed with a terminal illness. He became seriously debilitated. He passed away in September 2013. You had a close relationship with your father. During his illness you visited him frequently to provide him with support. You also began abusing a weight loss prescription drug for its stimulant properties, which Dr Manawadu hypothesises in his report could have led to 'manic and psychotic symptoms', which 'could' have impaired your judgment in committing these offences.
31 I note that your counsel did not press such an argument in his well-balanced submissions on your behalf. However, there is no doubt that the period of your offending coincided with a confluence of several substantial stressors upon your mental wellbeing, including the breakdown of your marriage. From time to time you also abused illicit drugs, including ecstasy and cocaine.
32 You told Mr Armstrong that you ceased using the prescription weight loss drug as recently as 18 months ago. You told Mr Armstrong that the offending occurred as a result of your becoming infatuated with a prostitute you met in a brothel in late 2011. She claimed that she was a student who had lived with a friend who had become indebted to criminals. The friend had fled the country, leaving her with responsibility for the debt. She claimed that her family had been threatened.
33 You told Mr Armstrong that you engaged in the offending because you would have done anything to avoid losing her. You claim that all of the misappropriated funds were paid to her. You received no direct financial benefit yourself. The offending continued until you realised that the prostitute was gambling with increased frequency and your psychiatrist questioned the bases for the benevolent presumptions underpinning your apparent generosity towards her. You then ceased your offending and terminated the relationship with the prostitute. The prosecution has not sought to challenge that explanation. In the absence of contrary evidence, I proceed on the basis that it is substantially true.
34 After 2 May 2012, when your offending ceased, you continued in your employment with CoInvest. In about July 2015 you commenced a relationship with your now partner, with whom you have been attempting to have children. You resigned from CoInvest Limited on 26 July 2016, following the detection of your conduct by the company auditors. With considerable help from your mother, you reached a settlement with your employer and its insurers by paying a total of $600,000 by way of reparation. You also apologised to the Chief Executive Officer of CoInvest for your conduct.
35 Since 2017, you have been employed in the higher education sector. You have purchased a home with your partner and have been involved in IVF in continuing efforts to start a family. Thus far the IVF treatments have been unsuccessful. The letter from Dr Lolatgis, which was tendered in the plea hearing, speaks of your hopes to pursue IVF options in Malaysia that are not available in Australia.
36 In his report Mr Armstrong details the results of psychological assessment. He opines that you fulfil the criteria for narcissistic personality disorder with features of dependant personality. Those features may help explain the offending, which otherwise seems quite out of character. But it was not suggested on your behalf that Verdins principles are enlivened in this case.
37 You have achieved much both academically and as a sportsman. You are an intelligent and capable person, seemingly with a strong work ethic. You have pursued your rehabilitation since May 2021. You have a solid relationship with your partner and strong support from family and friends. You have many good personal qualities, to which the letters of reference which were tendered before me speak. Mr Armstrong assesses your risk of reoffending as low. I do not expect you ever to reoffend.
38 Turning to sentencing principles. Your reason for offending, which is undisputed, provides no excuse. Your gullibility and stupidity do not in my judgment reduce your moral culpability for the offences. However, I am satisfied that the experience taught you a stern lesson and that your prospects of full rehabilitation are very good. Despite your diagnosed personality disorders, I think the need for individual deterrence is low. I must balance those factors against the need for just punishment, denunciation and general deterrence.
39 In this case the total sum of money misappropriated was very large. As Executive Officer, Compliance, your conduct represented a substantial and deplorable breach of trust. Your moral culpability is high. The offending conduct exhibited a substantial exploitation of your intimate knowledge of the system of financial controls for compliance and enforcement for which you were responsible.
40 Although your conduct placed you at risk of detection, the scheme you devised to cover your tracks required considerable care and planning. It was sufficiently sophisticated to go undetected for almost three years after the offending ceased. You continued your offending for more than 13 months. You had constant opportunity to consider and reconsider again and again the scale of your criminality and the repercussions of your conduct.
41 I regard the offences as very serious and requiring considerable weight to be given to just punishment, denunciation and, particularly, general deterrence. Your significant financial reparation avoids the aggravating feature of substantial permanent loss to your employer or its insurer. The delay of more than five years since the offending was first detected is through no fault of yours. The matter has been hanging over your head throughout the last five-year period.
42 You have pleaded guilty at an early opportunity and in these COVID times. You have expressed extreme remorse for your conduct. You are entitled to substantial reduction in sentence for these factors.
43 I am satisfied, however, that no punishment other than an immediate term of imprisonment is appropriate. The length of that sentence will be further tempered by the impact of the COVID pandemic on the likely current and ongoing harsh conditions of prison life.
44 I have been assisted by both counsel in seeking to identify current sentencing practice. However, many features of this case are unusual, not least of which is the absence of motive for direct personal gain.
45 In all those circumstances Rukesh Sadhai, I sentence you as follows.
On Charge 1, you are convicted and sentenced to imprisonment for 6 months. On Charge 2, you are convicted and sentenced to imprisonment for 9 months. On Charge 3, you are convicted and sentenced to imprisonment for 18 months. On Charge 4, you are convicted and sentence to imprisonment for 18 months.
46 The sentence on Charge 3 is the base. I order that one month of the sentence imposed on Charge 1, two months of the sentence imposed on Charge 2 and seven months of the sentence imposed on Charge 4 be served cumulatively upon each other and with the sentence imposed on Charge 3.
47 The total effective sentence is therefore imprisonment for 28 months.
48 You will be required to serve 16 months of that sentence before you are eligible for parole.
49 I declare 14 days’ pre-sentence detention, not including today, as time to be reckoned as served upon that sentence and deducted from it. I order that those facts be noted in the records of the court.
50 Pursuant to s6AAA of the Sentencing Act 1991, I further declare that but for your pleas of guilty, I would have sentenced you to a total effective sentence of 48 months with a non-parole period of 32 months.
51 Are there any other matters, counsel?
52 MR BROWN: No, Your Honour.
53 MR DUNN: No, Your Honour.
54 HIS HONOUR: Please adjourn the court.
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