Director of Public Prosecutions v Smith and De Alwis
[2016] VCC 705
•26 May 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CRIMINAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No. CR-14-00485
CR-14-0086
| DIRECTOR OF PUBLIC PROSECUTIONS |
| v |
| MARK THOMAS SMITH |
| and |
| ELMO RANJAN DE ALWIS |
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JUDGE: | HIS HONOUR JUDGE SMITH | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4, 5 and 6 April 2016 | |
DATE OF SENTENCE: | 26 May 2016 | |
CASE MAY BE CITED AS: | DPP v Smith & De Alwis | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 705 | |
REASONS FOR SENTENCE
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Subject:SENTENCING –
Catchwords: Falsification of company books – giving false or misleading information to a company auditor or director
Legislation Cited: Corporations Act 2001 (Cth) – Crimes Act 1914 (Cth)
Cases Cited:
Sentence:
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APPEARANCES: | Counsel | Solicitors |
| For the CDPP | Mr P Doyle | Office of Commonwealth Director of Public Prosecutions |
| For the First-Named Accused | Mr I Hill QC with Mr A Lewis | Galbally & O’Bryan Lawyers |
| For the Second-Named Accused | Mr N Cleland QC with Mr G Livermore | Tony Hargreaves & Partners |
HIS HONOUR:
1 Mark Thomas Smith and Elmo Ranjan de Alwis, you have both pleaded guilty to:
· Two charges of engaging in conduct that resulted in the falsification of books affecting or relating to the affairs of a company contrary to s.1307(1) of the Corporations Act 2001 (Cth); and
· Two charges of giving false or misleading information to a company auditor or director contrary to s.1309(1) of the Corporations Act 2001 (Cth).
2 The offences occurred between 25 June 2009 and
31 March 2010.
3 In that period you, Mr Elmo de Alwis, were the managing director and chief executive officer of Sigma Pharmaceuticals Ltd (a company which I shall refer to in these remarks as “Sigma”). You, Mark Smith, were the chief financial officer of Sigma.
4 Sigma is an ASX listed public company. It operated a pharmaceuticals division which encompassed the manufacture and distribution of prescription and generic pharmaceutical products for Australian and overseas markets. It also operated a healthcare division, which was a wholesale and distribution business providing various products to pharmacies. Sigma operated on a financial year ending annually on 31 January and a half-year ending
31 July.
5 Between July and November 2009, Sigma entered into four specific transactions which form the basis of the charges brought against the two of you.
6 Each of the four transactions involved the purchase of pharmaceutical drugs by Sigma from one or other of two of its suppliers – Schering-Plough Pty Ltd (which I shall refer to as “Schering”) or Spirit Pharmaceuticals Pty Ltd (which I shall refer to as “Spirit”). On its face, each of the four transactions appeared to be a standard part of Sigma’s normal business.
7 However, in each of the four transactions the price paid by Sigma to the supplier of the pharmaceuticals was significantly inflated. In each case, the inflated price was paid at the instigation of Sigma on your direction or authorization.
8 Details of each of the four transactions were spelt out in considerable detail by the prosecutor in his written summary of the Crown’s opening which was tendered at your plea hearing and I do not intend to go through all of those details here.
9 However some details will assist in placing your respective conduct in some perspective.
A.The Livial Transaction
10 Livial is the name of a pharmaceutical product supplied by Schering. In July 2009, Schering offered to supply Sigma with a quantity of its product at a price of $22.27 per pack. This was a discount of $12.07 per pack from the normal selling price of $34.34. The reason for that discount was that the use-by date of the product was approaching. This was a genuine discount for a legitimate and obvious reason.
11 Notwithstanding, Sigma proposed to Schering, that Sigma would purchase 97,549 packs of the Livial product for $34.34 per pack, a price effectively inflated by $12.07 (a little over 54 per cent) on the condition that Schering would pay to Sigma, before the end of July 2009, a payment for “promotional services” at a price calculated at $12.07 for each pack purchased.
12 Pursuant to the arrangement:
· Schering invoiced Sigma for 97,549 packs of the product at $34.34 per pack, a total of $3,349,832.60.
· Sigma paid that amount to Schering.
· Schering supplied the 97,549 packs to Sigma.
· On the same day, Sigma invoiced Schering for what was described as “promotional services” in an amount of $1,177,416 which amount was promptly paid by Schering to Sigma. It can be seen that that sum is the equivalent of 97,549 multiplied by $12.07 (the inflated price per pack).
· Schering paid that amount to Sigma.
13 The receipt of $1,177,416 was falsely recorded as income in Sigma’s statutory half-year financial accounts for the half year ended 31 July 2009 and in its full year financial account for the year ended 31 January 2010.
14 Further, the payment to Schering of the inflated price inflated the value of Sigma’s inventory as recorded for the same half-year and full year financial accounts.
15 There was no suggestion that any promotional services were provided to Schering.
16 This arrangement was approved and authorized by both of you.
B.The Ozmep transaction
17 Ozmep is a brand name for a generic drug distributed by Spirit.
18 In June 2009, Sigma had already ordered from Spirit 422,400 packs of Ozmep at an agreed purchase price of $5 per pack. You both, nevertheless, arranged with Spirit to amend that order so that the purchase price was amended from $5 per pack to $10.50 per pack (more than double the price).
19 The arrangement reached with Spirit was similar to that reached with Schering with regard to the Livial transaction.
· Spirit invoiced Sigma for 422,400 packs of Ozmep at a price of $10.50 which, together with GST, totalled $4,878,720.
· This amount was paid by Sigma to Spirit.
· On the same day, Sigma invoiced Spirit for what was described again as “promotional services”, supposedly supplied between February and July 2009 in an amount totalling $2,323,200, together with GST. This amount equates to the additional $5.50 for each of the 422,400 packs.
· Spirit promptly paid $2,323,200 to Sigma.
· The arrangement to pay this inflated purchase price was made by Mr de Alwis and approved by Mr Smith.
· The receipt of $2,323,200 was falsely recorded as income in Sigma’s statutory half-year financial accounts for the half year ended 31 July 2009 and in its full year financial account for the year ended
31 January 2010.
· Further the inflated price paid inflated the value of Sigma’s inventory as recorded in the same half-year and full year financial accounts.
C.The Sozol Transaction
20 Sozol is a brand name for a generic drug supplied by Spirit.
21 On 13 August 2009 a Sigma purchasing officer had placed an order with Spirit for the purchase of 380,000 packs of Sozol at a price of $5.79 per pack in the course of its normal business.
22 Notwithstanding, you made arrangements with Spirit for the purchase price to be inflated by $4 per pack.
23 The arrangement that was made was a little more complicated than that relating to the Livial and Ozmep transactions. The total inflation of the price to be paid was just over $2,200,000. This amount was paid by Sigma to Spirit. Sigma issued an invoice to Spirit for "promotional services" in the sum of $2,200,000 and that amount was then paid by Spirit to Sigma and again treated by it as income in its half yearly and full year financial records. Its inventory figures were also inflated accordingly.
D.The Clovix Transaction
24 Clovix is the brand name of a drug supplied by Spirit.
25 In November 2009 Sigma desired to purchase 28,350,000 Clovix tablets from Spirit. A similar arrangement was made with regard to the price to be paid by Sigma for the Clovix tablets.
26 The total price paid by Sigma for the Clovix tablets was inflated by some $10 million. Arrangements were made for Spirit to pay or re-pay to Sigma the sum of $10 million or thereabouts, as a “promotional allowance”.
27 Again, that sum was recorded as sundry income in the full year financial accounts for the 2009/2010 year and Sigma’s inventory figures were correspondingly inflated in those accounts.
Conduct/Offences
28 The charges to which you have both pleaded guilty relate to:
(a) Falsification and inflation of revenue figures and inventory figures in the half year and full year financial accounts referred to previously. These relate to each of the four transactions to which I have previously referred. These matters form the basis of Charges 1 and 2 which are brought against both of you.
(b) False and misleading information supplied by you Mark Smith to Sigma’s auditors Price Waterhouse Coopers (“PWC) in four separate documents, namely:
· An email to PWC dated 2 September 2009.
· A letter to PWC dated 14 September 2009 entitled “Management Representation Letter”.
· An email to PWC dated 22 March 2010.
· A further “Management Representation Letter” to PWC dated 31 March 2010.
That conduct of Mr Smith forms the basis for Charge 3.
(c) The false and misleading information supplied by you Mark Smith to the directors of Sigma namely:
· A statement to the Board of Directors dated
14 September 2009 tabled at a meeting of the Board on that date.
· Information provided by you to Sigma’s Risk Management and Audit Committee on
22 February 2010.
· A paper entitled “Summary of proposed adjustments” presented to Sigma’s Risk Management and Audit Committee on 17 March 2010.
· A paper entitled “Treatment of Spirit Income as Underlying Profit” presented to Sigma’s Risk Management and Audit Committee on
29 March 2010.
· A statement provided to Sigma’s Board of Directors dated 31 March 2010.
That conduct in providing that information to Sigma’s Board constitutes Charge 4.
(d) False and misleading information supplied by you Elmo de Alwis to Price Waterhouse Coopers (“PWC) in two documents, namely:
· A letter to PWC dated 14 September 2009 entitled “Management Representation Letter”.
· A further “Management Representation Letter” to PWC dated 31 March 2010.
Your conduct in provision of that information to PWC constitutes Charge 5.
(e) False and misleading information supplied by you Elmo de Alwis to the directors of Sigma namely:
· A statement to the Board of Directors dated
14 September 2009 tabled at a meeting of the Board on that date.
· Information provided by you to Sigma’s Risk Management and Audit Committee on
22 February 2010.
· A paper entitled “Treatment of Spirit Income as Underlying Profit” presented to Sigma’s Risk Management and Audit Committee on
29 March 2010.
· A statement to Sigma’s Board of Directors dated 31 March 2010.
Your conduct in provision of that information to the Board constitutes Charge 6.
29 In summary,
· The information supplied by you both to the auditors and the directors was false and misleading in that it did not reflect the true nature and substance of the four transactions to which I have previously referred.
· The reasons initially given by both of you for the payments to Sigma by Schering and Spirit were false.
· Both of you omitted to disclose that, in relation to each of the four transactions, the payments Sigma received were funded by Sigma through the inflation of the purchase price of the drugs bought by it.
30 Further, the half-year and full-year financial reports in question failed to comply with the relevant Australian accounting standards pertaining to Revenue and to Inventory.
Sentencing Principles
31 Section 16A of the Crimes Act 1914 (Cth) provides that a court, when sentencing a person in respect of a federal offence, must impose a sentence that is of a severity appropriate in all the circumstances. The section requires me to take a number of matters into account. Briefly, they include –
· The nature and circumstances of your offending;
· Any course of conduct on your part;
· Your personal circumstances;
· The degree to which you have shown contrition for the offences;
· The fact that you have pleaded guilty;
· The deterrent effect of any sentence on the community;
· The deterrent effect that any sentence may have on you;
· The need to ensure that you are adequately punished for the offence;
· Your character, antecedence, age, means and physical or mental condition; and
· The prospects of your rehabilitation.
32 Further, I am conscious of the provisions of s.17A of that Act, which provide that a court shall not pass a sentence of imprisonment on any person for a federal offence, unless the court, after having considered all other available sentences, is satisfied that no other sentence is appropriate in all the circumstances of the case.
33 There were a number of sentencing considerations which I have taken into account in respect of you both.
Seriousness of Offences
34 Firstly, I consider that the offences committed by you are serious ones. This is reflected by the maximum penalties set by Parliament for those offences. These are:
· For an offence contrary to s.1307(1) of the Act – a fine of 100 penalty units, which on my calculations is $18,000, 2 years’ imprisonment, or both.
· For an offence contrary to s.1309(1) of the Act – a fine of 200 penalty units or $36,000, 5 years imprisonment, or both.
35 Written plea submissions provided to me by both of your counsel were to the effect that your offending was, in effect, technical in nature - mere accounting errors in respect of what would otherwise have been legal conduct. I reject that submission. These offences are, in my opinion, based upon transactions that were simply fictitious.
36 In the end, those submissions were not pressed by either of your counsel. Had they been pressed and had I concluded that they were pressed on specific instructions from either of you, I would have concluded that you had not demonstrated remorse of any significance for your offending.
37 The conduct of both of you was to intentionally inflate Sigma’s revenue and inventory figures in the 2010 half year and full year financial statements in question. As part of such conduct, false and misleading information was given to the Sigma’s Board and to its auditors.
38 When pressed for some explanation for your respective actions, both of your counsel informed me, in as many words that the inflation of those figures had occurred because of (and here I quote Mr Cleland) “pressure being applied by the Board for targets to be met…”.
39 I can only assume that the targets in question were sales targets.
40 Many senior executives involved in the management of companies of various sizes, large, little and small, are given performance targets which the Board of Directors or shareholders hope will be achieved. I accept that the failure to achieve such targets may, in some instances, lead to demotion, dismissal or possible loss of reputation. However, I consider that no desire to achieve performance targets could ever justify the falsification of financial accounts to any degree or the provision of false or misleading information to a Board of Directors or to auditors of a company.
41 It was submitted and I accept, that during the relevant period Sigma was experiencing difficult economic times, described in one submission as “tumultuous”. I accept that both of you would have been under considerable stress over this period, no doubt working long hours and attending to a multitude of significant financial issues. However, I consider that such stresses are part and parcel of the life of a senior management figure associated with large listed public companies. It was submitted that, at the time of these offences, the company’s very ongoing viability may have come into question. Indeed, at around the time of your offending, the value of e Sigma’s goodwill was written down by some $400 million.
42 This may well have been so. However, when a company is experiencing tough financial times, I consider that it would be more important than ever for financial reporting by senior executives to the Board, to the auditors and to the public in general to be accurate.
43 It was submitted on behalf of you both that there was no direct financial gain for either of you as a consequence of these offences. The prosecution does not allege such.
44 I accept that there was no evidence of any direct financial gain for either of you. But I consider that there was likely to have been some indirect benefit for each of you. Your conduct in committing these offences was to inflate revenue figures in order to either achieve targets set by the Board or at least to create better revenue figures than would otherwise have been the case. The effect was that the performance of Sigma, of which you were either CEO/Managing Director on the one hand or Chief Financial Officer on the other, was made to appear somewhat better than it actually was. I consider that this result would have generally reflected well upon both of you and was therefore to your benefit even if not by way of direct financial gain.
45 Nevertheless, I accept that, in the context of a company with a very large turnover and revenue over the relevant period, the inflation of those figures was of a relatively small percentage.
46 Further I accept that there was no evidence that the company’s share price was affected by your offending conduct or that any investor or would-be investor was misled by the financial accounts in question or suffered financial loss as a consequence of their inflated features. I accept that there was no evidence of any victim of your offending, at least in a financial sense.
Delay
47 There has been a delay of some five years since your offending behaviour. There is no suggestion that this delay has been caused by either of you. It is correct that the matter went to a contested committal hearing but I accept that this was in the context of more serious charges relating to conspiracy which were later withdrawn.
48 Such delay has been described by our Court of Appeal as a powerful mitigating factor. I accept that you have both had these matters hanging over your heads for that period and that it has weighed heavily on both of you.
Plea of Guilty
49 I take into account that you have both pleaded guilty to these charges and that such a plea reflects remorse for your offending and also has a utilitarian benefit, in that a lengthy trial has been avoided, witnesses will not be troubled to give evidence at such a trial and Court resources have been saved.
DPP v Couper Distinguished
50 In his submissions regarding sentence, the prosecutor submitted that in considering consistency of sentences for similar offending, the sentence imposed in the matter of DPP v Couper should be considered as being imposed in similar circumstances to your own offending.
51 I consider that there are significant differences between Couper’s offending and that of your own. I accept the submission by both of your counsel to that effect. I have concluded that:
· Couper’s offending was even more serious than your own.
· He was sentenced for additional charges of lying to ASIC.
· His conduct gave the market the impression that his company had actually sold goods resulting in a significant profit when the stock did not exist.
52 Comparing offending behaviour in different cases is usually a difficult task. Each case is to be determined on its own facts.
No Prior Convictions
53 Neither of you have any prior convictions. I am to sentence both of you on the basis that prior to these offences, you were persons of good character.
54 I accept that these matters that I have referred to are mitigating factors in each of your cases.
55 Submissions were also made concerning you each individually.
Mark Smith
56 You are aged 51. At the time of your offending you were aged 46.
57 You are married with four children aged between 13 and 27.
58 Your two sons aged 27 and 22 have very significant health issues. Your son Michael suffers from tuberous sclerosis resulting in benign growths in his heart, brain, and kidneys. The future of that condition is uncertain. He has undergone surgical procedures. In 2014, his partner gave birth to a child who was born with the same condition. The child died at 13 days. Michael has suffered from depression since that event.
59 Your son Christopher suffers from cystic fibrosis and diabetes. The former condition has led to more than 100 hospitalizations. In 22 years he has spent the equivalent of 5 years in hospital. He has undergone double lung transplants on two occasions in 2008 and again in 2015. As recently as 2013 his condition was described as perilous. Currently he suffers from kidney problems caused by immuno-suppressant medication, his sinus infection has created a risk of brain infection and he is scheduled for further surgery later this year.
60 I accept that you and your wife have worked tirelessly and been tirelessly involved in the care of both of your sons for many years, often on a daily basis.
61 An offender’s anguish at not being able to contribute to the care of a family member can be taken into account as a mitigating factor in sentencing. If you were sentenced to a term of immediate imprisonment, I accept that your inability to contribute to the care of your sons would make such a sentence more burdensome for you and, in all likelihood have an effect on Christopher that could properly be described as exceptional circumstances.
62 I have read a number of reports tendered on your behalf from:
· Mr Patrick Newton, clinical and forensic psychologist, dated 11 September 2015 and 30 March 2016.
· Mr Tim Layton, clinical psychologist, one report undated but apparently written between May and September 2015, and a later report dated
28 March 2016.
· Dr Malcolm Hopwood, clinical psychiatrist dated
16 September 2015 and 15 March 2016.
63 I consider that these reports can broadly be summarised in the following terms:
·You have a longstanding history of depressed mood disturbance dating back from your childhood. You experienced panic attacks from the early 2000s and finally sought assistance from a psychologist from about 2006. This was of limited assistance. You suffered specific depressive episodes in May 2010 and later in April 2012, which were treated with antidepressant medication and resolved;
·As a consequence of a combination of your current prosecution and your son’s health problems, you suffered a further depressive crisis;
·Your depression has improved somewhat over the last 12 months. However, your anxiety-related problems appear to have worsened in that period. Your depression is now noted to be in partial remission. Your anxiety remains at a level where you would meet the criteria for a diagnosis of panic disorder;
·Your current treatment with antidepressant medication and individual therapy with your clinical psychologist, Mr Layton, should be continued;
·Your illness is unlikely to come under complete control until your legal issues are fully resolved;
·The opinion of those individuals would be that you would cope relatively poorly with a custodial sentence.
64 A large number of character testimonials were tendered on your behalf. In summary, these indicate that you are a person who has, prior to these offences, been regarded as a person of good character. Your work record is one that many people would envy. I accept that you have been greatly affected by these charges and that they have been of considerable embarrassment to you. You have been described as “shattered” and “broken” by the circumstances of these legal proceedings.
65 A letter from your general practitioner was tendered. It indicates that you currently suffer from severe sleep apnoea, which had been diagnosed in 2011. You require an apparatus each night. Without it, you would develop significant oxygen deprivation.
Elmo De Alwis
66 You are aged 63. At the time of your offending, you were aged between 56 and 57.
67 You were born in Sri Lanka and educated there and, for a year, in the USA. You completed tertiary accounting courses in Sri Lanka and also in the UK.
68 You married in 1974 and migrated to this country in 1975.
69 Almost immediately you obtained employment and remained in full time employment until your offending behaviour came to light.
70 You commenced with Sigma in early 1977 as a cost accountant. You worked your way up in the company until in 2001 you were appointed CEO and Managing Director.
71 In 2005, you were awarded the Chartered Accountants Business Award for the Service Sector for that year.
72 You have two children aged about 35 and 31, each working in responsible positions.
73 You are in reasonable health although you are treated for alimentary problems and for an auto-immune condition for which you are prescribed medication.
74 Since resigning from Sigma in 2010, you have been employed in a smaller pharmaceutical company, management of which were aware of investigations into these offences prior to employing you. You were obliged to resign from that position following your plea of guilty to these offences. Your counsel has informed me that you wish to continue working but that, given these convictions, you are not optimistic of gaining future employment.
75 You also tendered a significant number of character testimonials. I accept that, until these matters became public, you were a person highly regarded in the corporate world for your abilities, honesty, and compassion. Many of those testimonials attest to your many altruistic activities.
Sentences
76 These offences are serious. For senior corporate managers to falsify company books and to mislead and deceive the Board of Directors and auditors can only be viewed as serious offending.
77 Nevertheless, you both come before this Court having pleaded guilty to these offences; having shown remorse for your offending; and with impressive employment records in the corporate world.
78 You both are to be sentenced on the basis that your corporate record prior to this offending was of honest and hardworking executives.
79 Regardless of my sentence, you have both paid a heavy price for your offending already. You have both had to resign from Sigma, ending long and successful careers in corporate management. Your business reputations generally have no doubt been greatly affected.
Discussion of Sentences
80 Before I proceed to my sentence, I just want to clarify with you, Mr Prosecutor, Mr Doyle, a number of matters. My understanding is that in relation to each of these offences, there is a maximum term of imprisonment being two years - is it three years or two years in the case of the offence under - I read it out before - - -
81 MR DOYLE: Two years, Your Honour, in the case of the offences against - - -
82 HIS HONOUR: Two years, s.1307 and five years, s.1309.
83 MR DOYLE: Yes, Your Honour.
84 HIS HONOUR: The fines of 100 or 200 penalty units respectively?
85 MR DOYLE: I believe at the time of the offending,
Your Honour is correct that that is the maximum, 100, 200.
86 HIS HONOUR: That would be the fines that I would take into account.
87 MR DOYLE: At the time of the offending, a penalty unit was less than it is now. It was $110, not $180. So the maximum fines are $11,000 for the breaches of s.1307 and $22,000 for the breaches of s.1309.
88 HIS HONOUR: In my remarks previously I used the words, "Or both". Is that correct?
89 MR DOYLE: Yes, that is correct, Your Honour.
90 HIS HONOUR: Now perhaps I can leap ahead and say this. Subject to what and particularly you say I can or cannot do as a matter of law, it is my intention to impose terms of imprisonment upon each of the charges that these men face. It is also my intention to impose a financial penalty of sorts.
91 I intend to direct in respect of each sentence of imprisonment, that the person involved be released pursuant to s.20(1) of the Crimes Act (Cth) on a Recognizance Release Order commencing this date, provided there is consent to enter into a recognizance with a number of conditions.
92 One of those conditions would be that that person be of good behaviour during the course of that term.
93 Now it was my intention to impose a further condition to that Recognizance Release Order, that both individuals pay to the Commonwealth pecuniary penalty in an amount. I am not convinced that I am able to do so and I am - the pecuniary penalty may either be imposed as a fine straight out in relation to one or more of the charges which the gentlemen have pleaded guilty to, or I can lump it as a pecuniary penalty to the Commonwealth as part of the conditions of the Recognizance Release Order.
94 Perhaps I can just take you to the section or you can take me to the section. For reasons that are alluding me, the Crimes Act 1914 (Cth) is missing. In any event, perhaps you could just check for me the restrictions.
95 From memory, I think it is s.20(1) and then there is sub-sub-s.(a) and (b). Subsection (a) seems to imply where a conviction is not recorded and that would be the case here. These seem to apply where a conviction is recorded but it is not entirely clear to me whether the ability to impose a condition is limited to where a conviction is not - whether the ability to impose a pecuniary penalty to the Commonwealth is restricted to merely cases in sub-s.(a) where a conviction is not recorded, or whether it would extend to sub-s.(b) where a conviction is recorded. Thank you.
96 I am looking here at sub-s.1(a); (i) is the normal good behaviour clause; (iii) is that he or she will pay to the Commonwealth such pecuniary penalty as the court specifies.
97 MR DOYLE: Yes, Your Honour.
98 HIS HONOUR: Now the relevant words that I am concerned about in sub-s.(a) are, "By order release the person without passing sentence on him, upon him giving security with or without sureties by recognizance or otherwise to the following by the Court."
99 Subsection (b), further down the page, deals with where a person is sentenced to imprisonment in respect of the offence, but direct by order, that the person being released and upon giving security of the kind referred to in paragraph (a), either forthwith or after having served a specific period.
100 Does (iii) and for that matter, (i) - that is, be of good behaviour and pay the Commonwealth pecuniary penalties. Am I able to apply both of those to a recognizance where I am passing sentence? The wording of it, as in many of the Commonwealth sentencing provisions, is not easy.
101 The alternative would be to apply a fine as part of the penalty. It is just easier to do it as a lump sum as part of the recognizance.
102 MR DOYLE: If I might just take a moment to make sure we have got - - -
103 HIS HONOUR: Yes, I do not want to rush you.
104 MR DOYLE: Yes, Your Honour. The answer is, firstly,
Your Honour may impose these conditions where a conviction is recorded.
105 HIS HONOUR: That makes sense to me.
106 MR DOYLE: That is the consequence of the wording in s.20(1). Now if Your Honour - - -
107 HIS HONOUR: Yes, the first part, "Where there is a conviction", yes.
108 MR DOYLE: It is where there is a conviction. From there, if Your Honour skips down to sub-paragraph (b), so if
Your Honour has convicted the accused, you may if you think fit, (b), sentence the person to imprisonment in respect of the offence or each offence but direct by order that the person be released upon giving security of the kind referred to in sub-paragraph (a). So that appears to solve
Your Honour's problem. You are passing sentence upon conviction, sentences of imprisonment and sub-paragraph (b) effectively picks up the kind of conditions you may have imposed without passing sentence pursuant to sub-paragraph (a). So in other words, Your Honour can impose the pecuniary penalty listed in (iii) under sub-paragraph (a).
109 HIS HONOUR: Thank you, Mr Doyle. Mr Hill,
Mr Hargreaves, do you want to say anything about that?
110 MR HILL: We would not disagree with that, Your Honour.
Sentences Imposed
111 Mark Thomas Smith, you are sentenced as follows:
· On Charge 1, engaging in conduct in connection with the purchase of Livial and Ozmep products and the accounting treatment thereof, that resulted in the falsification of Sigma’s financial report for the half year ended 31 July 2009, in that Sigma’s revenue and income for that half year was overstated by $3,500,616.43 and inventories were overstated contrary to s.1307(1) of the Corporations Act 2001 (Cth) – you are sentenced to imprisonment for 9 months.
· On Charge 2, engaging in conduct in connection with the purchase of Livial, Ozmep, Sozol and Clovix products and the accounting treatment thereof, that resulted in the falsification of Sigma’s full year financial report for the financial year ended 31 January 2010, in that Sigma’s Other Revenue and income for that financial year was overstated by $15,500,616, inventories were overstated by $11,313,224, prepayments were overstated by $2,000,000, and total equity and profit after tax were overstated by
$9,599,000 contrary to s.1307(1) of the Act – you are sentenced to imprisonment for 9 months.
· On Charge 3, giving information to Price Waterhouse Coopers, the auditor of Sigma, which you knew was false or misleading in a material particular or had omitted from it matters the omission of which rendered the information misleading in a material respect contrary to s.1309(1) of the Act – you are sentenced to imprisonment for 1 year.
· On Charge 4, giving information to the directors of Sigma, which you knew was false or misleading in a material particular or had omitted from it matters the omission of which rendered the information misleading in a material respect contrary to s.1309(1) of the Act – you are sentenced to imprisonment for 1 year.
112 Elmo Ranjan de Alwis, you are sentenced as follows:
· On Charge 1, engaging in conduct in connection with the purchase of Livial and Ozmep products and the accounting treatment thereof, that resulted in the falsification of Sigma’s financial report for the half year ended 31 July 2009, in that Sigma’s revenue and income for that half year was overstated by $3,500,616.43 and inventories were overstated contrary to s.1307(1) of the Corporations Act 2001 (Cth) – you are sentenced to imprisonment for 9 months.
· On Charge 2, engaging in conduct in connection with the purchase of Livial, Ozmep, Sozol and Clovix products and the accounting treatment thereof, that resulted in the falsification of Sigma’s full year financial report for the financial year ended 31 January 2010, in that Sigma’s Other Revenue and income for that financial year was overstated by $15,500,616, inventories were overstated by $11,313,224, prepayments were overstated by $2,000,000, and total equity and profit after tax were overstated by $9,599,000 contrary to s.1307(1) of the Act – you are sentenced to imprisonment for 9 months.
· On Charge 5, giving information to Price Waterhouse Coopers, the auditor of Sigma, which you knew was false or misleading in a material particular or had omitted from it matters the omission of which rendered the information misleading in a material respect contrary to s.1309(1) of the Act – you are sentenced to imprisonment for 1 year.
· On Charge 6, giving information to the directors of Sigma, which you knew was false or misleading in a material particular or had omitted from it matters the omission of which rendered the information misleading in a material respect contrary to s1309(1) of the Act – you are sentenced to imprisonment for 1 year.
113 I consider that, in both of your cases, your conduct constituting these offences formed part of a continuous course of conduct. I direct that each of those sentences be served concurrently.
114 However, in view of your prior records and the fact that you have already effectively lost your company management careers, I direct that, in respect of each of the sentences imposed on you, you should both be released pursuant to s.20(1) of the Crimes Act 1914 (Cth) forthwith on a Recognizance Release Order from this date provided that you consent to enter into a recognizance in the sum of $1,000 to comply with the following conditions:
· Firstly, that you be of good behaviour during the total effective term of your imprisonment; and
· Secondly, in relation to each of you, that you pay to the Commonwealth, a pecuniary penalty in the sum of $25,000.
115 Other matters
116 Are there other matters that I need to deal with?
117 MR DOYLE: Just to confirm, Your Honour stated that the period of the recognizance was the term of imprisonment. Did Your Honour intend to make that period of 12 months?
118 HIS HONOUR: Now you spell out what I have said, that the term of the recognizance should be for the terms of each of the cumulative - well I have indicated that they will be served concurrently, each of those terms of imprisonment on a cumulative basis will be the term of the recognisance.
119 So that would amount to, in the case of each of Mr de Alwis and Mr Smith, it would be three and a half years by my calculations. Namely one year plus one year plus nine months plus nine months. Is my arithmetic correct?
120 MR DOYLE: Yes, Your Honour. The sentence is to commence today?
121 HIS HONOUR: Yes.
122 MR DOYLE: Yes.
123 MR HILL: Your Honour, just in respect to the payment of the pecuniary penalty, might my instructing solicitor just seek some instructions as to the length of a stay that we would seek?
124 HIS HONOUR: You seek to do likewise, Mr Hargreaves?
125 MR HARGREAVES: If I may, Your Honour?
126 HIS HONOUR: Please do.
127 MR HARGREAVES: Thank you, sir.
128 MR DOYLE: Your Honour, my instructor has a form of recognizance release order we are currently amending by hand to reflect the conditions if that is of assistance.
129 HIS HONOUR: That would be required to be signed by
Mr Smith and Mr de Alwis? Or merely by me?
130 MR DOYLE: Certainly by Your Honour and by both accused, yes.
131 HIS HONOUR: Have a look at this. My associate has - it will save you maybe making alterations to a draft by hand. If not, it can be altered in a manner that you may suggest is appropriate if you prefer to stick to the original arrangement.
132 MR DOYLE: We have spotted an error with the typed version. It has got the pecuniary penalty of $25,000 as the recognizance which should be $1000. The penalty should be part of the conditions.
133 HIS HONOUR: Yes. Have you got a computer in court, between the two of you?
134 MR DOYLE: We do not.
135 HIS HONOUR: We will do it here. If you can just indicate the - show it to Mr Hill and Mr Hargreaves before it comes back to us if you would not mind?
136 MR DOYLE: Sure.
137 HIS HONOUR: If you would prefer me to leave the Bench for a short period while that is - - -
138 MR DOYLE: That might be easiest, Your Honour and then we can liaise directly with Your Honour's associate.
139 HIS HONOUR: I do not want to put you under any pressure. I will just stand the matter down temporarily.
140 (Short adjournment.)
141 HIS HONOUR: What was the result, Mr Hill and
Mr Hargreaves in terms of your inquiries of your respective clients in terms of time?
142 MR HILL: A stay of a month, Your Honour, which I understand we get in any event.
143 HIS HONOUR: Yes.
144 MR HARGREAVES: And for me too. Yes, thank you, sir.
145 HIS HONOUR: Is that correct, Mr Doyle, that there does not need to be any formal alteration of condition (b) of the order to read: pecuniary penalty of $25,000 within one month. But it is built into the system?
146 MR DOYLE: Yes, that is what I understand, Your Honour.
147 HIS HONOUR: So the document as it now is, is satisfactory?
148 MR DOYLE: Yes, we do not seek any amendment at all.
149 HIS HONOUR: Yes. Just bear with me for one moment. Yes. Both of these recognizance documents need to be signed by you, Mr Smith and Mr de Alwis and witnessed by my associate.
150 Yes, thank you. Any other ancillary matters of any description?
151 MR HILL: No, Your Honour.
152 HIS HONOUR: Mr Doyle?
153 MR DOYLE: No, Your Honour.
154 HIS HONOUR: Yes, adjourn the court. Thank you.
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