R v Alex

Case •

[2024] NSWSC 1565

•

06 December 2024

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: R v Alex & Ors [2024] NSWSC 1565
Hearing dates: 6 September 2024, 21 and 22 November 2024
Date of orders: 6 December 2024
Decision date: 06 December 2024
Jurisdiction:Common Law - Criminal
Before: Fagan J
Decision:

Sentences imposed as follows:

George Alex:

1. On count 1, conspiracy to cause loss, 8 years.

2. On count 2, conspiracy to deal in proceeds of crime, 8 years (cumulative by 1 year and 3 months on the sentence for count 1).

3. Overall head sentence, 9 years and 3 months with a single non-parole period of 6 years and 2 months.

Lindsay Kirschberg:

1. On count 1, conspiracy to cause loss, 7 years.

2. On count 2, conspiracy to deal in proceeds of crime, 7 years (cumulative by 1 year on the sentence for count 1).

3. Overall head sentence, 8 years with a single non-parole period of 5 years and 6 months.

Gordon McAndrew:

1. On count 1, conspiracy to cause loss, 7 years.

2. On count 2, conspiracy to deal in proceeds of crime, 7 years (cumulative by 1 year on the sentence for count 1).

3. Overall head sentence, 8 years with a single non-parole period of 5 years and 6 months.

Pasquale Loccisano:

1. On count 1, conspiracy to cause loss, 7 years and 6 months.

2. On count 2, conspiracy to deal in proceeds of crime, 7 years and 6 months (cumulative by 1 year on the sentence for count 1).

3. Overall head sentence, 8 years and 6 months with a single non-parole period of 6 years.

Mark Bryers:

1. On count 1, conspiracy to cause loss, 7 years and 6 months.

2. On count 2, conspiracy to deal in proceeds of crime, 7 years and 6 months (cumulative by 1 year on the sentence for count 1).

3. Overall head sentence, 8 years and 6 months with a single non-parole period of 6 years.

Lucas Connell

1. For aiding and abetting an offence by Mark Ronald Bryers of conspiracy to cause loss, 1 year and 6 months, to be released after 8 months under recognisance release order.

Catchwords:

CRIMINAL LAW - sentence - federal offenders - conspiracy to defraud Commonwealth of PAYG tax - conspiracy to deal in proceeds of crime

Legislation Cited:

Crimes Act 1914 (Cth)

Criminal Code (Cth)

Taxation Administration Act 1953 (Cth)

Cases Cited:

Chang v R [2016] NSWCCA 296

Dickson v R [2016] NSWCCA 105

DPP (Cth) v Goldberg (2001) 184 ALR 387; [2001] VSCA 107

El-Chaar v R [2007] NSWCCA 16

Kitson v R [2022] NSWCCA 166

Kljaic v R [2023] NSWCCA 225

R v Adam Cranston [2023] NSWSC 1004

R v Anquetil [2020] NSWSC 995

R v Cartwright (1989) 17 NSWLR 243

R v Dev Menon [2023] NSWSC 768

R v Dunn (No 9) [2014] WASC 61

R v Issakidis [2018] NSWSC 378

R v Kitson [2019] NSWSC 1109

R v Walters [2001] NSWSC 640

Totaan v R (2022) 108 NSWLR 17; [2022] NSWCCA 75

Category:Sentence
Parties: Rex
George Alex
Lindsay Kirschberg
Gordon McAndrew
Pasquale Loccisano
Mark Bryers
Lucas James Connell
Representation:

Counsel
C O’Donnell SC with H Mann, B Anniwell and R O’Donnell - Crown
J Agius SC with E Beljic - Offender George Alex
M Breeze - Offender Kirschberg
D Price - Offender McAndrew
M Pickin - Offender Loccisano
L Brasch - Offender Bryers
C Watson – Offender Connell

Solicitors
Solicitor for the Commonwealth DPP
Matouk Joyner Lawyers - Offender George Alex
Birchgrove Legal - Offender Kirschberg
McGirr & Associates - Offender McAndrew
Kingston Fox - Offender Loccisano
Nyman Gibson Miralis - Offender Bryers
Era Legal - Offender Connell
File Number(s): 2020/216740; 2020/213439; 2020/210570; 2020/212593; 2020/210541; 2020/213459
Publication restriction: None

JUDGMENT

  1. The trial of George ALEX, Lindsay KIRSCHBERG, Gordon McANDREW, Pasquale LOCCISANO and Mark BRYERS commenced on 12 February 2024, on two counts as follows:

1 Conspiracy with the intention of dishonestly causing a loss to the Commonwealth, contrary to s 135.4(3) of the Criminal Code (Cth) (maximum penalty 10 years imprisonment).

2 Conspiracy to deal with money of a value of $1,000,000 or more believing it to be proceeds of crime, contrary to ss 11.5(1) and 400.3(1) of the Criminal Code (maximum penalty 25 years imprisonment).

  1. The object of the conspiracy charged in count 1 was non-remittance of PAYG amounts that were withheld from wages paid in connection with a labour hire business conducted in Queensland. The companies jointly operating the business were GHR Consolidated Pty Ltd (“GHRC”) and Civil Personnel Consolidated Pty Ltd (“CPC”). The proceeds of the offence in count 1 were alleged to have been dealt with pursuant to the conspiracy charged in count 2. The beginning of the charge period for both counts, 1 July 2018, is the approximate date on which four of the offenders commenced to conduct the labour hire business through GHRC/CPC. The four (to whom I will generally refer by surname only, for brevity) were George Alex, Kirschberg, McAndrew and Loccisano. George Alex owned the business. Loccisano acted as a channel of communication between George Alex and Kirschberg and McAndrew. McAndrew was a director of the two operating companies for all but five months of the charge period and Kirschberg was a director for the first year, up to July 2019.

  2. For most of the charge period GHRC carried on business as the trustee of a unit trust. That can be ignored for sentencing purposes. I will refer to the operating entities as one: GHRC/CPC. The Crown’s case at trial was that the first failure to remit PAYG occurred on 7 August 2018. Bryers joined the conspiracy in mid April 2019 as a consultant to the other offenders. The end of the charge period, 21 July 2020, is the date on which the first arrests of the offenders were made. Kirschberg had ceased to do anything significant in furtherance of the conspiracy by the end of July 2019. Bryers took very little part in it after late April 2020.

  3. By 4 January 2019, when George Alex, Kirschberg, McAndrew and Loccisano had been conducting the labour hire business for only six months, the Australian Federal Police (“AFP”) had grounds for suspicion of criminal conduct sufficient to obtain telephone intercept and surveillance device warrants. Recording of the offenders’ conversations, on the telephone and in premises used by them, commenced during the first week of January 2019 and continued for 18 months. That produced an enormous volume of audio evidence, of which the 110 hours played back to the jury was only a small proportion.

  4. The Crown’s opening address occupied six days. Its evidence occupied another 56 days, with several interruptions due to illness of jurors and other participants. None of the accused gave evidence. George Alex called one witness. Each accused tendered documents. Counsel’s closing addresses and the summing were delivered over five weeks, with numerous interruptions, again mainly due to illness of jurors. The jury retired to consider their verdicts shortly after midday on 24 July 2024. They returned verdicts of guilty against the offenders on both counts, sequentially on 21, 22 and 23 August 2024 (T 509, 519 and 524) and 3 September 2024 (T 632). That was 6½ months after arraignment and empanelment.

  5. The course of the investigation and trial may cause the Australian Taxation Office (“ATO”) and the AFP to consider whether early disruption of discovered systemic non-compliance may be a preferable means of protecting the revenue. The authorities could have stopped this fraud in January 2019 when Prime Services (Queensland) Pty Ltd lodged Business Activity Statements (“BASs”) disclosing that it had by then defaulted on remittance of $3.6 million of PAYG withheld from the wages of the workers used by GHRC/CPC. Prompt ATO intervention, utilising the Commissioner’s extensive powers to require production of business records and to conduct examinations on oath, would have prevented $7 million in further revenue losses over the next 18 months of the investigation. Disruption would also have averted the loss of another $3 million in PAYG on the payroll of Superform (Queensland) Pty Ltd. The trial was long because it concerned crimes that were carried out continuously while evidence was amassed during the long investigation. The trial must have incurred many millions of dollars in prosecution legal costs. Approximately $3.6 million of Commonwealth legal assistance has been provided to four of the offenders.

  6. On the basis of the evidence given during the trial and with due regard for what is implicit in the jury’s verdicts, I find the facts of the offending in relation to each count as stated below. The standard of proof beyond reasonable doubt has been applied for findings that increase the objective seriousness and any aggravating circumstances of the offending; facts advanced by the offenders in mitigation have been found on the balance of probabilities.

Lucas James CONNELL

  1. Lucas James CONNELL was named as a co-conspirator in both counts on the indictment of the five principal offenders. However, the Crown accepted his plea of guilty, on 12 February 2024, to one count as an accessory – in the following terms:

Between about 1 January 2019 and 21 July 2020 he did aid, abet, counsel or procure the commission of an offence by Mark Ronald BRYERS against s 135.1(5) of the Criminal Code, namely that Mark Ronald BRYERS dishonestly caused loss to the Commonwealth knowing or believing that the loss would occur.

  1. Connell’s sentence hearing was deferred until after the trial of the other five. It took place on 6 September 2024. An amended agreed statement of facts was supplied to the Court on 5 September 2024. The parties agreed that the Court should take account of findings based on evidence received in the trial. That approach is favourable to Connell because the evidence tended to show that he was only minimally and peripherally involved in Bryers’ principal offending.

  2. For the purpose of Connell’s sentence, it is agreed between him and the Crown that Bryers’ offending as a principal included both involvement with the other offenders in non-remittance of PAYG from GHRC/CPC’s payroll between April 2019 and 21 July 2020 and similar conduct with respect to the payroll of Superform (Queensland) Pty Ltd (“Superform”) between March and July 2020. Superform was a formwork contractor operating in Queensland in 2020. The company and its business were entirely discrete from GHRC/CPC and its labour hire business. The conspiracy to defraud charge of which Bryers has been convicted went to the jury only on the basis of his involvement with the payroll of GHRC/CPC and not that of Superform. Bryers is to be sentenced on that limited basis whereas Connell is to be sentenced for aiding and abetting Bryers in causing non-remittance of PAYG for both enterprises.

Statutory obligations to deduct and remit PAYG

  1. Sections 12-35 and 16-70 of Schedule 1 of the Taxation Administration Act 1953 (Cth), in the terms in which they were in force throughout the charge period, required a payer of wages to withhold PAYG at the rates promulgated by the ATO and to remit the amounts withheld to the Commissioner of Taxation. The sections are in the following terms:

12-35 Payment to employee

An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

16-70 Entity to pay amounts to the Commissioner

(1)   An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision.

16-140 Withholders must be registered

(1)   An entity that must pay an amount to the Commissioner under

(a) subsection 16-70(1) (about amounts withheld under Division 12)

[…]

must apply to register with the Commissioner.

  1. The time limits for remittance are specified in s 16-75. An entity paying the wages of the labour hire workforce utilised by GHRC/CPC would be withholding in excess of $1,000,000 per annum and would therefore be a “large withholder” within the meaning of the Taxation Administration Act (s 16-95). The wage-paying entity would therefore be required to remit PAYG within eight days after each payday.

  2. Commencing from 1 July 2018, the ATO introduced Single Touch Payroll (“STP”), whereby payroll software used by wage-payers is electronically connected to the ATO. Under STP, when a payrun is put through the software there is automatically transmitted to the ATO information about gross wages paid, PAYG withheld and superannuation contributions.

Overview of the offending in count 1 – conspiracy to defraud

Modus operandi

  1. The conspiracy to cause loss to the Commonwealth, that is, to defraud the Commissioner of Taxation, was put into effect by very simple means. GHRC/CPC did not directly employ the 200 or so workers whom it hired out to construction industry clients. The workers were employed by two companies controlled by Kevin McHugh: Global HR Pty Ltd (“Global HR”) and Civil Personnel Services (Aust) Pty Ltd (“CPS (Aust)”). McHugh had run the labour hire business through those two companies for some years prior to July 2018, from which time GHRC/CPC took it over. GHRC and CPC, like McHugh’s companies before them, derived income from construction companies that paid by the hour for workers hired to them.

  2. McAndrew was the general manager of GHRC/CPC throughout the charge period. He was a director of both companies for most of that time. He worked full-time in the companies’ office, located between Brisbane and the Gold Coast. Kirschberg lived in Sydney and carried on other business activities from there. He visited the GHRC/CPC office infrequently. Until the end of July 2019 Kirschberg was often in phone contact with McAndrew to discuss the business. GHRC/CPC employed an office manager, Ms Robyn Turkington. A few office assistants worked under her and a young in-house accountant, Ms Amy Dorling, worked on contract to the companies. The workers who were hired out to construction clients were organised and directed by site managers who had their headquarters at the office. The office workers and site managers are referred to hereafter, collectively, as staff.

  3. Kirschberg received financial information about the labour hire business by email from Ms Turkington and Ms Dorling and he instructed Ms Dorling to carry out accounting and reporting tasks from time to time. After July 2019 his phone and email communications with McAndrew and others in the GHRC/CPC office were markedly less frequent and were for the most part confined to discussion of legitimate aspects of the business.

  4. To maintain the availability of the labour hire workers, GHRC/CPC had to ensure that they were paid their wages, superannuation and other entitlements, irrespective of who directly employed them. The weekly net pay of each worker was calculated by the office staff of GHRC/CPC under the direction of Ms Turkington. Each week Kirschberg and McAndrew, as directors and bank account signatories of GHRC/CPC, caused the total of the workers’ net wages to be transferred from GHRC/CPC into a bank account in the name of an intermediary company. Ten different intermediary companies were used in succession over the charge period.

  5. The directors and bank account signatories of the intermediaries acted on the instructions of Kirschberg, McAndrew and, later, Bryers and Loccisano. The conspirators directed the signatories to distribute net wages to the workers each week by electronic multi-pay transfers from the intermediaries’ accounts. The conspirators did not put into those accounts funds for remittance of the PAYG that was withheld from the wages. They made no other arrangement for remittance. They intended and agreed that PAYG withheld would not be paid to the Commissioner but would be applied to their personal purposes, principally those of George Alex.

  6. During most of the charge period the net wages of GHRC/CPC’s staff were also transferred each week into the bank account of an intermediary and distributed from there by electronic multi-pay. Again, no funds to cover the PAYG withheld from the staff wages were deposited to the intermediaries’ accounts and no other arrangement for remittance of PAYG was made.

Quantum of the loss to the Commonwealth

  1. The number of labour hire workers engaged in the GHRC/CPC business varied significantly from week to week while the conspiracy was on foot and declined significantly in 2020. There were corresponding variations in the weekly PAYG withholding amounts. The average amount withheld each week from the wages of labour hire workers, disregarding the annual construction industry shutdown around Christmas, was approximately as follows in the periods indicated:


Period

Approx average weekly PAYG withheld from labour hire workers’ wages

August to mid-December 2018

$132,000

Late January to late May 2019

$116,000

End May to mid-December 2019

$123,000

Late January to 20 July 2020

$71,000

  1. The amounts of PAYG withheld and not remitted are necessarily estimates, calculated retrospectively by the ATO by inference from the amounts of net pay distributed. A rigorous method of estimation has been used and the resulting figures have not been challenged by the offenders. The total amounts of PAYG not remitted during the charge period were as shown in the following tables. As the dates in the left-hand column indicate, the use of a particular intermediary sometimes overlapped with the use of another intermediary or with distribution of net pays directly from GHRC/CPC’s bank accounts.

LABOUR HIRE WORKERS

Range of pay dates

Intermediary

$PAYG not remitted

7 Aug 18 - 24 Jan 19

Prime Services (Queensland) Pty Ltd
(“Prime”)

1,992,941

25 Sep 18– 14 Nov 18

[GHRC]

839,276

30 Jan 19 – 11 Apr 19

CPC Queensland Services Pty Ltd [with ACN ending 543]
(“ACN 543”)

371,727

30 Jan 19 – 2 May 19

GHRC Queensland Services Pty Ltd [with ACN ending 481
(“ACN 481”)

1,249,046

9 May 19 – 24 May 19

CPC Queensland Services Pty Ltd [with ACN ending 797]
(“CPC Qld 797”)

105,117

9 May 19 – 24 May 19

GHRC Queensland Services Pty Ltd [with ACN ending 706
(“GHRC Qld 706”)

282,116

30 May 19 – 28 Feb 20

Australian Priority Invoicing Pty Ltd
(“API”)

3,992,341

5 Mar 20 – 23 Apr 20

Australian Office Administration Pty Ltd
(“AOA”)

391,803

29 Apr 20 – 13 May 20

North West Hire Services Pty Ltd
(“NWHS”)

177,790

20 May 20 – 15 Jul 20

QT Inland Management Pty Ltd
(“QTI”)

564,541

Total

9,966,698

STAFF

Range of pay dates

Intermediary

$PAYG not remitted

7 Aug 18 - 27 Mar 19

Prime Services (Queensland) Pty Ltd
(“Prime”)

270,215

25 Sep 18 – 14 Nov 18
&
7 Feb 19 – 23 May 19

[GHRC]

103,818

8 Apr 19

ACN 481

6,964

9 May 19 – 22 May 19

CPC Qld 797

2,691

9 May 19 – 7 Aug 19

GHRC Administration Pty Ltd

80,160

9 May 19 – 20 Feb 20

API

107,490

5 Mar 20 – 30 Jun 20

AOA

95,877

19 Mar 20 – 15 Jul 20

[GHRC]

48,115

13 May 20 – 15 Jul 20

[CPC]

24,560

Total

739,890

  1. The estimated total of PAYG not remitted, as shown in the above tables, is $10,706,588. Of that, between $500,000 and $600,000 was recovered by the ATO by “involuntary payments”, being amounts garnisheed from bank accounts together with credits for GST or income tax. After deduction of the involuntary payments the net estimated total loss is approximately $10,120,000. There are slight discrepancies between figures given at various places in the evidence and in the submissions on sentence. The discrepancies are not significant because all components of the total figure for unremitted PAYG are estimates.

Inferences of intent and agreement amongst the conspirators

  1. Kirschberg and McAndrew obviously knew that insufficient funds were transferred into the intermediaries’ accounts each week to cover remittance of PAYG – because they effected, or authorised, the transfers. They knew that the intermediaries would not remit PAYG because those entities were not provided with any funds from which to do so and had no resources of their own. The only intermediary in relation to which that was contested was Prime. Both at trial and in the sentence proceedings, most of the forensic effort in the cases for George Alex, Kirschberg, McAndrew and Loccisano was directed to trying to raise a reasonable doubt along the lines that those four offenders may have thought that Kevin McHugh, nominally the principal of Prime, would pay the PAYG. For reasons given below there is no reasonable doubt in that respect.

  1. Bryers did not participate in the factual dispute concerning Prime. It was alleged by the Crown that he joined the conspiracy only after its bank accounts had ceased to be used. From then on Bryers, like the others, was well aware that the subsequent intermediary companies received funds only sufficient to cover net wages and had no independent resources from which to remit PAYG.

  2. During the relatively brief periods in which GHRC/CPC paid labour hire workers or staff directly rather than through an intermediary, again it was obvious to Kirschberg and McAndrew that PAYG was not remitted. Being obvious, the non-remittance was necessarily intended by them and agreed.

  3. Evidence concerning the management of the labour hire business from July 2018 until the arrests two years later established that George Alex asserted full ownership and the right to make all decisions affecting the business. His assertions of ownership, authority and control were accepted and acted upon by Kirschberg, McAndrew and Loccisano at all relevant times. They were accepted and acted upon by Bryers from mid April 2019 when he became a consultant to the other offenders.

  4. George Alex was declared bankrupt in 2011 and remained undischarged throughout the period of the conspiracies. His directions with respect to GHRC/CPC were frequently communicated through Loccisano to McAndrew, Kirschberg and Bryers. Their requests for approval of actions were likewise conveyed through Loccisano to George Alex. George Alex did not assume any formal role or office in GHRC or CPC or in any of the associated companies. He did not have an email address. He used telephone services sparingly. Those precautions were in part adopted for the purpose of evading the administration of his bankruptcy, by obstructing the vesting in his trustee of property acquired after the date of bankruptcy and before discharge.

  5. Having regard to George Alex’s control over GHRC/CPC and his dominion over McAndrew, Kirschberg, Loccisano and Bryers with respect to the business and the distributions of its funds for personal purposes, it is inconceivable that any of them would have taken the steps they did to cause non-remittance of PAYG without George Alex’s agreement and instructions. The inference of George Alex’s agreement is supported by the fact that none of the others received financial dividends proportionate to the risk of financial and criminal liability that they were taking. Also, Kirschberg, McAndrew and Bryers at various times expressed reluctance and discomfort about the non-payment of PAYG and the risk to themselves. They would not have pressed on with the fraud, relatively poorly rewarded and in a state of anxiety, while keeping the whole exercise secret from the owner of the business who was receiving the lion’s share of proceeds.

Offenders’ reasons for using intermediaries in the conspiracy to defraud

  1. Intercepted phone conversations between Kirschberg, McAndrew and Bryers make it clear beyond reasonable doubt that all three believed, wrongly, that the obligation to remit PAYG rested with the direct employer of the wage earners, rather than with the entity that distributed the net pays. As far as possible they tried not to distribute from GHRC/CPC’s accounts, in order to avoid the appearance that those entities were employers. Intending that no PAYG would be remitted and believing that a financial liability of the employer to the Commissioner would arise, they sought to ensure that GHRC/CPC would not be seen as the employer. Kirschberg and McAndrew, especially, were aware that they would face personal financial liability under Director Penalty Notices if the companies in which they held office, GHRC and CPC, were deemed responsible for the PAYG debt.

Aspects of gravity in the conspiracy to defraud

  1. The gravity of the offending in count 1 lies in the amount of loss caused to the Commonwealth ($10.120 million), the length of time over which the conspiracy was carried out (22 months), the recurrent misappropriation during that period (in the order of $100,000 plus each week) and the persistence of the offenders in utilising one intermediary company after another, particularly following ATO enforcement action against two of the entities in March 2019 (Prime) and in March 2020 (API). The criminality involved in count 1 is not aggravated by the use of sophisticated corporate structures or complex transactions. The fraud on the ATO was crude. The conspirators just calculated PAYG, deducted it from wages and kept it for their own purposes instead of sending it to the Commissioner. Their use of intermediary wage paying entities was a simplistic device for trying to keep financial liability for the default away from themselves. Nothing they did concealed the transparency of their deliberate non-remittance. The only attempt to create deniability of fraudulent intent was the execution by Kirschberg and McAndrew of two Payroll Services Agreements with Prime. As considered below, those Agreements were so obviously not performed in fundamental respects that they were relegated to the status of a sham.

Overview of count 2 – conspiracy to deal in proceeds of crime

  1. Between 9 November 2018 and 23 December 2019 approximately $100,000 per week was transferred from either GHRC or CPC to one of three companies controlled by Loccisano, either D & B Plant Hire Pty Ltd, Online Distribution & Supply Pty Ltd or Pasloc Pty Ltd. From those companies Loccisano caused the funds to be distributed to family members and associates of George Alex, as George Alex directed. From 13 January 2020 regular weekly payments from GHRC/CPC resumed and continued until 27 May 2020 – but in a reduced amount reflecting a decline in turnover of the labour hire business. In the period May 2019 to February 2020 the regular weekly payments were not made directly from a bank account of either GHRC or CPC but through an account of API, the intermediary that was then being used for the payment of net wages to the workers.

  2. In addition to the regular weekly transfers through Loccisano’s companies to the benefit of George Alex, there were regular payments in the nature of a salary to each of Kirschberg and McAndrew. There were also regular payments of consulting fees to Bryers. Other ad hoc payments were made to the individual benefit, variously, of the conspirators.

Detail of the facts of count 1 – conspiracy to defraud

Kevin McHugh’s conduct of the business before July 2018

  1. In about 2012, when McHugh was running the labour hire business through entities bearing various names that included the title “Global HR”, George Alex and an associate, Joseph Antoun, claimed that they were entitled to a majority interest. McHugh and his business associates disputed the claim. The dispute led to the execution of a deed on 11 March 2013, pursuant to which McHugh and others promised to pay to George Alex and Joseph Antoun a total of $12 million by instalments over 15 months. The deed expressly provided that McHugh was liable for $5 million of the total. It was a term of the deed that failing payment in full the promisees would be entitled to terminate it and require transfer to themselves of all issued shares in a named parent company.

  2. On 20 March 2013 McHugh paid an instalment of $1,000,000 due under the deed but thereafter he defaulted. Although consent orders were subsequently made in this Court declaring the deed “void, unenforceable and of no effect”, on 15 August 2017 McHugh as director of Global HR signed an acknowledgement that the debt was due under the deed and that it would “be paid to [George Alex] in weekly instalments from the Global business”. McHugh was induced to make this acknowledgement by an official of the Construction Forestry and Mining Employees Union (“CFMEU”) who said that if he did not “sort out the debt with George” then his company’s Enterprise Bargaining Agreement with the union “will not be renewed and … may be withdrawn”. Without an Enterprise Bargaining Agreement McHugh would not have been able to trade in the field of labour hire.

  3. The letter of acknowledgement of debt included a further undertaking to the effect that during the period in which McHugh would continue to pay instalments of the $12 million, he and his companies and others would pay all taxes and other statutory obligations incurred in the labour hire business and all debts due to creditors. In performance of those promises, between late August 2017 and 30 June 2018 McHugh caused a total of $1.28 million to be paid to two companies controlled by Loccisano. Those companies received the money on George Alex’s behalf. By about August 2018 the balance of the original debt was approximately $9 million.

Takeover of the business by the offenders through GHRC and CPC

  1. In early 2018 McHugh was continuing to operate the labour hire business through Global HR and CPS (Aust). In April 2018 he was in financial difficulty. He had received notice from his bank that it would no longer provide finance against invoices rendered by his companies to their construction industry clients. Through channels that were not identified in the trial, George Alex and Kirschberg learned in about April 2018 that the business was close to failure in McHugh’s hands. On 11 April 2018 Kirschberg sent an email to George Alex in the following terms:

After looking at the labour hire opportunity in Qld it is clear to me that I should simply await the inevitable demise of GHR and pick up the pieces. I will continue my preparation of Skillology to be fully compliant with Qld and NSW requirements and aggressively target the Qld clients as you suggest.

  1. Skillology was the then name of GHRC, which Kirschberg controlled. On 1 June 2018 he caused its name to be changed to GHR Consolidated Pty Ltd. He also caused CPC to be incorporated on 27 April 2018, with GHRC as its sole shareholder. Kirschberg held the two companies ready to take over the labour hire business from McHugh’s entities. He was a director of both GHRC and CPC from early in the charge period.

  2. McAndrew was a career banking officer until early 2018 when he retired from employment with Westpac after 11 years’ service as a manager. He met McHugh as a client of Westpac. After leaving the bank he commenced to assist McHugh with the business while it still belonged to McHugh. I infer that he first met George Alex and Kirschberg when they were in the process of taking over from McHugh in mid 2018.

  3. By the beginning of July 2018 bank accounts had been set up for GHRC and CPC with Kirschberg and McAndrew as signatories. From the middle of that month GHRC and CPC commenced to receive deposits to those accounts from construction industry clients, indicating that the two companies were by then conducting what had been McHugh’s labour hire business. The workers continued to be employed by McHugh’s companies. Global HR employed CFMEU members. They were made available to GHRC for deployment to clients who operated unionised sites. CPS (Aust) employed non-unionists who were made available to CPC for hiring out to other construction industry clients.

  4. No evidence was led in the trial or on sentence to show that the employment of any of the workers with Global HR or CPS (Aust) was terminated in July 2018, or that they were rehired by some other employer, or that new workers who may have been taken on after July 2018 were engaged by an employer other than Global HR or CPS (Aust). The evidence is not clear enough to support a finding as to how long those two companies continued to be the employers of the labour hire workforce that was used in the GHRC/CPC business.

Management of the labour hire business by McAndrew, Kirschberg and staff

  1. GHRC/CPC initially had insufficient receipts from construction industry clients to cover the wages of the labour hire workers. During the first eight weeks of those companies’ conduct of the business, in July and August 2018, Loccisano made weekly deposits to Prime’s bank account in amounts sufficient to cover the net pays of the labour hire workers. Prime was incorporated on 2 November 2006. Kevin McHugh was its sole director, secretary and shareholder at all times. The total of the deposits by Loccisano was $1.8 million. Individual net pays were transferred electronically from Prime’s bank account to the numerous bank accounts of the workers commencing from 10 July 2018.

  2. At trial George Alex’s counsel argued that the deposits from Loccisano’s company to Prime represented a loan from George Alex to Kevin McHugh. I accept that the deposits came from money under the control of George Alex but their true character was an injection by George Alex of initial working capital into the business that he had taken over, in the name of GHRC/CPC, from the beginning of July 2018. The money put into Prime’s account was used to fund the wages expense that GHRC/CPC had to meet in order to carry on the labour hire business that now belonged to George Alex, not to Kevin McHugh. No doubt George Alex desired to recover the $1.8 million from the business as quickly as possible but in doing so he would be recovering working capital that he had outlaid to his own enterprise, not loaned to McHugh.

  3. Counsel submitted to the jury that George Alex thought McHugh was still indebted to him for millions of dollars under the deed of 11 March 2013 and the acknowledgement of 15 August 2017. I accept it is possible that George Alex, rightly or wrongly, perceived that a large balance was still owing by McHugh notwithstanding that he had from 1 July 2018 acquired full beneficial ownership of the labour hire business. Although the business was now his, George Alex may have considered that getting money out of it was in some sense enforcement of his old claim against McHugh. He may also have considered that he was entitled to remuneration out of the business by way of commission for introducing work.

  4. Whatever the state of his understanding about the basis of his various claims, I am satisfied that from 1 July 2018 George Alex was determined to take out of the labour hire business as much money as he could as quickly as he could. In a loose sense he may have thought that what was now his own labour hire business owed him millions of dollars, either on an historical basis reflecting his dispute with McHugh from six years earlier or on the more current basis of his injections of funds and his introduction of clients.

Distribution of net wages through Prime’s bank accounts – August 2018-March 2019

  1. As earlier mentioned, from 7 August 2018 GHRC/CPC commenced to deposit weekly amounts into a Prime bank account to cover the net wages of the labour hire workers and staff. Supplemental deposits from Mr Loccisano’s company were required on some dates in August to fund the net wage distributions. Each week there were received at the GHRC/CPC office timesheets from the labour hire workers who had been deployed to worksites of the companies’ clients. Office staff under Ms Turkington’s direction entered the timesheet data into a payroll program. They did the same with the staff hours.

  2. Once the data had been entered, the software would calculate the gross pay due to each individual, the amount of PAYG to be withheld and any entitlements in addition to the individual’s hourly rate. The software generated payslips, which the GHRC/CPC office staff sent out to the workers by email. The software also generated an ABA file; that is, a listing of the net pay amounts due to each individual, with account names and identifying numbers, capable of being uploaded to the Prime bank account to effect multi-pays of net wages to the workers and staff. The whole of this weekly activity was referred to throughout the case as “payroll processing”. Ms Turkington continued uploading weekly ABA files to Prime’s first bank account, Ex 1/TB-946, until mid-September 2018.

  3. From late September to mid-November 2018 net pays were distributed to the workers and staff directly from a bank account of GHRC. During those months Ms Turkington uploaded the weekly ABA files to that account. Then a new account was opened in the name of Prime (Ex 1/TB-947) with Ms Turkington as a signatory. Commencing in November 2018 weekly transfers from GHRC/CPC were made into the new Prime account in amounts sufficient to cover net wages. Ms Turkington proceeded as before, uploading ABA files to effect distributions. There were also transferred from GHRC/CPC into Prime’s bank account funds to cover workers’ superannuation contributions and other entitlements. Those additional payments were funded approximately monthly, with electronic transfers from Prime’s account to the bank accounts of superannuation funds and workers’ benefit trusts. This continued up to and including the pay run of 22 January 2019.

  4. The regular weekly transfers from GHRC/CPC into Prime’s bank account were only sufficient to cover net wages. Once the net distributions to the workers and staff members had been debited, following uploading of the ABA files for the week, the balance of Prime’s bank account was reduced to approximately the level at which it had stood prior to the payday transfer from GHRC/CPC. The Crown tendered Ex 45/TB-120 comprising 23 Weekly Analysis Excel spreadsheets, in electronic form, for the weeks ended 10 June 2018 to 18 November 2018. For the week ended 8 July 2018, when GHRC/CPC’s conduct of the business commenced, and thereafter, the spreadsheets showed the total estimated net wages of workers and staff for the week. Ms Turkington prepared the Weekly Analysis spreadsheets, taking the total net wages figures from the payroll software into which timesheet data was entered. The amount shown on the spreadsheets as net wages was the amount, subject to rounding, that was then transferred from GHRC/CPC to the Prime bank account for distribution.

  5. From 7 August 2018 the bank accounts in the name of Prime functioned for all practical purposes as additional accounts of the GHRC/CPC business. Prime was not an arms length entity. Ms Turkington effected transactions on the Prime accounts at the direction of McAndrew. I am satisfied beyond reasonable doubt that from at latest 7 August 2018 Prime was nothing more than a corporate name or shell. Apart from Ms Turkington operating its bank account as directed by McAndrew and accountants lodging its BASs with the ATO on 25 January 2019 (explained further below), there was no one conducting Prime’s affairs and it had no affairs to conduct. Kirschberg and McAndrew had available to them the figures for gross wages due each week, from the timesheet data that was entered into GHRC/CPC’s payroll software by the companies’ office staff. They did not cause gross wages to be paid into Prime’s bank account each week because they did not intend that the PAYG withheld would be remitted from that account to the Commissioner.

Cessation of payment of labour hire workers through Prime’s bank account

  1. On 25 January 2019 McAndrew learned that accountants retained by McHugh proposed to lodge BASs for Prime. On that day he told Loccisano, “We’re not going to be able to run anything through Prime anymore”. No further labour hire pay runs were paid from the Prime account. McAndrew continued to transfer funds into the Prime bank account for the payment of staff net wages, on pay dates 29 January 2019 to 20 March 2019 inclusive. Those pay runs were about $24,000 per week, compared to over $300,000 per week for the labour hire workers. The continued use of the Prime account for the limited purpose of paying staff involved the risk of only a modest loss if the ATO should garnishee the account for unremitted PAYG.

  2. BASs were lodged on behalf of Prime on 25 January 2019, disclosing that it had failed to remit $3.63 million of PAYG for the quarters ended 30 September 2018 and 31 December 2018. (That figure is greater than the amount for those two quarters for which the Crown has sought to hold the offenders criminally responsible, by reason of an imperfectly explained analysis that the Crown has made of the source of funds used to distribute net wages). On 29 January 2019 Kirschberg told Loccisano, “the Prime intermediary … is out of the picture”. On 11 February 2019 McAndrew told Kirschberg that the Prime bank account was still active but “we don’t know for how much longer … we don’t know when the ATO’s just going to go bang with the garnishee”. The ATO went “bang” on 29 March 2019 but by that date there was only $663.02 in the account.

  1. Kirschberg’s statements about not being “able to run anything through Prime anymore” and referring to “the Prime intermediary”, are revealing. He made other similar statements, at various times, about “putting [funds] through” the bank accounts of Prime and, later, other entities. The language used supports the conclusion that Kirschberg and McAndrew used the Prime accounts as mere passive conduits. They sought to forestall a conclusion by the ATO that GHRC/CPC was the payer of wages, or the employer, that would be liable for unpaid PAYG.

  2. According to a tracing exercise carried out by Ms Celona, the total amount transferred from GHRC/CPC to bank accounts of Prime in the period 17 July 2018 to 24 January 2019 was approximately $9,328,762. Ms Celona traced $6,566,479 of that sum to the payment of net wages and other worker entitlements. Another $918,709 was traced from Prime’s bank accounts to various interests of McAndrew, McHugh and an associate of George Alex, as well as substantial cash withdrawals. When the last of the Prime bank accounts ceased to operate it held the negligible credit balance of $663.02, as referred to above. Of the total funds that had been transferred into Prime’s accounts from GHRC/CPC, the disposition of $1,843,574 was not traced. It certainly did not go towards payment of PAYG. In the period during which Prime was the intermediary, the total unremitted PAYG, that should have been paid in respect of wages funded by GHRC/CPC, was $2,263,156.

  3. The absence of tracing of the $1,843,574 does not give rise to any doubt that the offenders intended there to be no remittance of PAYG withheld during the period in which Prime was used as a wage paying intermediary. Given the size of GHRC/CPC’s payroll, PAYG was required to be remitted within eight days of each distribution of net pays. It is apparent from the Prime bank statements that the weekly cycle of transfers from GHRC/CPC never permitted this. Further, I am satisfied beyond reasonable doubt that the offenders were well aware that no person purported to be acting in the affairs of Prime or to be assuming responsibility for causing remittance of PAYG.

  4. In submissions on sentence, as in their addresses to the jury, counsel for each of George Alex, Kirschberg, McAndrew and Loccisano urged that it was a reasonable possibility that those four thought McHugh would separately fund and remit the PAYG that was withheld from the workers’ wages during the period in which Prime’s accounts were used. It was submitted that on the basis of that reasonable possibility the Court should not infer beyond reasonable doubt that those offenders must have intended non-remittance during the Prime period and therefore should not find that the conspiracy to defraud commenced any earlier than January 2019, when different intermediary companies commenced to be used.

  5. Kirschberg, McAndrew and Loccisano endeavoured to sustain this possibility on the basis of two Payroll Services Agreements entered into with Prime by GHRC and CPC. They argued that the Agreements obliged Prime to remit the PAYG of labour hire workers and that the offenders would have believed the obligation was performed and that McHugh would see to its performance. The Payroll Services Agreements must therefore now be considered at length. George Alex sought to sustain the reasonable possibility that McHugh was remitting PAYG on the basis that McHugh owed him a lot of money and that remittance would be a way of incrementally discharging that debt.

Payroll Services Agreements between GHRC/CPC and Prime

  1. In August 2018 Kirschberg and McAndrew retained a solicitor to prepare the Payroll Services Agreements. They were duly drawn up and were executed on 16 August 2018 – by McHugh as director of Prime and by McAndrew and Kirschberg as directors of GHRC and CPC. Each Agreement commenced on 18 June 2018 and would continue for 12 months, with the following provisions:

“Fees” were defined as the charges described in an attached schedule. The schedule to the GHRC Agreement listed eight classifications of workers, including “Labourer”, “Dogger, Rigger”, “Carpenter” and so on. For each classification there were listed three “Prime EBA Rates”: for ordinary time, time and a half and double time, respectively. The CPC agreement had a similar schedule of Fees specifying hourly rates for each of 10 categories of labour.

Clause 2 provided that in consideration for “the Client” (GHRC or CPC) paying the Fees, Prime would perform Services including, first, weekly payroll processing. That would be carried out on the basis of workers’ timesheets and would include issuing payslips and paying weekly wages. A second service would be the supply of workers as required by the Client.

By cl 3 it was agreed that GHRC or CPC could create invoices on Prime’s behalf, in which case an opportunity to review would be afforded to Prime before finalisation of each invoice.

Clause 8 obliged Prime to pay all statutory charges in respect of the workers, including PAYG, superannuation, workers’ additional entitlements and payroll tax.

Cl 10 required GHRC or CPC to pay the Fees in consideration for Prime providing the Services, as defined in cl 2, subject to receipt of invoices from Prime.

  1. Despite the titles of the Agreements, on their face they were not merely contracts for payroll processing services. Under agreements of that nature an employer transfers a large weekly lump-sum to a payroll contractor together with time data and pay rate information. The contractor enters the data into suitable software, calculates gross and net pay and other worker entitlements, distributes net individual pays, issues payslips, remits PAYG and so on. The Payroll Services Agreements with Prime went beyond this. They were premised on the workers not being employees of GHRC/CPC but being “supplied” by Prime, on the basis that either Prime or some other entity from whom it obtained the workers was the employer. Clause 9(a) included the following:

9(a)   Nothing in this Agreement constitutes an employment relationship between […] the Client and the Service Provider’s workers (such as the employees, agents or sub- contractors of the Service Provider). No relationship of employer and employee is created by this Agreement.

  1. In substance these purported on their face to be agreements for the hire of labour from Prime to GHRC/CPC. As GHRC/CPC were not to be employers of the workers supplied, Prime’s undertaking to GHRC/CPC that it would carry out the pay calculations, issue payslips, transfer pays to the workers, remit PAYG and so on, was not essential to either Agreement. Those obligations, being incidents of the employment relationship, would fall upon whoever was the payer of wages to the workers – Prime or some other entity from whom it obtained the workers. GHRC/CPC was not the payer of wages to the workers but the payer of labour hire Fees to Prime as its labour supplier. Although not central, the promise of Prime to ensure that all the obligations of a wage payer were satisfied and thereby to maintain good financial standing vis-à-vis the workers and relevant statutory authorities had commercial utility.

Each of the Payroll Services Agreements with Prime was a sham

  1. The Crown opened to the jury that the Payroll Services Agreements were shams on the basis that “it was people within GHRC's own office … who actually provided the payroll services by doing the clerical work to make it happen”. In closing, the prosecutor repeated that submission using substantially the same language. There were other respects in which the Agreements were not observed by either party.

  2. Contrary to the terms in which counsel for one of the accused addressed the jury, the unchallenged evidence was that the weekly transfers from GHRC/CPC into Prime’s bank account were not made against invoices from Prime and were not in amounts calculated at the Fee rates stipulated in the Agreements. Only the workers’ net pays for the week were transferred to Prime in each pay cycle, in one or more total sums. The net pays were at hourly rates very much less than the Fees in the schedules. Also, the weekly transfers for wages from GHRC/CPC to Prime’s bank account were made without invoices from Prime. Any invoices that were raised were prepared retrospectively by GHRC/CPC personnel in the name of Prime. Ms Dorling said that from “probably late 2018” she was requested by McAndrew and/or Kirschberg to prepare invoices from Prime “after-the-fact”. In doing so she inserted a total amount payable that was either derived from data in the payroll software or was simply a “clearing amount”, that is, an amount that had been transferred by GHRC/CPC to Prime and, in the absence of any invoice, had been initially posted to a clearing account in the bookkeeping software. The invoices were not prepared by extension of the hours for each category of worker applied to the corresponding rate in the Fee schedule.

  3. Consistently with her evidence that “there wasn't anyone sort of there running [Prime]”, Ms Dorling gave no evidence that anyone on behalf of Prime was given an opportunity to review the invoices that she prepared in its name. On Ms Dorling’s evidence there was no one on behalf of Prime to carry out a review of invoices. She was not cross-examined to suggest that any such review was ever sought or undertaken by anyone purporting to represent Prime.

  4. The only invoices from Prime to GHRC/CPC that were tendered and explained in evidence were a group that had been prepared by Ms Dorling in June 2019, on Kirschberg’s instructions, in respect of the period late January 2019 to the end of April 2019. Those invoices were prepared after the offenders had ceased to pay labour hire workers’ wages from Prime’s bank accounts and they covered periods extending beyond the utilisation of Prime’s accounts.

  5. Kirschberg’s June 2019 instructions to Ms Dorling included the amounts that were to be shown on the invoices. He emailed to her spreadsheets purporting to show the total numbers of hours worked during each weekly pay period from the last week of January 2019 through April 2019, multiplied by rates that he specified as ordinary time, time and a half and double time. For invoices from Prime to GHRC, Kirschberg’s calculations used rates that were all for a single category of worker, being the lowest paid category in the schedule to the GHRC Payroll Services Agreement. Similarly, for invoices to be rendered to CPC Kirschberg’s spreadsheets were all based on the lowest paid category of worker in the schedule to the CPC Payroll Services Agreement. None of this evidence was the subject of cross examination or contradiction or qualification by other evidence.

  6. On 22 May 2024 (Day 62, near the close of the Crown case) the Crown tendered in electronic form a subfolder of documents that were added to Exhibit 1. Within that folder were documents identified as TB-335, 336, 337 and 591, each of which is in form an invoice from Prime to GHRC or CPC. Those documents were never opened in the presence of the jury for display on the courtroom screens. No oral evidence was adduced concerning them. No submission about them was made to the jury or in the course of the sentence proceedings. In the circumstances those documents cannot be regarded as evidence of performance of the Payroll Services Agreements in any respect.

  7. Separately from the question of invoicing, the amounts of weekly transfers to the Prime bank accounts show that the transfers were not calculated according to the Fee rates specified in the Agreements. The Fee rates included gross pay, superannuation, other entitlements and statutory obligations. That becomes apparent by comparing the Fees with the figures in payslips for individual workers, both union members and non-unionists. Payslips were tendered by the Crown and by George Alex. The hourly Fees in the schedules to the Agreements were well above even the gross hourly pay for the workers. If the amounts transferred to Prime’s bank account each week had been calculated using the number of hours worked by personnel in each classification, multiplied by the Fees in the schedules, the transfers would have been much greater and comfortably sufficient to fund PAYG remittances.

  8. The uncontested fact that Kirschberg and McAndrew caused GHRC/CPC to transfer only the net pay to Prime’s accounts each week and not to transfer the scheduled Fees reveals their intention not to perform the Agreements in a fundamental respect. This departure from the Agreements had the direct effect of leaving insufficient funds in Prime’s account to enable it to fulfil its putative written obligation to remit PAYG withholding amounts – assuming that there was anyone to act in Prime’s name to do so.

  9. From all of the above-mentioned departures from the terms of the Agreements I am satisfied beyond reasonable doubt that all the signatories to them intended from the outset that they should not have their apparent, or any, legal effect. It was intended that the Agreements would not be binding and would not be observed or performed. Each of the Agreements was a sham.

GHRC/CPC’s internal reporting ignored the Prime Agreements

  1. Further support for this conclusion is provided by the nature of internal reporting within GHRC/CPC. The evident purpose of the Weekly Analysis spreadsheets referred to at [48] above was to keep the directors and the owner of the GHRC/CPC business informed about trading performance. The Analyses for the weeks ended 8 July 2018 to 18 November 2018 (Ex 45/TB-120) set out figures under headings “Invoiced”, “Wages To Pay EST – Net” and “Entitlements”. No figures were shown for amounts calculated at the Fee rates in the schedules to the Payroll Services Agreements. If those Agreements were intended to be performed it would be expected that Ms Turkington’s Weekly Analyses would have shown the accrual of very substantial indebtedness to Prime, because the only weekly transfers to it were of net wages, well short of the scheduled Fees. If the Agreements were intended to be performed there would be no reason for Kirschberg and McAndrew to concern themselves with figures for “Wages To Pay EST – Net” or “Entitlements”. It would fall to Prime to calculate those amounts as part of its payroll processing obligation. Under the Agreements GHRC/CPC would be concerned only with the Fees payable to Prime. Calculation of amounts due to the workers and for PAYG would be solely Prime’s concern.

  2. For the weeks ending 18 November 2018 to 23 June 2019 Weekly Analysis Excel spreadsheets were prepared by Ms Turkington in a different format: Ex 21/TB-282, comprising 32 weekly sheets. On those reports both the total gross wages and the total net wages for each week were shown, as well as the value of invoices issued for the week and “Entitlement Data” in respect of workers entitlements over and above their hourly rates. The Weekly Analyses in this second generation format again did not show amounts owing to Prime calculated in accordance with the Payroll Services Agreements. The “Gross Wages”, “Net Wages” and “Entitlement Data” that were dissected should have been irrelevant to GHRC/CPC’s directors if the Agreements were intended to have any legal effect.

  3. Each week McAndrew requested the current Analysis from Ms Turkington and she provided it to him. She also sent current Analyses out by email to Kirschberg and Loccisano from time to time. It was not suggested to Ms Turkington in cross examination that she was ever asked by any of the offenders for a report on how much was owing to Prime under the Payroll Services Agreements, calculated at the scheduled Fee rates and taking into account credit for weekly transfers of net wages and periodic transfers of funds to workers’ entitlements. Nor was evidence adduced from any other source that the offenders at any time sought to quantify an accrued liability to Prime.

Weakness of the offenders’ reliance on the Payroll Services Agreements

  1. Paying wages through Prime’s bank accounts in order to keep the liability for PAYG, which was never going to be paid, away from GHRC/CPC and the offenders, was a ruse. The Payroll Services Agreements were a feeble attempt by Kirschberg and McAndrew to create the appearance that they thought someone other than themselves was going to remit PAYG. The superficiality of the attempt is shown by the circumstance that the offenders caused the net wages of GHRC/CPC’s staff to be distributed through the Prime bank accounts. That could never have been explained by reference to the Payroll Services Agreements, which did not provide for Prime to “supply” personnel in categories of office staff or site managers.

  2. When Prime’s bank account became too risky to use for large labour hire pay runs, because of an anticipated garnishee from the ATO, the reactions of Kirschberg, McAndrew and Loccisano were captured in their intercepted phone conversations. There were no expressions of indignation that Prime may not have fulfilled its obligations on paper. There was no discussion of contacting McHugh to demand that he cause Prime to pay its debts to the ATO, to maintain solvency and to be in a position to continue to supply labour under the Agreements. At that time, in January 2019, and later when the ATO’s garnishee order rendered Prime’s bank account unusable, the offenders’ conversations reflected a total lack of surprise. That was consistent with their full knowledge that a substantial debt for PAYG had accrued and their expectation that eventually the ATO would respond as it did.

No reasonable possibility that George Alex thought McHugh would remit PAYG

  1. In both the trial and the sentence proceedings there was no direct or circumstantial evidence that George Alex knew of the terms of the Payroll Services Agreements or that he relied upon them for an expectation that McHugh would pay, or cause Prime to pay, PAYG withheld from wages that Kirschberg and McAndrew distributed through Prime’s bank account. The possibility that he placed any such faith in the Agreements is purely speculative and does not reasonably arise.

  2. George Alex’s counsel put the following submission during the sentence hearing:

But they [Kirschberg and McAndrew] had an agreement that it would be paid. And if they shared anything with Mr Alex, the inference is that what they would have shared with him is that McHugh is paying the PAYG. We don't have to pay that and that's why we're giving McHugh the net wages because he's looking after the PAYG.

  1. For reasons already given, I am satisfied beyond reasonable doubt that Kirschberg and McAndrew did not think McHugh was “looking after the PAYG”. I am satisfied that they knew he was in no position to do so and they were not expecting his company, Prime, to remit PAYG pursuant to its putative obligation under the Payroll Services Agreements because they were not performing those Agreements, in particular in the respect of not paying the agreed Fees that would cover PAYG. Counsel’s submission is not merely speculative, it is positively negated by the evidence.

  2. Counsel propounded the alternative possibility that George Alex thought McHugh would remit the PAYG as an indirect way of discharging his personal indebtedness to George Alex. The first flaw in this is the lack of any reasonable answer to the question: how could George Alex have thought that McHugh had the means to fund PAYG liability in the order of $116,000-$132,000 per week (see [20] above). At that rate, $1,000,000 of PAYG became payable every eight weeks.

  3. There is no evidence that McHugh had any business that could generate cash flow of that order, or that George Alex thought he did. The only business McHugh ever had, so far as the evidence shows, was taken out of his hands by the offenders from July 2018. There was no evidence that he had any capital reserves. The business was failing when he handed it over and there was nothing in the evidence to suggest that he was paid anything for relinquishing it.

S 16A(2)(f), (j), (ja), (n) – contrition, deterrence, rehabilitation

  1. Connell has expressed remorse for his involvement in the fraud, by direct communication with the Court in a letter, through statements he has made to his partner, Lia, and through statements to medical practitioners who have provided reports with respect to him. I accept unreservedly the genuineness of those expressions. They are consistent with Connell’s plea of guilty, the lateness of which does not detract from its weight in his favour, for reasons explained below.

  2. Connell is strongly supported by his partner, his immediate family (mother and brother), and extended family. He is well regarded and further supported by a network of lifelong friends. Persuasive letters of from those sources, in combination with Connell’s acceptance of responsibility for his offending, give the Court confidence in his rehabilitation and justify the conclusion that he is most unlikely to reoffend. Personal deterrence is a very much diminished sentencing factor in relation to Connell. Deterrence of others who might contemplate defrauding the Commissioner of taxation remains a relevant sentencing objective.

S 16A(2)(g) – plea of guilty

  1. Connell was initially charged on 21 July 2020 with the two counts of conspiracy upon which the other offenders have now been tried. After committal to this Court, when first arraigned on 11 April 2022 he pleaded not guilty to the two conspiracies. On 22 June 2022 the Crown offered to accept a plea of guilty to the accessory charge for which he is now to be sentenced. Connell did not accept that offer when made and the Crown maintained the original two charges against him for another 19 months. There were substantial interlocutory procedures in this Court in relation to those two charges, including directions hearings with respect to the Crown’s service of voluminous evidence, applications to vacate trial dates and a pre-trial hearing concerning the admissibility of intercepted phone conversations and summaries of financial transactions and other data.

  2. Connell was passive with respect to the interlocutory procedures. He did nothing to protract or complicate them. His stance was consistent with the very small fraction of the Crown’s evidence that in any way concerned his alleged adherence to the conspiracies or acts in furtherance of them. The evidence served on all accused included several thousand pages of banking, financial and other business records, dense summaries of countless facts in the corporate and tax affairs of more than 40 companies (including the intermediary wage payers and conduit companies through which unremitted PAYG was distributed) and some 10,000 pages of transcript of 140 hours of intercepted conversations. Connell was barely mentioned in that vast body of material, yet while the conspiracy charges were maintained his legal representatives were set the task of trying to discern whether the Crown could prove that the alleged criminal agreements were entered into by the other offenders and, if so, by what evidence the Crown would endeavour to establish Connell’s adherence and acts in furtherance. I consider it doubtful that the Crown could have satisfied the jury that Connell became a party to either conspiracy if he had proceeded to trial. I reject the Crown’s submission that his plea to the charge as an accessory is no more than recognition of an inevitable outcome with respect to the charges on which he was to have been tried.

  3. In the circumstances, Connell’s plea to the accessory charge was of very significant utilitarian value. It materially facilitated the course of justice. But for the plea, the Crown would have pressed on against Connell with the two conspiracy counts and his participation would have added to the trial’s length, as an extra accused always does. He may well have been acquitted of both conspiracies. As it was, the trial placed immense strain on the jury by reason of its duration and the Crown’s extravagant documentary and audio tender – insistently pressed despite the marginal or negligible probative value of much of the evidence and in the face of all efforts by the Court to limit the burden on the jury. Any further prolongation of the trial would have been intolerable.

  4. In the above circumstances I consider it appropriate to discount the sentence that I would otherwise have imposed upon Connell by slightly less than 15% in recognition of his plea.

Delay in passing sentence

  1. Connell has accepted from the date when he entered his plea of guilty, 12 February 2024, that a term of imprisonment would be inevitable. Sentence proceedings had to be long deferred, to avoid publicity and potential compromise of the trial of the other offenders that commenced on that day. Once the trial had concluded his sentence proceedings were conducted promptly but I found it necessary to defer passing sentence until I had all relevant material and submissions in relation to the other offenders and could give proper consideration to relativity between penalties. In consequence, without fault on his part, the offender has been under the strain of not knowing how long a sentence he would have to serve, with his life on hold in the meantime, for most of this year. I will reduce the length of the non-parole period that I would otherwise fix in order to make some allowance for the adverse impact of this procedural sequence.

Parity

  1. Connell’s sentence must be in proportion to the sentence imposed on William Samuel Pahl following his plea of guilty to a charge in the same terms. On 31 March 2023 Judge Townsden in the District Court sentenced Pahl to imprisonment for 2 years and 6 months, to be released after 1 year and 3 months on recognisance to be of good behaviour for the remainder of his head sentence. The learned judge arrived at the sentence after allowing a discount of 25% on account of Pahl’s plea.

  2. The particulars of how Pahl aided and abetted Bryers were more concrete and more substantial than the particulars of Connell’s accessory acts. Pahl had expertise in accounting and in payroll processing using software. He provided advice and technical expertise with respect to processing the payroll of GHRC/CPC’s workers and staff through ACN 481, ACN 543 and each of the four subsequent intermediaries up to the end of the AOA period. He performed some of the payroll processing himself. Pahl assisted in the transition of GHRC/CPC’s payroll from one software program to a replacement. He also assisted with migrating data within payroll programs when the other offenders changed the identity of the corporate intermediary.

  3. Pahl from time to time gave instructions to Mr Hegedus, the nominal director of API, with respect to distributing funds that included the $100,000 going to the benefit of George Alex and lesser amounts to Strategic Capital Resources Pty Ltd, to McHugh and to Mr Hegedus himself. With respect to Superform, in about March 2020 Pahl set up KeyPay software to process the company’s payroll and he assisted with the migration of data into that program. Thereafter he advised upon and worked to resolve technical issues in the processing of Superform’s wages, as difficulties were encountered by other offenders in carrying out the withholding and fraudulent non-remittance of PAYG from that payroll.

  4. The Crown conceded before Judge Townsden that Pahl’s conduct was “in the lowest category of the participants and only Connell’s conduct was less culpable”. A comparison of his Honour’s description of Pahl’s activities, in the Remarks on Sentence, with the agreed facts regarding Connell, as summarised above, shows that the latter’s culpability as an accessory was less by a very substantial margin. Pahl received less financial benefit from his offending, only $136,535, but I attribute Connell’s larger receipts to factors not associated with the degree of his criminal involvement, as explained earlier.

  5. Pahl was 39-40 years old at the time of his offending and 43 when he was sentenced. His antecedents and subjective case generally were comparable to Connell’s. Pahl is not afflicted by any medical condition that would make his time in custody more onerous than that of the general run of inmates.

Sentences

George Alex

  1. George Alex is sentenced as follows:

  1. For conspiracy to cause loss to the Commonwealth as charged in count 1 on the indictment George Alex is sentenced to imprisonment for a term of 8 years commencing on 8 August 2024 and expiring on 7 August 2032.

  2. For conspiracy to deal with proceeds of crime as charged in count 2 on the indictment George Alex is sentenced to imprisonment for a term of 8 years commencing on 8 November 2025 and expiring on 7 November 2033.

  3. Pursuant to section 19AB of the Crimes Act 1914 (Cth) there is fixed a single non-parole period of 6 years and 2 months commencing on 8 August 2024 and expiring on 7 October 2030.

The effective overall head sentence is 9 years and 3 months and the single non-parole period is 6 years and 2 months.

Kirschberg

  1. Lindsay Kirschberg is sentenced as follows:

  1. For conspiracy to cause loss to the Commonwealth as charged in count 1 on the indictment Lindsay Kirschberg is sentenced to imprisonment for a term of 7 years commencing on 18 August 2024 and expiring on 17 August 2031.

  2. For conspiracy to deal with proceeds of crime as charged in count 2 on the indictment Lindsay Kirschberg is sentenced to imprisonment for a term of 7 years commencing on 18 August 2025 and expiring on 17 August 2032.

  3. Pursuant to section 19AB of the Crimes Act 1914 (Cth) there is fixed a single non-parole period of 5 years and 6 months commencing on 18 August 2024 and expiring on 17 February 2030.

The effective overall head sentence is 8 years and the single non-parole period is 5 years and 6 months.

McAndrew

  1. Gordon McAndrew is sentenced as follows:

  1. For conspiracy to cause loss to the Commonwealth as charged in count 1 on the indictment Gordon McAndrew is sentenced to imprisonment for a term of 7 years commencing on 21 August 2024 and expiring on 20 August 2031.

  2. For conspiracy to deal with proceeds of crime as charged in count 2 on the indictment Gordon McAndrew is sentenced to imprisonment for a term of 7 years commencing on 21 August 2025 and expiring on 20 August 2032.

  3. Pursuant to section 19AB of the Crimes Act 1914 (Cth) there is fixed a single non-parole period of 5 years and 6 months commencing on 21 August 2024 and expiring on 20 February 2030.

The effective overall head sentence is 8 years and the single non-parole period is 5 years and 6 months.

Loccisano

  1. Pasquale Loccisano is sentenced as follows:

  1. For conspiracy to cause loss to the Commonwealth as charged in count 1 on the indictment Pasquale Loccisano is sentenced to imprisonment for a term of 7 years and 6 months commencing on 19 August 2024 and expiring on 18 February 2032.

  2. For conspiracy to deal with proceeds of crime as charged in count 2 on the indictment Pasquale Loccisano is sentenced to imprisonment for a term of 7 years and 6 months commencing on 19 August 2025 and expiring on 18 February 2033.

  3. Pursuant to section 19AB of the Crimes Act 1914 (Cth) there is fixed a single non-parole period of 6 years commencing on 19 August 2024 and expiring on 18 August 2030.

The effective overall head sentence is 8 years and 6 months and the single non-parole period is 6 years.

Bryers

  1. Mark Ronald Bryers is sentenced as follows:

  1. For conspiracy to cause loss to the Commonwealth as charged in count 1 on the indictment Mark Ronald Bryers is sentenced to imprisonment for a term of 7 years and 6 months commencing on 16 June 2024 and expiring on 15 December 2031.

  2. For conspiracy to deal with proceeds of crime as charged in count 2 on the indictment Mark Ronald Bryers is sentenced to imprisonment for a term of 7 years and 6 months commencing on 16 June 2025 and expiring on 15 December 2032.

  3. Pursuant to section 19AB of the Crimes Act 1914 (Cth) there is fixed a single non-parole period of 6 years commencing on 16 June 2024 and expiring on 15 June 2030.

The effective overall head sentence is 8 years and 6 months and the single non-parole period is 6 years.

Connell

  1. But for Connell’s plea of guilty I would have fixed a sentence of 1 year and 9 months. Taking into account his plea, the sentence orders are as follows:

  1. For aiding and abetting an offence by Mark Ronald Bryers of dishonestly causing loss to the Commonwealth contrary to s 135.1(5) of the Criminal Code (Cth) Lucas James Connell is sentenced to imprisonment for a term of 1 year and 6 months commencing on 6 December 2024 and expiring on 5 June 2026.

  2. After serving 8 months from the commencement of his sentence, the offender is to be released on 5 August 2025, upon giving security by recognisance that he will be of good behaviour for the further period of 10 months expiring at the end of his head sentence on 5 June 2026.

  1. Connell is informed that pursuant to s 20A of the Crimes Act, in the event of him failing to be of good behaviour in breach of the recognisance that he will be required to give under the above recognisance release order, an information may be laid before Magistrate to have him called up to be further dealt with under that section.

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Decision last updated: 06 December 2024

Cases Citing This Decision

0

Cases Cited

16

Statutory Material Cited

3

Chang v R [2016] NSWCCA 296
Dickson v R [2016] NSWCCA 105
DPP (Cth) v Goldberg [2001] VSCA 107