R v Howard

[2003] NSWSC 1248

Reported Decision: 48 ACSR 438

Supreme Court

CITATION:	R v Howard [2003] NSWSC 1248
HEARING DATE(S):	16/12/03
JUDGMENT DATE:	23 December 2003
JURISDICTION:	Common Law Division Criminal List
JUDGMENT OF:	Kirby J
DECISION:	Count 1: Imprisonment for 1 year 9 months commencing 23/12/03 and expiring 22/09/05; Count 2: Imprisonment for 2 years commencing 23/12/04 and expiring 22/12/06; Recognizance release date 22 December 2005; Sentence suspended under s20(1)(b) of the Crimes Act 1914
CATCHWORDS:	Criminal Law - crimes of dishonesty and breach of trust by senior manager - white collar crime - offer of assistance - suspended sentence provided fulfills undertaking to give assistance
LEGISLATION CITED:	Corporations Act 2001 Crimes Act 1900 (NSW) Crimes Act 1914
CASES CITED:	R v Ellis (1986) 6 NSWLR 603 R v Cartwright (1989) 17 NSWLR 243 R v Gallagher (1991) 23 NSWLR 220
PARTIES :	Regina William Herbert Howard
FILE NUMBER(S):	SC 70106/03
COUNSEL:	T A Game SC (Crown) I McClintock SC/H Dhanji (Acc)
SOLICITORS:	Ms J Phillips/B Hatfield, (Cth DPP) Watson Mangioni (Acc)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CRIMINAL LIST

DAVID KIRBY J

Tuesday 23 December 2003

70106/03 REGINA v William Herbert HOWARD

JUDGMENT ON SENTENCE

1 KIRBY J: On 16 December 2003 the Commonwealth Director of Public Prosecutions presented an ex officio indictment against William Herbert Howard. The indictment was in these terms:

Count 1 : Between 2 December 2000 and 15 March 2001, William Herbert Howard did, contrary to section 184(2)(b) of the Corporations Act 2001, as an employee of HIH Casualty and General Insurance Ltd (HIH), use his position dishonestly, recklessly as to whether such use resulted in Bradley David Cooper directly or indirectly gaining an advantage, in that he dishonestly received from Cooper cash sums totalling approximately $124,000 in return for his facilitating payments by HIH, or its subsidiaries, to or in favour of Cooper, or companies associated with him.
Count 2 : Between 2 January 2001 and 16 January 2001 William Herbert Howard did, contrary to section 184(2)(a) of the Corporations Act 2001, as an employee of HIH Casualty and General Insurance Ltd (HIH), use his position dishonestly, with the intention of directly or indirectly gaining an advantage for Bradley David Cooper, by facilitating the payment of $737,500 by HIH to The Goodwill Group Pty Ltd, a company associated with Cooper, knowing that the payment obligation had already been discharged.

2 Mr Howard pleaded guilty to both counts. It remains for me to pass sentence. Before I do so, I must determine the facts relevant to the sentencing discretion. Where the facts are adverse, they must be established beyond reasonable doubt. Where they favour Mr Howard, it is enough that they should be proved on the balance of probabilities.

Background

3 The circumstances giving rise to these charges are complex. They are described in the statement of facts (Exhibit A). Mr Howard was an accountant. He joined the group which ultimately became HIH Insurance Limited in December 1996. In April 1999 he was appointed General Manager (Finance). The Chief Executive Officer at that time was Mr Raymond Williams. In December 2000, Mr Williams resigned. He was replaced by Mr Randolph Wein. On 17 December 2000 Mr Wein made Mr Howard the Chief Investment Officer, a position which he held until 15 March 2001, when a Liquidator was appointed.

4 In December 2000 Mr Williams gave Mr Howard a task. The task was to sort out with Mr Bradley Cooper various claims which Mr Cooper said he had against HIH. Mr Cooper had a long association with HIH. He was the head of an American corporation, Home Security International Inc. He was also a friend of Mr Rodney Adler. Some years before these events, when Mr Adler was in charge of FAI Insurance Limited, FAI had invested in Home Security International, and the Australian subsidiary through which it operated (which became known as FAI Home Security Pty Limited). The company sold security alarms. FAI acquired a 36% shareholding in these companies.

5 In January 1999 FAI was taken over by HIH Insurance. By this means HIH acquired the subsidiaries and investments of FAI, including the 36% shareholding in the companies associated with Mr Cooper. HIH's shareholding in these companies was later increased to 47%.

6 In late 2000, Mr Cooper put a proposal to Mr Williams. He offered to purchase HIH's shareholding in Home Security International and FAI Home Security. Mr Williams agreed, believing that a "divorce" between the two companies would be in the best interests of HIH. On 8 December 2000 a formal agreement was signed. Mr Cooper would pay HIH $1.25 million dollars by instalments. Mr Williams, as part of the arrangement, directed Mr Howard to deal with Mr Cooper, to sort out his claims.

7 By December 2000, when this direction was given, it was plain that HIH Insurance was in financial trouble. The month before Ernst & Young, chartered accountants, provided a report to Westpac in which they expressed concern about HIH's solvency. By December 2000 the problems with cash flow were acute. Staff were told to pay only core expenses, such as telephone and electricity. Where possible, they were to delay payment of claims. These were all matters known to Mr Howard.

8 A strategy to rescue HIH was developed. On 1 January 2001 the company entered a joint venture agreement with Allianz Australia Insurance Limited. HIH was required to place $450 million dollars of liquid assets into a trust for the benefit of the joint venture. It was hoped that HIH would then be able to draw cash out of the venture and by this means survive. However, the announcement of the joint venture coincided with the release of HIH's preliminary final result for the financial year 30 June 2000. The result was a $42.1 million operating profit, after tax and before abnormals. The stock market reacted adversely. The share price of HIH fell from 99 cents to 55 cents. It never recovered. The hope that the joint venture would generate cash vanished. Instead, HIH was required to pay into the venture the cash it received from Allianz. It was also required to transfer the insurance products which, in the past, had provided its source of revenue. It was then only a matter of time before it would be forced to close its doors.

9 Mr Howard witnessed these events. He well knew of HIH's plight. That was the context within which he met Mr Cooper in December 2000 to discuss Mr Cooper's claims against HIH.

The meeting with Mr Cooper

10 In any sentence hearing the matter under enquiry is the objective seriousness of the offence or offences which have been committed. The criminality revealed must be weighed along with the circumstances of the offender, and a sentence then imposed. Here, the maximum penalty in respect of each offence is 5 years imprisonment, or a fine of $200,000, or both.

11 I should make it clear that the material before me, upon the basis of which I am obliged to make findings, and thereby determine the criminality of Mr Howard, is limited. Mr Howard did not give evidence on sentence. He was not obliged to do so. He has made a statement in respect of these events. It was not tendered by the Crown or by Mr Howard. Again, there was no obligation that either do so. Rather, a document (Exhibit A) was placed before the Court which, according to the parties, sets out the factual basis upon which Mr Howard should be sentenced.

12 It should be said that, insofar as these facts implicate other persons, and specifically Mr Bradley Cooper, in criminal offences, they do not constitute evidence against such persons. The material before me is not sworn, although I would infer that it is based upon material in the possession of the Crown that has been sworn. Nonetheless, it is material that has not been tested by cross examination. It does not fully explain, to my mind, a number of matters which are relevant to the offending behaviour.

13 The statement of facts records that, in December 2000, Mr Cooper complained to Mr Adler about his inability to settle his claims against HIH. On 1 December 2000 Mr Adler spoke to Mr Howard. He told him that Mr Cooper would contact him shortly to arrange a meeting.

14 Shortly thereafter Mr Cooper spoke to Mr Howard. The meeting was arranged for 3 December 2000 at a hotel in Balmain. That conversation is fundamental. I do not have the full text of what Mr Howard says was discussed. The statement of facts, however, includes the following:

"It was at this meeting that Mr Cooper first made the offer to pay money to Mr Howard in order to assist the resolution of his claims and promised that, if Mr Howard helped him, he would 'look after' Mr Howard."

15 The payments would be in cash. Mr Cooper, according to Mr Howard, hinted that after the collapse of HIH, Mr Howard may become a senior executive with one of Mr Cooper's companies.

16 At that meeting, or at one of their later meetings, Mr Cooper provided Mr Howard with an outline of his claims against HIH. Mr Howard made a note on a yellow piece of paper. He no longer has that piece of paper. In respect of each claim, according to Mr Howard, Mr Cooper identified three amounts. The first was the amount claimed. The second was the amount for which the claim would likely be settled. The third was Mr Howard's reward. It was the amount Mr Cooper would secretly pay Mr Howard in cash. In ordinary English, it was a bribe or a secret commission, although the Crown did not like these terms, since the charges were not under s249B of the Crimes Act 1900 (NSW) (dealing with secret commissions) but were under the Corporations Act. Whatever the payments may be called, they were a corrupt "kick-back" which Mr Howard accepted as an inducement to breach his duty to the corporation for which he worked.

Count 1: The payment's to Mr Howard

17 Dealing with Count 1, Mr Howard met Mr Cooper between 3 December 2000 and 15 March 2001 many times. He spoke to him frequently on the telephone. The claims were discussed and, one by one, they were settled. The list on the yellow piece of paper was amended. In the end Mr Howard said that one could not relate any particular payment to any one claim. Mr Howard received five cash payments in all. They totalled between $119,000 and $124,000 spread over a number of months as follows:

PAYMENT	DATE	APPROX. AMOUNT
1	Approx 22 Dec 2000	$20,000
2	Early Jan 2001	$30,000
3	Between 18-27 Jan 2001	$9,000
4	Approx 22 or 23 Feb 2001	$40,000
5	Early March 2001	$20,000 to $25,000
Total approximately $119,000 - $124,000

18 What was the nature of Mr Howard's breach of duty? The statement of facts is not entirely satisfactory. The criminality involved in easing and accelerating the passage of legitimate claims is markedly different from the criminality in overlooking patent exaggeration or deficiencies in the claims put forward.

19 The statement of facts provides what is termed "an overview" of the claims made by Mr Cooper. They related to four issues:

· First, a sponsorship claim in respect of a company known as Vision Publishing Pty Limited.

· Second, the FAI Finance Corporation discount rate.

· Third, the Data Advantage claim.

· Fourth, the publiCARD issue.

20 Dealing with the first of these issues, at the time HIH took over FAI Insurance, it acquired an interest in FAI Finance Corporation Pty Limited. That company provided finance to customers who purchased security alarms from FAI Home Security. In April 2000, HIH negotiated the purchase of the remaining shareholding in FAI Finance Corporation. At the same time it was agreed that HIH would sponsor seminars which were planned by Mr Cooper's company, Vision Publishing Pty Limited. The terms of the sponsorship "agreement" were vague. They were expressed as follows:

"... As a separate matter, HIH has agreed to sponsor the forthcoming seminars to be produced by Vision in an amount of $1,200,000. Details of this sponsorship will need to be finalised directly with HIH."

21 The arrangement plainly contemplated further discussion between HIH and Vision. I gather there were no such discussions. Nor was a programme ever produced or submitted by Vision Publishing in respect to the seminars which it proposed.

22 Mr Cooper repeatedly wrote to Mr Howard throughout the year 2000, pressing for payment. Nothing was paid. In November 2000 Mr Cooper wrote again, this time putting a proposal. Mr Cooper's companies owed HIH $817,500. He suggested his companies' indebtedness should be offset against the $1.2 million which HIH owed in respect of the sponsorship deal. HIH should then pay the balance of $347,500.

23 The issue was discussed at the meeting at Balmain on 3 December 2000. On 8 December 2000, Mr Howard agreed to Mr Cooper's proposal. A cheque for $347,500 was drawn shortly thereafter, payable to Vision Publishing. An acknowledgement was also provided that the indebtedness of Mr Cooper's companies to HIH for $817,500 had been discharged.

24 The second claim related to what was termed "the discount rate". As mentioned, the companies with which Mr Cooper was associated, Home Security International Inc and FAI Home Security, sold security alarms. Finance was provided to purchasers through FAI Finance Corporation. There was an arrangement whereby FAI Finance Corporation would hold back a percentage of the sale price, referred to as the "hold-back fee" or the "discount rate". In September 2000, HIH acquired an interest in the company which supplied the security alarms themselves. This was another company associated with Mr Cooper. At the time of that acquisition, there were discussions between HIH and Home Security International Inc as to the discount rate. Mr Adler, on behalf of Home Security International, and Mr Williams, on behalf of HIH, agreed that there should be an increase in the rate effectively from 15% to 18%.

25 However, the management of FAI Finance Corporation objected. It refused to pay the additional 3%. Mr Cooper complained. He ultimately took his complaint to Mr Howard. Mr Howard made calculations based upon assumptions as to the likely sales of security alarms, and the cost to Mr Cooper of not paying the additional 3%. Depending upon sales, the cost of withholding from Mr Cooper's companies the 3% over one year was between $2.3 million and $2.9 million.

26 On 21 December 2000 Mr Howard agreed to settle the issue by HIH paying Mr Cooper $2.65 million. A cheque was drawn the following day, 22 December 2000. On the same day Mr Howard opened a safety deposit box and received from Mr Cooper a cash payment of $20,000.

27 Mr Cooper may have had a legitimate grievance against HIH. Once it had been agreed in September 2000 that the additional 3% should be paid, it ought to have been paid. However, the arrangement contemplated that payment would be made on actual sales. Mr Cooper negotiated with Mr Howard an arrangement whereby his companies were paid in advance on estimated sales to September 2001.

28 The third claim concerned the company, Data Advantage Limited. Data Advantage was the parent company of Credit Reference Australia Agency. In September 1998, Data Advantage was floated on the Stock Exchange. Shares were allocated to finance companies which used the credit reference service. FAI Insurance was allocated a parcel of shares because of the consumer finance activities of FAI Finance Corporation. That company, it will be remembered, provided the finance for security alarms sold by the companies with which Mr Cooper was associated.

29 Mr Cooper claimed that a proportion of the shares allocated to FAI rightfully belonged to Home Security International Inc, since, at the time of the float, that company owned 50% of FAI Home Security.

30 Mr Cooper pressed his claim on various officers of HIH from 1998, although without success. Once Mr Howard had been directed to deal with outstanding claims, he took the issue up with Mr Howard. Whereas initially Mr Cooper had suggested that 50% of the allocated shares rightfully belonged to Home Security International Inc, he reformulated his claim, suggesting that the appropriate allocation was 85% of the shareholding. The entitlement of FAI Finance Corporation to shares, he argued, arose from its membership with the credit reference agency. For a significant proportion of that period of membership, FAI Finance Corporation was a wholly owned subsidiary of Home Security International. That fact should be reflected in the proportion of shares allocated to his company, Home Security International.

31 Mr Cooper pressed Mr Howard to settle this claim in mid January 2001. He provided a folder of correspondence going back to 1998. He threatened to sue unless the issue were resolved. He ultimately produced a document, which he said had been "retrieved from archives", in which Mr Adler recognised the legitimacy of Home Security International Inc's claim. According to the Crown, that document had been falsified, although it is not suggested that Mr Howard knew that it was false.

32 Mr Howard sought legal advice. The advice was inconclusive because further information was required. He did not provide that information, and therefore obtained no further guidance. Instead, he negotiated a figure of $1 million with Mr Cooper to settle the claim. A cheque for that amount was drawn on 16 February 2001, that is one month before the collapse of HIH.

33 The final issue involved a company, publiCARD Limited. It was listed in the United States of America pursuant to a joint venture arrangement between HIH and Mr Cooper. Mr Cooper made an offer to buy all the publiCARD shares for 65% of their value, then the equivalent of US$163,800. The offer was accepted. Mr Cooper's assistant drew a cheque in favour of HIH for the equivalent sum in Australian dollars, $312,000.

34 Thereafter, Mr Cooper claimed that he was shocked to learn that there was no market for the shares in the USA. He stated that his offer to purchase was for $163,800 Australian, not United States dollars. It was Mr Howard's belief that the agreement had been made in US dollars. That notwithstanding, he agreed to refund the amount of $148,200 to Mr Cooper. Mr Cooper was paid that sum on 14 March 2001, the day before the appointment of a Provisional Liquidator for HIH. Mr Cooper, incidentally, later sold the shares for Australian $322,855.

Count 2: Vision Publishing Pty Limited

35 Let me turn then to the second count, which concerned a second payment to Mr Cooper's company, Vision Publishing Pty Limited. I have already described the negotiations between Mr Cooper and Mr Howard concerning HIH's promise to provide sponsorship of $1.2 million for seminars which were planned by Mr Cooper's company, Vision Publishing. The claim was settled on 8 December 2000 upon terms which provided Mr Cooper with $347,500 cash, the balance being the discharge of debts owed by his companies to HIH.

36 Shortly after that settlement, Mr Cooper, according to Mr Howard, made a further proposal. Mr Williams had not yet been told of the settlement. It was possible, therefore, to duplicate the sponsorship payment. On 15 December 2000, that is, within seven days of the settlement, Mr Cooper wrote to Mr Williams. He again complained that the sponsorship obligation had still not been honoured. He sent a copy of his letter to Mr Howard. Mr Cooper later spoke to Mr Williams about his complaint.

37 On 3 January 2001, Mr Howard wrote to Mr Williams. He enclosed a copy of the letter by which HIH made its sponsorship promise. He falsely suggested the obligation had not been discharged. His memorandum included these words:

"The memo from us is quite straight forward, and while we may like to argue the toss, it appears binding, and is one that we would probably lose. Another step in the extraction of HIH from the HSI web."

38 That was a lie, as Mr Howard well knew. HIH's "obligation" to Mr Cooper had been discharged in full. Mr Williams instructed Mr Howard to settle the claim on the best terms he could. Mr Howard agreed on a settlement figure of $750,000. Mr Williams accepted the outcome. A small discount was negotiated by Mr Howard with Mr Cooper (to $737,500) for settling at an early date.

The criminality of Mr Howard

39 Turning, then, to the criminality of Mr Howard, the offences are plainly very serious. They merit a term of imprisonment, unless the particular circumstances of Mr Howard are truly exceptional.

40 Mr Howard was, at the time of these offences, a mature man. He is now aged 43 years. He was an accountant. He had professional obligations. He occupied a senior position in a large public corporation. It was a position of trust. The shareholders of that corporation, the policy holders of insurance issued by that corporation, and the public were entitled to expect that Mr Howard would act with integrity. The law expects no less.

41 Yet Mr Howard, as he acknowledges, acted dishonestly. He was guilty of gross breaches of trust. Repeatedly, over a number of months, he failed to act in the interests of the corporation, preferring his own interests. He did so at a time when he well knew that the corporation was on its knees.

42 So far as the first count is concerned, the dishonesty is acknowledged. Indeed, it is an element of the offence to which Mr Howard has pleaded guilty. However, it is suggested that Mr Howard, in processing Mr Cooper's claims, acted recklessly. The implication appears to be that Mr Howard did no more than facilitate payment, not investigating each claim with the rigour that could be expected of someone at arms length from Mr Cooper. The Crown joins in that suggestion.

43 However, I have grave misgivings that such an acknowledgement accurately represents the level of Mr Howard's criminality. I have, as I have remarked, limited material before me. I have none of the primary documents. I have not heard testimony. I do not have the benefit of cross examination upon such testimony. However, the statement of facts, and the description it gives of Mr Cooper's claims, and their resolution, suggests, to my mind, something rather more than recklessness. In respect of the sponsorship claim, when first settled, Mr Howard must surely have recognised that Vision Publishing had not produced or submitted the seminars which may (if there was, in law, an agreement) have entitled that company to sponsorship funds. In the claim relating to the discount rate, again Mr Howard must surely have recognised the enormous advantage to Mr Cooper in providing funds nine months in advance. His conduct was the more reprehensible because HIH sorely needed every dollar it had. In the publiCARD settlement, Mr Howard knew that the agreement he had made with Mr Cooper was in Australian dollars, not US dollars. This was deliberate conduct. It was not a matter of recklessness.

44 What can be said by way of mitigation? Not much. Mr Howard recounted to his psychiatrist his thinking in December 2000 when Mr Cooper approached him. He came from a large family. They lived in the country. His father was a respected member of the community. Mr Howard gained his qualifications as an accountant after studying at the New England University. He thereafter came to Sydney. He always felt something of an outsider. He worked for a time in a stockbroking firm. During an economic downturn he was retrenched. He observed others, better placed, making arrangements for their future. When retrenched, the package offered was modest. He could see the same thing happening again in December 2000 as HIH lurched towards its doom. He was, therefore, vulnerable to the blandishments of Mr Cooper as he offered the bait of security after HIH's demise. Once he accepted money from Mr Cooper, he had been compromised. The acceptance of more money for yet more favours followed.

45 This is an explanation, but not an excuse. At a time when Mr Howard should have exhibited character, he had none. He was dishonest. He abused the trust that had been placed in him. He acted out of greed.

46 What was paid to Mr Cooper as a result of Mr Howard's intervention? It appears that Mr Cooper, or his companies, received payments totalling approximately $4.8 million and were forgiven debts of $1.8 million. It should not be assumed that these sums represented a benefit to Mr Cooper to which he was not entitled. He was certainly not entitled to the duplicate payment of $737,500 for Vision Publishing. The remaining claims, however, to a greater or lesser extent, may have been legitimate.

47 Punishment, where it is imposed, is designed to serve a number of objectives. One of those objectives is deterrence. The punishment imposed should be sufficiently severe to warn like-minded persons of the consequences of such conduct, once detected. In the context of crimes of this sort, deterrence is especially important.

The circumstances of Mr Howard

48 Let me turn from the offences to the offender, that is, the personal circumstances of Mr Howard. He is, as mentioned, a married man. He has three children. By his conviction, he will lose his profession as an accountant. Since his decision to assist the prosecution of Mr Cooper and others involved in HIH, he has been preoccupied with that task. He has not worked fulltime since January 2002. He has been obliged to sell the family home to meet his legal and other expenses. His marriage has been under strain. He has received, and will continue to receive, psychiatric help. His psychiatrist believes that he exhibits the symptoms of a major depressive illness. He now takes medication to control that illness.

49 Mr Howard's friends described him as having visibly aged since these events. I accept that he is deeply ashamed of his conduct. I accept that, until these events, he was a person of good character, much valued by his family and friends. I also accept that his prospects of rehabilitation are very good.

Discounts on sentence

50 There are three aspects of Mr Howard's circumstances that entitle him to a discount upon the sentence which would otherwise be appropriate.

51 The first is that Mr Howard has pleaded guilty. More than that, and unusually, he went to the authorities before he was charged, and revealed his wrongdoing.

52 The law takes a pragmatic approach to pleas of guilty. They save the court time. They also save the expense of a trial. The offender is entitled to a discount for the utilitarian value of that plea. He thereby assists the administration of justice. The discount for pleading guilty does not take account of the strength of the Crown case. The earlier the plea, the greater the saving to the court system. The longer and more complex the likely trial, the greater the utilitarian value.

53 The value of such a discount has been expressed as between 10% and 25% of the sentence which would otherwise be imposed. Sometimes it may go beyond 25%. Indeed, counsel for Mr Howard has urged a discount beyond 25% reflecting the fact that Mr Howard indicated a willingness to plead guilty, even before he was charged. Had the trial been contested, it would have been long, complex, and expensive, as the Crown acknowledges.

54 The pleas of guilty are also a sign of Mr Howard's contrition, which I have accepted.

55 The second discount is sometimes referred to as the "Ellis" discount. Its name derives from the statement of principle in R v Ellis (1986) 6 NSWLR 603, where Street CJ said this: (at 604)

"This court has said on a number of occasions that a plea of guilty will entitle a convicted person to an element of leniency in the sentence. The degree of leniency may vary according to the degree of inevitability of conviction as it may appear to the sentencing judge, but it is always a factor to which a greater or lesser degree of weight must be given.
When the conviction follows upon a plea of guilty, that itself is the result of a voluntary disclosure of guilt by the person concerned, a further element of leniency enters into the sentencing decision. Where it was unlikely that guilt would be discovered and established were it not for the disclosure by the person coming forward for sentence, then a considerable element of leniency should properly be extended by the sentencing judge. It is part of the policy of the criminal law to encourage a guilty person to come forward and disclose both the fact of an offence having been committed and confession of guilt of that offence.
The leniency that follows confession of guilt in the form of a plea of guilty is a well recognised part of the body of principles that cover sentencing. Although less well recognised, because less frequently encountered, the disclosure of an otherwise unknown guilt of an offence merits a significant added element of leniency, the degree of which will vary according to the degree of likelihood of that guilt being discovered by the law enforcement authorities, as well as guilt being established against the person concerned."

56 Here, the prosecution was investigating Mr Howard's finances when he approached them, offering to assist, and confessing his own guilt. They were aware that his salary did not fully explain his expenditure, at least as to $45,000. However, the Crown had no knowledge of the meeting between Mr Howard and Mr Cooper at Balmain on 3 December 2000. It had no knowledge of the magnitude of the payments made to Mr Howard, which now form the basis of count 1. Mr Howard is entitled to an "Ellis" discount in respect of these aspects.

57 The position in respect of the second count is somewhat different. At the time Mr Howard confessed his guilt, the Crown already knew that the payment for sponsorship had been duplicated. Given the proximity of the earlier settlement, the Crown case, even without Mr Howard's confession, would have been strong. That is not to say that Mr Howard's confession is worthless. Mr Howard revealed details unknown to the Crown, including his conversation with Mr Cooper. He is entitled to a more modest "Ellis" discount for having done so.

58 One comes, finally, to the most important aspect of Mr Howard's claim for leniency. He has provided assistance to the Crown, and has undertaken to provide further assistance in the future. He is entitled to a discount on sentence for the reasons explained by the Court of Criminal Appeal in R v Cartwright (1989) 17 NSWLR 243: (at 252/3)

"It is clearly in the public interest that offenders should be encouraged to supply information to the authorities which will assist them to bring other offenders to justice, and to give evidence against those other offenders in relation to whom they have given such information.
In order to ensure that such encouragement is given, the appropriate reward for providing assistance should be granted whatever the offender's motive may have been in giving it, be it genuine remorse (or contrition) or simply self-interest. What is to be encouraged is a full and frank co-operation on the part of the offender, whatever be his motive. The extent of the discount will depend to a large extent upon the willingness with which the disclosure is made."

59 The policy of encouraging those with information to break ranks and come forward has special relevance in the context of what is commonly called White Collar crime. Those who commit such crimes are usually intelligent, and well able to afford expensive lawyers. Their crimes are often obscure. They depend upon subtle inferences arising from documentation, the so-called "paper trail". The paper is usually buried in a mass of other paper. Even where it can be uncovered, proof is usually difficult. Crucial documents are often missing. Motivation will sometimes remain obscure. Prosecution is therefore difficult. Successful prosecution is even more difficult.

60 Accordingly, there is a great temptation in these circumstances for those involved to sit tight and to close ranks. The policy pursued by the law is designed to encourage those not as deeply involved to offer assistance. It is a policy described by one English Judge in 1913 as one of "encouraging dishonour amongst thieves", that is, for persons to come forward to trade information for advantage. That is not to overlook that contrition may form part, at least, of the motivation in offering to provide assistance.

61 Here Mr Howard is well placed to act as a guide through the labyrinth. He was a senior manager. He was concerned with finance. He dealt with those at the top. He is able to shed light upon their motivation.

62 A confidential exhibit tendered on sentence was an affidavit of Mr Alan Turton, the Director of Enforcement at the Australian Securities Investments Commission (ASIC). Mr Turton records that in July 2001, before letters patent had been issued establishing the Royal Commission, Mr Howard approached ASIC to discuss the provision of assistance. Discussions were suspended when, in August 1999, the Royal Commission was established. Mr Howard, having completed his evidence, again approached ASIC. No agreement, however, could be reached concerning the terms upon which that assistance would be provided.

63 The Royal Commission was completed on 16 April 2003 with the tabling of the report in the Federal Parliament. Shortly before that occurred, Mr Howard, through his solicitors, made a further offer of assistance. This time agreement was reached. Mr Howard has executed an undertaking to provide assistance in respect of a number of named individuals.

64 Mr Turton describes Mr Howard as crucial to the success of prosecutions which are contemplated. He is in a position to save the taskforce, established after the Royal Commission, a great deal of time, by directing attention to certain particular areas and transactions. He has made a number of statements. He has, on two occasions, also given evidence. The first occasion was between August and November 2001 when he assisted counsel and gave evidence in proceedings before the Supreme Court against Mr Adler, Mr Williams and Mr Dominic Federora. The second occasion concerned the prosecution of Mr Adler under provisions of the Corporations Law. Mr Adler has been committed for trial in respect of that alleged offence.

65 Mr Howard retained his own lawyers to help prepare statements, which he then provided to the Crown. He did so at considerable cost. He has been reimbursed for part only of that cost. In the next several years there will be a number of prosecutions arising out of the collapse of HIH. Mr Howard will be an important witness. It is envisaged that much of his time will be absorbed in meeting the obligations arising out of his undertaking. It will simply not be practicable for him to undertake full employment during this period. The prosecutions, moreover, are likely to attract publicity. Mr Howard can expect to be cross examined at length. Such cross examination will revisit time and again his wrongdoing.

66 I do not doubt that Mr Howard was aware of these matters when he made the decision to come forward. It cannot have been an easy decision to have made. Mr Howard is entitled to significant leniency as a consequence of that action.

The appropriate sentence

67 I then come to the sentence that should be imposed. It must reflect the criminality exhibited by Mr Howard. It must address the issue of deterrence which is important in this class of offence. It must take account, as well, of the matters which I have described as the subjective case of Mr Howard.

68 The Crown and counsel for Mr Howard speak as one in their submissions as to the penalty that should be imposed. Both urge, that by reason of the assistance of Mr Howard, and the importance of that assistance, that any prison term that may otherwise be imposed should be suspended.

69 I should approach such submissions conscious of the words of the Court of Criminal Appeal in R v Gallagher (1991) 23 NSWLR 220, where Gleeson CJ said this: (at 232)

"It is a common feature of cases where leniency is being sought on behalf of a person who has co-operated with the authorities that the argument in favour of such leniency comes from the Crown as well as the offender. The prosecuting authorities themselves have gained, or hope to gain, from the assistance in question, and it is understandable that they regard it as advancing the interests which they represent to see that such assistance is suitably and publicly rewarded. There is, however, usually no-one to put an opposing or qualifying point of view. This raises the need for special care on the part of the judge. The Court must be astute to ensure that it is being given accurate, reliable, and complete information concerning the alleged assistance and the benefits said to flow from it. Public confidence in the administration of criminal justice would be diminished if courts were to give uncritical assent to arguments for leniency, which are being jointly urged by both the prosecution and the defence, in circumstances which may call for a close examination of the alleged assistance. Care must also be taken to ensure that the ultimate sentencing result that is produced is not one that is so far out of touch with the circumstances of the particular offence and the particular offender that, even understood in the light of the considerations of policy which support the principles set out above, it constitutes an affront to community standards. If sentencing principles are capable of producing an outcome of that kind, then that calls into question their legitimacy."

70 The criminality in count 2 is arguably worse than that in count 1. On the other hand, the beneficiary in count 2 was Mr Cooper and there was only one transaction, in contrast to count 1 where there were repeated breaches of trust, and where Mr Howard received a substantial sum. On balance, I believe the same sentence should be imposed in respect of each count.

71 Mr Howard pleaded guilty to each offence at the earliest opportunity. Indeed, as mentioned, he created the opportunity for such pleas by confessing his guilt in advance of having been charged. There are differences between counts 1 and 2 in the extent to which the matters which he confessed were already known to the prosecution. These differences should be reflected in what I have termed the "Ellis" discount. Finally, Mr Howard should have some discount for the considerable assistance he has given to the prosecution in the past, and that which he has undertaken to give in the future.

72 Leaving aside the future assistance which Mr Howard has undertaken to provide, I believe the appropriate sentence in respect of each count is as follows.

73 On Count 1, and before discounting, the appropriate sentence is 3 years imprisonment. A discount for the plea of guilty, for what I have termed the "Ellis" discount and the discount for past assistance, should be approximately 40%. That is, the sentence would reduce to 1 year and 9 months commencing on 23 December 2003.

74 On Count 2, before discounting, the appropriate sentence is also 3 years imprisonment. The appropriate discount on Count 2 is less because the "Ellis" factor is less. The discount for the plea of guilty, the "Ellis" factor, such as it is, and past assistance, should be 33 1/3%. The sentence would therefore reduce to 2 years imprisonment.

75 The issue then arises whether the sentences should be concurrent or cumulative, or partly concurrent and partly cumulative. The overall term imposed should reflect the totality of the criminality involved. I believe the sentences should be partly cumulative. Count 1 should commence today, 23 December 2003. Count 2 should have as its commencing date 23 December 2004, and expire on 22 December 2006. Being a sentence of not more than 3 years, a recognizance release date must be set. The recognizance release date should be 22 December 2005.

76 That is the sentence that I would impose, reflecting all aspects other than the promise of future assistance. The promise of future assistance entitles Mr Howard to a further reduction in respect of each count. In the context of that issue, I believe it is appropriate to consider whether the sentence should be suspended. But for the promise of future assistance, I would not have suspended the sentence. A suspended sentence is obviously a significantly more lenient penalty than a prison term.

77 It is appropriate, in view of the undertaking to provide future assistance, to suspend the sentence that I would otherwise have imposed. Mr Howard should understand that, if he fails to honour his undertaking to provide the prosecution with assistance in the future, he will be liable for the term of imprisonment that I have identified.

78 William Herbert HOWARD, I sentence you as follows:

· On Count 1, to imprisonment for 1 year 9 months commencing on 23 December 2003 and expiring on 22 September 2005; and, on Count 2, to a term of imprisonment of 2 years commencing on 23 December 2004 and expiring on 22 December 2006. I direct that the recognizance release date should be 22 December 2005.

· I further order that the sentence should be suspended under s20(1)(b) of the Crimes Act 1914, and that you be released forthwith.

79 Let me explain the implications of that sentence. I have sentenced you to a total term of 3 years imprisonment, of which, subject to what I am about to say, you would be obliged to serve 2 years. In view of your undertaking under s21(E) of the Act to provide assistance in the future, I have suspended that sentence so that you may be released forthwith. Should you fail to honour your undertaking, you will be liable to serve the prison term that I have identified.

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Last Modified: 12/30/2003