R v Jenkins
[2000] VSC 503
•20 November 2000
| SUPREME COURT OF VICTORIA | |
| CRIMINAL DIVISION | Not Restricted |
No. 1472 of 1999
| THE QUEEN |
| v |
| BRUCE DAVID JENKINS |
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JUDGE: | COLDREY, J | |
WHERE HELD: | MELBOURNE | |
DATE OF SENTENCE: | 20 NOVEMBER 2000 | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 503 | |
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CATCHWORDS: Sentence – Multiple counts of furnishing false information and obtaining financial advantage by deception – Use of false valuations to obtain multi-million dollar loans from OST Friendly Society – Importance of general deterrence in business fraud – Weight to be accorded to lengthy delay in prosecution – Total effective sentence 7 years with a non-parole period of 3½ years.
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APPEARANCES: | Counsel | Solicitors |
For the Crown | C. Hillmann and J. Saunders | Office of Public Prosecutions |
| For the Accused | M. Lincoln and M. Hodgson | Victoria Legal Aid |
HIS HONOUR:
Bruce David Jenkins, you have been found guilty by a jury of five counts of furnishing false information and five counts of obtaining a financial advantage by deception. You were acquitted of two counts of furnishing false information, one count of obtaining financial advantage by deception and two counts of giving a secret commission. The offences of which you were found guilty spanned a period of time from 4 May 1988 to 21 August 1989, and involved false representations in valuation reports of properties purchased by you and on the security of which you sought, and obtained, loans.
The maximum penalties for furnishing false information and obtaining financial advantage by deception were, at that time, seven and five years respectively.
It is necessary for me to briefly outline the circumstances surrounding the commission of each of the offences for which you were convicted, since those circumstances are relevant to the sentences which I must impose upon you.
Each of the loan applications was made to the Order of the Sons of Temperance Friendly Society. OST, as I shall refer to it, was governed by the provisions of the Friendly Societies Act 1986. The Act provides that a loan on the security of a mortgage over commercial land could not exceed two thirds of the value of the property. This is known as the loan valuation ratio. The actual value of the property was required to be obtained from a registered valuer engaged independently of the owner of the land.
The loan applications were sent to OST by a Mr. Keith Bulfin of the Mortgage and Property Division of McKinley Wilson & Co. Ltd., a stock broking firm (McKinley Wilson). On the evidence, Bulfin was not only a mortgage broker but an agent for OST in facilitating loans. He also collected interest payments on loans on behalf of OST. For this service he was permitted to retain a percentage of the interest rate over the 15% charged by OST. This was usually an amount of one quarter to half a percent. Bulfin also shared with OST the establishment fee charged on each individual loan.
Although you sought to downplay your relationship with Bulfin during the trial, the fact of the correspondence between you, of the community of interest you shared in these applications, together with a trip to Holland you took together on one occasion in search of overseas finance, would, in my view, have enabled the jury to infer that you had a close business association throughout this period.
The valuer involved in these offences was a Mr. Tibor Verebes of the Queensland firm Novak Tonkin. The evidence revealed him to be a man of poor reputation within the profession and a person given to valuing properties at inflated levels. Further, Verebes was, to a considerable extent, dependent upon Bulfin for valuation work and was accommodating of Bulfin's suggestions as to the content of valuations. Bulfin stood to benefit from inflated valuations both as to the amount of the establishment fee that McKinley Wilson would receive and the quantum of interest that could be retained from the payments collected.
Final approval for these loans lay with a Mr. Paul Robinson the Investment and Marketing Director of OST. He too stood to benefit from a high level of borrowings, being entitled to a commission on new business.
Bulfin and Verebes both pleaded guilty to a number of offences arising out of these transactions about which I will have more to say later. On the evidence Robinson's role in pursuing an aggressive lending policy on behalf of OST, coupled with his commercial imprudence and apparent negligence in processing the loan applications, facilitated the fraud perpetrated upon the Friendly Society.
There was some evidence of a business association between Bulfin, Robinson and the Managing Director of OST, Mr. William Setterfield, in a business entity called Coral Oak Pty. Ltd. The evidence indicated that OST's moneys were used in this venture. Given the paucity of evidence on this topic, it is not possible to comment upon what effect such a relationship may have had upon the manner in which your applications were treated by the officers of OST.
The first two counts upon which the jury found you guilty, counts 1 and 2, involved furnishing false information and obtaining financial advantage by deception in relation to what may be called the Glen Crag transaction.
On 22 April 1988, you entered into a contract to purchase an office and residential building known as Glen Crag which was situated in Leichardt Street, Brisbane. The contract price was $2.41 million. On 4 May 1988, a loan application was sent to Mr. Daryl Faithful, the Investment Manager of OST by Bulfin. The amount of the loan sought was $4.1 million. The accompanying valuation report, both in the valuation summary and the conclusion, stated that the current fair market value of the property, as at 29 April 1988, was $6.67 million. Those portions of the valuation made no mention of any refurbishment of the property. According to Verebes, the instructions provided to him by you and Bulfin were contained in the valuation report under the heading Instructions, namely: "To assess the current fair market value of the property described in this report for mortgage security purposes assuming the complete refurbishment of the building for use as offices and managed serviced apartments."
An expert valuer Mr. Colwyn Leggett told the jury that this form of valuation was quite unsuitable for mortgage purposes which required an "as is" valuation, (that is the current market value). It was suggested by your counsel that the valuation should be seen in terms of an application for construction finance. However, Mr. Leggett was adamant that no such finance would be lent on a lump sum basis as distinct from progressive payments. Indeed, the Investment Manager Mr. Daryl Faithful, told the jury that, under no circumstances could a Friendly Society lend on a projected valuation.
Since you were the applicant for, and the beneficiary of, the large amount sought by way of loan, and since you knew that the recent purchase price of the property was a mere $2.41 million, the jury may be taken to have inferred your complicity in at least the furnishing of misleading, false or deceptive information in claiming $6.67 million was the current fair market value. On the same basis the jury may be regarded as having found you guilty of obtaining a financial advantage by deception – namely the credit facility ultimately provided by OST of $4.2 million. Although the original application was in the name of Northern Resorts Developments Pty. Ltd., the ultimate loan was to Toptown Pty. Ltd. (Toptown), a company which you controlled.
A further false representation alleged by the Crown in relation to these two counts was constituted by a letter you wrote on 26 April 1988 to Verebes purporting to set out current rentals for 1987/88 totalling $692,000. (In all references to amounts of money I will round the figures off). It was put on your behalf that these figures represented proposed rentals, albeit they formed the basis of the Verebes' valuation. That valuation, together with the others dealt with in these charges, was further inflated, according to the expert valuers, by the application of a low capitalisation rate of 9.5%. While you were aware of the operation of the capitalisation mechanism, there is no evidence to suggest that you specifically influenced the figure chosen and it is not necessary for me to discuss the formula involved.
As far as the rental figures are concerned, it was pointed out in your defence that your solicitor, Mr. Kerr, had, in March 1988, sent an accurate tenancy schedule to Verebes. This was included in the Schedule of Annexures of the valuation, and the figures you provided were labelled in that Annexure as "Proposed Rentals on Redevelopment and Project Income Details". Verebes himself, in his evidence, described them as proposed rents.
In these circumstances I am not prepared to find that the jury found this to be a material particular in relation to count 1 or a false representation in relation to count 2.
In the course of these reasons I shall use the shorthand term "material particular" for the offence of furnishing false information and the term "false representation" in relation to the offence of obtaining financial advantage by deception.
The fact that Robinson approved the loan and Faithful failed to realise its shortcomings, is indicative of a slipshod and negligent approach of both men in undertaking their responsibilities at OST. This was a problem to be repeated in future transactions.
The motive to which the Crown pointed for your activities was your pressing financial situation at that time. For example on 20 April and 10 May 1988 you had been served on behalf of both the Australian Guarantee Corporation Limited and the Community Benefits Association respectively with Notices of Exercise of Power of Sale because of arrears of interest on mortgages over the White Rock Caravan Park, the Grand Hotel Atherton and the Sunset Caravan Park, Mount Isa. The funds upon which interest was owing had been borrowed either by you or a company under your control called Moresro Pty. Ltd.
Additionally, since January 1987, you had operated in excess of your overdraft facility at the ANZ Bank Atherton.
On 9 May 1988 you received the sum of $4.189 million being the loan advance sought less the sum of $11,000 retained as an establishment fee by OST. A considerable amount of that loan was used to pay the debts to which I have just referred. Other moneys went into the account of your company Toptown.
The jury may also be taken as regarding as significant the fact that, had the purchase price of $2.41 million been taken as the current market value of the Glen Crag property, OST could only have been permitted to lend you $1.606 million, an amount which would not even have enabled you to purchase that property.
On 30 June 1988 you entered into a contract to purchase a property at High Street, Southport. This was the subject of your convictions on counts 4 and 5. The High Street property was described by the vendor, Mr. Robert Stubbs, as a substantial building on an acre of land. It was all but finished although it was unpainted concrete and was without heating and light, and had open windows. It had a lift space with no lift. This property was purchased by you for $1.45 million. Nonetheless, by 7 July 1988 – one week later - you wrote to Verebes venturing the view that its capitalised value was $8.3 million. Further, on 25 July you wrote to Bulfin asserting an "as is" value of $6.5 million. It is not without significance that Verebes ultimately produced virtually matching valuations – namely a capitalised value of $8.17 million and an "as is" valuation of $6.5 million (albeit these figures were inflated by mathematical errors as to the revenue from car parking spaces). That valuation, which was dated 29 July 1988 and an application for $3.8 million were forwarded to Robinson at OST on 26 August.
In relation to this valuation the Crown further pointed to your role in specifically providing Verebes with false information which served to inflate the valuation. This was the assertion contained in the valuation that: "Porsche have agreed to lease the ground floor for a vehicle showroom/workshop as well as office space in the building on completion of the proposed redesign and conversion." You also supplied plans to Verebes depicting Porsche as an incumbent tenant. Although at one stage in cross-examination Verebes allowed the possibility that you may have said no more than that Porsche was considering taking up a lease, the clear tenor of his evidence, which I regard the jury as having accepted, was that you affirmatively put that proposition to him.
The evidence of Mr. John Watson, the Porsche dealer involved, was to the effect that you pursued him on this matter and, that, over two or three weeks of discussions with you, he never gave you any indication he would proceed with the leasing arrangement.
The figures in the valuation, when contrasted with the actual purchase price were said to be materially deceptive and to found criminal liability for furnishing false information. The ultimate provision of $3.8 million on 29 August 1988 on the basis of the same false representation, constituted the offence of obtaining a financial advantage by deception.
I should add that the Crown, through the evidence of a financial investigator with the Major Fraud Group, Mr. Gerard Curtin, placed before the jury the financial situation of Toptown and the Jenkins Development Corporation Pty. Ltd. (JDC), the major vehicles employed by you in these transactions. On 28 August 1988, which was the day before OST advanced the amount of $3.77 million, (being $3.8 million less the establishment fee), there was a significant deficit of income to outgoings from 5 May when Toptown commenced to trade. This shortfall was funded by the previous OST loan to Toptown. Indeed, Toptown, which owed some $63,000 in interest to OST at this time, was technically insolvent.
From the money received these interest arrears were paid and $1.64 million went into the accounts of JDC.
Of the original loan only $57,000 had been spent on improving Glen Crag. This was exterior painting.
On the basis of the purchase price of the High Street property, the maximum loan you could have received from OST was $966,000.
It is clear that, by this stage, you were reliant on OST money to continue your business activities.
It was on the basis of the evidence which I have outlined, that the jury were satisfied of your criminal involvement in the High Street, Southport transaction.
On 18 October 1988 you entered into a contract to purchase the Ashmore Commercial Complex for $4 million, (counts 6 and 7). On 9 December a loan application was forwarded through Bulfin to Faithful at OST seeking a loan of $4.5 million with this property as mortgage security.
In the course of negotiations with the vendor, a Mr. John Jenkins, he had pointed out to you defects in the building including a problem with expansion joints which had resulted in concrete flaking off the building.
Mr. John Jenkins had also provided you with a list of tenants and current rentals. In fact, a Deed of Covenant was entered into by you, in which you agreed to honour the existing tenancy agreements and leases. This you failed to do. The point, however, is that, adapting that list, you supplied Verebes with a false tenancy schedule in which, according to Mr. John Jenkins, the rental amounts had been substantially overstated in all but four instances and usually by 50%. Instead of the genuine net figure of $487,000 per year, your document showed $705,000. This falsehood was repeated in a letter you wrote to Bulfin on 11 October 1988.
As your earlier letter to Verebes prior to the High Street, Southport valuation made clear, you were well aware of the valuation process of capitalisation and the effect of this gross distortion on the valuation when it was subjected to that methodology. Here it produced a valuation from Verebes purporting to represent the current fair market value of the Ashmore Commercial Complex, as at 22 November 1988, as
$7 million.
On 15 December 1988 you received the OST advance of $4.46 million net. A financial analysis of your company's affairs on the day immediately prior to this advance, demonstrates that the Jenkins Group had a deficit of interest over rental income of $387,000 and payments of interests had been met from debt funds. A cash balance of $381,000 at this time represented the excess of funds from the High Street, Southport loan. During this time $347,000 was directed by you to improvements on the Glen Crag and High Street properties. Put succinctly, the financial analysis reveals that the majority of your trading in that period was debt financed.
Once again, if the OST loan valuation ratio of two thirds had been applied to the actual purchase of the Ashmore Commercial Complex, you would not have had sufficient funds to complete the purchase. Of the amount received from OST you injected $937,000 into JDC.
The jury, in my view, would have been satisfied on this evidence, that both the purported current fair market value of $7 million, and the tenancy schedule you supplied, were materially deceptive to your knowledge. Similarly, the jury would, in my view, have been satisfied that these false representations, as well as the falsity of the avowed assertion that the valuation report represented an assessment of the current market value of the property for mortgage security purposes, were the cause of OST parting with its money.
Counts 10 and 11 related to furnishing false information in relation to the Great Adventures Portfolio and the Dreamwold Theme Park respectively.
One of your ambitions was to own the Dreamworld Theme Park on the Gold Coast. This enterprise was described by its then owner, Mr. John Longhurst, as a miniature Disneyland. You were a friend of his son Anthony Longhurst (who gave character evidence on your plea).
As well as the Theme Park, Mr. John Longhurst had a portfolio of properties called the Great Adventures Portfolio which included Green and Fitzroy Islands, the Green Island Observatory, the Cairns Ferry Terminal Site, and the Cairns Cruises Business. Mr. Longhurst made it clear that any sale of the Dreamworld Theme Park had to be in conjunction with the Great Adventures Portfolio.
It appears that you made a number of offers to Mr. Longhurst over a 12 month period but it is not necessary to set out the protracted negotiations. A point was reached, however, on 30 March 1989 when you signed a confidential agreement with Mr. Longhurst, as a result of which, according to his evidence, he made available to you some financial statements. These included valuations by the respected valuers Herron Todd White of both the Dreamworld Theme Park and the Great Adventures Portfolio as at February 1989. The former was valued at $90 million, (being $80 million for the actual Theme Park and $10 million for the adjacent land). The latter was valued at $42.5 to $45 million dependent upon whether the Ferry Terminal Site was treated as a commercial site or an hotel site. The Ferry Terminal Site component of this valuation was $5 to $7.5 million. These valuations were also examined on your behalf in mid April 1989 by a Mr. Trevor Maloney, a chartered accountant then employed by Coopers & Lybrand. Consequently it is quite clear that you were aware of their quantum prior to any valuation of these assets by Verebes.
In a letter of 31 March, you wrote to Bulfin that the Dreamworld assets, (and I use that term to cover both entities), would be worth $232 to $240 million. You attributed that view to Novak Tonkin but Verebes denied expressing such an opinion. The jury may well have been satisfied that what you were expressing was your own deliberately inflated view. Significantly, in valuations of 6 April (the Great Adventures Portfolio) and 10 April (Dreamworld Theme Park) Verebes totalled the assets at $240.1 million. The amount assigned to Dreamworld was $186.5 million and the amount to the Great Adventures Portfolio $53.6 million. On 1 May 1989 the valuation reports of $240.1 million were forwarded to OST.
At this time your own offer to purchase both enterprises was in the region of $155 million. The discrepancy between that amount and the Verebes valuation was such that Capel Court, merchant bankers that you had engaged, queried why the vendor Mr. John Longhurst was selling the Dreamworld and Great Adventures properties at "quite a significant discount". Your responses included assertions that Mr. Longhurst was unaware of the real worth of the group and that he was a private and reclusive man who, because of your close friendship with him, was unwilling to entertain offers from other purchasers. Not only did Mr. Longhurst's evidence belie those claims, you were well aware of the Herron Todd White valuations that had been obtained by him as the prospective vendor.
It was the Crown case that, given your knowledge of the Herron Todd White valuations, and the amount you were prepared to offer, it was manifest that you were well aware that the Verebes valuations did not represent the true value of the properties for mortgage security purposes. This was so even allowing that Verebes' valuation of the Theme Park was predicated on 1989-1990 projected figures of increased attendances and admission prices.
The jury may be regarded as accepting those contentions insofar as count 11 relating to the Dreamworld Theme Park valuation is concerned. You were, however, acquitted on the count pertaining to the Great Adventures Portfolio: (count 10).
It was suggested in the course of your plea that such verdicts were inconsistent. However, the jury may not have been satisfied of the misleading nature of the Great Adventure valuation because the amount of the discrepancy between this valuation and that of Herron Todd White was not far outside the 10% tolerance spoken of by Mr. White of that firm. Furthermore, there was evidence that Capel Court ventured the opinion that the Great Adventures Portfolio might be worth $70 to $100 million (albeit its expertise lay in merchant banking rather than property valuation).
Whilst on the question of inconsistency, it was also suggested that the acquittals on counts 8 and 9, which related to the Wildwood Estate, Buderim, were inconsistent with the guilty verdicts on the other property transactions. It is trite to note that the jury were instructed to examine each count separately in the light of the evidence relevant to it. To attempt to ascertain the reasons for these acquittals would not only be unprofitable, it could never amount to more than speculation.
Count 12, of furnishing false information, concerned the revaluation of the property at High Street, Southport. The revaluation was contained in a letter dated 11 May 1989 from Verebes to Arthur Brown at McKinley Wilson asserting that rentals had risen at the High Street location since the July 1988 valuation. Recalculations of the market rentals including the car park rentals resulted in an "as is" figure of $8.186 million and an "on completion" valuation of $9.5 million.
Bearing in mind that the purchase price for the building less than a year earlier was $1.45 million, and that you had, according to your own company books, spent $1.177 million in total on refurbishment of all of the properties you had purchased in this period, the jury were no doubt satisfied of the falsity of the valuation ultimately transmitted to OST.
According to Verebes, the information in the revised valuation was supplied to him by you.
The amount of $2.61 million, at least part of which was predicated upon this revaluation, was provided to you by OST on 12 May 1989. This is the subject of count 13 of obtaining a financial advantage by deception. This amount, together with a guarantee of $2.4 million from a Mr. Andrew Buxton in favour of the Dreamworld vendor John Longhurst, was utilised in providing the deposit for the Dreamworld properties. It was the Crown case, in my view accepted by the jury, that the reason for this revaluation was your need to raise money to pay the deposit on the Dreamworld purchase.
Having paid that deposit you were still faced with the challenge of raising the balance of the Dreamworld purchase price.
While the April valuations of Verebes totalled $240.1 million, this included a figure of $15 million for goodwill. Since OST could not lend on goodwill, the relevant total was $225 million. This left no margin at all in the loan value ratio if OST were to provide the full sum required for the purchase, being $156.07 million. Accordingly, in an effort to increase the valuation you sought firstly to have Verebes alter the Dreamworld Theme Park valuation by increasing the value of the land adjoining the theme park from the $10 million that he had attributed to it. When Verebes declined to do so you requested he discuss the matter with Bulfin. The desired effect was achieved by Bulfin persuading Verebes to reduce the goodwill component of the valuation by $8 million and to transfer that figure to the value of land and improvements. This increased that total from $171.5 to $179.5 million. A substituted valuation page (p.43) was forwarded to OST.
Next you sought to increase the value assigned to the Great Adventures Portfolio.
The account of Verebes was that you contacted him requesting that he revalue the Cairns Ferry Terminal Site. This had earlier been valued by Verebes at $12 million as compared with the Herron Todd White valuation of $5 to $7.5 million. You told Verebes that you had inside information that three of the tenders for the adjacent yacht club site had been over $16 million. Further, you told him you needed the revaluation to borrow additional funds and that failure to revalue could result in your losing your cash deposit of $6 million.
At this time you were under great pressure to finalise the OST loan. The original settlement date of 20 July had already been aborted and a further date of 4 August fixed.
As a result of your efforts Verebes wrote to Bulfin on 4 August 1989 revaluing the Ferry Terminal Site at $36.5 million. As a consequence the Great Adventures Portfolio valuation was increased to $78.219 million and the total of both valuations to $264.619 million.
Your own financial situation at this time was a parlous one. For example, immediately prior to settlement of the Dreamworld transaction your companies owed OST $533,000 in interest. Excluding this amount there remained a deficit for the whole of the period of 5 May 1988 to 20 August 1989 of $968,000. In essence, Toptown and JDC were insolvent.
On 21 August 1989 the Dreamworld transaction was settled with OST guaranteeing $96 million to NatWest Bank which contributed that amount of the purchase price, and providing your company Dream Co. Finance Pty. Ltd., which was the vehicle for this purchase, with a credit facility of $54 million. It is the obtaining of the guarantee and credit facility by the false valuations which constituted count 14, obtaining a financial advantage by deception. This was the final charge upon which you were convicted by the jury.
Subsequently, you received further advances from OST in relation to this transaction, but these were not the subject of any charges and are to be ignored for sentencing purposes.
The offences for which you have been convicted occurred over a period of some 15 months. During that time you obtained loans and a guarantee from OST totalling approximately $165 million. Some of that money was utilised to pay debts owing on previous investments such as the Grand Hotel, Atherton and some to pay interest on the loans generated by the purchase of the Glen Crag and the High Street, Southport buildings and the Ashmore Commercial Complex. At no time could the corporate entities through which you operated be described as solvent.
You were assisted in plundering the funds of OST by the conduct of a dishonest and voracious mortgage broker, a dishonest and compliant valuer, and persons in positions of responsibility at OST such as Robinson whose negligence and commercial recklessness ill–served the OST members. There was a complete absence of due diligence and there was no credit committee. The actions of those at OST assist in explaining without excusing your conduct.
I have no doubt that you, like a number of others who have come before these courts, were attracted to, and seduced by, the cavalier lending practices adopted by financial institutions in the post-regulation period of the eighties. At 30 years of age you had already engaged profitably in property development. You hoped and believed that the ventures upon which you now embarked would be a success. As it turned, this was not to be so. For example, factors such as the pilots' strike of 1989 eroded the profitability of your Dreamworld enterprise. It is not suggested the large sums of money you obtained were directed towards any grandiose lifestyle. One of your ambitions, according to your friend Anthony Longhurst, was to be a multi-millionaire. Unfortunately in pursuing that goal you were prepared to engage in dishonest and deceptive practices.
It is difficult to quantify the financial losses occasioned by your activities. The subsequent sale of the properties involved in these transactions occurred in a market that had lost the buoyancy of the late eighties. For example, the Ashmore Commercial Complex was subsequently resold in 1990 for $2.375 million having been purchased for $4 million and been the subject of a $4.5 million loan. The Great Adventures Portfolio was sold in 1991 for $33 million and the Dreamworld Theme park in 1996 for $85 million. In this instance the loss as against the original guarantee and loan was $32 million. That figure does not take into account the considerable amount of lost interest occasioned by the failure of your businesses.
As far as the individual OST members are concerned, documentation provided by the Independent Order of Oddfellows Friendly Society (IOOF) and tendered by the Crown, indicated that three of the OST members benefit funds were frozen in July 1990 when IOOF effectively took over OST.
Some 31,000 members were affected by that freeze. It is to be noted that at that time there were some 90 mortgages, mainly secured on tourism and commercial properties, involving $390 million. It was estimated that 98% of these mortgages were either non-performing or in default, although the opinion was expressed that the major contributing factor for the freeze was the Dream Co. Finance Pty. Ltd. loan of $158 million and a Lassiters Casino loan of $33 million. The latter has no relevance to this case.
As the properties were eventually sold, the freeze was gradually lifted until, in June to August 1996 members were given the opportunity to access the sum total of their funds at a discounted rated varying from 5% to 20%. Twenty thousand members accepted this offer. In late 1998, the remaining 11,000 affected members received all of the principal they had invested. It appears, however, that no interest was paid to any member between the date of the freeze and 1998.
On the basis of this material it can be said that your activities were one of the contributing factors to the financial losses experienced by a large number of OST members.
In cases such as DPP v. Bulfin[1], the approach of courts to white collar crime is set out: see for example Charles, J.A. at pp.131-2.
[1](1998) 4 VR 114
Frequently, the offender involved will have no prior convictions and indeed no subsequent convictions, as is your own situation. The effective discovery and subsequent sentence will have devastating effects on the individual's personal life. The exposure will tend to ensure that the perpetrator is never again in a position where the opportunities to offend exist. Consequently specific deterrence will tend to play a lesser role in the application of sentencing principle. On the other hand, offences such as the present ones involve a course of conduct with deliberate repeated acts of dishonesty resulting in a substantial loss of money and deleterious effects to small investors. Investigation of such offences is, as in this case, lengthy and necessarily expensive and the prosecutions protracted. Moreover, offences such as the present ones inevitably affect the operation of credit providers who are an essential part of our economy. The need for financial institutions to combat deliberate dishonesty by the imposition of stringent and extensive safeguards against loss, increases the cost of lending and necessarily the financial burden which must be borne by borrowers.
In these circumstances courts have pointed to the significance of general deterrence as an element in the sentencing process.
Accordingly, in your case the total effective sentence imposed must reflect not only the seriousness of these offences in the substantial sums of money involved and the effect of your actions on investors, but also the principle of general deterrence.
There are, however, a number of matters personal to you which I must also take into account in determining the appropriate sentence. You are presently 43 years of age having been born in September 1957. Both your parents are deceased. You have one sister with whom you have recently been living in Sydney. You matriculated from Newington College, Sydney in 1975, and you recently commenced a four year Diploma in Law in Sydney under the auspices of the Legal Practitioners Admission Board and have completed one year.
I was informed that your interest in real estate began in 1979 when you were aged 22. You progressed from buying and selling a block of land at a substantial profit to a situation where, some eight years later, you had accumulated funds of between $1 and $2 million.
After an earlier relationship which produced a daughter now aged 11, you married in July 1993. You have one son aged four from this relationship. At the time of your marriage your wife was aware that this investigation had commenced. Ultimately, however, she could not stand the publicity and accompanying notoriety which was generated by the Brisbane press as events surrounding Dreamworld unfolded. Consequently, in 1998 she separated from you. You remained friends and you have been seeing your children about every two months.
Your employment history since 1990 is that for five years you were employed by a company called Mitchie Pty. Ltd. in the management of the units that were part of the Cranbrae Retirement Village which had been purchased by you in 1987. In that role you earnt about $75,000 per annum.
In 1995 the Australian Tax Office sought from you $450,000 in unpaid tax. You were made bankrupt in that year and your company Mitchie Pty Ltd. was liquidated. Thereafter your notoriety plus your bankruptcy made it impossible to find a job and you were unemployed for 12 months. Subsequently you were employed by your sister in a company called Newport Securities the activities of which involved raising capital for companies described by your counsel as medical and technological. Your salary was performance based and your earnings were only about $15,000 per year.
The Lassiters Casino prosecution, which resulted in your discharge at committal; your bankruptcy, which lasted until February 1998; and, thereafter, these pending legal proceedings, have apparently frustrated your efforts to obtain gainful employment.
I have already adverted to your lack of prior and subsequent convictions. In the course of the character evidence of Mr. Anthony Longhurst, your long time friend, mention was made of your capacity for hard work, your dynamism and your desire to achieve. From his perspective you are loyal and trustworthy. I accept the genuineness of his evidence. He also spoke of your great desire to buy and operate the Dreamworld Theme Park. In this regard your counsel also informed me that when you were eventually in charge of Dreamworld you gave funds to various community groups and entertained less privileged children at the Theme Park. This is to your credit.
Mr. David Craik, a Chartered Accountant from New South Wales, with whom you have been associated for many years, sent an affidavit to the Court in which he expressed his views of your business acumen, your enthusiasm for projects you undertook, your tireless perseverance, and your loyalty and trustworthiness.
Given your proven capacity for hard work, your intelligence and your lack of convictions, I regard your prospects of rehabilitation as excellent. In your case little if any weight needs to be accorded to the principle of specific deterrence.
In this case you do not have the benefit of remorse. It is my impression, essentially confirmed by Mr. Longhurst, that you continue to regard what occurred as a legitimate business activity. Nonetheless I regard you as intelligent enough not to transgress in this manner again.
In terms of the trial itself I take into account in your favour the co-operative approach you took by way of the many admissions of fact that you made. This resulted in the significant shortening of the proceedings and the saving of public cost.
One factor upon which your counsel, Mr. Lincoln, placed great reliance, was the 11 years which has elapsed from the commission of these offences between May 1988 and August 1989, and the sentencing for them in November 2000. In my view the reason for much of the delay has been the complexity of the investigations which, it must be remembered, involved a number of potential offenders beside yourself. Further, your disinclination to co-operate with the investigating authorities, whilst totally legitimate, no doubt had the effect of prolonging their inquiries. Nonetheless, that delay has had several significant effects which I take into account. The strain of having this matter hanging over your head has exacted a great personal toll upon you. Your marriage has been destroyed and your capacity to function as a business man has been shattered. Almost nine of the prime years of your life have been devalued in the aftermath of these events. No doubt you have experienced great anxiety about the ultimate outcome of the legal process. Ultimately you have been reduced to borrowing money for necessities from Mr. Anthony Longhurst, who spoke of the cloud hanging over you and the fact that you are no longer the dynamic and enthusiastic person that you used to be. Mr. Craik also described a lack of confidence and depression which accompanied your business failures and the subsequent investigation and prosecution. I regard the effects of the period of delay as constituting a considerable degree of punishment.
In the course of this plea, I was referred to the sentences imposed upon Bulfin and Verebes. Bulfin pleaded guilty to a number of frauds perpetrated on different entities over a period of time from July 1988 to early 1992. He initially received a total effective sentence of five years with a minimum of two years, but on appeal this was increased to six years with a minimum of three years. However, only one of those offences related to the present matters, namely the Dreamworld transaction. The offence concerned Bulfin's involvement in submitting the falsely inflated valuation of Dreamworld and the Great Adventures Portfolio to OST. For that offence, which was obtaining a financial advantage by deception, he was sentenced to two years' imprisonment. This one offence does not provide me with a sufficient basis to consider questions of parity. This is particularly so having regard to the fact that Bulfin, although pleading guilty to 14 counts, received a discount for his guilty pleas, for demonstrating remorse, and evincing a willingness to give evidence on behalf of the Crown. Further, the length of his ultimate sentence was subject to the palliative effect of the double jeopardy concept attaching to appeals by the Director of Public Prosecutions. In Bulfin's case, the delay between the investigation and sentencing in September 1997 was said to be four and a half years.
The valuer Verebes pleaded guilty to three counts of furnishing false information and expressed remorse for his actions. He also undertook to give evidence for the Crown and was sentenced on that basis. Only one count to which he pleaded guilty related to matters involved in this trial. Those relevant included the Glen Crag and High Street, Southport buildings, the Ashmore Commercial Complex, the Dreamworld transaction, and the revaluations of the High Street and Southport properties and the Cairns Ferry Terminal Site. The reward Verebes received for his criminality was the negotiated valuation fees. In his case there was a delay of about nine years between offences and sentence which the Court took into account. Verebes received two years for this offence. His total effective sentence was three years of which eighteen months was suspended for a period of two years. Once again the distinctions I have outlined are such that no real guidance is provided by that case.
In determining the total effective sentence, I have balanced, as best I can, the various sentencing principles enunciated in the Sentencing Act. In particular I have had regard to the gravity of the offences, to the need for general deterrence and to your prospects of rehabilitation. I have fixed the individual sentences taking into account the amounts involved, the circumstances surrounding the offences, the element of overlap between the offences of furnishing false information and the actual obtaining of a financial advantage by reason of that false information, and, importantly, the overall effective sentence which I regard as being appropriate. I have, of course, had to take into account the maximum penalties which existed at the time of these offences.
Insofar as the counts of furnishing false information are concerned, you are sentenced as follows: on Count 1, two years' imprisonment; and on Counts 4, 6, 11 and 12, three years' imprisonment.
On the charges of obtaining financial advantage by deception you are sentenced as follows: Count 2, two years' imprisonment; Counts 5, 7 and 13, two and half years' imprisonment and Count 14, three years' imprisonment.
I further order that four months of Counts 4, 6 and 12 and nine months of Counts 2, 5, 7 and 13 be served cumulatively with each other and with Count 14.
This results in a total effective sentence of seven years. I fix a minimum of three and a half years before you become eligible for parole.
I further declare that the period to be reckoned as already served under the sentence is 18 days inclusive of today's date. I direct that there be noted in the records of the Court the fact that such declaration is made and its details.
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