R v Musolino

R v MUSOLINO
[2004] SASC 89
Court of Criminal Appeal: Bleby, Gray and Sulan JJ

BLEBY J: The appellant appeals against his sentence for 15 counts of fraudulent conversion. He was found guilty of those offences after a trial by jury in the District Court. The maximum penalty for each offence is 7 years imprisonment.
The appellant was charged with 16 counts of fraudulent conversion. He was convicted on all but count 5. Counts 1,2 and 3 related to sums advanced to the appellant by Mr Nick Assiotis to finance the investigation of the transfers of certain intellectual property to the company as franchisor of Barnacle Bill food outlets. Counts 7-10 related to monies paid to the appellant for the purchase of the debts of a bankrupt and of shares in the same franchisor company. Counts 4 and 6 and 11-16 related to sums advanced by seven persons, including Nick Assiotis and his brother Steve Assiotis, to be invested by the appellant on their behalf. Counts 14 and 15 related to monies advanced for the purchase of creditors’ debts.
The offences were committed during a period from 18 May 1999 to 1 March 2000. The total amount involved was $201,642.80. Some of that money was used to repay others who had invested with the appellant.
The sentence imposed by the sentencing Judge was 6 years imprisonment, with a non-parole period of 3 years. The sentencing Judge took into account the fact that the appellant had spent one month in custody after his conviction and approximately 1 month on home detention bail before being sentenced. The sentence took effect from 22 April 2003.
There are two grounds on which leave to appeal was given. One is that the sentencing Judge erred in finding that in order to commit the offences the appellant gained the trust of the victims by holding himself out to be an accountant and an auditor employed by the Commonwealth Government. The second is that the head sentence and non-parole period are manifestly excessive, taking into account the appellant’s age, his previous record and prospects of rehabilitation, that he had endeavoured to make restitution and that, although the offending involved a breach of trust, it did not involve an abuse of his position and was therefore not of a “systematic type”.
Before turning to those grounds it is necessary to say something more about the facts. The appellant previously appealed against his conviction. That appeal was dismissed: R v Musolino (2003) 86 SASR 37. The judgment of Lander J at [17] to [54] contains a convenient summary of the facts. I have relied on that summary and will not repeat it. In essence, Steve and Nick Assiotis conducted two Barnacle Bill franchises. They had ongoing disagreements with the franchisor and in particular with a Mr Leonida, with whom they dealt. Mr Leonida was bankrupt, and Nick Assiotis believed that, before his bankruptcy, he had transferred certain intellectual property in relation to the franchise to a company of which it was believed he had defacto control, and that he had done this in order to avoid the assets being available for his creditors.
The appellant was introduced to Nick Assiotis by a Mr Reinboth who arranged a meeting with the appellant. The appellant offered to make appropriate inquiries to investigate Mr Assiotis’ allegations at a cost, which the appellant estimated, would be of about $20,000. Monies were in due course paid to the appellant by Mr Assiotis for that purpose but were used for the appellant’s own purposes. Mr Assiotis was also persuaded to invest money through the agency of the appellant for a high rate of return. What purported to be interest on that investment was in fact paid to Mr Assiotis but the investment was not made.
During the course of discussions the appellant reported on what purported to be his investigations and suggested to Mr Assiotis that he should buy Mr Leonida’s debts in bankruptcy, which could be bought for between $90,000 and $100,000. Mr Assiotis arranged for a meeting of various relatives who might be able to assist in that exercise, together with Mr Reinboth and the appellant. Various proposals were put to that meeting by the appellant for the purchase of the debts. A further meeting was held with the same group and another man at which that proposal was discussed together with an additional proposal to purchase shares in the Barnacle Bill franchisor company. Those present, apart from Mr Reinboth, agreed to contribute money which was to be given to the appellant in order to set up a company to buy the shares.
The appellant purported to negotiate the purchase of the shares and presented a fraudulently signed transfer of them to the company which he purported to set up. Nick Assiotis proceeded on the basis that the new company then owned the shares in the franchisor, and that on the appellant’s advice he was no longer required to pay the franchise fee. In fact the transfers had not taken place and the appellant had retained the monies paid to him.
Other victims were induced by the appellant to pay money to him for the purpose of making investments on their behalf. The appellant held himself out as an apparently plausible, competent accountant/auditor to whom clients could entrust their money for the purposes of investment but at very high rates of return. That may well have been part of his attraction to some rather gullible victims. He used the money entrusted to him for his own purposes.
I return to the first ground of appeal. The passage in the sentencing remarks complained of was the following:
“In order to commit these offences you gained the trust of your victims. You did this by holding yourself out as an accountant and auditor employed by the Commonwealth Government, which you were not, and by lying about ways you could invest money at high interest rates. Once having gained the trust of your victims, it was an easy matter of getting them to hand over their money to you.”
There was evidence that the appellant had presented Mr Reinboth with a card purporting to be of the Commonwealth of Australia implying that the appellant was manager of the “Commonwealth Special Audit Investigation Branch”, and that he was told that the appellant had “powers to investigate the tax office”. A copy of the card was tendered in evidence. It included the Commonwealth of Australia coat of arms and bore a Canberra address and telephone number. The appellant told Mr Reinboth that he was on leave from the Commonwealth Government.
There was also evidence that he told Nick Assiotis that he was an auditor working for the Commonwealth Government. He produced a business card to Mr Assiotis that contained the Commonwealth coat of arms. He introduced himself to one of the other victims as an auditor with the Commonwealth and produced a copy of the card to him. He introduced himself to Steve Assiotis as a Commonwealth auditor who was on 12 months leave. He showed him “like a little badge …. like a credit card”. Other witnesses indicated that the appellant represented himself as carrying on business in various guises as an accountant/auditor. One of those also said that he was told by the appellant that he had worked for “the Government”. With one or two of the victims he had little or no personal contact. They invested through relatives who did.
The appellant admitted having a number of cards printed for his own purposes which were identical to the one tendered. In fact the appellant had never been employed by the Commonwealth Government. He had no formal qualifications in accountancy. The businesses with which he claimed to be associated did not exist. At some stage he had done some internal audit work for the South Australian Workcover Corporation.
It is clear that the appellant did not tell all the victims that he held himself out as an accountant and auditor employed by the Commonwealth Government. To some he made no representation as to his qualifications.
What the sentencing Judge was obviously wishing to emphasise in the passage complained of is the appellant’s gaining of the trust of his victims. He mentioned that twice. What followed was not stated by the sentencing Judge to be exhaustive of the manner in which the appellant gained the trust of his victims. What the sentencing Judge said was factually correct. The appellant falsely held himself out as a person with experience, integrity and expertise in financial and corporate services. By so holding himself out and by falsely representing what he could and would do, both in relation to the affairs of the Barnacle Bill franchise and by way of high-return investments, he gained the trust and confidence of those who committed their money to him. He maintained that façade by producing to his victims apparently genuine documents purporting to evidence his work and the investments made. The fact that he mentioned an association with the Commonwealth Government to some of his victims was purely incidental to the main thrust of the deceitful means by which he gained the victims’ trust. I do not consider that there is any substance in the appellant’s complaint.
I turn to the question whether the head sentence and non-parole period are manifestly excessive. At the outset, it must be observed that on at least two occasions members of this Court have expressed the view that penalties for allied types of criminal activity should be increased. In R v Davies (1996) 88 A Crim R 226 the sentence imposed was 6 years imprisonment with a non-parole period of 2½ years. On a prosecution appeal the head sentence was not disturbed but the non-parole period was increased to 4 years. There was one victim. The appellant was a chartered accountant. The amount converted was $492,000 over 12 years. He pleaded not guilty to 18 counts but changed his plea to five counts during the trial. He was convicted of the other 13 counts and asked a further similar charge be taken into account. He came with glowing character references. The Court questioned whether the existing sentencing standards were adequate and said that the time may well come when it is necessary to revise them “for large-scale systematic breaches of trust”: Cox J at 230. The Chief Justice agreed at 231.
In R v Cavanagh [1999] SASC 418 the Chief Justice expressed the view that the time had arrived for an increase in the sentences imposed for substantial frauds of this kind. Of the case before him he said:
“In future a sentence of the order originally imposed by the sentencing judge would not be regarded by me as inappropriate”.
That was a sentence of 9 years imprisonment with a non-parole period of 5 years after a plea of guilty to 144 counts of fraudulent conversion over a period of about 4½ years involving three victims. In each case Cavanagh had gained the trust of the victims and was a signatory to accounts and investments held in their names which he appropriated to his own use. The total amount involved was approximately $240,000.00. There are some similar features in all three cases and some dissimilar features, but the underlying theme common to all is a systematic inducement of trust and confidence in the victims by a person of apparently impeccable character, and the ongoing abuse of that trust involving the conversion of substantial sums of money to the use and benefit of the defendant.
The sentencing Judge in this case observed that the appellant’s course of conduct involved the appellant “in spinning a web of deceit and lies; and, as best I can tell, was done to finance a comfortable lifestyle”. There had been some minor recovery by forced sale of some of the appellant’s personal effects. The recovery was estimated by the sentencing Judge to be unlikely to be more than a quarter of what the appellant dishonestly obtained.
The appellant was not entitled to any reduction on his sentence for a plea of guilty or contrition. He has never acknowledged his guilt.
At the time of the offending the appellant was aged 31 and 32. At the time of sentencing he was running a family trucking business and had married for the second time some three months before sentencing. As is not unusual in such cases, the Court was supplied with positive character references.
One of the factors relied on in support of the penalty being manifestly excessive was the appellant’s age. At the age of 31 and 32 he would normally be expected to have shed the immaturity, inexperience and impulsive behaviour of a youth for the purpose of sentencing. That age in itself is little guide to the appellant’s prospects of rehabilitation. I can see no reason to discount his sentence on account of his age alone.
Reliance was also placed on the appellant’s previously unblemished criminal record and his good character, and the fact that the sentencing Judge did not accord any or sufficient weight to that good character. In particular, his counsel, Mr Griffin, drew attention to the fact that the position of trust in this case was not generated by his previous good character, such as might be the case with a solicitor, banker or financial consultant. It was said that what gave rise to the position of trust in this case was the misrepresentation as to his qualifications and status.
That submission overlooks two important factors. One is that it was not merely the representation made to some of the victims about his status that induced the trust but his initial and continued presentation as an honest, competent and trustworthy financial and corporate advisor, knowing that any reference to his antecedent character and community activities would have borne this out. The second factor relates to the need for deterrence adverted to by Cox J in R v Davies (1996) 88 A Crim R 226 at 229:
“[C]rimes of this sort are usually committed by respectable people of good standing – that is how they come to be in positions of trust which they are able to exploit to their own advantage. The deterrent effect of a sentence or non-parole period upon other people of good reputation, in a similar position and similarly tempted, would be substantially diminished if persons who commit a series of offences of this kind are still given substantial credit for their previous good character. Nor for the same reason should much allowance be made for the circumstance that, as is almost always the case, such a defendant is unlikely to offend again”.
In similar vein Doyle CJ said, at 231:
“[D]eterrence is an important aspect of sentencing. If credit is to be given for the maters identified by the sentencing judge and referred to by Cox J, the scope for adequate deterrence will be substantially eroded. This is the case because the matters identified by the sentencing judge and by Cox J – previous good character, unlikelihood of further offending and so on, are regularly found in cases such as this, as Cox J points out. The need for deterrence, and the fact that these features are routinely present in such cases, combine to mean that such a low non-parole period cannot be justified upon the basis of such matters in cases such as this”.
Deterrence, both personal and general, was of paramount importance in sentencing for these offences. They were premeditated, deliberate, repetitive and involved deceit on a large scale.
The prospects of rehabilitation were also said to have been ignored by the sentencing Judge in this case. While the sentencing Judge did not expressly refer to that, for the reasons given by Cox J in R v Davies this factor assumes less significance than might be the case with offences of a different nature. There was little objective evidence to suggest that the prospects of successful rehabilitation of the appellant were particularly good in any event. There has never been any acknowledgement of guilt or any explanation for the offending. That provides no satisfactory basis for a conclusion that the prospects of rehabilitation are good. With nothing to explain the offending, the fact that the appellant now operates a trucking business, and has since remarried and begun a family, does not of itself carry great weight in assessing the appellant’s prospects of rehabilitation.
Two matters remain which are mentioned in the grounds of appeal.
It does not assist the appellant to plead that some of the money obtained was not applied for the appellant’s own personal use but to make restitution to others whom he had previously defrauded. The application of monies converted for that purpose are just as much for the appellant’s own use in order to perpetuate the fraudulent behaviour and in order to prevent its early detection. Nevertheless, the overall net deficiency will be a relevant factor in assessing the penalty. In this case, such additional restitution as was made after discovery of the fraudulent conversions was not made voluntarily nor out of any sense of contrition.
It is not to the point that the appellant did not systematically defraud a particular victim over a period of time, or that he was not in the position of continual abuse of trust of a particular client or employer. For each of the victims in this case there was deliberate and ongoing deception and breach of trust, deception not only in inducing them to part with their money but in maintaining the charade of a responsible and successful investor and financial advisor.
Mr Griffin argued that because of the brevity of the sentencing remarks and the fact that some matters said to be favourable to the appellant had been mentioned only in passing or not at all, they had either been overlooked by the sentencing Judge or afforded insufficient weight by him. The sentencing remarks were brief but adequate. Sentencing for offences of this nature does not lend itself to a notional starting point to which is applied discounts or credits for particular factors said to be favourable to the offender. Whilst there can be no general standard or common notional starting point for offences of this nature, the penalty must be determined largely against the nature and extent of the offending, the nature and extent of the deceit involved and the impact of the offending on the victim or victims. Other personal factors, while relevant, will not necessarily assume the same influence as they might in other cases.
Given the observations of the sentencing Judge and the penalty he imposed, it cannot be said that the sentencing Judge failed to take into account any relevant matters or that he failed to give due weight to matters favourable to the appellant. The head sentence was appropriate. It was certainly not manifestly excessive.
So far as the non-parole period is concerned, there is no reason to believe that the sentencing Judge did not make some allowance for the appellant’s prospects of rehabilitation, whatever they might be. There comes a point, in sentencing for this type of offence, where too great a non-parole period begins to undermine the necessary deterrent effect. In my opinion, the non-parole period set indicates a degree of leniency towards the appellant.
I would dismiss the appeal.
GRAY J: I agree with the reasons of Bleby J. The appeal should be dismissed.
SULAN J. I agree that the appeal should be dismissed, for the reasons given by Bleby J.

[2004] SASC 89

2 April 2004