Hailemichael v Police
[2024] NZHC 183
•13 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI-2023-404-498
[2024] NZHC 183
BETWEEN SOPHONIAS HAILEMICHAEL
Appellant
AND
NEW ZEALAND POLICE
Respondent
Hearing: 13 February 2024 Appearances:
Z Trinder for the Appellant R Va’a for the Respondent
Judgment:
13 February 2024
ORAL JUDGMENT OF BECROFT J
[As to appeal against conviction and sentence]
Solicitors/Counsel:
Meredith Connell, Auckland
Public Defence Service, Waitakere
SOPHONIAS HAILEMICHAEL v NEW ZEALAND POLICE [2024] NZHC 183 [13 February 2024]
This appeal
[1] Sophonias Hailemichael pleaded guilty to one charge of engaging in money laundering.1 In the Waitakere District Court, Judge GS Collin declined to grant him a discharge without conviction.2 Mr Hailemichael was convicted and sentenced to six months’ supervision and ordered to pay $6,000 in reparation.
[2] This is an appeal against that conviction and sentence. Mr Hailemichael seeks to be discharged without conviction.
Facts
[3] Mr Hailemichael came across what was described as a “get rich quick scheme” on the social media platform Tiktok. If involved, he was required to provide bank accounts to an unknown third party into which funds could be transferred. Mr Hailemichael contacted two of his friends and persuaded them to provide him with their bank account numbers, saying that they would have money transferred into their accounts.
[4] Mr Hailemichael then provided the two bank account numbers of his friends to the unknown third party (presumably obtained from Tiktok). Subsequently, $3,000 was paid into each account.
[5] On instructions from the third party, he went with his first friend to a service station while she purchased two, what are known as, “Prezzy” cards worth $500 each, using her bank card linked to her account.
[6] Mr Hailemichael took possession of the Prezzy cards. He then took his friend to an ATM machine, and she made two withdrawals of $800 each—totalling $1,600. At another ATM machine, his friend made a further withdrawal of $300. As a reward for her involvement, Mr Hailemichael’s friend was given a Prezzy card worth $500.
1 Crimes Act 1961, s 243(2); maximum penalty 7 years’ imprisonment.
2 Police v Hailemichael [2023] NZDC 24911.
[7] As Judge Collin indicated, the facts are less clear in relation to Mr Hailemichael’s second friend. In general terms, the same process occurred with cash being withdrawn and converted to Prezzy cards and the friend given a reward for “services” provided.
[8] Mr Hailemichael then contacted the unknown person and arranged to meet this person in a park. He handed the person a combination of the cash and Prezzy cards which had been obtained or withdrawn. Mr Hailemichael was paid $1,450 for his services.
Mr Hailemichael
[9] When spoken to by the police, Mr Hailemichael made full admissions; he said that he knew he was partaking in a scam and regretted his actions.
[10] Mr Hailemichael was 22 years old at the time. He has no previous criminal history. His long-term relationship had recently ended. He had recently lost his job as a collection agent. He had previously been employed at a call centre in a bank as a first line of communication helping callers who owed money to the bank to establish a payment plan. He reported struggling to cope financially and with his mental health at the time of the offending.
The three-step process for a discharge without conviction
[11] There is what is commonly described as a three-step process in assessing whether a discharge without conviction should be granted. The principles are well settled. The Court must consider whether the threshold under s 107 of the Sentencing Act 2002 has been met. The required three-step analysis assesses:3
(a)the gravity of the offence taking into account all aggravating and mitigating factors of the offending and offender;
3 Z (CA447/12) v R [2012] NZCA 599, [2013] NZAR 142 at [27].
(b)the direct and indirect consequences of a conviction (there must be a “real and appreciable risk” that any given consequence will happen); and
(c)whether those consequences are out of all proportion to the gravity of the offence.
[12] If the offender meets the s 107 threshold, then the Court may go on to consider whether to exercise the residual discretion to grant a discharge without conviction under s 106 of the Act.
The District Court decision
[13] Judge Collin’s decision was careful and analytical. He assessed the overall gravity of the offending as moderate. In doing so, he balanced Mr Hailemichael’s age, lack of prior convictions and remorse against the planning, duration and loss involved in the offending, and Mr Hailemichael’s background in what he called “the banking and finance industry”.
[14] The Judge acknowledged the impact that a dishonesty conviction would have on someone as young as Mr Hailemichael and someone with a demonstrated interest in the finance industry. However, he considered that this was outweighed by the public concern about online scams and the need for deterrence and accountability.
[15] Following that assessment, the Judge concluded that the consequences of a conviction, although significant, would not be out of all proportion to the gravity of the offending as he assessed it.
The law on appeal
[16] An appeal against a refusal to grant a discharge without conviction is an appeal against both conviction and sentence.4 The appeal proceeds by way of re-hearing. If the appellant can show that the first instance decision was wrong, this Court will
4 Jackson v R [2016] NZCA 627, (2016) 28 CRNZ 144 at [8]–[9] and [16]; and Ovtcharenko v Police [2017] NZCA 65.
evaluate the s 107 Sentencing Act factors afresh: see the observations of Fitzgerald J in Kamboj v Police.5
[17] As Ms Trinder put it in her helpful submissions in this case, Mr Hailemichael must show an error, namely the application of an incorrect principle, insufficient or excessive weight being given to a factor or that the Judge was plainly wrong.
The position of the appellant and the Police’s fresh evidence
[18] Ms Trinder, for Mr Hailemichael, submits that there was a material error in assessing the gravity of the offending and that the learned Judge assessed it as being more serious than it was and did not properly appreciate or give sufficient weight to Mr Hailemichael’s personal circumstances. She also submits there was an error in assessing the direct and indirect consequences of a conviction and that the proportionality test was incorrectly applied. In Ms Trinder’s view, the gravity of the offending was at the low end of moderate or, indeed, was generally low; that the direct and indirect consequences of a conviction particularly to Mr Hailemichael’s employment are significant and that they are out of all proportion to the gravity of the offending.
[19] Ms Trinder also seeks to adduce new evidence on appeal. The test for doing so is whether the evidence is fresh and credible and whether it is in the interests of justice for it to be admitted: see for instance R v Bain.6
[20] The fresh evidence is an updated affidavit by Mr Hailemichael, some documentary evidence as to him making mental health appointments, and also a very detailed affidavit from a senior research fellow at the New Zealand Work Research Institute—a Dr Alexander Plum—providing clear evidence that males with a first-time conviction experience a sharp decline in employment prospects and earnings after that conviction.
5 Kamboj v Police [2019] NZHC 2652 at [28].
6 R v Bain [2004] 1 NZLR 638 (CA) at [22]–[27], affirmed on appeal in Bain v R [2007] UKPC 33, (2007) 23 CRNZ 71 at [34].
[21] Ms Va’ai for the Crown has taken what I regard as a responsible and realistic approach to this new information and does not oppose its introduction.
[22] The Crown’s original written submissions argue that the Judge was correct to decline the application on the basis that the accepted consequences were not out of all proportion of the gravity of the offending.
[23] When the matter was first heard before me, I was concerned that there was not sufficient evidence to support some of Ms Trinder’s statements and assertions, particularly regarding the consequences for Mr Hailemichael’s employment and future prospects in the finance industry. I adjourned the matter for her to obtain the further information that she said was available. The information I have described has now been provided to the Court, at least as best as Ms Trinder has been able to do so.
[24] Against that background and after considering the new information that was not available to the sentencing Judge, Ms Va’ai has properly reconsidered her position. In her view, given the information that Mr Hailemichael now has $1,200 in cash saved up for reparation, received primarily, it seems, from his benefit, and that he has been at every one of the three hearings in this matter which has demonstrated remorse, the Crown’s view is that a neutral position is now taken. The original opposition to the appeal is discontinued. That, it seems to me, is a most responsible and constructive approach. Nevertheless, the appeal must still be made out.
[25]I now consider the required three-step process in more detail.
The gravity of the offending
[26] In my view, Ms Trinder is correct to view this offending “in the round” as being at the high end of low offending.
[27]The amount of money in which Mr Hailemichael was involved with was
$6,000, with two separate deposits into friends’ accounts of $3,000. I understand now that the victim has been fully reimbursed by the bank.
[28] Ms Trinder submits that the Judge was overly influenced by the fact that the person whose account was scammed had $41,000 removed from their bank account. That, of course, is nothing like the amount with which Mr Hailemichael was involved.
[29] Ms Trinder also submits that the Judge, in analysing the offending, set out eight separate steps comprising of Mr Hailemichael’s deliberate offending, totalling 15 individual steps with his two friends over several days. He set those out in great detail. Ms Trinder submits that, in doing so and in “cumulating” those steps, the Judge elevated the gravity of the offending and Mr Hailemichael’s actions into activity that was more sophisticated and premeditated than it was. In her view, the offending was in fact unsophisticated, was relatively opportunistic and was carried out in response to the temptation of a “get rich quick scheme”. Mr Hailemichael effectively became a small but somewhat idiotic cog in a much bigger machine of money laundering.
[30] There is something in Ms Trinder’s submission that the Judge erred in calculating 15 individual steps taken by Mr Hailemichael over several days. It errs because it does not stand back and look at the offending as a whole. In a sense, it was an opportunistic response to the “get rich quick scheme”. He encouraged two other friends to be involved in providing their accounts to the unknown person; he removed the money with his friends’ help, and then handed the money over to the third person. It was not Mr Hailemichael’s scheme. He did not conceive of it. In that sense it seems to me he was what might, in colloquial terms, be described as a “money mule”. He allowed himself to be involved in a much bigger and sophisticated operation—but his role was not particularly sophisticated even given the number of steps he took, particularised by the Judge.
[31]I also think it is right to suggest that the learned Judge, by starting with the
$41,000 total amount of money scammed, and then overestimating the premeditation and sophistication of what Mr Hailemichael actually did, assessed the gravity of the offending as too high.
[32] That said, I do not want to suggest that money laundering is not a serious offence and that those involved in money laundering should not be held accountable. I agree that money laundering has a negative impact on the banking and financial
sector and that clear deterrence is needed. The cases of R v Stephens and R v Muir,7 relied upon by the District Court Judge, make that point very clearly. Nevertheless, when assessing the offending itself, the Court must focus on the particular aggravating and mitigating circumstances of the instant offence.
[33] I conclude that the gravity of Mr Hailemichael’s offending has been assessed at too high a level. Perhaps too much focus has been placed on the harm caused by scamming generally and the person who lost a large amount of money, rather than Mr Hailemichael’s actions and his personal culpability.
[34] In assessing the gravity of the offending, the Court is also required to look at the offender himself. Mr Hailemichael is a first offender. At the time of the offending, he had lost his job. He had been employed with the ASB Bank as a frontline call centre telephonist who assisted those who owed money to the ASB Bank in making initial proposals for repayment of their debts. He was not someone who had previous sophisticated involvement in the banking or financial industry.
[35] To the extent that the Judge relied on such factors, the new evidence before the Court is clearly to the contrary. Mr Hailemichael had commenced, but not finished, a tertiary qualification of a Bachelor of Business. But there is nothing to suggest from his employment history that Mr Hailemichael had any sophisticated knowledge of the finance industry, or in the way that scams are conducted. His employment with the bank was low level.
[36] I accept that at the time of his offending, Mr Hailemichael had broken up with his girlfriend and he was having serious mental health problems for which he had previously sought help with workplace mental health services. He had also lost his job. These matters are clearly set out in the helpful cultural report. Given the new information, I assess his remorse for his offending as genuine and serious and I do not, as did the Judge, “take it with a grain of salt”. I also accept, as did the sentencing Judge, the shame Mr Hailemichael has brought upon his family and the cultural significance of this.
7 R v Stephens HC Hamilton CRI-2005-419-122, 1 June 2006; and R v Muir HC Hamilton CRI- 2005-419-122, 19 May 2006.
[37] Mr Hailemichael had lost his job at the time. He was struggling in life. He was coping with a relationship breakdown and the offending took place in this immediate context. He was 22 years old at the time and while not a teenager, it is accepted that he was still someone whose frontal lobe was developing. He was still maturing, and he was susceptible to outside pressures and the attraction here of a “get rich quick scheme”. As is well known, those in their early twenties are still unfortunately susceptible to impulsive activities.
[38] There was also clearly a misunderstanding as to reparation. Mr Hailemichael had made it clear to the police that he was always prepared to make reparation but because he was unemployed and surviving on a benefit, he could only do so at the rate of $20 per week. That position was not conveyed to the Judge. The Judge concluded that no real active steps had been taken by Mr Hailemichael to mitigate the loss. However, he acknowledged that if those steps had been taken, he was clearly of the view that might have moved his assessment of the offending from moderate to “low to moderate”.
[39] I accept Mr Hailemichael was genuine in his intentions regarding reparation. It seems that this information was not provided to the Court as it should have been. Some idea of Mr Hailemichael’s commitment to reparation can be gained from the fact he now has $1,200 saved up from his benefit to pay $1,000 into Court today and
$200 tomorrow.
[40] There was also a miscarriage in the sentencing in that the restorative justice process had not been completed at the time of sentencing. It was something Mr Hailemichael wanted to undertake. It had been arranged. Ms Trinder concedes she was in error in not asking for an adjournment in the sentencing so that it could have been completed. In her view, this too would have made a difference to the assessment of the gravity of Mr Hailemichael’s offending.
[41] All in all, it seems to me that the gravity of this offending is better classed as low to moderate than the classification of “moderate” ascribed to it by the sentencing Judge. The Judge, himself, said that if there was different information, the gravity would have been in the lower category that he described. That very information is
now before the Court. It was not before the sentencing Judge. In my view, taking into account both the offending and the offender and all the relevant factors, the gravity of the offending is low to moderate or low.
Direct and indirect consequences of the offending
[42] I turn to the direct and indirect consequences of Mr Hailemichael’s offending. It is accepted there must be a real and appreciable risk of those consequences eventuating. Counsel accept that is a starting point. It has been difficult for Ms Trinder to provide exact “chapter and verse” as to the financial consequences for Mr Hailemichael’s future employment. She has had many discussions with WINZ. Some have been in confidence, and all have been “off the record”. There have been no affidavits provided and WINZ staff are not able to do that. Her understanding from those apparently many conversations with WINZ staff is that a conviction for money laundering will make it difficult for Mr Hailemichael to gain employment. Ms Trinder understands that WINZ would not, in the first instance, be putting Mr Hailemichael forward for any job involving the handling of money or trust. She believes that any employment would be at a low level.
[43] The Judge was alert to all these factors but was particularly concerned with the need for deterrence.
[44] I accept that there is a balance to be struck between the public knowing of someone’s offending, particularly for money laundering, when it comes to future employment but, equally, that must be weighed against an assessment of the consequences that will flow directly and indirectly from offending such as this.
[45] In this respect the statement from Dr Plum is particularly helpful. He was one of a number of authors of a paper on the effect of first-ever criminal conviction on labour market outcomes. The paper itself has not yet been published. It is still out for peer review. However, Dr Plum says the study makes clear that employment prospects and earnings after a first conviction, in my words, “plummet”. There is a sharp drop right after the first conviction before employment prospects gradually recover. The study does not go so far as to establish a causative relationship between the offence and the drop in work and wage prospects. But there is at least a clear temporal
relationship. Further work will need to be done to establish causation. It is certainly a very telling and helpful piece of research.
[46] What the study makes clear is that Mr Hailemichael with a conviction for money laundering around his neck as a 22-year-old will almost inevitably suffer a sharp decline in prospects of employment and of well-remunerated employment.
[47] In my view, the conviction for money laundering will have a real and appreciable consequence on his short to medium term employment and that seems to be unarguable.
[48] To similar effect was the discussion by Fitzgerald J in Kamboj, and I echo her comments:8
[38] Ms Magrath also accepted at the hearing before me that a conviction for money laundering does carry with it connotations that many other offences do not. It no doubt conveys to a lay person, serious offending involving a lack of trust and honesty. It would also no doubt give rise to concern on the part of future potential employers as to Mr Kamboj’s honesty and trustworthiness. It would no doubt require some significant explanation by him to convey his very limited role in what a lay person might otherwise consider to be “money laundering”. I therefore accept that a conviction on that charge will likely taint Mr Kamboj’s good standing going forward, and will hinder his employment prospects.
[49] Given all the information now before me, I take a different view as to the consequences of a conviction on Mr Hailemichael’s future than that taken by the sentencing Judge. As I say, the conclusion reached by the Judge was influenced by his understanding that the appellant had a history of employment in the banking and finance industry, which clearly overstates the position. I would regard the consequences of conviction for Mr Hailemichael as being “significant”, and it would not be an overstatement to describe them as being “life changing”.
8 Kamboj v Police, above n 5, at [38].
Out of all proportion?
[50] All these sentencing exercises involve a task of weighing and balancing. In my view, the consequences of the conviction for Mr Hailemichael are out of all proportion to the gravity of his offending.
[51] In short, in my view, the Judge assessed the gravity of Mr Hailemichael’s offending as too high. It is best described as low or low to moderate. He also underestimated the consequences of the conviction upon his future. The assessment of “proportionality” is that the significant consequences of a conviction are out of all proportion to the low or low to moderate gravity of the offending. To that extent, as I stand back, I conclude the sentencing Judge was wrong in principle and was in error. This conclusion is buttressed by the new information I have before the Court.
Conclusion
[52] By a fine margin in this case, I am prepared to uphold the appeal. I do accept that the first instance decision in the District Court was wrong. After considering all the matters afresh as required by s 107 of the Sentencing Act, I reach the conclusion that there should have been a discharge without conviction.
[53] The sentence in the District Court is quashed, save for the continuation of the reparation order of $6,000. Mr Hailemichael is otherwise discharged without conviction. Counsel are to confer about where the reparation ($1,000 today and $200 tomorrow) should be paid. Mr Hailemichael is to follow instructions from his counsel as soon as that is conveyed to him.
[54] This decision includes the understanding that Mr Hailemichael will undertake 80 hours of voluntary community work, likely with the Salvation Army.
Becroft J
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