R v Gilchrist
[2013] NZHC 643
•30 August 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CRI 2011-085-5660 [2013] NZHC 643
THE QUEEN
v
BRENT JOHN GILCHRIST SCOTT CRAWFORD ANDERSON
Hearing: 4 February 2013
Counsel: D La Hood and M Ferrier for Crown
P V Paino for accused Gilchrist
J C Bonifant and S A Pettett for accused Anderson
Sentence: 30 August 2013
SENTENCE OF SIMON FRANCE J
[1] Mr Gilchrist and Mr Anderson, you appear for sentencing in relation to a fictitious invoice scheme. A co–defendant pleaded guilty and has been sentenced in the District Court. You were convicted following a Judge alone trial.
[2] Mr Anderson you also appear to be sentenced in relation to a different incident of false invoices. These are the GlobeNet invoices issued to Dr O’Connor. The total of the invoices was $875,000, with the loss to the revenue being around
$220,000.
R v GILCHRIST AND ANDERSON [2013] NZHC 643 [30 August 2013]
Joint offending
[3] This scheme involved issuing false invoices to a Wellington based accountant. The invoices were issued by one of your entities, Mr Anderson. The accountant paid the invoices and then treated them for GST and income tax purposes as if they were genuine. However, in the interim a bank account had been opened in his name in Vanuatu. You had funds in Vanuatu, Mr Anderson, and you transferred the amount of the invoices back to the accountant, less a fee. The accountant then repatriated the money to New Zealand.
[4] The respective benefits were these:
(a) the accountant paid an 8.5 per cent fee for gaining income tax and
GST credits;
(b)Mr Anderson received 5 per cent of the total of the invoices, plus the benefit of obtaining the use in New Zealand of money that was seemingly otherwise trapped in Vanuatu;
(c) Mr Gilchrist received 3.5 per cent of the total of the invoices.
[5] There is some dispute as to the exact split of the fee, but in my view nothing turns on it. The fee is not that big either way, and the primary benefit otherwise was for Mr Anderson – namely the freeing up of the money.
[6] As for respective roles you are obviously long time business associates and friends. The evidence suggest Mr Gilchrist was the architect, although that is a grandiose word for a reasonably crude fraud. Mr Gilchrist’s role, undertaken I believe out of misguided loyalty to Mr Anderson, was to organise the mechanics, attend to all the Vanuatu dealings concerning which he had expertise, and suggest an amended wording for the invoices provided to the Commissioner.
[7] Mr Anderson’s role was essentially to do as Mr Gilchrist directed. However, as noted, he is the primary beneficiary of the scheme as between the two of you.
[8] There are six convictions which relate first, to three false GST returns and two false income tax returns filed by the accountant, all of which treated the invoices as legitimate; and second, to one charge of providing false information, namely invoices that had been amended from those initially issued to the accountant so as to make them appear more legitimate. The catalyst for the amendments was an inquiry by the Commissioner into Mr Anderson’s company. The total loss to the revenue was just under $56,000. The offending occurred in 2005–2006.
Mr Anderson’s offending
[9] Mr Anderson you supplied Dr O’Connor with false invoices totalling
$875,000. The invoices were issued just prior to Dr O’Connor settling the sale of his business, and the purpose was to enable Dr O’Connor to protect business income from income tax. The offending occurred in 2004.
[10] Little more need be said. It was, as with the accountant offending just described, blatantly dishonest. The benefit to you was the use of the money. My assessment in the judgment was that most of the money was to be returned to Dr O’Connor, but I did not rule out you and he having some other venture on the go which was the real reason for the payments. The two of you had a history including, I held, doing a similar thing as far back as 1996.
[11] This is the more serious of the offending because of the quantum involved but has similarities to the joint offending with Mr Gilchrist. I will focus on you first because yours is the more serious situation.
Mr Anderson’s situation
[12] Mr Anderson you are 52 years old. You are presently unemployed but have over the years been an entrepreneurial businessman. You advise the report writer you are permanently banned from being a director, and you were bankrupted in
2007.
[13] You have previous tax related convictions, involving failing to file returns. You have other convictions for drink driving and providing a false statement, an activity I consider you engaged in during the trial.
[14] Ms Bonifant advises me you have two children, aged 12 and 18. You have care of the 12 year old on weekends, and generally provide support for their upbringing. Although unemployed you have a job offer which will be available should the outcome of today’s sentencing permit it.
[15] Concerning remorse and insight, the report writer was critical of what she saw as your sense of entitlement, and your ego. Having observed you, both over a nine week period and whilst you gave at times untruthful evidence, I can understand how the probation officer may have got that sense. However, Ms Bonifant submits you do have insight. You accept you were previously leading a chaotic life at around 2008. The death of a close family member, and your lifetime ban on being a company director, saw you step back from the world you previously inhabited. You advise your motivation throughout the relevant periods was to keep your business afloat and staff members employed.
[16] The Crown suggests a starting point of three years for the GlobeNet offending committed with Dr O’Connor, with an uplift of 18 months to two years for the joint offending. Standing back it contends for an overall starting point of four to four and a half years with no mitigation.
[17] On your behalf Ms Bonifant submits the appropriate starting point for both offences is three to three and a half years, which in effect is to take a similar starting point for each set of offences. She also raises matters in mitigation.
Mr Anderson’s sentence
[18] In fixing the starting points for your offending, I acknowledge, and for myself fully endorse, the principles previously articulated in these types of cases. In particular the need for deterrence given that the tax system necessarily relies on tax payer honesty and the recognition this is not a victimless crime. Indeed, the opposite
is true as it is an affront to all who work, normally for so much less money than the defendants in this case, and yet who pay their share.
[19] That said, the cases to which I have been referred all occur within that same context, so provide a useful guide. The aspect of this case that needs emphasis is that it is not just incorrect or aggressive tax treatment of potentially legitimate events. Here the work purportedly underlying the invoices was never done. They were false documents created solely for the purpose of rorting the tax system. For that reason I accept the Crown references to Skinner and to some of the Crimes Act cases (albeit the different starting point must be noted). I agree based on a comparison with Mr Stevens in Skinner that three years is an appropriate starting point for this offending standing alone. I will consider respective roles later.
[20] I turn then to the joint offending with Mr Gilchrist. I acknowledge Judge Barry took 20 months as the starting point for the co–defendant. Some parity is needed, but the Judge did not have the benefit of hearing all the evidence, so strict parity is not required, if I take a different view.
[21] The quantum of loss to the revenue is $55,000. The offending has the aggravating features of being planned, sustained over a period even when the Vanuatu end was proving problematic, and aggravated by providing amended false invoices to the Commissioner, again with the intention to deceive. It also has an aspect of providing a fraud service on demand to which I will return. It has the same qualities as the offending with Dr O’Connor, but is ameliorated by the quantum of tax. Putting to one side the sentencing of the co–defendant, I would see two years as an appropriate starting point.
[22] I see no basis to differentiate in culpability between the two of you. I have no doubt it was a scheme intended to benefit Mr Anderson. I expressed puzzlement at your involvement Mr Gilchrist, and still feel an element of that, but it is as it is. You facilitated the scheme, and I am sure suggested the amended invoice wording. I cited an extract from a Skype conversation between the two of you that makes plain you joint complicity.
[23] An aggravating factor identified by Judge Barry in sentencing you co– defendant was in breach of trust as a tax agent. That is a point of difference, but you two were the promoters of the scheme to him, something which more than off–sets that difference.
[24] Applied cumulatively that would suggest a starting point of five years but there are other assessments that need to be made.
[25] First, are they properly cumulative sentences? I consider so. First and obviously they are separate offending with different taxpayers. Second, although the same device is used, the incidents are not part of the same scheme. The GlobeNet offending is an extension of a sustained relationship with Dr O’Connor, a relationship that involved the same fraudulent abuse of the tax system for equally large sums in the mid 1990’s.
[26] The accountant offending is different. Conceptually it is offending that must be condemned. Mr Gilchrist had a client who wanted ideas how to avoid tax; Mr Gilchrist also had a friend (you, Mr Anderson) who was always open to anything involving cheating the revenue who had money in Vanuatu he needed to repatriate. This friend had previously, at least twice just on the evidence in this case, used false invoicing as a device. And so the fraud was hatched and carried out.
[27] Cumulative sentences are appropriate.
[28] Next, I consider whether a starting point of five years would be out of line with other cases. This is a broad brush assessment because cases are different. In others the sums involved are higher but all the offending is just repeat examples of the same single scheme. Here there are two separate sets of offending.
[29] Looking only at quantum, I doubt if the $55,000 loss to the revenue caused by the second offending would make much difference to that starting point of three years. So what one has to capture are two things – first, the extra penalty required to reflect you doing the same thing as you did in GlobeNet but in relation to a different taxpayer; second, to acknowledge any extra culpability, different from GlobeNet,
that arises. In that regard I consider there is a different feature, which is that there is an overlay of fraud being used as a business model. You took a fee for your services like you were selling a product. The offending had the hallmarks of the start of a scheme. I do not overstate the scheme idea because things would always be limited by the amount of money available in Vanuatu to reimburse the New Zealand invoices. But it was nevertheless fraud carried out, for a third party, for a fee.
[30] From an uplift viewpoint, I consider anything less than 12 months for this offending would inadequately reflect that it was separate offending; and inadequately denounce and deter this idea of fraud within the tax system being delivered as a service.
[31] That would leave a starting point of 4 years. However, but based on comparisons with the other cases, and particularly Mr Stevens in Rowley and Skinner, and bearing in mind you were not the taxpayer in GlobeNet, I think that would be too high and adjust it to 3 years 6 months.
[32] I see no basis for any reduction. Mr Anderson has previous tax related convictions, and has no other matters in mitigation. Matters of mitigation advanced on your behalf are the business bans to which you are subject, your previous bankruptcy, health matters, and your family responsibilities. It is submitted that there was some hope that your bans might have been modified but these convictions will prevent that. So it is said, a penalty has already occurred. Finally reference is made to your community work in Waikanae and the community’s apparent support for you. Ms Bonifant advises that you are remorseful and that you were motivated by keeping your businesses afloat and your employees in work.
[33] I do not consider these matters merit reduction generally, and particularly not in a case where individual deterrence is plainly an important consideration. Only because it has been raised, I comment on the proposition that you now have insight, and have stepped away from what was a chaotic lifestyle, and have remorse. I hope it is right but I am sceptical. All the material in this trial showed you to be someone always open to beating the revenue, by fair means or foul. You have in my view been acting dishonestly in conjunction with just Dr O’Connor since the mid 1990’s.
You promoted a large scale tax avoidance scheme that must have cost New Zealand million of dollars.1 In my view, you lied when giving evidence and you produced what I consider to be a false document in support of the lies.
[34] I agree with the report writer that the remorse you feel is for your situation, not for what you have done.
Mr Gilchrist
[35] Mr Gilchrist, you are 52 years old, and a self employed tax consultant. You have been married for 13 years, have three children at home, and a fourth on the way. The family relies on you for its income. Letters from community and business associates have been provided in support. I accept they are genuine but obviously most have not read the judgment, or otherwise the business practices they are endorsing say nothing for their own standards.
[36] I accept the impact of the offending on your business has been significant. You attracted much of the publicity during the trial, especially since for most of the time Dr O’Connor’s name was suppressed. It is to be noted you were acquitted on the charges you faced jointly with Dr O’Connor, and I record that I did not see that as being the result of any sort of technicality.
[37] As regards the offending on which you have been convicted, there is little for me to add to that I have already said. I consider a two year starting point is appropriate, but note that a 20 month starting point was taken for your co-defendant. The lesser figure of 12 months I added for Mr Anderson is based on other principles and is not relevant.
[38] You have a previous tax conviction and there is no basis on which to reduce that starting point. Counsel has raised on your behalf the length of the trial and how you were affected by it. I accept that is so, but the charges against you on which you
were acquitted, and which accounted for the bulk of the time, were fairly brought. I
1 At trial there was considerable evidence on the ACTONZ scheme. Given the high level of subsequent settlement with taxpayers, this may be an overstatement. (Footnote added after sentencing.)
accept there has been a cost involved in all that, and bear it in mind without specifically allocating anything to it.
[39] Mr Paino submitted that home detention would provide adequate deterrence, and remarked that a package of community detention and other sanctions might well do likewise. I cannot accept the latter but agree that home detention is a matter to be considered.
[40] The real issue today is whether your sentence should be jail or home detention. I have said already that deterrence is a key concept in this regard, and it tells against home detention. However, there are matters that speak in its favour:
(a) as reflected in the starting point, though serious, this is not the worst example of this type of offending. Further, the personal gain to you was minimal;
(b)I accept the pre-sentence report assessment that there is little risk of you committing this type of offending again. This type of fraud, for whatever reason you were involved in it, is not part of your general approach. That said, I do hope that as a result of seeing how some of what you say and write appears, you will more generally modify how you use your undoubted knowledge and tax expertise, particularly as regards the integrity of documents;
(c) you have family commitments including a pregnant wife and they undoubtedly would be best served by you being able to work, which you can do from home;
(d)you have suffered a penalty through the trial process and publicity, and you have adhered to bail conditions, attended court promptly, and generally shown you would be fully compliant with a home detention sentence.
[41] Balancing these factors I am satisfied a sentence of home detention can be imposed. It needs to be lengthy, and will not be easy, but anything less would be inadequate deterrence and denunciation. I intend to sentence you to 10 months home detention on the conditions set out in the pre-sentence report. I note Mr Paino’s submission that the accountant ultimately received a sentence of three months’ home detention. I do not comment on the deductions given there, but I consider I must address Mr Gilchrist’s mitigation as it presents itself.
[42] That outcome means there is quite a gap between you and Mr Anderson. However the reality is that you Mr Anderson are also being sentenced on the GlobeNet charges which are more serious and you also have a worse past record. Home detention would never have been an option for you whatever the length of sentence.
[43] Mr Anderson please stand:
(a) on the two charges of being a party to knowingly providing false information to the Commissioner, being the GlobeNet invoices, I sentence you to two years’ 6 months imprisonment. Those two sentences are concurrent;
(b)on the charge of knowingly providing false information, namely the amended Barclays Designs Limited invoices, I sentence you to
12 months’ imprisonment. This sentence is cumulative on the three
year imprisonment sentence just imposed;
(c) on the other five charges of providing false information I sentence you to 12 months’ imprisonment, these sentences being concurrent with the 12 month sentence already imposed. The final outcome is a sentence of three years six months’ imprisonment.
[44] Mr Gilchrist:
(a) on the six charges of providing false information to the Commissioner I sentence you to concurrent terms of 10 months’ home detention on the following conditions:
(i)to travel on Monday 2 September from the Wellington High Court to 205 Valley Views, R D 2, Palmerston North and there await the arrival of a Probation Officer and a representative of the monitoring company;
(ii)to reside at 205 Valley Views, R D 2, Palmerston North for the duration of home detention;
(iii)to abstain from the consumption and/or possession of alcohol and non-prescription drugs, unless prescribed to you by a medical practitioner, for the duration of home detention.
[45] Mr Paino requested I make recommendations about daily arrangements to alleviate the sentence and allow you to deal with your family situation. I do not consider I have the material to do that (without commenting on it as a general practice), but I do observe that I have already noted that, based on my experience of my Mr Gilchrist through a lengthy trial, I consider he will comply with all directions
and opportunities he is given.
Simon France J
Solicitors:
Luke, Cunningham & Clere, Wellington
Paino & Robinson, Upper Hutt
Public Defence Service, Wellington
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