R v Gilchrist
[2013] NZHC 1868
•26 July 2013
THERE IS INTERIM NAME SUPPRESSION IN RELATION TO THE PERSON REFERRED TO IN THIS JUDGMENT AS AB. THE JUDGMENT MAY BE PUBLISHED IN ITS CURRENT FORM.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CRI 2011-085-5660 [2013] NZHC 1868
THE QUEEN
v
BRENT JOHN GILCHRIST SCOTT CRAWFORD ANDERSON
Hearing: 13 May - 5 July 2013
Counsel: D La Hood, M Ferrier and A Instone/S Lukey for Crown
B J Gilchrist in Person
J C Bonifant and S A Pettett for Anderson
Judgment: 26 July 2013
JUDGMENT OF SIMON FRANCE J
Introduction
[1] This judgment deals with six charges faced by Messrs Gilchrist and Anderson in relation to what the Crown alleges was a fictitious invoice writing scheme. The charges were heard at the same time as other charges involving them and a Wellington businessman who has interim name suppression. For that reason it is
convenient to write a separate judgment.
R v GILCHRIST & ORS [2013] NZHC 1868 [26 July 2013]
Overview
[2] The Crown say that Messrs Anderson and Gilchrist were involved in a scheme whereby a company owned by Mr Anderson would issue fictitious invoices to a Wellington accountant, AB.1 AB paid the invoices, filed GST returns, and claimed deductions. Concurrently Mr Anderson transferred funds he held in a Vanuatu account to another Vanuatu account which Mr Gilchrist had opened for AB. The amount transferred was the total of the invoices, less an 8.5 per cent fee taken by the defendants. AB then repatriated the money to New Zealand by way of bank cheques. It had been anticipated that he would use an internet bank card, but this
never happened.
[3] The essential events are not in dispute in that it is common ground that invoices were issued, that Mr Gilchrist opened a Vanuatu account for AB, that Mr Anderson arranged for funds he held in Vanuatu to be transferred to AB’s Vanuatu account and that AB repatriated the transferred money. What is disputed is whether the invoices were fictitious, why the money was transferred and whether AB claiming New Zealand tax deductions was ever part of the scheme.
[4] When the Inland Revenue Department (IRD) requested information on these transactions, the original invoices that had been issued to AB were amended before he provided them to the IRD. The Crown says these changes were made to try and make them look more legitimate.
[5] There are six charges, being three charges of knowingly providing false information (GST returns), two charges of knowingly providing false information (two income tax returns) and one charge of knowingly providing misleading information (the amended invoices). The primary offender is the company taxpayer through which AB traded. Both defendants are charged as parties. AB pleaded guilty, also as a party, to these same charges. He was sentenced in the District Court
to a term of home detention. He gave evidence for the Crown in this trial.
1 AB has interim name suppression. He has pleaded guilty in the District Court to this offending and been sentenced; however, an application for permanent name suppression has yet to be dealt with.
The allegation
[6] AB was a successful accountant with a keen interest in reducing the amount of tax he paid. He knew Mr Gilchrist and had used him as a tax adviser in relation to his clients’ affairs. He asked Mr Gilchrist whether he had any ideas for reducing his, AB’s, tax liability. AB’s evidence is that the fictitious invoicing scheme, which he believed was a legitimate tax loss scheme, was Mr Gilchrist’s response.
[7] AB says it was always part of the plan that he would receive invoices, claim the relevant tax effects, and get the money back less a fee.
[8] AB says that he met Mr Anderson down the track, but that his initial contact was with Mr Gilchrist whose scheme it was. Mr Anderson was involved because it was his company from which AB was buying the tax losses. When referred to the invoices, AB confirmed that they were the invoices he paid. No services were ever provided by Mr Anderson to support them. The invoices were dated:
21 March 2006 – $67,500.00
15 May 2006 – $28,125.00
02 June 2006 – $14,062.50
24 July 2006 – $28,125.00
[9] Concerning Vanuatu, AB testified that it was Mr Gilchrist’s idea that he open an account in Vanuatu, which was to be how he would get the money back. AB had no other interest or reason to have a Vanuatu account. The evidence shows that the transfer of funds between Mr Anderson’s Vanuatu company and AB’s Vanuatu company did not proceed as easily as expected. The bank in Vanuatu was not satisfied as to the reasons for transfer. Delays occurred, and AB became increasingly anxious with the defendants when the money did not appear in his account. Mr Gilchrist made a trip to Vanuatu to sort it out, but he did not succeed. Eventually the problem was solved by AB issuing a false invoice to Mr Anderson’s Vanuatu company. The invoice was purportedly for accounting services provided by AB to Mr Anderson’s company. It was a fiction designed to allay the bank’s suspicions, which seemingly it did.
[10] Finally, concerning the amendment of the invoices, AB said that the changes were suggested by Mr Gilchrist, as he thought the new description of “accounting support services” (changed from an initial description of consultancy) would look more legitimate.
[11] As noted, the available documentary evidence2 is consistent with AB’s
evidence in that:
(a) invoices were issued. Copies of the original invoices are available and it is beyond doubt that the invoices later provided to the IRD had been changed in a number of respects;
(b)AB, through his company, filed the GST returns, and claimed the income deductions that underlie the charges;
(c) a bank account for AB was opened in Vanuatu;
(d)it proved very difficult to transfer the money from Mr Anderson’s company to AB’s, and there are numerous emails evidencing an increasingly frantic effort by the defendants to make it happen;
(e) the money that was transferred to AB’s account was the sum of the invoices less an 8.5 percent fee;
(f) the Vanuatu money was brought back to New Zealand by AB with the effect that AB received the benefit of the tax deductions, and all but
8.5 per cent of the money. Mr Gilchrist and Mr Anderson shared the
8.5 per cent fee, and Mr Anderson effectively repatriated his Vanuatu money.
2 The evidence was located from two sources – first AB’s home files and computer, and second, a
computer seized from Mr Gilchrist.
[12] On the face of this evidence, and bearing in mind that AB testified that the invoices were a fiction and always intended to be, absent a reasonable doubt emerging in cross-examination of AB or through the defendants’ evidence, conviction is inevitable.
Mr Anderson’s explanation
[13] Mr Anderson is, amongst other endeavours, a person involved in the development of computer software, particularly software in the accounting area. His explanation is that the invoices were real, and covered the first stage of a proposal to develop a software based accountancy outsourcing business run from Vanuatu.
[14] He wanted a funder for the software development, and AB was that person. The idea was that once it was developed, AB would be the first accountant to use the service. He would also presumably share in the profits of any sales of the system to other businesses. Vanuatu was the intended venue for the business because Mr Gilchrist was active there, so could assist, and because changes were expected to New Zealand’s tax laws that meant income earned in Vanuatu would be tax free in both Vanuatu and New Zealand.
[15] Mr Anderson said he was introduced to AB by Mr Gilchrist who knew Mr Anderson was looking for investors. Mr Anderson followed up on the initial contact and eventually there was a meeting in November 2005 at which his proposal was discussed. Mr Anderson says he took two documents to the meeting – one was called “Accounting Services – Quotation for AB Ltd” (“SA1”) and the second an agreement for the provision of accountancy services between Mr Anderson’s company and AB Limited. (AB said he first saw the second of these documents in the latter part of 2006, well after the fictitious invoices were paid. It was unconnected to the fictitious invoice transaction. He denied ever seeing SA1). Mr Anderson says at the November 2005 meeting AB agreed to invest. Accordingly, Mr Anderson hired staff and went ahead with developing the software. The invoices related to this work.
[16] Mr Anderson went through the names of various staff members he had employed in November–January once AB gave the go-ahead. The first phase of the work, through January–February 2006, was identifying the appropriate software and testing it. The second phase would be to make it operational and convince AB to commit to using it. The third phase would be to operate out of Vanuatu.
[17] As for why sums equivalent to the invoices were deposited in Vanuatu for AB’s benefit, Mr Anderson explained that this was not initially intended. However, once Mr Anderson started pushing AB for payment of the invoices, it became plain that AB did not trust the Vanuatu banking system. He was concerned that he might struggle to get money out of Vanuatu if there eventually should be profits. To assuage this, Mr Anderson says he agreed to put an equivalent sum to what AB was paying in New Zealand into an account under AB’s control in Vanuatu. This money would then be available for the Vanuatu outsourcing business once it was operational.
[18] Mr Anderson said he agreed to do this because he had money going into a Vanuatu account in early 2006 consequent upon the successful completion of a New Zealand project. As far as Mr Anderson was concerned, he did not expect AB to bring the money back to New Zealand. It was intended to stay in Vanuatu for the joint venture. He did not know about AB bringing the money back until after it had happened, at which point he decided to cut his losses with AB, and just move ahead with the software that had largely been developed.
[19] As for supporting material, Mr Anderson called one witness, and introduced some documentation. The witness was the person who Mr Anderson used at the time as his staff recruiting agent. That witness generally corroborated the process used by Mr Anderson to employ staff, and testified that he recalled the specific adverts that Mr Anderson said related to these staff and this project. As for the documents, Mr Anderson produced from his personal records the advertisements, job descriptions, and employment profiles of these staff who he said had been engaged to work on AB’s deal. That Mr Anderson was able to produce these documents was of some moment, as generally he had no records at all from the relevant times, either on these charges or on the matters in which he is involved in the other part of the
indictment. This was their first appearance. However, Mr Anderson explained these were the few documents he kept because he had it in mind that he might want to get in touch with these people and use them again in the future.3
[20] The other document Mr Anderson introduced was one of two agreements he said he took to the November 2005 meeting. The other agreement was already part of the bundle introduced by the Crown, it having been found amongst AB’s papers. The document Mr Anderson produced had not been sighted until trial.
[21] In summary, Mr Anderson’s case is that the invoices were genuine. He says he was unconcerned whether AB claimed deductions on the invoices or even if he could do so (ie whether they were capital or revenue payments). From his viewpoint, work was done to justify them, and that was his sole concern. He says the invoices were later amended at AB’s request, to help AB. He believes Mr Gilchrist did the changes. He accepts he knew amendments were being made, but so far as he was concerned, the amendments were solely done to ensure the invoices better and more accurately reflected what was actually done. There was no intention to mislead.
[22] AB’s evidence, which has already been summarised, obviously conflicts with that of Mr Anderson. In relation to the proposition that the whole thing was about software development leading to an accounting services outsourcing business, AB accepts there was a proposal that he and Mr Anderson run an outsourcing business. However that proposal was only raised with him in the second half of 2006 and well after the separate unconnected invoicing scheme. Further, as far as he was concerned, there was never any suggestion that the outsourcing business would be run out of Vanuatu. He expected it to be Wellington based. AB is unsure when he first met with Mr Anderson but is adamant there was no discussion in 2005 or early
2006 about the outsourcing work. Finally he says he was never involved with, or funding, a software development project.
[23] Issues arise in relation to both documents. The one found in AB’s papers had
a date of November 2005 typed on the front. The Crown submits that this date was
3 Mr Anderson’s companies failed and he was forced to leave the businesses behind.
added sometime after September 2006, and the document was only sent to AB in late October 2006. In a similar vein it submits the one introduced at trial by Mr Anderson (SA1) has been created by him for the purposes of his defence.
Mr Gilchrist’s evidence
[24] Mr Gilchrist acted for himself. He gave evidence by way of a prepared statement. It is fair to say it was largely unforthcoming on these transactions. His evidence-in-chief on the topic can be set out in full:
AB Matter
24.I introduced AB to Mr Anderson in 2005. They proceeded to enter into a business deal centered around a software-based accounting system. My entire focus on the arrangement was in selling them both on the idea of forming a Vanuatu-based business to undertake the accounting outsourcing aspect of their dealings. I also offered AB various tax saving deals, none of which he took up. I do not recall giving any advice or thought to AB’s tax position in relation to invoices between Mr Anderson’s interests and AB’s company.
[25] Mr Gilchrist, in closing, outlined his position more fully than he had chosen to do in evidence. I use the word chosen advisedly because I do not put this down to an error by a lay litigant. Mr Gilchrist’s brief of evidence was written carefully and he chose not to engage with evidence that suggested a more active involvement. He was of course dragged more into the battle during cross-examination.
[26] That said, and recognising a level of unfairness to the Crown, I set out the fuller version disclosed by Mr Gilchrist in his closing submissions. Mr Gilchrist says that after introducing AB to Mr Anderson, he had little to do with what went on between them. He was based in Palmerston North and had little opportunity to observe what was happening in Wellington. He honestly believed work was being done, but had no capacity to assess its level.
[27] Mr Gilchrist says he considered the invoices to be genuine and gave no thought to any link to the payments back in Vanuatu, of which he was aware. In his mind the initial payments from AB to Mr Anderson were clearly capital in nature, an understanding reinforced by the payments back in Vanuatu from Mr Anderson to AB.
He never advised AB on deductibility of these payments and was unaware that AB
was claiming deductions.
[28] Mr Gilchrist says his principal involvement was in making AB’s Vanuatu account operational and able to receive funds from Mr Anderson’s account. He says it was AB who asked for the revised invoices. He drafted a reply for AB to the IRD request, but the content of the draft was based on information given to him by AB, Mr Anderson, and Mr Anderson’s staff. It was not based on personal knowledge.
[29] In relation to his understanding of what the invoices were about, Mr Gilchrist said he believed they were not connected to software development. He thought they were for a computer/internet services scheme Mr Anderson was offering under the brand Assure IT. The payment of $12,500 a month was a fixed fee arrangement. The extent of AB’s benefit from that would vary according to the amount of use AB made of it. He likened it to a gym membership arrangement, only this related to IT services. The more you used it, the better value it was. Beyond that he knew no detail. The payments in Vanuatu were, as he understood it, in relation to the software based accounting outsourcing project. He says he never drew a link with the Assure IT invoices. As for AB’s evidence which had him as the architect of the fictitious invoice scheme, Mr Gilchrist testified that he believed that AB was framing him in order to curry favour with IRD, after AB was caught out.
Analysis
[30] I have previously noted that the Crown evidence, unchallenged, made conviction inevitable. It is necessary, therefore, to assess whether the challenges to AB’s credibility, and the alternatives to the apparent picture presented by the documents, individually or cumulatively raise a reasonable doubt.
[31] A key issue is obviously Mr Anderson’s evidence that the invoices were about a software based accountancy system being developed. Mr Gilchrist’s belief that it was about an Assure IT project can be put to one side. Since Mr Anderson is the invoicer, Mr Gilchrist’s evidence is either untrue, or discloses he was operating under a misapprehension that will be relevant to his liability.
[32] AB was emphatic that in November 2005 and early 2006 his dealings with Mr Gilchrist and Mr Anderson had nothing to do with developing a software based accountancy system. This was only raised later. He thought, he says, he was buying into a tax loss scheme but one which never involved nor was intended to involve actual services.
[33] Mr Anderson relies, as proof of the reliability of his evidence, on the two documents that he said he took to the November 2005 meeting. Each requires consideration.
[34] The first is an “agreement for the provision of accountancy services”. This is the one found in AB’s papers. The crucial issue is when AB received it. The agreement is between Globe Business Services (the correct Anderson entity that would be providing such services in 2005) and AB Limited. In its date section, at the top of page one, it reads:
AGREEMENT dated November 2005
[35] The question is whether this date is real, or added some time in late 2006. In order to resolve the debate, mention must be made of an email sent to AB by Mr Anderson’s administrative assistant in September 2006. This is the time when the Crown and AB say the outsourcing possibility really arose. The September email attaches an almost identical agreement to the one in dispute, except the month is blank, and the name of Mr Anderson’s entity has changed to the entity that would now do the work. The names of some staff members are also changed. Mr Anderson says the September agreement was an updated version of the earlier one dated November 2005. The Crown says the September agreement came first. It says the one dated November 2005 is a modified version of the September 2006 one, but backdated, and changed in other respects to support Mr Anderson’s story.
[36] The first thing on which the Crown relies for its contentions is where the disputed agreement was located in AB’s papers. AB himself cannot recall when he received this agreement. However, it was located in his files, physically attached to a letter written by Mr Gilchrist in October 2006. The letter is a draft reply for AB to send to the IRD in response to a recent IRD request for information about the
invoices. The backdated agreement would provide support for the explanation that Mr Gilchrist is setting out in the draft reply. The Crown submits the agreement was created and provided at this time, as is shown by the fact it is attached to a letter definitely only written in late 2006, and in a context where it makes sense to be attached to that letter.
[37] The Crown makes other submissions which I also accept cast doubt on the authenticity of the date:
(a) Appendix 2 of the 2005 agreement deals with the costs of the services to be provided. There is an entry that says “Set-up No Fee”. This is an inexplicable entry for a November 2005 agreement where the whole purpose was to get the project started. The payments were start up payments;
(b)the 2005 agreement describes the services to be provided as accountancy services, for $12,500 plus GST a month. But these were not to start for some months. There is no logic in agreeing an outsourcing fee at this time, and no explanation why Mr Anderson would have such an agreement at that time;
(c) the agreement speaks of Mr Anderson’s company providing four staff to provide “the service”, again a wholly inapt expression for what the November 2005 agreement was meant to be about;
(d)in paragraph seven there is a typographical nonsense – it says the accountancy team providing the services will consist of “representatives of GBS and its representatives”. When one looks at the same spot in the September 2006 agreement, it says “representatives of Accountancy Outsourcing and representatives of Globe Net Communications”. The nonsense entry in the “November 2005” agreement is explicable by a bad cut and paste job being done to the September 2006 agreement.
[38] Mr Anderson tried to deal with the first of these three points by saying that the description of the work in Appendix 2 was apt to cover both the development work and the later accounting services. This was an example of him making up evidence as he went. The descriptions in Appendix 1 are:
(a) to provide administrative and accounting services for AB, using the internet based MYOB system accessed by Remote Access;
(b)maintenance and improvement of systems in order to achieve management objectives; and
(c) to provide any additional support the clients require.
[39] Whilst one can twist words to mean many things, the reality is that this work had nothing to do with what Mr Anderson called Phase 1 and cannot credibly be seen as a document presented to AB to have him start paying $12,500 a month for software development. The document sits much more comfortably with what Mr Anderson called Phases 2 and 3. It has nothing to do with developing the software, everything to do with the accounting outsourcing work concerning which AB was to be the first client.
[40] In isolation, I would assess it as very likely that the November 2005 date is untrue. Although efforts have been made to modify the document, the underlying point remains that it makes no sense to have had this document in November 2005 if the arrangements were as Mr Anderson said. He was looking, at that point, for a software development funder; providing outsourced accounting services was to come way down the line. The points made above by the Crown, and the location where the document was found, reinforce this doubt over its authenticity.
[41] The second document is the one that emerged at trial for the first time, the document I have termed SA1. It has on each page a footer, “November 2005”. AB said the first time he saw it was at the trial when counsel for Mr Anderson showed it to him. I will observe later in this judgment that I regarded his reaction as genuine.
AB noted, with some force I consider, that SA1 was not amongst his papers, unlike most other key documents.
[42] Another credibility issue with the document emerged. In the narrative on page one of the document, it refers to AB being a finalist in the Accountant of the Year competition. This is true, but it is something that only happened some time subsequent to 2005. Mr Anderson said AB had told him this, and he had seen a plaque in AB’s office. As it happens, AB had prior to 2005 been a nominee for the same competition, but never a finalist.
[43] I do not believe Mr Anderson’s evidence on this. It is a slip up that has exposed the document as a fraud. It reinforces my assessment at the time of AB’s genuine rejection at trial of ever having seen this document. I accept it is telling that the document was not amongst AB’s papers. Equally telling, in my view, is that it was apparently in Mr Anderson’s papers. He kept nothing else, it seems, and there is no credible basis for him just happening to keep this document.
[44] Moving outside the document itself, there is subsequent correspondence that also casts real doubt on whether any agreement was reached in 2005. There are two emails in February 2006 in particular that are difficult to reconcile with the idea of a November agreement. On 9 February 2006 Mr Anderson emails Mr Gilchrist about what the Crown says is the fictitious invoice scheme and how it can be dressed up. The email is obviously about AB. Of interest:
(a) the email attaches a standard form template contract which it seems Mr Anderson generally uses. The blank agreement is accompanied by a comment from Mr Anderson that full paperwork could be developed; and
(b)in the body of the email, when talking about the scheme, Mr Anderson responds to Mr Gilchrist by observing he does not want to use his company, Globe, because it has solid tax losses and may become profitable in the future. For the relatively small amount of money involved, he would rather use a shelf company.
[45] It is hard to reconcile this email with the proposition that three months earlier AB had approved a joint venture software development on which staff had already been working. This email is talking about setting a deal up. It is equally odd, if agreements already existed in 2005, to be attaching a blank template agreement and talking about doing full paperwork.
[46] The next day Mr Gilchrist replied to this email. The two defendants are again talking about the AB deal in a future sense. It is of passing interest that neither mention AB by name even though he is supposedly known to both and already in a joint venture with Mr Anderson.
[47] It has been difficult to discern if the defendants’ explanations of these, and a further earlier email, is that they were about the software development project, or were about a separate tax loss deal which was proposed to AB but which he never agreed to. The evidence oscillates, the reason for which seems to be the lack of
genuineness underlying it.4
[48] The next flurry of email traffic around 21–22 February is equally telling. There are two threads to pick up on. First, it can be recalled that Mr Anderson was reluctant to use Globe in the transaction because it had solid losses. Instead he wanted to use a shelf company to issue the invoices. One then sees in late February an exchange between him and Mr Gilchrist over which entity should be used. (Mr Anderson seemed to have numerous options.) Mr Gilchrist replies with advice as to why several options are not suitable. Eventually a company called Barclay Designs Ltd, trading as Assure IT, is settled on.
[49] The significance of this is twofold. First, it is again hard to reconcile all this effort to find an entity to use if one is talking about the straight forward legitimate
4 It is unnecessary to spend too much time on the earlier 9 February email to which I refer. It was said by Mr Gilchrist to be about a tax loss deal that never progressed. The idea was that AB would buy a tax loss company Mr Anderson owned. Interestingly, even with this different deal, if indeed it is a different one, Mr Gilchrist accepted that it had a degree of deception. The idea was for AB to buy half a tax loss company off Mr Anderson for $10,000. However, the sale price would be $100,000 so Mr Anderson could use the sale to cover the transfer of $90,000 he had in a Vanuatu account. The purchaser would ostensibly pay $100,000 for the company but secretly would get $90,000 of it back into a Vanuatu account. The Crown disputes this explanation altogether, but even accepting it may be correct, it can be noted it rather sets the tone for assessing the legitimacy of all these transactions.
deal that Mr Anderson says has been in place since November. Second, Mr Gilchrist is fully engaged with the activity. He is no mere bystander or occasional participant. His role is consistent with AB’s evidence. The email traffic located on Mr Gilchrist’s computer shows Mr Gilchrist drafting up an Assure IT promotional document and arranging for it to have an email address. Later, on 21 March, Mr Gilchrist emails Mr Anderson an “Assure IT invoice template doc”. This was to be the model for the invoices actually issued to AB. The only text to Mr Gilchrist’s email is:
Please store somewhere and delete this email.
[50] Mr Gilchrist explains this surprising secrecy, given everything is meant to be legitimate, by essentially claiming it is a habit. He points out similar instructions elsewhere in his emails. Whilst this is so, the direction to delete is rather more targeted than he suggests. It is by no means a common or regular event. It often occurs in the context of him engaging in establishing a false or misleading paper trail. I do attach weight to it being used in relation to what should be the innocuous provision of a template.
[51] The other thread in these late February emails is correspondence not between the two defendants, but between one or both of them, and AB. A particularly crucial email is one of 22 February where Mr Gilchrist sends AB the forms to set up a Vanuatu account. He then says:
You will get the idea of the service provision. If you agree, then a subscription invoice will be issued in April at $12,500 a month payable each month and you then set up an AP to their account and stop it whenever you decide. You then get monthly deposits into your ANZ account which you access by your card (remember the NZD7 cost each time! You need to keep a USD1000 minimum balance in your account.
I can discuss further by phone.
Please delete this email once read. I will delete my copy.
[52] This is of interest for several reasons. First, it is late February 2006, and Mr Gilchrist is explaining the deal to AB, something Mr Anderson says was done and agreed to in November the previous year. Second, it is already recognised by this time that the money is coming back to AB. This is inconsistent with
Mr Anderson’s evidence that there is a change of tack in March5 as the result of AB demanding a different arrangement when he was pressed for payment of the invoices. Third, it says “if you agree”. Fourth, of interest to, and undermining of, his defence, it is Mr Gilchrist doing the explaining. And finally, it being a key email arguably disclosing the fraud, AB is asked to delete it.
[53] I have reached a clear view that the invoices do not represent work done pursuant to the deal which Mr Anderson says was reached in November 2005. First, the documents said to evidence the deal both have real authenticity issues. Next, email correspondence in early February, and then late February, is inconsistent with the idea of an agreement having been reached. The emails explain a deal, talk about “if you agree”, and talk about preparing paper work.
[54] Third, it is plain from the late February email that it is already known that money is coming back to AB. The Vanuatu transfers were no late change in plan. I have referred to a 22 February email showing this, but there is one even earlier, dated
10 February. There is a debate as to whether the email is about tax loss proposal that AB rejected, or about the software development plan. The indisputable fact, though, is that whichever it was, the scheme involved AB ostensibly paying money but getting the bulk back. That is an unchanging theme in the evidence.6
[55] There is a further factor that tells in favour of AB’s version, and contrary to that of the defendants’. It is that all the email traffic about the outscourcing work starts around the middle of September 2006. This is consistent with AB’s evidence that outsourcing was a new idea raised in the second half of 2006, and unconnected to the invoices. It seems from the emails that AB was initially interested in the proposal and he testified to that effect. However, he pulled out in December 2006
because he was concerned about the IRD interest in the first deal.
5 At one point Mr Anderson said February/March.
6 Another point in this email between the defendants is that Mr Anderson says he will instruct his company to pay $92,500 of the $100,000 back to AB. He asks Mr Gilchrist, however, as to what description the company should give the payment back. Because there is no legitimacy to the payment, a label to explain it must be made up.
[56] Apart from the two agreements I have discussed already, the other evidence supportive of Mr Anderson’s version of events is the employment contracts for the staff. 7 These documents are consistent with the staff being engaged around the time of the alleged deal with AB. The difficulty, however, is that the job descriptions do not mention AB’s project, or anything like it. Their consistent theme is delivering services to international students, with a facility in Asian languages being a job requirement. I do not accept that employees engaged at that time in late 2005/early
2006 were employed for a project associated with AB.
[57] In addition to the four main factors I have mentioned, there are other isolated matters that increase my conviction that the defendants’ explanation, and particularly Mr Anderson’s evidence, is not to be accepted.
[58] On 15 May 2006 AB emailed the following to Mr Anderson, copied to
Mr Gilchrist:
Please invoice me for April and May 06. I want to increase the amounts for
Consultancy, will need to talk to Brent on this issue.
[59] It is to be recalled that the defendants’ version is that the $12,500 a month was either investor start up funding (Mr Anderson) or a fixed fee for access to services (Mr Gilchrist). It is inexplicable why, in either situation, AB would ask for the fee to be increased. Not so, of course, if the quantum of the invoices had nothing to do with either but was being dictated by the level of income AB was seeking to shield. If either of the defendants’ version had credibility, one would not expect Mr Gilchrist to reply how he did. Having been asked by Mr Anderson for his view, Mr Gilchrist commented to Mr Anderson:
The past invoice was for $12,500 a month. Really pushing it to justify higher. Could keep at that and have one-off reports etc. Wot you think?
7 There is also a November 2005 email in which a client of Mr Anderson is described not by name but by ethnicity. The ethnicity is AB’s and Mr Anderson says he had only one client of such ethnicity, namely AB. If accepted it is a point in his favour, but the tenor of the judgment makes it plain I do not generally accept Mr Anderson’s evidence, and there is nothing to otherwise show it is a reference to AB.
[60] Significantly, there is no query by Mr Gilchrist as to what AB meant, and no confusion as to why AB would want to increase his fee. Plainly, if anything the defendants were saying is true, a genuine consumer (IT Services) or investor (software development) would not be asking to increase his monthly fee. Instead, with an eye to later scrutiny, Mr Gilchrist demurs on increasing the monthly amount and suggests another device such as one-off reports be used. Neither defendant could give a remotely credible explanation for this exchange. It is a telling piece of evidence.
[61] A second general aspect are the events concerning Vanuatu. I have commented already about how Mr Anderson’s evidence that this situation of transferring funds resulted from a change of heart by AB, was not supported by early emails suggesting it was always a feature. Mr Anderson’s evidence on this lacked credibility in many ways. It was never clear why, to satisfy AB about the security of Vanuatu banking and show him that he could get future profits out, Mr Anderson had to put his own money in an account solely controlled by AB. Further, Mr Anderson said he did not expect AB to repatriate the money, even though getting the money out of Vanuatu was allegedly AB’s concern. And then it seems, when AB did take the money, Mr Anderson just wrote it off. This too was unconvincing.
[62] Another aspect of the Vanuatu endeavour that was inexplicable if the defendants’ evidence were true, was the fervour with which they worked allegedly just to get joint venture funds, already in Vanuatu, from one Vanuatu account to another. There is no doubt the transfer exercise proved more difficult than expected, but why work so feverishly? The evidence suggests that the months of May and early June were dedicated to constant efforts to satisfy the bank, including visits from agents in Vanuatu and then Mr Gilchrist himself. Then, ultimately, the transaction was achieved only by a gross deception of the bank in question, a deception involving the issue of a fictitious invoice. Mr Gilchrist said he felt responsible for AB’s Vanuatu account and so was doing his best for that reason, but the overall level of endeavour is explicable not by the defendants’ explanation but by the Crown’s allegation.
[63] Although my view on the charges is clear, by way of conclusion I will formally address the arguments presented by both defendants. Many have been answered already but I consider it appropriate to list them and briefly address matters not yet covered. For convenience I address Mr Anderson first.
[64] On his behalf it was submitted:
(a) work was done to develop an online accountancy outsourcing business;
(b) the development was financed in part by AB;
(c) that agreement was reached in November 2005;
(d)it was intended to be a joint venture based in Vanuatu with the profits tax free in both New Zealand and Vanuatu; and
(e) AB was not a credible witness.
[65] The first point relied upon in support was the documentation said to have been taken to the November 2005 meeting. I have dealt with that. Next was reference to the employment agreements. Again that has been covered. Generally, on that aspect of the evidence, I accept the independent witness’s evidence that these people were employed and that he played a role in employing them. I was not convinced the witness could be sure about timing, nor had any reason to recollect timing at this point. It did not particularly matter, however, because the evidence did not raise the possibility that the employees were engaged for AB’s project.
[66] Mr Anderson next relied on the existence of a software manual emanating from the accounting software development project. Mr Anderson says that he gave the manual to AB in March, thereby demonstrating that the work had been done, and when it was done. It is a substantial manual. There is no other evidence to say it was given to AB in March, but, as it happens, there is evidence showing his administrative assistant emailed it to AB in September. It is inexplicable why the manual would be sent in September if already provided in March. It is wholly
explicable that it would be sent in September if that is when, as all the documentation suggests, the push was on to engage AB with the outsourcing project.
[67] The existence of the manual shows that Mr Anderson was indeed developing software for a web based accountancy project. I consider it likely that he hoped to engage AB as its first user, and that the September emails on the point were all genuine. What has happened is that this genuine project has been falsely used to explain what was happening with the invoice writing scheme, just as AB says. That this is so is fairly plain on the evidence I have already discussed, but to emphasise it is not just conjecture, there is an email that says as much.
[68] In October 2006 the IRD wrote to AB asking for an explanation of the invoices. The inquiry letter was headed Barclay Designs Ltd, being Mr Anderson’s company that issued the invoices. Since this was Mr Anderson’s company, AB sent the inquiry to him and he in turn sent it to Mr Gilchrist. Eventually AB received a reply via Mr Anderson which said:
We think that the accounting outsourcing service is best.
[69] Efforts to explain this away as other than what it plainly is were unconvincing. The email confirms that the decision was taken in response to the IRD request to defend the fictitious invoice scheme by attaching it to the genuine accountancy outsourcing service project. I do not consider the evidence about doing
the outsourcing work in Vanuatu was genuine and prefer AB’s evidence on that,8 but
I accept there was a software project being worked on.
[70] Mr Anderson did not impress as a witness. There were many times when he seemed to be making things up as he went. An analysis of the contemporary evidence has reinforced that impression. His evidence has not engendered any reasonable doubt about the Crown case.
[71] Turning to Mr Gilchrist it follows generally that I reject his evidence, and I
have commented along the way how his level of involvement is wholly at odds with what he now claims. However, there is an aspect to his evidence, not starkly put,
8 There is no mention of Vanuatu in the outsourcing contract sent to AB in September.
that he was in some way a dupe being used by Mr Anderson. So it is appropriate to consider this further. The context must be that the invoices did not reflect any genuine services, but is it a reasonable possibility that Mr Gilchrist thought they did?
[72] The first point, to which I will return, is that I would need to have a doubt about ABs evidence before I could accept a reasonable possibility that Mr Gilchrist misunderstood what was happening. Second, however, Mr Gilchrist’s evidence needs to be measured against the objective evidence.
[73] I comment first on a disputed 9 February 2006 email. It is the one which the Crown says is the first iteration of the invoice scheme, and which Mr Gilchrist says is about a wholly different tax loss proposal that AB rejected (see [45] above and accompanying footnote). Whichever version is correct, the email shows that by this early date Mr Gilchrist is aware Mr Anderson has funds that need to be relocated.
[74] Next, one must turn to the 22 February email (cited at [49]) where Mr Gilchrist, not Mr Anderson, is describing the fixed fee scheme to AB. Two things here – it is Mr Gilchrist who is describing the scheme, and the scheme plainly involves the money coming back to AB. It is not some unconnected money Mr Anderson might transfer for other reasons; it is money explicable only as a repayment of the invoices.
[75] There are then other factors that show Mr Gilchrist’s level of involvement right throughout – he drafts the Assure IT pamphlet; he drafts the Assure IT template; in May he notes a payment by AB and tells Mr Anderson some of it needs to be transferred to Vanuatu; in May he discusses with his Vanuatu agent getting AB his bank card, the reason being to facilitate getting the money back; he works somewhat frantically in May/June to make the Vanuatu transfer work; again in May he is advising whether the consultancy fee could be increased or whether that would look bad; and then in October he is involved (as I will find) in amending the invoices and preparing replies to the IRD. None of this can sit with his picture of a person not really involved, and not understanding what was happening.
[76] An extract from one 9 May 2006 email reinforces these points. AB was concerned about the money not showing up in his Vanuatu account. Mr Gilchrist writes to AB:
I have confirmation that the money is in your account. Please complete the personal details area of the attached, sign it and fax it back to me today so we can get your online banking set up. Your card is being processed and posted to me.
Assuming you trust me that the money is in your account (I can get a fax to that effect from ANZ if you wish), we need to get the $50,000 balance on the first invoice processed. Barclays want to do it today or tomorrow as they
have money i n Vanuat u t hat needs t o “c ome home” and it i s saf er f or you
that the money you pay them does not leave NZ. (emphasis added) Please advise if you can now provide the $50,000.
[77] It simply cannot be contended by Mr Gilchrist that he thought all this was some sort of legitimate deal whereby the money was legitimately being housed in Vanuatu for a joint venture.
[78] Inherent in Mr Gilchrist’s evidence was the idea that he never made a link between the invoices and the money being transferred, and therefore the legitimacy of it all. This and earlier emails suggest he knew otherwise, but generally the proposition defies belief. The two defendants were obviously close and discussed many schemes. More importantly Mr Gilchrist is an astute man. I do not accept something like this could have passed him by without him realising the money “coming home” suggested the invoices were not legitimate.
[79] Finally, Mr Gilchrist played a role in the amending of the invoices, and suggested the best route to explain them was accounting outsourcing. Although that email is from Mr Anderson to AB, it speaks of “we think”. It is part of the defendants’ common plan, and I draw the irresistible inference that Mr Gilchrist is the other part of “we”. After all the email is a response to the challenge presented by the IRD notice, it was copied to Mr Gilchrist, and Mr Gilchrist is the key man on tax issues.
[80] It is for these reasons that I reject Mr Gilchrist’s essential defence of peripheral innocent involvement. But there are some other general submissions he makes that I should address.
[81] First, Mr Gilchrist notes that the fictitious invoice scheme is a naked fraud with no tax credibility or sophistication. He submits that it is not the type of transaction he would be involved in, a fact reinforced by the comparatively paltry sum he was getting. He says $350; the Crown would say 3.5 per cent or $3,500 per
$100,000.
[82] I do not generally reject Mr Gilchrist’s point. I admit to being surprised by his involvement in this type of scheme, but that is based of course only on my experience in this case. Mr Gilchrist is plainly an aggressive tax adviser willing, the evidence irrefutably establishes, to create false paper trails to mislead IRD and willing to create false invoices to mislead a bank. Also his propensity to destroy records reflects someone always conscious of covering his tracks. None of this reflects on him at all well. The limited surprise I feel stems from the fact that there is no sophistication or tax skill in the present scheme. It is really just a simple fraud. But that element of surprise just leaves me unsure about why he engaged in it, not whether he did.
[83] The second general submission is that AB was not a reliable witness. Mr Gilchrist cross-examined AB for three quarters of a day. A large focus was on undermining AB’s credibility, a theme to which Mr Gilchrist returned in closing. Some lines of attack were always going to be fruitless because Mr Gilchrist had no contrary evidence to establish the point. For example, Mr Gilchrist seems convinced that AB is lying about having a particular tertiary qualification. An inordinate amount of time was spent on this, to no ultimate avail. I will focus accordingly on the aspects of the challenge which would have legitimate value if established. In this regard:
(a) it is clear that AB was inconsistent on some things across his voluntary interview, compulsory interview and evidence;
(b)it is beyond dispute that the resolution of AB’s criminal liability included a commitment on his part to testify for the Crown. Further, it seems, unwisely, that the question of AB’s status as a tax agent had not been resolved before he testified; and
(c) it is plain that AB was stressed and depressed around the time he made his statements to IRD implicating the defendants. He may also have been under pressure at the time of his dealings with Messrs Gilchrist and Anderson.
[84] Turning first to AB’s inconsistencies, it is clear that he lied initially about whether he had received a Vanuatu bank card. Mr Gilchrist submits he also lied when he claimed that Mr Gilchrist had the ability to control AB’s Vanuatu account. I am not accepting that this second point involved anything more than looseness of language. It is clear Mr Gilchrist was in control of the bank situation right through the setting up phase, up to getting Mr Anderson’s money into AB’s account. Once it was in there I accept Mr Gilchrist could not control what happened to the money, but I do not consider AB was saying otherwise.
[85] A third area of inconsistency, or lie, was said to be AB’s evidence as to when he first met Mr Gilchrist. AB initially said around 2005; Mr Gilchrist established it was at least sometime in 2003, and he submits that AB was lying so as to distance himself and minimise his own culpability.
[86] I am unsure I see this as a lie as opposed to just a timing error. However, addressing the underlying point being made by both Mr Gilchrist and Mr Anderson, I accept that it is at least likely AB is downplaying his own culpability. He has probably got out of all this quite well. I am not saying that this means his testimony was now knowingly untruthful because he may well, as people often do, have convinced himself in his mind of his self-proclaimed role as victim. Certainly, however, I find it hard to accept he was as náíve as he now says. Wilful blindness may well, I suspect, be an apt description.
[87] But ultimately I do not consider that particularly assists the defendants. I am not of the view that I should reject all of AB’s evidence because he seeks to downplay the extent of his admitted involvement. He has admitted the essence of the scheme and has still paid a significant price – criminal convictions, home detention, and no doubt civil tax liability. It is not credible that if all that was really involved on his part was incorrectly claiming capital expenditure as revenue, he would seek to extricate himself from that by making up a story that the whole scheme was a fraud in which he was complicit. For that reason, whilst accepting AB may be minimising his own culpability, I do not for a moment consider it means his evidence as to the basic plan is unreliable.
[88] Is there a present incentive for him to lie? I was disappointed to learn at trial that there was still an outstanding issue, and was somewhat surprised his unsuitability as a tax agent is not obvious. I accept that leaving open the issue of tax agent status provides an incentive but see it as a minor factor in light of what has otherwise already been settled – criminal convictions, and a sentence of home detention.
[89] Nor have I ignored the reality that there can in these situations be a question of someone in AB’s situation having to stick to the story. Even though AB has been dealt with, one needs to assess, when his evidence is challenged as it is, that he may have backed himself into a corner and his testimony reflects the fact that he now needs to maintain his story to the end, even though it may be untrue. I am satisfied, however, that is not so. There was no reason for AB to invent a fictional invoice scam if what the defendants say is true. Whatever the ultimate tax liability, it would be some distance (on their account) from fraud of the sort being disclosed by AB not only against the defendants but also against himself.
[90] Next, I need to comment on AB’s various health issues that were relied upon. It is clear AB was working hard at the time these events occurred and Ms Bonifant dwelt on the pressures he was under. It is also clear that at the time the IRD inquiry gathered momentum, and AB’s position became exposed, he was stressed and became physically and mentally unwell. These factors are relied on by the defendants to suggest either confusion or succumbing to pressure. I reject the latter,
and see no basis for the former. It is not a subtle error he would be making, and as I repeat, the documentary material overwhelmingly points to the accuracy of his evidence.
[91] There were other challenges to his credibility. For example, Mr Gilchrist has established that he and AB continued to have a working relationship beyond 2006, so claims by AB of being shocked and disappointed to have been caught up in an IRD scam should not be accepted. However, the reality is that the initial 2006 IRD inquiry died, and it was much later, 2010 I think, that the main investigative focus commenced. Most of the contact with Mr Gilchrist predates this.
[92] One point of dispute I have not addressed is a diary note of AB’s. It is a daily calendar with hand written entries for 21 February. This is the day before Mr Gilchrist sent the email to AB explaining the scheme (see [49] above). It is at this 21 February meeting that AB says the scheme was discussed. Mr Gilchrist says otherwise, and submits the diary entry is a late forgery added by AB. Mr Gilchrist accepts there was a meeting but says it was about something else, a point which can take some support from the concurrent appointment entry in an electronic diary AB also ran. Mr Gilchrist emphasises that the handwritten note of the meeting has him advising AB that subvention payments would be capital in nature. This would be fundamentally wrong tax advice and not something Mr Gilchrist would ever say.
[93] The general conclusion I have otherwise reached on this case means that obviously I accept AB’s evidence on this, and in particular I reject that he would falsely create a document, or entry in it, in this way to implicate Mr Gilchrist. Standing in isolation the points Mr Gilchrist made would certainly have meant one could not be sure either way. That is why I have not addressed this topic previously. My conclusions on it are driven by my conclusions on other aspects of the case, and not through any definite conclusion on the particular topic. So I do not see it as adding to the Crown case.
[94] Before concluding on AB it would be wrong at this stage for me not to observe that as he testified I believed AB. His reactions to questions seem genuine, and particularly his responses on SA1. I understand of course that one must be wary
of basing too much on these assessments given a prior lack of exposure to AB, but I
record it was my sense.
[95] However, the key point in assessing the challenge to AB’s credibility is that his evidence is supported by the documentary evidence. He says outsourcing arose in the latter part of 2006 – that is when there is a flurry of email and documentary activity on the topic. He says he was to get the money back from the outset – that is exactly what the early February emails suggest. AB’s angst over the money not appearing in his Vanuatu account is wholly consistent with an arrangement whereby it was his money and he was to get it back. It is very inconsistent with an idea that it was money he could not use but was just being put in an account so that he could take comfort from its presence. AB says he never saw SA1 before. Unlike almost all the other documents, it was not amongst his papers, and there is a curiosity within the document that calls into question its authenticity.
[96] In summary, I acknowledge that AB, as I see it, is not an untainted witness. He is probably – deliberately or through self-delusion – underplaying his own level of culpability, but not at the expense of the others. It is a question, at most, of how much, if at all, less culpable he was. But the essence of his evidence is credible, and well supported by contemporaneous evidence. There is no sensible explanation for him making the core allegation and exposing himself to criminal convictions and sanctions, if it were all a fiction, and especially so if Mr Anderson’s version was correct.
[97] That concludes my analysis of the various issues. The conclusion I have reached is clear. However, in fairness to what I see as the great strength of the Crown case, it is appropriate to set out one last piece of evidence. It is a record of an instant messaging skype exchange between the two defendants on 29 May 2006. Despite its brevity, it really encapsulates the scheme and the defendants’ involvement:
MrAnderson : Would like to contact AB direct and send a couple of bills, as have around 20k in V... that I need to bring over here or give to him there.
Mr Gilchrist : Yep just ring AB. He will probably do it without my input.
[98] Accordingly, for all the reasons given, I find that counts 16–20 of the indictment are proved against both defendants beyond reasonable doubt. That is, each defendant was party to, and indeed jointly the architect of, a fictitious invoice writing scheme. The reward was 8.5 percent of the value of the invoices, together with Mr Anderson being able to repatriate the use of funds he held in Vanuatu. It was integral to the scheme that the taxpayer would get tax benefits. Accordingly, both men are parties to the filing by AB’s trading company of GST and income tax returns that are false because they rely on false invoices. Both men knew that such filing would occur; indeed it is the only way to sell the scheme to the taxpayer, since the benefits to him are the tax deductions less 8.5 per cent.
[99] I turn finally to count 21, the amended invoices. There are issues here that need addressing notwithstanding my conclusion on the other charges. In particular, each defendant sought to disassociate himself from the amendments.
[100] In relation to this, crucially I reject the evidence of both defendants that AB sought the amendments. Throughout the scheme, the drafting of the invoices has been the domain of the defendants, particularly it seems of Mr Gilchrist who provided the template. It is inconceivable to me that AB, when asked by the IRD for invoices issued by Mr Anderson’s company, would of his own initiative request amended invoices. I do not consider he would have the knowledge to think a different narrative would be better. He had no reason to believe the initial invoices were not satisfactory.
[101] Further, it would be an error to think the only change to the invoices was the narrative. There are four invoices. Originally they contained these features (taking the 15 May invoice as an example):
(a) letterhead: “Assure IT”, and contact details;
(b) issuer : Barclay Designs Ltd; (c) date : 15 May 06;
(d) GST : 84-221-937;
(e) addressee : AB;
(f) narrative : “Assure IT consultancy for April and May 06. 2 months @
12500”;
(g) footer : “Assure IT is a trade name owned and traded by Barclay
Designs Limited”.
[102] The amended invoice provided by AB to the IRD reads:
(a) letterhead: Globe Business Services, and contact details, which apart from email address are the same as for Assure IT;
(b) issuer : Barclay Designs Services (trading as Globe Business
Services);
(c) date : 15-05-06; (d) GST : same;
(e) addressee : same;
(f) narrative : “Our agreed fee for accounting support services for
April-May @ 12500 a month”;
(g) footer : none.
[103] The changes, therefore, are to the letterhead, the name of the issuing entity, the date format, the narrative, and the footer. It is not easy to discern the exact reasons for the changes. By October 2006 Assure IT, whatever it was, had not carried on, but why all reference to it was expunged I am unsure. Perhaps it was hoped to prevent just another line of questioning that would need explanation. However, it could not possibly have been any interest of AB’s to change the name of the issuing entity.
[104] The change in the narrative is presumably to increase the prospects of valid deductibility – accounting support services, when used on an invoice addressed to an accounting firm, might pass with no inquiry. However, it is idle to speculate. I have not accepted the defendants’ evidence in relation to the basic changes, and do not reach a different conclusion here. It has been their scheme all along and to suggest they were not involved in the amendments is not credible. Both accept they knew the amendments were happening. Given I reject that AB was behind the amendments, the answer to who was is irresistible.
[105] Mr Gilchrist’s evidence is inconsistent. He says he was not involved in the amendments but also says the changes were intended to better reflect his understanding of what happened. He points to the draft reply he gave AB to send to the IRD. The draft reply states:
Barclay Designs Limited Payments
We enclose copies of the invoices that relate to the payments in question. The invoices should answer most of your questions. The services result from an approach by Scott Anderson on behalf what I considered to be Globe Business Services. Mr Anderson was looking for accounting firms to outsource bookkeeping services that may otherwise have to be turned away by the accountant due to insufficient resources. Mr Anderson had, he said, surplus resources in the form of staff sourced from Asia and in NZ for work experience. I am unsure of the names of staff involved but I have visited Globe’s premises and have been introduced to the staff.
As to whether we continue to use Globe for such outsourcing is a matter I
am currently reviewing.
I add that I was advised that the contracting would be through Barclay Designs Limited but I assumed that was for Globe’s own tax or accounting reasons. The legal provider of the services was of little interest to us so long as the contract was performed as promised. No formal contract was signed (although some draft agreement was tabled) as we proceeded on the basis of goodwill and the fact that we would become a continuing and formally contracted user if services proved cost effective. That is the matter I am currently reviewing.
[106] Mr Gilchrist relied on this to show his understanding of what was happening and therefore why he was not guilty. If it was genuine it would do that, but of course it was a reply drafted in October so equally could be quite self-serving for both him and the conspiracy generally. For the reasons already given, I consider it is the latter, and instructive of Mr Gilchrist’s knowledge. It was to this letter that the November 2005 (backdated as I have found) accounting services agreement was attached in AB’s files. Arguably, AB’s credibility is also reinforced, because he declined to send the reply on the basis that it was untrue.
[107] Whereas Mr Gilchrist seemed to oscillate on whether he was involved in the amendments, Mr Anderson consistently says he was not involved. He knew of changes being made but said he did not concern himself with invoices. Neither defendant however, was particularly able to explain an email from AB on 26 October which reads, in relation to the IRD request:
Dear Scott/Brent. Can you kindly email me the revised invoices? Brent please do draft replies. Today is the last day.
[108] Mr Anderson’s evidence that he did not focus on this, or engage with it, was unconvincing. It was this email that required both defendants to testify that AB requested the invoices, but of course its more obvious reading is that an anxious AB had been told to await amended invoices, and is asking where they were.
[109] My conclusion on this flows from my conclusions on the case generally. It was the defendants’ scheme. They were invoices from Mr Anderson’s company, drafted initially by Mr Gilchrist. They provided the theoretical legitimacy for the Vanuatu payments. Their acceptability on their face was vital to the scheme. One of the two, almost surely Mr Gilchrist, suggested revising the invoices. Mr Anderson knew changes were to be made to invoices issued by his company, and agreed, because he was as much part of the scheme as Mr Gilchrist.
[110] There is no reasonable doubt both men were complicit in the filing of the amended invoices. The invoices were designed to mislead because they were changed from the original to better protect the scheme. Both men knew that the IRD had requested them from AB, but in relation to Mr Anderson’s company, and both knew the amended invoices were to be provided in response to that request. Given the invoices were always fictitious, there can be no doubt that the amendments were intended to mislead. Both defendants are guilty of count 21 in the indictment.
Verdicts
[111] Messrs Anderson and Gilchrist are both convicted of counts 16–21 of the amended indictment in that they were parties to the filing, by AB on behalf of his trading company, of three GST returns and two income tax returns, which were based on fictitious invoices. Both defendants are also convicted of being party to a misleading answer to an IRD request for information. They provided AB with amended versions of the fictitious invoices, knowing the amended invoices would be provided to the Commissioner as being the true original invoices, and intending
thereby to mislead the Commissioner.
Simon France J
Solicitors:
Luke Cunningham & Clere, Wellington
Public Defence Service, Wellington
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