R v Hendon

[2015] NZHC 973

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CRI 2013-085-3520 [2015] NZHC 973

THE QUEEN

v

ANTHONY JOHN HENDON

Hearing:	8 May 2015
Counsel:	G J Burston and P W Gardyne for the Crown C Nicholls for Mr Hendon
Sentence:	8 May 2015

SENTENCING NOTES OF MALLON J

[1]      Mr Hendon you appear for sentencing having pleaded guilty shortly before trial to 24 charges of reproducing a document with intent to cause loss.1

Circumstances of the offending

[2]      The  charges  concern  a  scam  involving  selling  or  endeavouring  to  sell advertising in fictitious publications.   Each of the charges related to one of 24 fictitious publications.  The charges cover 1,732 individual instances of such conduct aimed at approximately 884 individual victims.2    This took place between October

2009  and  October  2012.    The  total  amount  sought  from  those  targeted  was

approximately $1.077 million.3    Based on forensic accounting analysis, the money actually received into accounts controlled by you was approximately $786,000.

1      Crimes Act 1961, s 258(1) (maximum penalty of 10 years imprisonment).

2      In delivering these remarks I said 848 which was a slip of the tongue.

3      In delivering these remarks I said $1.7 million which was a slip of the tongue.

R v HENDON [2015] NZHC 973 [8 May 2015]

[3]      The offending was predominantly carried out from your home in Picton. You enlisted co-offenders to assist you with your operation.  You mostly targeted small businesses and charities.  Most were targeted once or twice for relatively small amounts of money, generally in the range of around $295 plus GST to around $595 plus GST per advertisement (although there were many others outside that range). Some victims were targeted repeatedly for total sums of money that ranged from around $4,000 to nearly $40,000 depending on the number of times that they were targeted and the price you set for the advertising for that business.  The targeted businesses were situated throughout the country.

[4]      Your offending followed a general pattern.  You obtained information about potential victims, primarily by finding their advertisements in other, often genuine, publications.  The advertisements were sourced on “lead runs”, where you would travel by car throughout the country to collect large numbers of publications from places such as community centres, doctors’ surgeries, and police stations (for example).

[5]      You would then copy the advertisement on to a “fax proof”.  The fax proof was a document which was headed with the name of a fictitious publication.   It would   include   a   place   for   the   targeted   businesses   to   sign   approving   the advertisement.    You  would  send  the  fax  proof  to  the  targeted  business  with  a covering note, which would say something like in the following example:

Please find the proof and order form for your advertisement in the following publication: “Child Safety at Home – Issue 1, Volume 2 (Autumn).  We look forward to receiving your confirmation back ASAP.

[6]      The intention was to dishonestly represent that the advertising in the named publication had already been discussed and agreed with the business.  The fax proof would be signed off in a fictitious name.  Different fictitious names were used for different publications.  The fax proof would also have different telephone numbers with a variety of area codes for different publications.  The different names and contact details were to give the impression that the fictitious publication was by a different publisher and business, when in fact the contact details would be routed directly to your home in Picton.

[7]      Representations  about  the publication  would  often  be  made  in  telephone calls.  Such calls often preceded the sending of the fax proof.  Or a business who received the fax proof and who had no recollection of agreeing to the advertising, would use the contact details to query it.  When contact was made in either of these ways a variety of deceptive tactics would be used to convey to the business that the advertising had been agreed to earlier.  The tactics were tailored to the publication and or business.  For example, they would be told that the advertising was to support children in their community or lies would be told about the distribution size and area of the fictitious publication.  You arranged for associates to front companies and to set up bank accounts into which payments from businesses who agreed to pay for the advertising were made.   You were in contact with others involved in similar operations.

[8]      You did not publish the magazines in the quantities or areas represented. Instead, you infrequently arranged for print runs of between 20 to 30 copies, and never more than 200 copies.  You did this to have examples to show to anyone, law enforcement officials, who asked to see a copy.  If a business queried when the publication would be provided, you often claimed that it would have been lost in the post. You would sometimes provide a copy to a business in order to ensure payment. A small sample of magazines were taken to various locations and photographed with the intention of falsely representing (if necessary) that magazines were being distributed.

[9]      There were approximately 884 individual victims of your advertising scam. Many of them were not duped into paying you any money.  But a significant number did.  Although the amounts sought were generally relatively low, they were sought largely from small businesses, whose advertising budget was likely to be small, and also from charities.  Where the advertising was agreed to, it was a cost for that business for no gain.  The victim impact statements that are before me provide a sample of the impact your offending had.   In some cases there were detrimental effects for the victims’ health and/or business.  More generally the victims’ trust was abused causing upset and embarrassment and a general loss of trust.  The Crown is correct  to  describe  it  as  a  blight  on  commerce.    It  is  offending  that  requires significant resources to investigate and prosecute.

Circumstances of the offender

[10]     Your present circumstances are that you are 54 years old, you have work and you live with your elderly mother and take care of her.  You are not in a position to offer reparation.

[11]     As to your view of the offending, you appeared to believe that as long as you printed a few magazines you were not committing fraud.  You told the pre-sentence report writer that you did not regard your offending as materially different from what you had previously regarded as legitimate business practice.   You said you had slipped into the offending when business conditions became “tight”.  You expressed remorse, although the pre-sentence report writer assessed this as partly because you had been apprehended.  Through your counsel today you have said that you are sorry for the loss and embarrassment caused to victims by your actions.

[12]     You have relevant previous convictions:

(a)      You  have  previous  dishonesty  convictions:  for  receiving  property, theft (x2), theft as a servant (x3), theft by failing to account, altering a document, and taking or obtaining a document for pecuniary advantage.  The most recent of these convictions dates back to August

1998.  It was all low level. You mainly received small fines by way of sentence.

(b)You also have 55 convictions for breach of the Fair Trading Act for offending in 1999 to 2001.4   That offending had some similarity to the present.  It related to selling advertisements in a range of magazines which were published by or on behalf of yourself.  Your method of identifying targets and persuading them to advertise in your publications bore strong resemblance to that for which you are presently  here  for  sentence.5    You  were  fined  $20,000  for  that

offending.

4      Fair Trading Act 1986, ss 13 and 40.

5      The summary of facts and a reporting letter from the prosecuting counsel to the Commerce

Commission are available but the Judge’s sentencing remarks are not available despite enquiry.

Sentence

[13]     The aggravating features of the present offending are that:

(a)	it was a planned and quite elaborate operation6 motivated by financial gain;
(b)	the  impact  of  your  offending  was  wide-spread,  targeting  a  large
number of victims, some of them a number of times, from around the country;
(c)	it was persistent offending carried out over three years;
(d)	the  amount  netted  by  the  operation  was  high,  around  $786,000
(although some of that was paid to co-offenders and whatever other expenses were involved);
(e)	you  were  the  principal  offender  in  the  operation,  instrumental  in putting it into place and recruiting others to assist you in it.
[14]	The	Crown submits that the offending sits at the upper end of dishonestly

reproducing documents offending.  With reference to a range of cases it submits that the appropriate starting point in this case would be between five and a half and six years imprisonment.7    It submits that the sentence should then be uplifted (three to

six months is suggested) because of your earlier Fair Trading Act offending.

6      Those premeditated arrangements and methods used to advance the scam and deceive victims included: (a) incorporation of companies fronted by de facto directors to give the appearance to victims they were dealing with distinctly legitimate entities; (b) using associates to open and operate a number of different bank accounts to hide the offender’s involvement; (c) operating an elaborate multi-faceted telephone system that gave the appearance to victims that they were dealing with distinct entities located throughout New Zealand; (d) undertaking extensive travel throughout New Zealand to identify potential victims on what is known as a leads run; (e) identification of victims and the cynical targeting of susceptible victims; (f) the use of an established, misleading cold calling strategy that had been developed over time to deceive victims; (g) the creation of fax proof documents incorporating the reproduction in part of an earlier advertisement for the victims; (h) the engagement of external typesetters to format fictitious magazines as part of the pre-emptive defence strategy; and (i) use of an invoicing system and follow-up debt recovery strategy.

7      It has provided a range of cases in support of this submission: Klair v Commerce Commission [2014] NZHC 1811; Hall v R [2014] NZCA 38; Otimi v R [2012] NZCA 216; Waghorn v Police HC Invercargill CRI-2008-425-1, 4 March 2008; Sahib v Police [2012] NZHC 3324; R v Davidson [2011] NZCA 356, R v McKelvy [2007] NZCA 340; R v Orchard CA123/03, 24

October 2003; and R v Stirling [2007] NZCA 106.

[15]     You counsel submits that a starting point of three and a half years to four years imprisonment would be appropriate, with four years four months being at the absolute top of the range.   This submission is based on a comparison with the starting point adopted for your co-offender, Mr Burns.  It is acknowledged that you were the more senior partner in the operation because it was run from your house, you dealt with the printers and type-setters as well as carrying out sales and lead

runs, and the amount you attempted to gain was greater.8    You were also involved in

the invoicing and collecting of payment from victims.   Your counsel submits that there should be no uplift for your previous offending because it is dated and in a different category, and Mr Burns’ sentence was not uplifted in light of his previous offending.

[16]     The starting point is appropriately set by looking at the offending as a whole. In my view the aggravating features of the offending put it at least in the middle of dishonestly reproducing documents offending.  With references to the cases provided by the Crown9  and some others10  I consider that a starting point of more than four years and up to four and a half years imprisonment would be appropriate.  I consider the upper end of that range is appropriate in light of your earlier Fair Trading Act offending. Although it occurred some time ago now, the similarities with the present offending are clear.  The reasonably substantial fine you received on that occasion

did not deter you from this activity.  Rather, you made refinements to it when you embarked upon it again.  The sentence for this present offending will be a significant step up from the previous fines imposed on you and will meet general and specific

deterrence aims.

8      Mr Burns was sentenced on 14 counts involving an intent to obtain $740,082.66 (R v Burns [2014] NZHC 2278), compared with Mr Hendon who is being sentenced on 24 counts involving an intent to obtain approximately $1.077 million.

9      Otimi v R, above n 7 (involving offending of a similar nature, albeit targeting more vulnerable victims, where $41,030 was obtained and a sentence of 18 months imprisonment was imposed);

Sahib v Police, above n 7 (involving offending against a trust of which Mr Sahib was secretary and a bank, where the net loss was approximately $272,000 and a starting point of four years imprisonment was taken); Klair v Commerce Commission, above n 7 (involving offending of a similar nature where the actual loss was de minimis, and a starting point of 12 to 18 months

imprisonment was appropriate); and Davidson v R, above n 7 (where the offence was using a

document with intent to defraud, with a lower maximum sentence of seven years imprisonment;

the loss was $1.6 million; and a starting point of four years imprisonment was taken).

10     R v Grygoruk HC Auckland CRI-2006-092-12831, 23 May 2008 (involving offending of a broadly similar nature but where the actual amount obtained was less, being between $200,000 to $300,000, and a starting point of four and a half years was taken).

[17]    Before considering mitigating factors, I consider that four and a half years imprisonment is not inappropriate when compared with the starting point11 that was adopted for Mr Burns.12     The different roles and the lesser charges (and correspondingly lesser sums sought) justify the difference.   Taking your counsel’s analysis that four years and four months is at the upper end of what is appropriate in light of these differences, the additional two months is warranted by the Fair Trading

Act convictions in any event.

[18]     Turning to mitigating factors, there is only one that warrants a discount from the four and a half years starting point.  That is your guilty pleas.  Your remorse is not particularly demonstrable other than through your guilty pleas.   Your offer to assist the Crown came late and was not needed at that point.  Your admissions when interviewed did not lead to early guilty pleas.  The guilty pleas were made very late, a matter of a few days before the trial was scheduled to commence.  That lateness was not reasonably justified by the change in the charges you faced.  The Crown submits that a discount of up to five per cent could be given for your guilty pleas which compares with the 15 per cent discount proposed by your counsel.

[19]     The appropriate discount for a guilty plea requires an evaluation of all the circumstances in which a plea is entered. Although the plea was late and convictions were inevitable, the time and cost and resources involved in putting the Crown to the proof of the charges at trial would have been significant.   In pleading guilty, inconvenience to witnesses who would have been called was also spared.  In those circumstances a more generous discount than would normally otherwise be appropriate for a guilty plea this late is in my view appropriate.   I will therefore apply a discount of just around 10 percent, which brings your total end sentence

down to four years imprisonment.

11     Thirty  three   months  imprisonment.  The   Crown  submits  that   this   was   lenient,   albeit understandably so.

12     No comparison with the sentence for Ms Dow is appropriate given her much lesser and different role and her different circumstances:  Serious Fraud Office v Dow DC Wellington CRI-2013-

085-9137, 11 October 2013.

The sentence

[20]     You  are  therefore  sentenced  to  four  years  imprisonment.     This  is  to  be imposed concurrently on each of the charges.

[21]     By consent I order forfeiture of the property listed in the notice dated 1 May

2015.13

[22]     You may stand down.

Mallon J

13     Sentencing Act 2002, s 142B.