R v Robinson
[2015] NZHC 2641
•27 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2013-004-010074 [2015] NZHC 2641
THE QUEEN
v
ANDREW HROTHGAR ROBINSON
Hearing: 27 October 2015 Appearances:
K C Chang for Crown
J N Bioletti for PrisonerJudgment:
27 October 2015
SENTENCING NOTES OF COURTNEY J
R v ROBINSON [2015] NZHC 2641 [27 October 2015]
[1] Andrew Hrothgar Robinson, you have pleaded guilty and appear for sentence today on the following charges:
(a) Two charges of making a false statement in a document required under the Financial Reporting Act 1993 (FRA) knowing that statement to be false or misleading. The maximum penalty is five years’ imprisonment or a $200,000 fine;
(b)One charge of being a person to whom the Financial Services Providers (Registration and Disputes Resolution) Act 2008 (FSPR) applied and providing brokering services when not registered to do so. The maximum penalty is 12 months’ imprisonment and/or a fine not exceeding $100,000;
(c) One charge of making a declaration for the purposes of obtaining authorisation knowing it to be false or misleading in a material particular. The maximum penalty is a $100,000 fine.
The offending
[2] These various offences arose out of an investigation started by the Financial Markets Authority in December 2012. It concerned the affairs of two companies. Strategic Planning Group Ltd (SPG) offered financial adviser services. It had three directors, of which you were one. Strategic Planning Group Investment Company (SPGI) had two directors, you and Mark Turnock. I note that Mr Turnock has also been charged with and pleaded guilty to making a false statement under the Financial Reporting Act.
[3] I note, too, that you pleaded guilty earlier this year to five charges of theft by a person in a special relationship and dishonestly using a document and were sentenced to six years’ imprisonment. That offending involved the misappropriation of more than $2.6m of investor funds. Most of the funds were used to repay other investors. Several hundred thousand dollars were used for business and personal expenses. The offending continued over a period of two and a half years against 13 victims, many of whom were elderly and vulnerable. I refer to that offending
because it is relevant when I come to determine the proper end result of the sentence that I have to impose today and for the purpose of determining whether the sentences I impose today should be cumulative upon that previous sentence that you are currently serving. Having heard from both counsel it is clear to me and Mr Bioletti, who appears for you today does not take a different view, that it is the most appropriate course to impose cumulative sentences today. So I turn to look at each of the instances of offending.
Making a false statement in a document required by the Financial Reporting Act
[4] The charges of making a false statement in a document required by the Financial Reporting Act relate to financial statements prepared for SPGI for the 2008 and 2009 financial years. You and Mr Turnock signed the statements correct and distributed copies to investors. But they contained false or misleading statements. The 2008 financial statements recorded a transaction “Paihia Road” under the heading “Investments and Non-current Assets” of $256,761. The financial statements also recorded that there had been no related party transactions that year. In fact, the transaction was a loan from SPGI to Heka Development Ltd, of which Mr Turnock was the sole director and 50 per cent shareholder.
[5] In the 2009 financial statements the transaction recorded as “Paihia Road/Titirangi Developments” was included again under “Investments and Non- current Assets” this time for $611,761. This amount represented more than half the funds contributed by investors to SPGI at the time. The financial statements recorded that there had been no related investments but again this amount represented the loans to Heka by SPGI.
[6] None of the proceeds of this loan have been recovered. Heka is now in liquidation and there is no surplus available after the sale of the property. According to the liquidator’s report there will be no further money available for investors.
Registration as a financial services provider
[7] The charge which is the third charge you face under the Financial Services
Providers Act is one of providing broking services when not registered to do so. You
became registered as a financial services provider on 19 March 2011. However, you were not registered to provide broking services. Some of your clients invested in SPG by paying funds into its trust account and you would then use those funds to purchase investments on their behalf. You generally received a commission from the investment providers for the placement of business and this amounted to a broking service.
Authorisation as an authorised financial adviser
[8] The last charge relates to your application for authorisation as an authorised financial adviser on 14 September 2012. Your application was approved by the Financial Markets Authority. In the application you were required to state whether you were aware of any matters that might adversely affect the Authority’s view of your character. You answered ‘No’. At the time of the application, however, you had already changed the nominated bank details of a number of your clients to SPG’s trust account without their knowledge or consent. You then transferred client funds to that trust account and used the funds to repay other clients for your own expenses. You made no mention of that activity on the application.
Approach on sentencing
[9] The objective in sentencing on charges of this kind is the need to hold you accountable for harm done to the community and to the victims,1 to promote in you responsibility for your actions,2 to denounce the offending, to deter you and others from similar offending.3 I accept the Crown submission that denunciation and general deterrence are the most important of these in the present case. I do note that
you are assessed at being at low risk of re-offending so personal deterrence is probably not a significant issue here but general deterrence is.
[10] In sentencing I am required to follow the principles set down in the
Sentencing Act 2002.4 Relevant to this case, these principles include taking into account the gravity of the offending, your culpability, the seriousness of the types of
1 Section 7(1)(a).
2 Section 7(1)(b).
3 Section 7(1)(e) and (f).
4 Section 8.
offence, the effect of the offending on the victims, the need for consistency in sentencing and the need to impose the least restrictive outcome that is appropriate.
[11] There is one further consideration. Because you are already serving a sentence for related offending I must take that into account and ensure that the total sentence I impose today is not wholly out of proportion to the gravity of the overall offending.
Starting point
[12] I turn then to consider the appropriate starting point and take as the lead offences the two charges under the Financial Reporting Act. This Act was introduced, among other things, to require issuers of securities to the public to file financial statements that complied with generally accepted accounting practice and give a fair view of the company’s affairs, to give legal force to accounting standards issued by the Board and provide for the issuing of auditing and assurance standards by the Board. The requirements for financial statements to be issued by entities are directed towards assisting investors, creditors and the public to assess the financial position of the company. That information is directly relevant to investment decisions and makes it critical that financial reporting is accurate.
[13] The false statements that you made obscured the related party lending which would have been highly relevant for any investor. The Deed of Participation given to investors when they made their investment contained a specific clause prohibiting related party transactions except as specifically provided for or with the prior approval of shareholders by extraordinary resolution. As a result of those false statements about related party lending investors were seriously misled as to the nature of the investment and unable to make fully informed decisions. It is clear from victim impact statements that some investors would certainly not have retained their investment had they known of that lending.
[14] I note that the Crown identifies your culpability as slightly less than Mr Turnock given that you did not directly benefit financially from the related party transactions. I accept that that is true, but on the other hand I also accept the
Crown’s submission that were directly responsible for introducing investors and recommending the investment in SPGI. The Crown puts your offending at the moderate to serious end of the range for offending of this kind and I consider that to be a fair assessment.
[15] For two consecutive years investors were misled by the financial statements on the issue of related party lending when the truth was that it was one of the company’s largest loans. As I have said none of the proceeds have been recovered. Victim impact statements show, for example, a loss of $50,000 to one of your investors, a retired woman for whom that loss has significantly impacted her retirement plans. People close to retirement and dependent on such funds are particularly vulnerable because they cannot to re-build their capital base. And further, you occupied a position of trust for many of these investors who chose to invest on your recommendation.
[16] There are no directly comparable cases to assist in identifying an appropriate starting point. But I have considered the cases that the Crown has referred me to.5 I am satisfied that a starting point of 12 months is appropriate, with an uplift of four months to reflect all of the offending that I am sentencing on today.
Financial Services Providers Act
[17] I need to impose a separate concurrent sentence, however, on the Financial Services Providers Act offence. The purposes of that Act is to establish a compulsory register of providers so that the public can access information, unsuitable people can be prohibited from being involved and providers properly regulated.
[18] By providing of broking services without authorisation you undermined those purposes and avoided the scrutiny of the Financial Markets Authority. The Crown does not seek a financial penalty on the basis that all ought to be directed towards
investors, but I impose a concurrent sentence of three months on that charge.
5 R v Williams [2013] NZHC 2139; Ludlow v R [2013] NZCA 196; R v Douglas and Nicholls
[2013] NZHC 1600.
Financial Advisers Act
[19] The charge under the Financial Advisers Act is somewhat different. The purpose of that Act is to provide sound and efficient adviser and broking services to the public and to encourage public confidence in such services. By making a false statement in support of your application you were able to take advantage of the significant status you obtained to which you were not entitled and which, if you had been truthful, would never have obtained.
[20] The sentence, however, for this charge is a fine only and the Crown, properly in my view, seeks to have me convict and discharge you on that charge, which I do.
[21] This brings the provisional starting point then to 16 months before I turn to consider the mitigating factors.
Mitigating factors
[22] Four factors have been raised as ones that warrant reduction from the provisional starting point. The first is your co-operation with authorities which I understand to be at a relatively low level, but worthy of some recognition and I allow
5 per cent. The second is your previous good character. Aside from current offending you have no other convictions. However, I take that your offending was sustained offending over a period of time and that you used your good character to further that offending by gaining the trust of potential investors. I do not allow any reduction for this aspect. This leaves your guilty plea. This plea came very late signalled on 23 September 2015 in the face of a trial scheduled to start on 12
October. I understand your motivation, as Mr Bioletti has explained it to me. You are now in a very unhappy position personally, having significantly lost in terms of financial position, in terms of your relationship and you will now be separated from your children for some years and I understand that. However, the attitude of the Courts to late guilty pleas is a firm one. I allow 10 per cent only for the guilty plea.
[23] Your counsel has also sought to have me consider the issue of remorse. Generally speaking, the taking of responsibility and a level of remorse is inherent in
the guilty plea. It would take something in addition to that to justify a further reduction. I have considered the letter that you have written. I accept that you are remorseful, but I also still feel that there is an element in you that seeks to minimise or explain why you did what you did. I am not satisfied that the remorse is such as to justify any additional reduction.
[24] This then takes the total reduction for mitigating factors to 15 per cent and would reduce the provisional starting point to 10 months. I have considered whether that sentence served cumulatively with the existing sentence is too high, but having regard to sentences imposed in other cases with similar features I do not think it is. I think that the total sentence, had you been sentenced for everything today, would not have exceeded seven years and the end result that I have come to produces a total sentence of six years 10 months which I do not think is out of proportion. I accordingly impose an end sentence of 10 months on the charges on which you appear today and convict and discharge you on the charge under the Financial Advisers Act. Stand down.
Addendum
[25] Mr Robinson, I am very, very sorry about this and my maths is just not too good today and what I have done is undershot in terms of where that reduction took us. So I am sorry to have to tell you this but, if we took a starting point of 16 months and reduce it by 15 per cent we come to 13 months. Now I do think that that is too high because I had indicated to you that the total sentence ought to be no more than seven years. So I am going to take another month off that which means that the end
sentence that I impose today is 12 months, not 10 months as I had indicated.
P Courtney J