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Supreme Court 26 April 2013

R v SAKOVITS; R v SAKOVITS

[2013] NSWSC 464

Fraud & dishonesty
CRIMINAL LAW SENTENCING GUILTY VERDICT BY JURY DISHONESTY OFFENCES S 29D AND S 86 CRIMES ACT 1914 (CTH) CONSPIRE TO DEFRAUD THE COMMONWEALTH

Citation: R v Sakovits; R v Sakovits [2013] NSWSC 464
Court: Supreme Court of New South Wales
Date: 26 April 2013
Judge: Hall J

Background

The two offenders, a husband and wife who were co-directors of a Sydney-based promotions company, were convicted by a jury on 21 February 2013 of two counts of conspiracy to defraud the Commonwealth. The offending spanned from April 2001 to September 2006 and was charged under two separate statutory regimes because Commonwealth criminal legislation changed partway through the relevant period.

The offending centred on an offshore tax avoidance arrangement. The offenders' accountant introduced them to a scheme involving a Vanuatu company, which they incorporated at her suggestion. Monies were transferred from their Australian company to the Vanuatu entity, disguised as payments for marketing and promotional services. False invoices were created to support the appearance of legitimate business expenses, and those fictitious deductions flowed into the company's tax returns, reducing taxable income reported to the Australian Taxation Office.

The scheme caused a loss to Commonwealth tax revenue in two respects: company tax shortfalls arising from the fraudulent deductions, and personal income tax shortfalls arising from the failure to declare as assessable income the funds repatriated through the offshore round-robin arrangement.

  • What sentences were appropriate for Commonwealth conspiracy to defraud offences, having regard to the factors specified in s 16A(2) of the Crimes Act 1914 (Cth)?
  • Whether the offenders' participation in the scheme should be characterised as a single conspiracy for sentencing purposes, notwithstanding that two separate charges were laid due to legislative change.
  • Whether the circumstances of the offender's mother constituted "exceptional circumstances" sufficient to affect the sentencing outcome.
  • What weight should be given to the facts that the scheme was initially introduced by the offenders' accountant, that there had been significant delay, and that there was evidence of good character?
  • Whether any sentence other than imprisonment was appropriate under s 17A of the Crimes Act 1914 (Cth).

Decision

Hall J treated the two charges as constituting a single conspiracy for sentencing purposes, consistent with the Crown's submission and the reasoning in R v Boughen; R v Cameron [2012] NSWCCA 17. The maximum applicable penalty for each count was treated as 10 years imprisonment. The sentences on both counts were ordered to run concurrently, reflecting the single course of criminal conduct underlying the two charges.

His Honour found that the offending was deliberate, calculated, and systematic. Although the scheme had been introduced by the offenders' accountant, the offenders knowingly participated in unlawful conduct and continued it over a prolonged period. The fact that a professional adviser had proposed the arrangement did not substantially diminish their moral culpability.

Hall J accepted that there was evidence of good character and acknowledged the circumstances of one offender's family, including the condition of the offender's mother. However, those matters did not constitute exceptional circumstances sufficient to justify a departure from what general deterrence required. The sentencing court emphasised that serious tax fraud offences demand sentences that reflect adequate punishment and the need to deter others, and that the deterrent and punitive effects must be reflected in both the head sentence and the non-parole period.

Having considered all available sentencing options, Hall J was satisfied that no sentence other than imprisonment was appropriate, given the deliberate and systematic nature of the offending. Both offenders received identical sentences, with provision for release on recognisance after serving half the head sentence.

Orders Made

Jane Maria Sakovits:
- Count 1: 6 months imprisonment, commencing 26 April 2013, expiring 25 October 2013.
- Count 2: 5 years imprisonment, commencing 26 April 2013, expiring 25 April 2018.
- Count 1 sentence to operate concurrently with Count 2.
- Recognisance release order on Count 2 after 2 years and 6 months (25 October 2015), upon giving security of $200 without surety, subject to conditions in s 20(1)(a) of the Crimes Act 1914 (Cth).

Ronald Rudolph Sakovits:
- Count 1: 6 months imprisonment, commencing 26 April 2013, expiring 25 October 2013.
- Count 2: 5 years imprisonment, commencing 26 April 2013, expiring 25 April 2018.
- Count 1 sentence to operate concurrently with Count 2.
- Recognisance release order on Count 2 after 2 years and 6 months (25 October 2015), upon giving security of $200 without surety, subject to conditions in s 20(1)(a) of the Crimes Act 1914 (Cth).

Key Takeaways

  • Two charges arising from a single continuous conspiracy, split only because of a change in Commonwealth legislation, were treated as one course of conduct for sentencing purposes, with concurrent sentences imposed.
  • General deterrence carries substantial weight in sentencing for serious, sustained tax fraud: the Supreme Court held that both the head sentence and the non-release period must reflect the punitive and deterrent purposes of the Crimes Act 1914 (Cth).
  • The fact that an accountant introduced the scheme did not significantly reduce the offenders' culpability, given that unlawful conduct was knowingly continued over several years.
  • Family hardship and favourable character evidence, while acknowledged, did not rise to the level of exceptional circumstances sufficient to displace the primacy of general deterrence in cases of deliberate and systematic Commonwealth fraud.
  • Under s 17A of the Crimes Act 1914 (Cth), a sentencing court must consider all available alternatives before imposing imprisonment; here, the deliberate and calculated nature of the offending meant no other sentence was appropriate.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1914 (Cth), ss 16A, 17A, 20, 29D, 86(1)
- Criminal Code Act 1995 (Cth), s 135.4(3)

Cases:
- Agius v R [2011] NSWCCA 119
- Cheung v R [2001] HCA 67; 209 CLR 1
- Hilli v R; Jones v R [2010] HCA 45
- R v Agius [2012] NSWSC 978
- R v Boughen; R v Cameron [2012] NSWCCA 17
- R v Bragias (1997) 92 A Crim R 330
- R v Gallagher (1991) 53 A Crim R 248
- R v Gregory [2011] VSCA 145
- R v Hart [1999] NSWCCA 204
- R v Hinton [2002] NSWCCA 405; 134 A Crim R 286
- R v O'Connor [2002] NSWCCA 156
- R v Olbrich [1999] HCA 54; 199 CLR 270
- R v Pang (1999) 105 A Crim R 474
- R v Pearce [1998] HCA 57; 194 CLR 610
- R v Rivkin (2004) 184 FLR 364
- R v Togias [2001] NSWCCA 522