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District Court 2 June 2017

R v Song CHANG

[2017] NSWDC 429

Fraud & dishonesty
CRIMINAL LAW SENTENCE COMMONWEALTH

Citation: R v Song Chang [2017] NSWDC 429
Court: District Court of New South Wales
Date: 2 June 2017
Judge: Tupman DCJ

Background

The offender was an employee of the High Trade Group of companies, a group structured around a property development company (RHV) that developed a hotel resort complex in the Hunter Valley, now operated as Crowne Plaza Hunter Valley. He had worked within the group since approximately 1987, sponsored by Mr Zhang, who was in effective control of the group. Between 1 April 2002 and 28 February 2007, the offender conspired with Mr Zhang and Mr Chan, the group's internal accountant, to dishonestly cause a loss to the Commonwealth.

The conspiracy operated by inflating or fabricating invoices across a tiered corporate structure. Tier 2 building companies invoiced RHV for substantially more than the actual construction costs, while tier 3 supplier companies issued invoices to tier 2 companies that were often never paid. Because of the accrual and cash accounting rules that applied differently at each tier, unpaid invoices from tier 3 companies created input tax credit (ITC) entitlements that were never matched by a corresponding GST liability. RHV then lodged Business Activity Statements with the ATO claiming excessive ITC refunds on the basis of these inflated and false invoices.

The total loss to the Commonwealth through excessive ITC refunds or offsets received by RHV was $10,500,000. This proceeding concerned only the Pokolbin development; the offender had previously been sentenced for a related conspiracy involving a separate development at Chippendale, which resulted in a further loss to the Commonwealth of approximately $2.9 million.

  • What sentence was appropriate for a Commonwealth offence of conspiracy to dishonestly cause a loss under s 135.4(3) of the Criminal Code 1995, carrying a maximum of 10 years' imprisonment?
  • How should the sentencing principles under Part 1B, and particularly s 16A, of the Crimes Act 1914 (Cth) apply, including the requirement that full-time imprisonment be imposed only where no other sentence is appropriate?
  • What discount, if any, was warranted for the offender's late plea of guilty?
  • How should the principle of totality apply, given the offender was already serving a federal sentence for the related Chippendale conspiracy?
  • What combined non-parole period was appropriate across both federal sentences?

Decision

Tupman DCJ accepted that full-time imprisonment was the only appropriate sentence, a position not contested by the offender. The objective seriousness of the offending was significant: the conspiracy ran for nearly five years, involved a sophisticated multi-tiered corporate structure, produced a loss of $10.5 million to the Commonwealth, and required the participation of multiple people in coordinated roles. The offender's role included instructing the internal accountant to issue invoices and participating in the preparation of inflated or false invoices, placing him well above the level of a mere functionary.

The court had regard to comparative sentences, including the sentence previously imposed on the co-conspirator Mr Chan by Judge Lakatos, which had been imposed following a trial (that is, without any guilty plea discount). Taking into account the offender's plea of guilty, albeit a late one, Tupman DCJ reduced the sentence below what would otherwise have been appropriate, on the basis that even a late plea reflects some willingness to facilitate the interests of justice.

The court then applied the totality principle, considering the two conspiracies together: overlapping methodology, largely the same participants, approximately the same timeframe, and a combined loss of just under $13.5 million. The court assessed an appropriate individual sentence for the current offence at five and a half years with a non-parole period of three and a half years, before adjusting the overall outcome to reflect totality and the existence of the earlier sentence.

Orders Made

  • The offender was convicted of one count of conspiracy to dishonestly cause a loss to the Commonwealth contrary to s 135.4(3) of the Criminal Code 1995.
  • Sentenced to a term of imprisonment of 5 years and 6 months, commencing 10 June 2016 and expiring 9 December 2021.
  • Pursuant to s 19AD(2)(e) of the Crimes Act 1914 (Cth), a new single non-parole period of 4 years and 6 months was imposed in respect of all federal sentences, commencing 10 June 2015 and expiring 9 December 2019.
  • Upon release from custody, the offender would be subject to two years of supervised parole.

Key Takeaways

  • A conspiracy to dishonestly cause a loss to the Commonwealth under s 135.4(3) of the Criminal Code 1995 carries a maximum of 10 years' imprisonment, and under Commonwealth sentencing law, full-time custody is reserved for cases where no other sentence is appropriate.
  • The District Court confirmed that even a late guilty plea retains sentencing value as a reflection of willingness to facilitate the interests of justice, and reduced the sentence accordingly.
  • Where a co-offender received a sentence following a trial, that sentence formed a useful sentencing reference point, with the plea of guilty in the current proceeding justifying a downward adjustment.
  • Under the totality principle, where an offender is already serving a federal sentence for related offending involving the same methodology and participants, the court must impose a single non-parole period under s 19AD(2)(e) of the Crimes Act 1914 (Cth) that reflects the combined criminality without resulting in a disproportionate aggregate term.
  • Sophisticated corporate structuring used to exploit the mechanics of the GST system, generating $10.5 million in dishonest ATO refunds over nearly five years, was treated as significantly serious offending warranting a lengthy custodial term.

Legislation and Cases Referenced

Legislation:
- Criminal Code 1995 (Cth), s 135.4(3) (conspiracy to dishonestly cause a loss to the Commonwealth)
- Crimes Act 1914 (Cth), Part 1B (general sentencing provisions for Commonwealth offenders), s 16A (matters to be taken into account in sentencing), s 19AD(2)(e) (single non-parole period for multiple federal sentences)

Cases:
No specific cases were cited by name in the text provided, beyond a reference to a sentence imposed by Judge Lakatos on a co-conspirator.