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District Court 8 May 2024

R v Waldron (No.3)

[2024] NSWDC 159

Fraud & dishonesty

Citation: R v Waldron (No.3) [2024] NSWDC 159
Court: District Court of NSW
Date: 8 May 2024
Judge(s): Mahony SC DCJ

Background

The accused was employed as General Manager of Infrastructure Engineering at the Commonwealth Bank of Australia (CBA), reporting to Keith Hunter, who in turn reported to the Chief Information Officer, Michael Harte. Both the accused and Hunter held senior roles overseeing the CBA's transition to cloud computing technology through a supplier called ServiceMesh Inc (SMI).

In 2013, SMI was acquired by Computer Sciences Corporation (CSC) under an agreement that included an "earnout" clause: if SMI's revenue exceeded US$20 million during a specified period, its shareholders would receive an additional payment calculated at roughly ten times each dollar of revenue above that threshold. The Crown alleged that the accused and Hunter facilitated two major contracts between the CBA and SMI, the "McAfee deal" in December 2013 and the "Pivotal deal" in January 2014, deliberately to boost SMI's revenue and benefit its principal shareholder, Eric Pulier, through the earnout.

The Crown's case was that Pulier made payments totalling approximately US$1.48 million to the accused, and approximately US$650,000 to Hunter, through an entity called ACE Inc., as rewards for facilitating those contracts. The accused denied receiving bribes and maintained the payments were for legitimate consulting work he performed for ACE. The trial proceeded before a judge alone following an order under section 132 of the Criminal Procedure Act 1986 (NSW).

Legal Issues

  • Whether the accused corruptly received, as an agent of the CBA, payments as a reward for facilitating business opportunities for SMI (Counts 1 to 7), contrary to section 249B(1) of the Crimes Act 1900 (NSW)
  • Whether the accused aided and abetted Keith Hunter to corruptly receive payments as a reward for the same conduct (Counts 8 to 10)
  • Whether the payments were received without the knowledge of the CBA and in circumstances that met the standard of corruption required by the section, as interpreted in Mehajer v R [2014] NSWCCA 167
  • Whether the accused's explanation that the payments were for legitimate consulting work was true, or might be true, so as to require acquittal

Decision

The Corruption Element and Legal Framework

The court applied the construction of section 249B(1) adopted in Mehajer v R [2014] NSWCCA 167, which held that a payment is corrupt where it is made in circumstances regarded as corrupt by normally received standards of conduct, and that non-disclosure to the principal (here, the CBA) will generally be sufficient to satisfy that element. The court also confirmed that no actual showing of favour or peril to the principal's assets is required; the requisite mental element is simply that the corrupt benefit is received (at [764]).

The McAfee Deal

The court found that within two days of the EPA between CSC and SMI being signed on 29 October 2013, the accused became aware of the earnout clause and immediately set out to facilitate revenue for that purpose by initiating the McAfee proposal, under which SMI would become the reseller of McAfee security software to the CBA, despite the CBA already having a contract with HP for that service. The accused informed Hunter of the proposal and stated "here's $7 million for them." The court found the accused played an integral role in progressing the McAfee contract despite limited short-term commercial benefit to the CBA, and that executing the contract before the end of December 2013 resulted in the revenue being included in the earnout provision to SMI's benefit (at [797]-[798]).

The Pivotal Deal

The court found that the accused also played an important role in the Pivotal deal executed on 25 January 2014, again to ensure SMI's revenue was included in the earnout clause (at [799]). The court found that the decision to structure the Pivotal contracts as nine separate transaction documents each below $1 million was done at the accused's instigation, so as to bring them within Hunter's delegated authority and avoid the CBA's procurement policies, as well as legal and risk assessment processes (at [799]).

Rejection of the Accused's Explanation

The court rejected the accused's evidence that the payments were for legitimate consulting work performed for ACE. The court found the Statements of Work and invoices produced by the accused (Exhibit AAB) could not be reconciled with the documents produced by Goldstein from ACE's records (Exhibit N), and that the documents in Exhibit AAB were fabrications created to justify payments that were in reality rewards (at [791]). The court found the accused told multiple lies to CBA investigators on 17 December 2014, including about his knowledge of the relationship between Pulier and Goldstein, the extent of payments received, and his involvement with ACE. The court found each false statement was made because the accused feared revealing his guilt (at [802]-[803]). The court also found the accused lied about the purpose of the $20,000 payment he made to Hunter's sister from the first payment received, and that his resignation and provision of a draft Statement of Work to Hunter, knowing Hunter intended to fabricate documents, demonstrated consciousness of guilt (at [804]).

Aiding and Abetting Hunter (Counts 8 to 10)

The court was satisfied that the accused aided and abetted Hunter's corrupt receipt of the payments by passing on Hunter's banking details to enable payments into Hunter's accounts, by agreeing to receive some funds on Hunter's behalf, and by providing Hunter with the Statement of Work which Hunter fabricated (at [808]).

Orders Made

  • Verdicts of guilty entered on Counts 1 to 10 on the Indictment

Key Takeaways

  • Under section 249B(1) of the Crimes Act 1900 (NSW), as construed in Mehajer v R, a payment to an agent is corrupt where it is made in circumstances regarded as corrupt by normally received community standards; non-disclosure to the principal will generally satisfy that element, and there is no requirement to prove actual showing of favour or that the principal's assets were in peril (at [764]).

  • The District Court found that structuring procurement contracts to fall within a delegated financial authority, deliberately to avoid the employer's procurement and governance processes, was a significant factual indicator of corrupt purpose, not merely a neutral commercial arrangement (at [799]).

  • Where an accused's explanation for receiving unexplained payments rests on documents that cannot be reconciled with records held by the counterparty, and those documents were not produced until years after the events and charges, a court may find the documents were fabricated to justify payments that were in fact bribes (at [791]).

  • False and misleading statements made by a defendant to an internal employer investigation, including deliberate understatement of payments received and denial of known relationships, can be treated as evidence of consciousness of guilt going to the ultimate issue of corrupt receipt (at [802]-[803]).

  • Aiding and abetting corrupt receipt by a co-conspirator is established where the accused passes on the co-conspirator's banking details to facilitate payments, receives funds on the co-conspirator's behalf, and provides documents the co-conspirator uses to fabricate a false paper trail (at [808]).

Legislation and Cases Referenced

Legislation
- Crimes Act 1900 (NSW)
- Criminal Procedure Act 1986 (NSW)
- Evidence Act 1995 (NSW)

Cases
- Allied Pastoral Holdings Pty Ltd v The Commissioner of Taxation [1983] 1 NSWLR 1, 44 ALR 607
- Browne v Dunn (1893) 6 R 67
- Khamis v R [2010] NSWCCA 179; 203 A Crim R 121
- Mehajer v R [2014] NSWCCA 167; 244 A Crim R 15
- MWJ v R (2005) 80 ALJR 329; [2005] HCA 74