Sentence: Charge 1, RRO to be released forthwith; Charge, 2 year CCO.
[2]
For the Commonwealth Director of Public Prosecutions
[3]
Antonio Dattilo, you have pleaded guilty to one charge of dishonestly obtaining a financial advantage by deception and one charge of attempting to do so. As a result of the deception that is the subject of Charge 1, you obtained the sum of $95,000 by way of refund from the Australian Tax Office. Charge 2 resulted from your attempt to repeat the process. The refund was not paid to you.
The deception and attempted deception occurred in the context of financial stress resulting from a number of factors including failed businesses and complicated family-connected corporate entities.
The details of all those factors are not necessary to explain the charges, but for completeness I shall append the prosecution opening to these sentencing remarks. Otherwise, it is sufficient to describe the offending as follows: between 22 February and 28 April 2010, you claimed from the Australian Tax Office a GST refund of $95,000. You claimed that Stefanol Pty Ltd, a business in which you were involved, was entitled to the refund. You falsely claimed that Stefanol had paid that GST to another corporate entity in which you were involved and you supplied a false invoice and a false receipt to that effect. On this basis the refund was paid to you. That is Charge 1.
Between 10 May and 26 August 2010 you attempted to obtain a further $82,500 refund from the Australian Tax Office, again by deceptively claiming that Stefanol was entitled to a refund with respect to GST, that you falsely claimed Stefanol had paid to the same corporate entity as before. Again you provided false documents in support of your claim. That is Charge 2. The refund was never paid because the ATO commenced an audit.
As part of the audit, you participated in a compulsory interview with Australian Tax Office officers in which you gave various explanations for the justification for the refund.
As a result of the audit, the ATO raised tax assessments against Stefanol on the basis that it was not carrying out any business and was not entitled to the GST refund claimed.
An investigation then took place and despite searches of documents seized from your home, there was nothing found to indicate the transactions you claimed had occurred and nothing to indicate GST had been paid in the sums claimed.
The detailed chronology supplied by the prosecution discloses that you were not served with the charges until 17 June 2014, almost four years after the audit began. This was conceded by the prosecution as being an inordinately long delay which I take into account.
You maintained a plea of not guilty until very recently, just before your trial was due to begin. Initially a five day trial was fixed for October 2015 but this was vacated when you produced further material requiring a longer trial and consequently a new trial date was not available until 8 August 2016.
Meanwhile you changed solicitors and following your receipt of legal advice, the case was resolved. Your plea of guilty was entered on 9 August.
The plea was a late plea but still has utilitarian value in avoiding a trial and evidence having to be given. That gives rise to a discount on your sentence.
Particularly in the circumstances of this case, to which I will come shortly, the plea also demonstrates some insight into your offending. That is an important aspect of the assessment of your prospects for rehabilitation as is the remorse which you have expressed.
Recently you were seen by the forensic psychologist Ms Carla Lechner who assessed you as having an adjustment disorder with depression and anxiety related to your financial situation and this court case.
Her opinion is that you have features of self-aggrandisement with narcissistic tendencies and that you tend to externalise blame for problems and also to express your distress through physical symptoms.
There is medical evidence to support that in the form of hospital records confirming your attendance after being found by the police wandering along a highway in a confused and distressed state, unable to identify yourself, in 2009.
Unfortunately that experience, serious as it was, did not prompt you to seek psychological treatment and it is only now that you have decided to do that.
You were born in Italy where you completed school and worked at various occupations for several years. You married and your son born of the marriage is now aged 20, living with his mother in Italy.
In 1998 you were sent to Melbourne to work with the Australian Chamber of Commerce and here you commenced a relationship with Patricia, whom you married in 2002. You have two children aged 13 and 11.
In Melbourne you established various businesses one of which was successful for some years. You bought a number of residential properties, at one stage, buying a five bedroom house into which you invited your wife's family to live.
In time the extended family became divided over disputed business and property transactions, producing the family and financial stress that you say lay behind the two offences.
Your explanation is that the false invoices represented the reconciliation of debts between various companies but no money was paid and therefore there was no GST refund payable.
The funds that were paid to you by the ATO following your false claim were spent on such commitments as mortgage and car payments, suggesting that you were trying to keep your head above water in efforts to preserve the lifestyle you and the family had established.
In that sense, the motivation was not one of need, but should be classified as greed when observed objectively as the dishonest taking of funds from the public purse. It was not greed in the sense of maintaining a lavish lifestyle as is evident from some otherwise comparable cases. I note that none of the money has been repaid.
Presently you are living in a rented house with your wife and two children and your mother-in-law. She is aged 81 and requires constant care owing to a number of health problems. You are her full time carer although you also set aside time to assist with some charitable organisations. Your wife works part time in a clothing shop.
Your 13 old son has been diagnosed with developmental difficulties and he requires additional support at school. He and his sister attend independent schools and the fees are paid by your family in Italy.
Clearly there is a need for general deterrence to be reflected by the penalties imposed in cases such as this, where the public purse is defrauded or where there has been an attempt to do so.
The maximum penalty for each of the charges is 10 years' imprisonment or a fine of $66,000 or both.
Specific deterrence also has a role to play in your case given that you have a prior conviction for dishonesty and that your insight may still be reduced by reason of the psychological profile described by Ms Lechner and that the problems connected with it have not yet been addressed.
While your focus on charitable works as described by your referees is commendable, the suggested expectation of a salaried position in Melbourne for one of these institutions does not seem grounded in reality, and placing faith in it might suggest your vulnerability, flowing from those personality tendencies identified by Ms Lechner.
Furthermore, as I have said, you have a prior conviction for a similar offence, and the experience of being dealt with by way of a fine did not deter you from offending again.
The need for a severe sentence is lessoned by the mitigating factors I have set out including your remorse, your plea, your family circumstances to some extent as well as the support and stability inherent in your family situation, and finally, delay.
It was submitted on behalf of the prosecution that while delay is not uncommon in these cases where investigations can be extensive, the delay before charges were filed was unacceptable and should be taken into account to some extent in reducing the sentence.
However the investigation became more complex resulting in a long delay for the trial and this was through your own doing by producing material which had the effect of obfuscating the central issue in the case.
I was provided with a number of cases said to be comparable, subject to the inherent difficulties in comparing cases that are only similar in some respects.
They all feature deliberate and intentional dishonesty as does this case, and they all resulted in prison terms of which the offender was required to serve a portion. Your case can be distinguished by the long delay and to some degree, the smaller amount of money defrauded. It follows that imprisonment to be served immediately can be avoided in this case.
Because there are two separate charges representing two occasions when you set about defrauding the tax office, there should be a degree of cumulation and this is possible when two different dispositions are imposed such as I will do here.
The prosecution submission as to sentence was for a Recognisance Release Order for Charge 1 and a Community Correction Order for Charge 2.
It was urged upon me by your counsel that for both charges, I should impose a term of imprisonment but that you should be released forthwith on a Recognisance Release Order.
Ms Price, on your behalf, submitted that a Community Correction Order was not necessary as you could manage the treatment of your mental health yourself and you already participate in community work.
I have already commented on your failure previously to seek treatment and I take the view that it does need monitoring. As for unpaid community work, this should be part of the punitive aspect of the order over and above that which you already perform on a private basis.
For Charge 1, I sentence you to a term of imprisonment of six months to be released forthwith on a Recognisance Release Order to be of good behaviour for two years. I fix a recognisance in the sum of $1000 which is not a sum to be paid immediately but which could be forfeited on some future date if you do not comply.
For Charge 2 I impose a Community Correction Order. You have been assessed as suitable for that. It is to commence today and to last for two years. You must perform 180 hours of unpaid community work over six months and you must be assessed and treated for any mental health issues.
You must go to the Werribee Corrections office at 87 Synnot Street, Werribee by 4 pm this Friday 4 November.
If you had pleaded not guilty to these charges, I would have imposed a Recognisance Release Order for 12 months to be released after serving 8 months with the same Community Correction Order for Charge 2.
You will be asked to sign those orders in a moment. Mr Dickie?
MR DICKIE: Yes, Your Honour. The Recognisance Release Order has just been drafted now. In terms of the reparation order, there was brief correspondence with Your Honour's associate. Your Honour, there was no objection to that order being made. As I understand it, there is no need for a formal written order unless Your Honour requires one.
HER HONOUR: No.
MR DICKIE: If Your Honour was to simply state that reparation has been ordered in the sum of the $95,000 then that would suffice.
HER HONOUR: I will make that order, that reparation is ordered to be paid in the sum of $95,000. I think you had already said there was no objection to that?
MS PRICE: That is right.
HER HONOUR: Yes, thank you. Do you want to look at those orders first on the way through, Ms Price?
MS PRICE: I will glance at them along the way. If I could step back and explain the order and facilitate his signature.
HER HONOUR: Certainly.
MR DICKIE: There is a draft order, Your Honour, that has been prepared. So if I can hand that to Your Honour's associate and Ms Price could also explain that to Mr Dattilo.
HER HONOUR: Yes, thank you. Now Mr Dattilo, what I have got in front of me now is the Recognisance Release Order and the legislation requires me to explain briefly to you, that this is an order that can be altered or varied according to whether certain circumstances exist. If there is any need for that, I am sure
[4]
Ms Price will explain that further. I will sign that now.
[5]
MR DICKIE: Also, Your Honour, implicitly, if there is a breach of the order,
[6]
Mr Dattilo can be brought back before the court and dealt with in relation to that.
[7]
HER HONOUR: Well that applies to both orders, does it not?
MR DICKIE: It does apply to both orders, Your Honour.
HER HONOUR: I will add that as well.
MR DICKIE: Yes, thank you, Your Honour, but no doubt Ms Price will explain that also.
HER HONOUR: Thank you. Mr Dattilo, you heard me mention before the possibility of non-compliance. If there is a breach of either of those orders by non-compliance or by reoffending, you would be brought back to court before me to be resentenced. Everything is signed now?
MS PRICE: Yes, he has signed both of those orders.
HER HONOUR: Thank you, Ms Price. Thank you, Mr Dickie.
Between 22 February and 28 April 2010 the accused, Antonio Dattilo, dishonestly obtained from the Australian Taxation Office ("ATO") a $95,000 Goods and Services Tax ("GST") refund by deceptively claiming that Stefanel Pty Ltd ("Stefanel") was entitled to the refund with respect to GST that the accused falsely claimed Stefanel had paid to RED Corporation as Trustee for the Rose Fato Family Trust (charge 1).
Between 10 May and 26 August 2010 the accused dishonestly attempted to obtain an additional $82,500 GST refund from the ATO, again by deceptively claiming that Stefanel was entitled to a refund with respect to GST that he falsely claimed Stefanel had paid to RED Corporation as Trustee for the Rose Fato Family Trust (charge 2).
[10]
The accused was born on 26 March 1973. He was aged between 36 and 37 during the offending and is now 43 years old. He immigrated to Australia in 1998. He is married to Patricia Dattilo (nee Fato). One of Ms Dattilo's sisters is Rose Fato.
From 1998 the accused was involved in a number of corporate entities and businesses, including Stefanel, RED Corporation Pty Ltd ("RED Corporation") and RED Corporation as Trustee for the Rose Fato Family Trust.
[11]
The accused was sole director of Stefanel from its incorporation on 7 June 2007 until 13 March 2010. From 13 March 2010 to 12 September 2011 Patricia Dattilo was sole director. From 12 September 2011 the accused returned as sole director.[1] Stefanel's main business activity was listed as "retail clothing sales".
From 14 June 2007 Stefanel was registered with the ATO for GST purposes, electing to report quarterly on a cash accounting basis.[2]
[12]
RED Corporation was registered as a corporation from 2003, later obtaining an ABN.[3] Its code description on the Australian Business Register was "Non-Residential Building Construction". It was registered for GST from 1 March 2008 to 21 April 2012.
From 26 November 2003 Rose Fato and the accused were listed as directors of RED Corporation. From 6 December 2005 to 18 November 2009 only Ms Fato was listed. From 19 November 2009 to 7 July 2010 Ms Fato and the accused were listed. From 8 July 2010 to 21 April 2012 only the accused was listed as director. RED Corporation had 12 shares, all beneficially held by Rose Fato.
9. The Trustee for Rose Fato Family Trust ("the trust") was a discretionary trust, the trustee of which was RED Corporation Pty Ltd. The trust was established by the accused around the same time as RED Corporation. Rose Fato understood the company, and the trust, were set up by the accused for Ms Fato as they might be useful down the track to buy property or for some other purpose.[4]
From 2003 the trust was registered on the Australian Business Register ("ABR") with ABN 76145793751 and registered for GST purposes. On the ABR its main business was described as "Commercial Property Investment".[5]
In 2004 Ms Fato became aware that the accused might have been conducting business using the name RED Corporation.[6] In 2008 the accused asked Rose Fato if he could use the company to buy a residential property at 24 Essex Road, Surrey Hills. Ms Fato agreed to this. She understood that, beyond purchasing the property in late 2008, RED Corporation was not trading.[7] Following this, there was a falling out between Ms Fato and the accused.[8]
Between about 1 and 28 July 2010, without her knowledge or consent, the accused arranged for Ms Fato to cease being listed as a director of RED Corporation and to retire RED Corporation as trustee for the Rose Fato Family Trust, appointing Rose Fato in place as trustee.[9]
[13]
A person or corporation conducting business and registered for GST generally has to pay 10% GST on the supply of goods and services ("taxable supplies").[10]
A person or corporation who has purchased taxable supplies in the course of conducting their business that has included GST can claim back an Input Tax Credit ("ITC") on creditable acquisitions. The ITC, or GST refund, is an amount that can be claimed back from the ATO. It is generally claimed pursuant to a Business Activity Statement ("BAS") lodged with the ATO, often quarterly.
The GST refund can only be claimed if the thing was acquired for a creditable purpose, had GST included in the purchase price and consideration was provided or to be provided. The difference between the amount of GST collected by an entity on taxable supplies and the amount of GST paid by an entity on creditable acquisitions is the amount of GST the entity either owes the ATO or can claim back from ATO for the respective reporting period.
[14]
Charge 1 relates to a BAS claim lodged on behalf of Stefanel on 22 March 2010.
On 22 February 2010 the accused sent an email to Luciano Lattanzio of Lattanzio & Associates, an accounting and taxation services business, containing an accounting file for Stefanel for the BAS quarter ending 31 December 2009. The accused had approached Lattanzio & Associates a week earlier to assist with his financial affairs.
18. The accused asked Mr Lattanzio to prepare the BAS for Stefanel. He told Mr Lattanzio that Stefanel expected a considerable refund as a cash transaction had been registered between an interrelated entity.[11] He indicated that Stefanel had capital purchases of $160.00 and non-capital purchases of $1,047,381.10.
19. As a result of the instructions provided by the accused, on 22 March 2010 Mr Lattanzio lodged Stefanel's BAS electronically with the ATO, claiming a refund.
On 26 March 2010 the ATO selected the Stefanel BAS for a pre-release audit and unsuccessfully attempted to contact the accused.[12]
On 12 April 2010 the accused contacted the ATO regarding his claimed refund.[13] On 13 April 2010 he spoke with an ATO compliance officer, when he was advised that a pre-release refund review was being conducted on the relevant BAS that required provision of documents to substantiate his claim.[14] The accused said the total GST amount owing to Stefanel was about $95,000. He said the amount owing on the invoice was offset by a debt owed to him by the supplier. When asked how the ATO could be satisfied it was a genuine transaction, he said the supplier would be reporting on the sale on its activity statement.
The accused faxed to the ATO on Stefanel letterhead a GST Detail Report and, along with other documents, an invoice dated 30 June 2007 purportedly from "REDCORP" ABN 76 145 793 751 to Stefanel.[15] The invoice was for "Brokerage fees and costs associated with the Licence of the clothing brand Stefanel in relation to the shop 235 located at the Melbourne Central Shopping Centre". The total of the invoice was for $1,045,000 inclusive of $95,000 GST. The invoice was marked as "Paid/Adjusted in Full" on 10 December 2009.
About 1.51pm on 19 April 2010 an ATO compliance officer contacted the accused, asking him for proof of the transaction.[16] The accused said payment had been made on 10 December 2009, but it was a cash payment and there was no bank statement. He said he could look for the receipt and fax it to the ATO.
Several minutes later, about 1.58pm, the accused sent an email to Domenic Troiano, accountant.[17] The accused had engaged Mr Troiano from March 2010 to undertake tax services on his behalf. In his email, the accused asked Mr Troiano to find the Tax File Number ("TFN") for "Redcorp Rose Fato Family Trust ABN 76 145 793 751", to register the trust with the ATO, to let the accused know what BAS "we need to do" for the trust and, as it was his sister-in-law's trust, to put her down as contact person and not the accused. Mr Troiano responded with advice that the ATO's records were that income tax returns were "not necessary" for the financial years ending 2006 to 2009, with no transactions recorded.
At 2.25pm the accused emailed Mr Troiano and confirmed the returns were all nil, and would be for 2009. However, he advised that the 2010 financial year would show activities as "we are offsetting and adjusting a couple of business transaction with my sister in law." He advised Mr Troiano that in December 2009 the trust had received $1,045,000 inclusive of $95,000 GST. He said this needed to be repaid to the ATO but he was unsure if "we need to the do the BAS now" or wait until the end of the financial year.[18]
At 2.33pm the accused sent an email to Mr Troiano attaching a REDCORP invoice dated 30 June 2007 and a receipt dated 10 December 2009.[19]
About 3.29pm the accused sent the ATO a receipt from REDCORP to Stefanel in relation to the purported payment of $1,045,000.00 on 10 December 2009.[20] The accused later told the ATO officer the amount on the main invoice had been offset by a debt owing to him from the other company.
On 21 April 2010 the accused contacted the ATO requesting that the compliance officer contact the accused's tax agent, Domenic Troiano, so Mr Troiano could confirm the invoice in question had been paid.[21] On that date, after being contacted by the ATO by email, Mr Troiano sent the ATO copies of the invoice dated 30 June 2007 and receipt dated 10 December 2009.[22]
On 21 June 2010, in response to an email from Mr Troiano about related entities, the accused indicated to Mr Troiano that the trust was related to his sister-in-law and had nothing to do with him.[23]
Rose Fato was not aware of any business being conducted on behalf of the trust, including the GST cost claimed to have been incurred by the trust and the relevant invoice and receipt.[24] The GST had not been paid by Stefanel to the trustee. The accused knew this, and knew that Stefanel was not entitled to the applicable GST refund.
As a result of his deception, the ATO determined that the refund was payable.[25] On 28 April 2010 the ATO deposited $95,465.59 into Stefanel's Bendigo Bank account.[26] On the same day, $90,000 was transferred out of the account, described as "Rep Directors" (or Director's repayments).
[15]
On 10 May 2010 the accused sent Luciano Lattanzio an email containing an accounting file relating to Stefanel for the BAS quarter ending 31 March 2010 and requested preparation of the Stefanel BAS return.[27] The information included capital purchases of $526.00 and non-capital purchases totalling $1,050,504.85.
On 14 May 2010 Mr Lattanzio lodged the BAS but in error only used details for the month of March as provided by the accused, which did not include the relevant non-capital purchases. This lodgement generated a refund of only $234.00 to Stefanel, which was electronically deposited into Stefanel's bank account on 14 May 2010.
On 24 May 2010 an email was sent to Mr Lattanzio from an account used by the accused (but addressed from Patricia Dattilo, the accused's wife) questioning why the refund was only $234.00 when the expected refund was $82,548.27.
Discovering his earlier mistake, on 25 May 2010 Mr Lattanzio lodged a revised BAS with the ATO, this time including the non-capital purchases totalling $1,050,504.85.
The BAS was selected for ATO audit.[28] After requests from ATO auditors, on 26 August 2010 the accused produced, amongst other documents, an invoice purportedly from REDCORP to Stefanel dated 10 July 2009. The invoice was for "Brokerage fees and all costs associated with the licence of the Clothing Brand Stefanel in relation to the shop in Flinders Lane". The invoice was for $1,045,000, inclusive of $95,000 GST. The invoice was marked as being paid on 30 January 2010.
The accused also produced a receipt dated 30 January 2010, purporting to be from REDCORP to Stefanel for the payment of $1,045,000, including $95,000 GST.
The GST had not been paid by Stefanel to the trustee. The accused knew this, and knew Stefanel was not entitled to the applicable GST refund. In this instance, the ATO did not provide a refund. If the GST claim had been successful, the accused would have fraudulently obtained an $82,548.27 refund.
[16]
Between 10 September 2010 and 13 October 2010 an ATO auditor attempted unsuccessfully to obtain further information from the accused.[29]
On 15 February 2011 the accused participated in a compulsory interview with ATO officers, when he said the following:[30]
[17]
Stefanel claimed the expenses from RED Corporation because RED Corporation was involved in the establishment of Stefanel in Australia by way of setting up and opening two shops.[31]
2. In terms of who at RED Corporation did the brokering for Stefanel, it was the director of the company, but the director of RED Corporation could not be named because of an intervention order.[32]
[18]
Calcorp was owned by RED Corp, which was the shareholder of Calcorp.[33]
[19]
He could not recall who made up the invoices.[34] He did not recall who provided the tax invoices to him.[35]
2. The GST-free component was basically a director's loan. It was money outstanding. His mother had paid this money to the company. Calcorp had not paid it. This was invoiced to the parent company of Calcorp, which managed Calcorp in the past year because the director of Calcorp and this other company had decided to wind up Calcorp.[36]
As a result of the audit, the ATO raised tax assessments against Stefanel on the basis that it was not carrying on an enterprise and was not entitled to the GST refund claimed. Administrative penalties were also imposed.[37] These amounts remain outstanding.
On 4 February 2013 the matters were assigned for investigation.[38] During the ATO investigation, documents were analysed and search warrants were executed on banks and on items that had been seized by police on 24 July 2013 from the accused's home at 20 Seychelles Drive Point Cook.[39] Seized electronic items were examined and relevant information identified.[40] Despite a large number of documents being found regarding financial transactions of the accused and entities linked to him, none revealed any transactions akin to the million-dollar transactions claimed and none indicated GST had been paid in the sums claimed.
Stefanel did operate a shop at Melbourne Central. However, the description of the GST payable with respect to brokerage fees and costs associated with the licence of the clothing brand regarding the Melbourne Central shop is inconsistent with the more limited costs involved. There was also no connection between the shop and RED Corporation as trustee for Rose Fato Family Trust.[41]
On 17 June 2014 the accused was served with a charge and summons. On 7 November 2014 he was committed by way of straight hand-up brief committal, entering pleas of not guilty to the charges. On 9 August 2016, when his re-listed County Court trial was due to commence, the accused was arraigned and pleaded guilty to the two charges.[43]
[21]
The maximum penalty for each charge of obtaining a financial advantage by deception is imprisonment for 10 years and/or a $66,000 fine.[44]
[22]
[1] D Coignet 285 (docs at 295) / A Greenwood 328 (docs at 332) / N Wiatrowski 782 (docs at 789)
[23]
[3] D Coignet 285 (docs at 292) / Nancy Wiatrowski 782 (docs at 785) / RED Corporation was registered with ABN 73107185320 from 1 March 2008
[24]
[4] R Fato 301 at [7] / J Troiano 660 at [31]-[32]
[15] J Thomas 637 at [10] / Fax at 645 / Invoice at 647 (although described on the documents as "REDCORP", the ABN quoted was for RED Corporation as trustee for the Rose Fato Family Trust)
[42] On 3 October 2013 the accused was invited to be formally interviewed (D Parker 399 at [24])
[46]
[43] See the Chronology of Relevant Events for more details of the history of proceedings
[47]
[44]Criminal Code s.134.2(1) / Pursuant to s.4B of the Crimes Act 1914, the Court may impose instead of or in addition to imprisonment, a pecuniary penalty of $66,000 (a penalty unit being $110 during the period between 7 April 1997 and 27 December 2012)