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[2009] ACTSC 45
Supreme Court of the ACT
2009-04-28
Higgins CJ
Original judgment source is linked above.
1. On each of counts 1 and 2, 4 - 16 you are convicted and sentenced to nine months imprisonment. Those sentences are to be concurrent and you are to be released forthwith upon giving security in the sum of $1,000 by recognisance that you will be of good behaviour for a period of three years from today and within 18 months perform 300 hours of community service.
2. On each of matters CC07/40104 and CC07/40413 you are convicted and sentenced to three months imprisonment. Those sentences are to be concurrent and to be suspended forthwith upon the terms of a good behaviour order in the same terms as the recognizance release order imposed above.
1. The offender, Edward James Ball, pleaded guilty to 15 counts alleging the provision of corrupt benefits to Neil David Vest as to six counts, and to Martin John Batchelor as to nine counts, contrary to s 142.1(1) of the Criminal Code (Cth) and to two counts alleging the production of a dishonest accounting document, being entries on a cheque register falsely describing cheques dated 19 February 2004 and 16 April 2004 to "Allens" as being for "stock", contrary to s 100 (ACT) as to the first cheque and contrary to s 350(3) of the Criminal Code (ACT) as to the second cheque.
A. Outline
1. EDWARD JAMES (Ted) BALL, the prisoner now before the Court, was at all material times the ACT State Manager of National 1. During the period of the offences National 1 was a publicly listed company which operated primarily as a stationary supplier to business and government. National 1 marketed itself as a "one stop supplier" in that National 1 would source and on-sell any product a customer requested, but at a profit percentage mark up.
2. On 15 separate occasions between April 2002 and April 2004 BALL either provided or caused to be provided corrupting benefits to two Commonwealth public officials, NEIL DAVID VEST and MARTIN JOHN BATCHELOR. Specifically, BALL dishonestly caused benefits to be provided to them in the form of diverse goods and services and which would tend to influence them in the exercise of their duties as public officials.
3. In respect of this offending, BALL has pleaded guilty to 15 counts of Giving a Corrupting Benefit contrary to subsection 142.1(1) of the Commonwealth Criminal Code.
4. In addition, on two occasions BALL produced a "National 1 Office Products Cheque Register Form ACT" form which was false or misleading in a material particular in that the document purported to show payments made in respect of stock, when the cheques were payable in respect of items purchased for the personal use of BALL.
5. In respect of this offending, BALL has also pleaded guilty to one count of False Accounting contrary to section 100 of the Crimes Act 1900 (ACT) and one count of False Accounting contrary to subsection 350(3) of the ACT Criminal Code.
B. Background to National 1
6. BALL was transferred from National 1's head office in Perth to Canberra as the ACT State Manager in May 2001. BALL's duties included managing staff, monitoring sales and budgets, including expenditure to grow sales and improve gross profits, in addition to directly managing a number of larger clients. BALL was paid a base salary of $70,000 and a $15,000 car allowance. He was also paid a commission on the percentage of sales that he was personally responsible for, based on the gross profit percentage to National 1, as well as receiving a commission on the overall sales in the ACT. BALL reported directly to a National Sales Manager, but was generally accountable for all facets of the ACT branch of National 1. BALL was required by National 1 to approve all expenditure for the ACT branch; in addition, all cheques issued by the National 1 ACT branch were required to be signed by BALL and countersigned by another nominated employee. BALL resigned from National 1 in September 2004.
7. [not pursued by the Crown]
8. NEIL DAVID VEST was at all material times the Purchasing Manager for the Australian Agency for International Development ('AusAID'). MARTIN JOHN BATCHELOR was at all material times the Purchasing Manager for the Therapeutic Goods Administration ('TGA') of the Commonwealth Department of Health and Ageing.
9. Gavin Pierce WATSON was one of BALL's subordinates at National 1. WATSON was originally employed by National 1 in May 2001 as a sales representative, but after approximately 12 months WATSON was promoted to Sales Manager. As a sales representative WATSON was responsible for maintaining and expanding the client spend and developing new business; as Sales Manager, WATSON added management responsibilities to his usual duties. WATSON too was paid a base salary and car allowance, together with a commission on the percentage of sales that he was personally responsible for. At all times, WATSON was answerable directly to BALL, and was required on occasion to countersign National 1 cheques for BALL. WATSON resigned from National 1 in June 2005.
10. On 20 December 2006, the Commonwealth Director of Public Prosecutions gave Gavin Pierce WATSON an undertaking pursuant to subsection 9(6) of the Director of Public Prosecutions Act 1983 (Cth) that any evidence he gave in relation to proceedings against BALL, VEST and BATCHELOR, or any of them, for offences against section 142.1(1) and (3) of the Commonwealth Criminal Code would not be used in evidence against him.
10A. On 29 January 2008, the acting ACT Director of Public Prosecutions gave Gavin Pierce WATSON an undertaking pursuant to subsection 9(7) of the Director of Public Prosecutions Act 1990 (ACT) that he would not be prosecuted in respect of any acts done or omissions made by him in respect of any involvement by him in connection with theft from National 1 Limited or fraudulent conduct towards National 1 Limited whilst employed in the ACT Branch of National 1 Limited, provided that he give evidence as and when called upon to do so in proceedings against BALL for offences against section 142.1(1) of the Commonwealth Criminal Code and/or for offences contrary to section 326 of the ACT Criminal Code.
3. The offender, however, gave notice that he disputed certain of the facts alleged.
4. The dispute was as to matters the offender alleged by reference to a statement he provided dated 16 May 2007.
STATEMENT
Name: Edward James Ball
Occupation: Branch Manager
Employer: Australian Pharmaceutical Industry
Work Address: 14 Tozer Street, West Kempsey, NSW 2440
Date: 18-5-07
Signed by Edward James Ball
Name of Witness Ben Aulich
5. On 17 April 2008 the Crown sought to address the issue raised by the offender, that is, that the dishonest scheme to influence Mr Vest and Mr Batchelor was one suggested to the offender by other employees of National 1 and approved by senior management.
6. The Crown called Mr Daniel Fogarty, the Managing Director of National 1 between February 2004 and July 2005. He deposed that there was no authority for National 1 funds to be spent on gifts to clients or their employees nor to provide items for the personal use of National 1 employees such as Mr Ball.
7. He became aware, he said, of certain improprieties in relation to the ACT Branch around 29 September 2004 from information reported to him by Ms Caron Cobarg, the financial controller.
8. Under cross-examination by Mr Pappas for the offender, he advised that Mr Warren Arbuckle had been his predecessor as managing director. There was, effectively, a takeover of management by Mr Fogarty's father-in-law. Not only was Mr Arbuckle replaced, Mr Mark Manderson was also appointed finance director/group managing director. Mr Paul Ballardin was the previous group general manager. Mr Manderson effectively replaced Mr John Burness. Also replaced was Mr John Date, former chief operating officer. The latter had responsibility for State/Territory managers and was himself responsible to Mr Arbuckle.
9. Mr Fogarty, on taking office, had met with State and Territory managers to impress on them the need to improve the company's performance and ethical and professional standards. One concern he had was that stock, reported as present, was not in fact able to be located.
10. He did not agree that these irregularities suggested to him that anything deceitful had been occurring but he did agree that, whether due to carelessness or not, there was a lack of financial and business control. Mr Manderson had conveyed to State and Territory managers that, in future, "things would be different".
11. Mr Fogarty later became aware that improper benefits had been provided to purchasing officers employed by the Commonwealth. He encouraged Mr Gavin Watson to "cooperate" with the authorities after the offender had left the employ of National 1. He became aware, though he was not sure how, that Mr John Date had been aware of the corrupt benefits practice before he, Mr Fogarty, took over management. Mr Date had suggested to him, he said, that it was the offender who had coerced him, Mr Date, into participating in the corrupt practices. That allegation was, it should be noted, contested by the offender.
12. It was suggested to Mr Fogarty that fraudulent transactions continued after the offender left the company. He denied that.
13. Mr Fogarty, as a witness, was somewhat difficult to extract information from. Nevertheless, his evidence supported the contention that, before he assumed office, there had been a scheme in place to confer gifts on Messrs Vest and Batchelor and that scheme was not one in which the offender was the sole participant amongst employees of National 1.
14. Mr Warren Arbuckle was next called. He had been, until January 2004, managing director of National 1.
15. He denied any knowledge, before 30 March 2008, of the provision of gifts out of company funds for benefits such as those conferred on Messrs Vest and Batchelor. Equally, he asserted, he was, before then, unaware that these benefits were concealed in invoices to the latter's employers.
16. However, Mr Arbuckle had been recorded in police surveillance tapes conversing with the offender on 8 September 2005. In that conversation, Mr Arbuckle appeared to acknowledge that "we", that is, he and Mr Ball, "did a few things with a couple of Federal Government departments that wasn't quite right".
17. He conceded, though he had earlier in his evidence denied it, that he had said to the offender, "The less people you involve the better." That seemed to betray knowledge, at least, of the corrupt practices. He acknowledged that Mr John Date may have advised him that AusAID and Therapeutic Goods Administration were potential clients for the newly established ACT branch. In any event, he accepted that the company was keen to attract government clients.
18. Mr John Date was next called. He had been, as noted, the national sales and marketing manager of National 1, before becoming the Chief of Operations. He had at the relevant time, frequent, even daily contact with State managers, including the offender. He asserted that he was unaware of any impropriety during his tenure involving the offender save for a minor breach of company policy relating to the use of a corporate credit card.
19. He acknowledged that the offender had, after the latter was charged with the current offences, suggested to him that he and members of the board of directors were aware of and approved of the corrupt transactions. He denied that he was or, so far as he knew, any members of the board were in fact aware of those transactions.
20. Mr Date was, in cross-examination, shown an intercepted telephone call transcript of 9 September 2005 in which he had apparently participated. He purported to have no recollection of the conversation even after reading the transcript of it. However, he did acknowledge its authenticity. He was aware, he said, of the purchase of a mountain bike through National 1 but denied any prior knowledge that it was a corrupt gift to a public official. Nevertheless, he had to agree that he had said to the offender in the course of that intercepted phone conversation concerning the "recipients" of benefits, being Commonwealth officials, ... "I would imagine that the ramifications for you are miniscule because you could quite rightly get up there and say the board were fully aware of what the actions were".
21. Mr Date suggested that in that conversation he was referring to the credit card irregularities previously referred to but I found that contention particularly unpersuasive.
22. It seems to me likely that Mr Date believed that Messrs Arbuckle and Ballardin were well aware of the offender's practices in bribing Commonwealth officials and had covertly approved of it.
23. When the matter resumed on 2 February 2009, Ms Baker-Goldsmith fairly and frankly observed:
... Given the way the evidence has fallen it's become clear that the Crown is not in a position to submit that no-one in middle or upper management of National 1 had no knowledge of Mr Ball's actions in providing gifts to employees of clients of National 1 and, accordingly, no submissions will be made by the Crown in that regard.
The Crown also intends to make no submissions as to from where the offending scheme originated.
24. The offender's criminal history was then tendered. It revealed, relevantly, convictions for "stealing" in 1979 and 1989. Fines were imposed. I have no details of the circumstances surrounding those convictions.
25. A pre-sentence report was tendered. It reported the offender's assertion which, in the circumstances I have to accept, at least on the balance of probabilities, that his criminal conduct was engaged in to continue the business of his employer with the knowledge and approval of senior management.
26. Apart from this episode, the reporter could identify no apparent lifestyle difficulties or "obvious criminogenic factors". He assessed the offender as being at low risk of re-offending. He had expressed remorse for his actions. That remorse would have been hollow had the offender's assertions of management approval been accepted as false.
27. The offender gave sworn evidence. He stated that on taking up his position as ACT Manager of National 1 he was told by Messrs Watson and Cook of a scheme for obtaining and retaining government business. This was due to those men having a prior association with Messrs Batchelor and Vest. The offender then consulted Mr Ballardin who approved of him going ahead with that scheme to obtain and then retain business by "looking after" those officials. The goods made available to Messrs Vest and Batchelor were, as the Crown alleged, misdescribed as "stock" of National 1 so as to conceal the true nature of the transactions.
28. The offender had not been aware at the time, he said, of the criminality of this conduct, though he was aware that it wasn't "above board". He did realise that it was serious when he was approached by police. He cooperated fully and, indeed, provided details of the involvement of National 1 management in the scheme.
29. The scheme continued until Mr Fogarty and Mr Manderson took control of the company. They had become aware of prior irregularities, they said, and had said that they had to stop. Sometime thereafter the offender resigned having had a better offer of employment with another company.
30. The offender described some serious health problems he had suffered since he had left National 1, though they are currently under control and have not prevented his continued employment.
31. There were also tendered, on behalf of the offender, testimonials to the offender's good character generally and as an employee. He had, also, repaid to the company the cost of the goods he had obtained for himself.
32. It was, of course, the concealment of these latter transactions that was criminal, as reflected in the last two counts, rather than the transactions themselves. It had always been intended that the cost to the company would be reimbursed.
33. He also reimbursed the Department of Health and Ageing and AusAID the sum of $3,949.55 and $5,917.25 respectively being the additions to their invoices with National 1 to cover the corrupt benefits given to Messrs Batchelor and Vest. That was 50 per cent of the cost to the Commonwealth of the payment for these benefits in inflated invoices . The balance was provided by Messrs Batchelor and Vest.
34. It is clear, as Mr Pappas submitted, that, although the offender was aware that he was doing wrong and that it was a criminal scheme, he did not initiate it, nor did he corrupt the two officials involved. They had already been suborned by Messrs Watson and Cook who were the initiators of the scheme. Further, the offender was, at least, honest with National 1 and acted in its interests as he then saw them, with the concurrence of senior management. Indeed, it seems that after he left National 1, though, no doubt, not with the concurrence of Mr Fogarty, some further corrupt dealings occurred between Messrs Batchelor and Vest and Messrs Watson and Cook. Mr Watson, and, it seems, Mr Cook, procured immunity by implicating others, including the offender.
35. Of significance is the sentence handed down to each of Messrs Batchelor and Vest. Parity of sentencing is an important matter. So also is the offer of assistance to authorities. Whilst Messrs Batchelor and Vest could implicate the offender and Messrs Watson and Cook, they could not implicate senior management of National 1. Thus the offender's information in that respect was potentially valuable.
36. Against that, as Ms Baker-Goldsmith rightly submitted, offences of this kind are secretive, insidious, and, more often than not, committed by persons of apparent good character. General deterrence is, therefore, of more than usual importance.
37. The Crown submitted that the offender's contention that the corrupt scheme predated his involvement in it and had been approved by senior management should not be accepted as mitigatory.
38. In support of that contention, the Crown pointed to R v Pantano (1990) 49 A Crim R 328, at 338 per Smart AJ. However, his Honour's remarks there supported the view that the more senior the corrupt executive, the greater the degree of breach of trust and, where a subordinate has been involved, the greater the responsibility for that subordinate's corrupt behaviour at the behest of the more senior employee.
39. It is true that a subordinate cannot plead obedience to superior orders to excuse criminal behaviour. Such a circumstance does not lead to a discount on an otherwise appropriate sentence but that begs the question as to the appropriate sentence, compared with the superior, for such an employee.
40. Reference was made to R v Hodgson [2002] SASC 349; (2002) 84 SASR 168. There the offender claimed that, though, as Chief Financial Officer, he had directed false entries to be made so as to deceive the Stock Exchange and, thereby, investors generally, it was encouraged by senior management. The deception involved many millions of dollars and misleading investors and financiers. The scale of the current offending is very much less.
41. Mr Hodgson did claim that he had been pressured by a director to act as he did. Debelle J noted that but did not comment on that contention otherwise than to note that, though the sentencing judge had acted on that assertion, it was a vague, unsubstantiated and untested assertion. However, the case involved the offender's appeal against severity. Clearly, to reject the trial judge's acceptance of the contention that he had been pressured to commit the offences would have afforded no reason to reduce his sentence. That decision is of no guidance as to the reverse contention.
42. Similarly, as R v Boskovitz [1999] NSWCCA 437 illustrates, it is not an excuse for an offender that superiors requested or even ordered the offending conduct. That is, however, a different question from the relative level of criminal responsibility between the superiors and the subordinate. Traditionally, to instigate a scheme is more blameworthy than falling in line with another's scheme. Similarly, obeying coercive orders is less blameworthy than the giving of them. That does not mean that a deterrent response is not appropriate as Smart AJ noted in Pantano (supra).
43. It is appropriate, therefore, to have regard to the sentences imposed upon the only other two participants who have so far been brought to justice. The Crown's failure to prosecute those apparently more blameworthy than the offender removes any other source of guidance.
44. On 31 July 2007, Messrs Batchelor and Vest were sentenced by Justice Connolly. They had pleaded guilty to 9 and 10 counts respectively of receiving corrupt benefits as Commonwealth officers. His Honour noted, correctly with respect, the importance of widespread public confidence in the integrity of the public service. That particularly applies to the system of competitive tendering to provide services to government. He also acknowledged the fine line between, say, accepting a free lunch from prospective suppliers, a perfectly acceptable practice between private sector agencies, and being the recipient of benefits that might be seen as corrupting. Public officials need to be particularly cautious in that regard.
45. The amounts involved in this affair, of course, were relatively modest, $7,899.10 in respect of Mr Batchelor and $15,652.05 in the case of Mr Vest. Each had lost his career and reputation.
46. Nevertheless, it being granted that, under both ACT and Commonwealth legislation, imprisonment is a response of last resort, offences such as the present, as Connolly J noted, call for a prison sentence. His Honour then considered the issue as to how that sentence should be served. He rejected a submission that it should be fully suspended and then considered whether it should be only partly suspended or served by way of periodic detention.
47. Though his Honour did not consider it in their case, the option of community service was also available. The orders his Honour made were that the offenders each be sentenced to nine months imprisonment to be served by way of periodic detention.
48. It is difficult to place this offender's conduct, given his later but slightly lesser involvement in this corrupt scheme, at a level greater than that of Messrs Batchelor and Vest. It is true that they benefited personally at the expense of the Commonwealth. On the other hand National 1 benefited from the offender's conduct and so did he. I mean by that to refer, not merely to the bonus that might flow to him, but also his cultivation of business, albeit corruptly. That is a reprehensible method of conducting business and deserves condemnation. In the result, I cannot see any reason to depart from Justice Connolly's overall approach.
49. The only question is as to the way in which that sentence is to be served. The offender has been assessed as unsuitable for periodic detention both because of distance and work commitments. He is, however, assessed as suitable, subject to health concerns, for community service. I consider that to be an appropriate order coupled with a suspended sentence and good behaviour order.
51. On each of counts 1 and 2, 4 - 16 you are convicted and sentenced to nine months imprisonment. Those sentences are to be concurrent and you are to be released forthwith upon giving security in the sum of $1,000 by recognizance that you will be of good behaviour for a period of three years from this date and within 18 months perform 300 hours of community service. On each of matters CC07/40104 and CC07/40413 you are convicted and sentenced to three months imprisonment. Those sentences are to be concurrent and to be suspended forthwith upon the terms of a good behaviour order in the same terms as the recognizance release order imposed above.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Chief Justice Higgins.
Solicitor for the Crown: Commonwealth Director of Public Prosecutions
Solicitor for the Defendant: Ben Aulich & Associates
R
Ball [2009] ACTSC 45
(2002) 84 SASR 168