[2007] NSWCCA 204
Cheung v The Queen (2001) 209 CLR 1
[2011] VSCA 145
Filippou v The Queen (2015) 256 CLR 47
[2015] HCA 29
Fung v R [2018] NSWCCA 26
Hili and Jones v The Queen (2010) 242 CLR 520
Source
Original judgment source is linked above.
Catchwords
[2011] NSWCCA 33
Ansari v R (2007) 70 NSWLR 89[2007] NSWCCA 204
Cheung v The Queen (2001) 209 CLR 1[2011] VSCA 145
Filippou v The Queen (2015) 256 CLR 47[2015] HCA 29
Fung v R [2018] NSWCCA 26
Hili and Jones v The Queen (2010) 242 CLR 520[2005] HCA 25
Milne v The Queen (2014) 252 CLR 149[2015] NSWCCA 95
R v Krivosic (No. 7) [2022] NSWSC 507
R v Lin [2014] NSWCCA 254
R v Ly (2014) 241 A Crim R 192[2014] NSWCCA 78
R v Milne (2012) 219 A Crim R 237[2012] NSWCCA 24
R v Nguyen (2010) 204 A Crim R 246[2010] NSWCCA 226
Strbak v The Queen (2020) 267 CLR 494[2020] HCA 10
TAN and Ors v R (2011) 35 VR 109[2011] VSCA 427
Tepania v R (2018) 275 A Crim R 233[2018] NSWCCA 247
The Queen v Hillier (2007) 228 CLR 618[2007] HCA 13
The Queen v Olbrich (1999) 199 CLR 270[1999] HCA 54
The Queen v Pham (2015) 256 CLR 550[2015] HCA 39
Totaan v R [2022] NSWCCA 75
Weininger v The Queen (2003) 212 CLR 629
Ms G Wright SC (Crown)
Mr GA Brady SC
Mr A Williams (Offender)
Judgment (17 paragraphs)
[1]
R (2018) 275 A Crim R 233; [2018] NSWCCA 247
The Queen v Hillier (2007) 228 CLR 618; [2007] HCA 13
The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54
The Queen v Pham (2015) 256 CLR 550; [2015] HCA 39
Totaan v R [2022] NSWCCA 75
Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14
Texts Cited: ---
Category: Sentence
Parties: Regina (Crown)
Sevag Chalabian (Offender)
Representation: Counsel:
Ms T McDonald SC; Ms G Wright SC (Crown)
Mr GA Brady SC; Mr A Williams (Offender)
[2]
Solicitors:
Commonwealth Director of Public Prosecutions (Crown)
Streeton Lawyers (Offender)
File Number(s): 2018/216206
Publication restriction: ---
[3]
REMARKS ON SENTENCE
JOHNSON J: On 21 February 2022, the trial of the Offender, Sevag Chalabian, commenced before a jury upon an indictment which charged a single offence of money laundering contrary to s.400.3(1) Criminal Code (Cth). The charge against the Offender was that, between about 1 February 2017 and about 18 May 2017 at Sydney in the State of New South Wales and elsewhere, he did deal with money or property that was, and that he believed to be, proceeds of crime and at the time of dealing, the value of money or property was $1 million or more.
On 21 April 2022, the jury found the Offender guilty of the offence charged in the indictment.
The maximum penalty for this offence is imprisonment for 25 years and/or a fine up to 1,500 penalty units ($270,000.00).
The remaining task for the Court is to determine sentence having regard to the circumstances of the offence and of the Offender, and after consideration of all factors that bear upon sentencing for an offence under the law of the Commonwealth.
[4]
The Sentencing Hearing
Following the verdict of the jury, a sentencing hearing took place on 27 May 2022. At the conclusion of that hearing, the proceedings were adjourned until today for the passing of sentence. The Offender has remained on conditional bail during the sentencing phase of the case, as he did prior to and during the trial.
At the sentencing hearing, a Crown sentencing bundle (Sentence Exhibit A) was tendered. Tendered in the defence case on sentence was a folder containing subjective material including affidavits, letters and references (Sentence Exhibit 1) together with a Case Conference Certificate dated 25 June 2019 (Sentence Exhibit 2) and a chain of email communications concerning recovery of a sum of money (Sentence Exhibit 3).
No oral evidence was given at the sentencing hearing nor was any author of an affidavit, letter or reference required for cross-examination.
Both the Crown (Sentence Exhibit A) and the defence (Sentence MFI1) had furnished helpful written submissions on sentence in advance of the hearing on 27 May 2022. Counsel addressed on sentence on that day, with submissions extending to a number of topics, including fact finding on sentence with respect to the offence itself. In this regard, both parties referred in some detail to evidence adduced at the trial.
As a result of a number of issues raised in the course of submissions, principally with respect to the role of character and evidence of good character on sentence, the parties provided further written submissions to the Court. Further defence submissions dated 3 June 2022 (Sentence MFI2) and further Crown submissions dated 10 June 2022 (Sentence MFI3) addressed these issues.
[5]
Finding Facts on Sentence
It falls to me as the trial Judge to determine punishment and, for that purpose, to make findings of fact relevant to sentencing. My view of the facts must be consistent with the verdict of the jury and findings of fact I make against the Offender must be arrived at beyond reasonable doubt: R v Isaacs (1997) 41 NSWLR 374 at 377-378; Cheung v The Queen (2001) 209 CLR 1; [2001] HCA 67 at [13]-[14].
The jury's verdict decided the issues joined by the Offender's plea to the indictment, namely proof beyond reasonable of the physical and fault elements of the offence charged. In finding facts for the purpose of sentence, the Court should have regard to the totality of the evidence adduced at the trial, both oral and documentary, and the interaction between the oral and documentary evidence which is of some significance for the purpose of fact finding in this case. The Crown case involved a combination of direct and circumstantial evidence. It is important that the evidence be considered as a whole and not piecemeal: The Queen v Hillier (2007) 228 CLR 618; [2007] HCA 13 at [48].
In finding facts on sentence, the Court is not required to take the view most favourable to the Offender. However, the Court may not take facts into account on sentence, in a way that is adverse to the interests of the Offender, unless those facts have been established beyond reasonable doubt. On the other hand, if there are matters which the Offender relies upon in mitigation of penalty, it is enough if those matters are proved by the Offender on the balance of probabilities: The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [27]-[28].
A sentencing Judge must do his or her best to find the facts which determine the nature and gravity of the offending, including the facts which inform an offender's moral culpability. However, it may not be possible for the Judge to ascertain everything which is relevant, especially where an offender (as here) chooses not to give evidence at trial or on sentence: Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29 at [70]. When sentencing an offender where there is a dispute as to the facts of the offence, the Court should not draw an adverse inference by reason of an offender's failure to give evidence save in rare and exceptional circumstances which do not apply to the present case: Strbak v The Queen (2020) 267 CLR 494; [2020] HCA 10 at [10].
[6]
Sentencing for Offences Under s.400.3(1) Criminal Code (Cth)
Before turning to findings of fact for the purpose of sentence, it is appropriate to place in context the offence for which the Offender was found guilty by the jury. Part 10.2 of the Criminal Code (Cth) creates a graduated series of offences under the general description "money laundering" which increase in gravity depending on the value of the money or property and an offender's state of mind: R v Ly (2014) 241 A Crim R 192; [2014] NSWCCA 78 at [86]. The higher the state of knowledge and amount of money, the more serious the offence: R v Ly at [86]; Ansari v R (2007) 70 NSWLR 89; [2007] NSWCCA 204 at [122].
Section 400.3(1) involves the intentional dealing with at least $1 million. An essential element is that an offender believes the money to be the proceeds of crime at the time he deals with it. Recklessness is not sufficient. In these circumstances, the offence committed by the Offender was the most serious offence in Part 10.2 of the Criminal Code (Cth) at the time of the commission of the offence in 2017: Milne v The Queen (2014) 252 CLR 149; [2014] HCA 4 at [38]; Ansari v R at [122].
It has been recognised that offences under Part 10.2 apply to a large range of activities (Oliver v R [2020] NSWCCA 26 at [29]) and that each case will necessarily turn on its own facts (R v Ly at [86]). Nevertheless, various considerations of broad application have been identified in the authorities including the following:
1. the Offender's belief that the money or property was the proceeds of crime (albeit this is an element of the offence and therefore double counting adversely to the Offender is not permitted): Fung v R [2018] NSWCCA 26 at [59];
2. precisely what the Offender did: Fung v R at [59];
3. the period of time over which the transactions constituting the offence were carried out: Fung v R at [59];
4. the amount of money involved in the offending and the Offender's role: Fung v R at [59];
5. whether the money or property was beneficially the Offender's or not, and if not, the value of any intended reward: Fung v R at [59];
6. where the offence sits in the scheme provided by s.400 of the Criminal Code (Cth): Kim v R [2016] VSCA 238 at [61];
7. whether the offending was numerous smaller transactions or a single larger transaction: Kim v R at [61];
8. the authority by which the Offender carried out his part: R v Nguyen (2010) 204 A Crim R 246; [2010] NSWCCA 226 at [59]; and
9. the nature of the criminal source of the money: R v Nguyen at [59].
[7]
Sentencing for a Commonwealth Offence
The sentencing task in this case is governed by Part 1B Crimes Act 1914 (Cth). The Court must impose a sentence of a severity appropriate in all the circumstances of the offence: s16A(1). In addition to any other matters, the Court must take into account matters listed in s.16A(2) that are relevant and known to the Court. This list of factors extends to a wide range of topics concerning the offence, the Offender and other factors which bear upon the determination of sentence.
[8]
Facts of the Offence
The Offender
The Offender, who was born in 1970, was admitted as a lawyer in the Supreme Court of New South Wales on 15 December 1993 and held a practising certificate, entitling him to practise as a solicitor, at all relevant times between December 2016 and May 2017. Between December 2016 and May 2017, the Offender was one of the principal solicitors of the law firm Lands Legal located in York Street, Sydney. As part of legal practice, Lands Legal held a trust account which was utilised by the Offender in his work as a solicitor (Trial Exhibit C).
Conduct of Trial and Trial Issues
The trial was conducted upon the basis that the great bulk of factual matters were not in dispute as between the parties. Extensive admissions were made by the Offender for the purpose of the trial and there were agreed facts concerning the background to the events to be considered at the trial including the role of the Offender.
The oral evidence focused substantially upon interaction by various persons with the Offender, including meetings and electronic communications involving WhatsApp messages, emails and recordings of telephone conversations made lawfully under warrants issued to the Australian Federal Police for the purpose of the investigation.
Witnesses of particular significance in the trial included Daniel Hausman ("Hausman") and a number of persons who were described generally as "straw directors", some of whom had direct dealings with the Offender.
As noted earlier, the Offender did not give evidence at the trial.
The trial was confined effectively to the real issues in dispute as between the parties. The critical question concerned the state of mind of the Offender regarding the source of funds which undoubtedly passed through his trust account in the period between February and May 2017. As noted earlier, the charge in the indictment alleged that the Offender dealt with money or property that was the proceeds of crime, and that he believed that money or property to be the proceeds of crime at the time of so dealing. The verdict of the jury demonstrates that the jury was satisfied beyond reasonable doubt that the Offender possessed the belief at the time of relevant dealings.
An issue at trial, and again in submissions on sentence, concerned the state of mind of the Offender at particular times in the period between 1 February 2017 and 18 May 2017, the period charged in the indictment. It is to that topic that I will return shortly for the purpose of fact finding on sentence.
An Offer to Plead Guilty to a Lesser Offence
[9]
Between 28 February 2017 and 18 May 2017, disbursements were made from the trust account to various corporate entities and other recipients in a total sum which, by 16 May 2017, amounted to $24,205,416.22 (Trial Exhibit C, paragraph 5).
There being no issue concerning the flow of funds in and out of the Lands Legal trust account, the trial issues concerned what the Offender learned from December 2016 to May 2017 about these funds and their sources and the activities of Hausman, Daniel Rostankovski ("Rostankovski") and Dev Menon ("Menon") (amongst others) which led to these very large sums of money passing through the trust account which, for all relevant purposes, was controlled by the Offender in his practice as a solicitor.
There was no issue at the trial that the Offender dealt with the funds which passed through the Lands Legal trust account in a way that satisfied that element of the offence.
The jury was directed concerning the term "proceeds of crime" in the following way (Trial MFI70, paragraphs 7-10):
"7 'Proceeds of crime' means any money or other property that is wholly or partly derived or realised, directly or indirectly, by any person from the commission of an offence against a law of the Commonwealth or a State that may be dealt with as an indictable offence.
8 The Crown case is that the proceeds of crime were derived or realised, directly or indirectly, from the commission of all or any of the following Commonwealth or State offences:
(a) fraud or money laundering offences committed by the Plutus conspirators including Simon Anquetil, Adam Cranston, Jason Onley and Dev Menon; and/or
(b) conspiracies to commit fraud or money laundering offences entered into by the Plutus conspirators including Simon Anquetil, Adam Cranston, Jason Onley and Dev Menon; and/or
(c) blackmail offences, namely, the making of unwarranted demands with menaces (threats) with the intention of obtaining a gain or causing a loss.
9 Each of these classes of offences may be dealt with as an 'indictable offence'.
10 The Crown is not required to prove that a particular offence was committed, or that a particular person committed an offence, in relation to the money or property."
With respect to the element of belief, the jury was directed (Trial MFI70, paragraphs 11-14):
"11 The Crown must prove that the accused believed that the money or other property was the proceeds of an indictable offence.
12 The Crown is not required to prove that the accused believed the money or other property was the proceeds of the same class or classes of indictable offence as the indictable offence or offences from which the money or other property was in fact derived.
13 The Crown is not required to prove that the accused believed that the class of offence from which the proceeds were derived or realised was known as a Commonwealth or State "indictable offence".
14 When determining under Element [4] whether the Crown has proved that the accused believed that money or property was the proceeds of crime, it is the actual belief of the accused at the relevant time that matters, not the belief of some hypothetical person, or the belief that one might think he ought to have had."
[10]
Assessment of the Objective Gravity of the Offence
The Offender played a critical and indispensable role in the laundering of the proceeds of crime between February and May 2017. It was Hausman who was the principal point of contact with the Offender and Hausman was the driving force for the scheme in conjunction with Rostankovski. However, the Offender, as a solicitor, played a critical role in the offending, utilising his professional status as a solicitor and access to a trust account which provided a level of cover for the criminal activity involved.
The Offender was prepared to modify the action required to advance the criminal course of conduct as time passed. The events took place over a three-month period and involved many transactions and a very substantial sum of money was laundered as the proceeds of crime.
The Offender was directly involved with the obviously unfit "straw directors" in ways which heightened his objective criminality and emphasised that the process which was being undertaken operated in the interests of Hausman, Rostankovski and the Offender, and not any of the "straw directors". The Offender created or adopted documentation that was intended to mislead others as to the nature of his legal services, and concealed the involvement of Hausman and Rostankovski and of the funds. In doing so, he took advantage of his knowledge as a solicitor.
Elements of dishonesty were involved in this process, which included the creation of client files for Palumberi and Mills which were, in reality, fronts for the true clients, Hausman and Rostankovski.
The amount of money dealt with was very substantially above the statutory threshold of $1 million for s.400.3(1) offences. The Offender was motivated by greed, having initially agreed to be paid $88,000.00 and, after the second blackmail, $20,000.00 for each additional million dollars received into the trust account. It is pertinent to observe that the Offender, on 13 March 2017, said in a WhatsApp message to Hausman "We will score massive outcomes" (Exhibit A, Volume 1, Item 663). Although this comment was made in the context of a discussion concerning Teplitsky, it echoed as well the Offender's motive for involvement in this criminal enterprise. The Offender ultimately obtained $51,000.00 and an additional $880,000.00 which was transferred in the manner referred to earlier in these remarks.
[11]
The Offender's Subjective Circumstances and the Relevance of Prior Good Character
As noted earlier, The Offender is a 51-year old solicitor having been admitted as a lawyer in the Supreme Court of New South Wales on 15 December 1993 and having held a practising certificate at all relevant times. He is a married man with three children and two stepchildren.
A number of affidavits, letters and references were provided by his present wife, his former wife, other family members and friends of the Offender, professional colleagues and religious leaders with whom he has had contact over a number of years.
The Offender's wife, Natalya Chalabian, married the Offender in 2018. They have five children between them aged 21, 18, 17, 16 and 14 years who live in the family home. Three of the children are still at school.
The defence evidence points to the Offender being a caring family man who has supported his family and his children and has undertaken community work. A number of persons who have had professional dealings with him speak highly of him.
The evidence of the Offender's voluntary work in different capacities, stands to his credit and is not to be diluted by what follows with respect to his good character and status as a solicitor.
As noted earlier, the Crown did not challenge by way of cross-examination any of the subjective material tendered on behalf of the Offender. Rather, the Crown submitted that limited weight should be given to it given the restricted role of evidence of prior good character on sentence and other aspects bearing upon the sentencing outcome.
The Offender has no prior criminal history. At the time of the commission of this offence, he was a person of good character. A question arises as to the role of evidence of good character on sentence in a case of this type. It must be kept in mind that prior good character, and being a fit and proper person, are prerequisites for admission (and continuing admission) as a lawyer and that the Offender utilised his professional status and functions as a solicitor in the commission of this offence.
I am satisfied that the Offender's prior good character should carry limited weight in the circumstances of this case. The offence for which he has been found guilty is not the type of dishonesty offence, such as fraud, which usually brings a solicitor (and the solicitor's trust account) before a criminal court. However, in this case, the Offender utilised his trust account, and his professional skill and responsibility, for the advancement of criminal purposes. He could not have been in a position to act in this way as a solicitor unless he possessed the mandatory requirements for admission, being prior good character and fitness to exercise professional duties and responsibilities as a solicitor.
[12]
Need for Adequate Punishment and General Deterrence
As noted earlier (at [18]), the Courts have emphasised the need for general deterrence when sentencing for money laundering offences. Offending of this type is often difficult to detect. It has been noted that such conduct is vital to the operation of organised crime, with the launderer becoming an "important cog in the wheel": Majeed v R [2013] VSCA 40 at [39]; Islam v R [2016] NSWCCA 233 at [118]. That is an apt description of the Offender's role in this case, so that general deterrence has an important function on sentence.
The fact that the Offender was a solicitor, and used that status in the commission of the offence, heightens the weight to be given to general deterrence. The Courts have emphasised that solicitors hold a special position of trust by the law and community: R v Hawkins (1989) 45 A Crim R 430 at 436.
Due to the special position in which solicitors are placed by the law in the community in circumstances where the trust is abused, necessarily the integrity of the profession is called into question and Courts will be required to impose sentences calculated to ensure that no solicitor will be left in doubt as to the serious consequences which would follow from such criminal conduct: R v Hawkins at 435; Croke v R.
In applying these principles, I have kept in mind the need not to double count, adversely to the Offender, the consequences of his role as a solicitor on sentence. That aspect, however, is relevant for different purposes on sentence and is to be taken into account.
[13]
The Parity Issue - Hausman and Rostankovski
The parity principle applies in respect of this case because of sentences imposed on Hausman and Rostankovski. Each pleaded guilty and was sentenced in respect of the same offences as the Offender, in addition to other offences.
With respect to the offence under s.400.3(1) with s.11.2A Criminal Code (Cth), and after a combined discount of 50% for his early guilty plea and his past and future assistance, Hausman was sentenced to a term of imprisonment for five years with a non-parole period of three years: R v Hausman; R v Rostankovski at [206]. In respect of the money laundering offence, Hausman's offending was found by the sentencing Judge to be well above the mid-range of objective seriousness and towards the high end of that range given the sum of money involved, Hausman's knowledge of the illegal source of the funds and the sophisticated and organised planning involved in the commission of the offence: R v Hausman; R v Rostankovski at [56].
The sentencing Judge found Hausman to be the architect of the money laundering scheme, and to have played a leading role in working with the Offender to receive and dispose of the proceeds of crime: R v Hausman; R v Rostankovski at [80].
Rostankovski pleaded guilty, but has not provided assistance to the authorities. After a discount of 20% for his early guilty plea, the sentencing Judge nominated for the offence against s.400.3(1) with s.11.2A Criminal Code (Cth), a term of imprisonment of nine years and six months: R v Hausman; R v Rostankovski at [74]. The starting point for this sentence was imprisonment for 11 years and 10 months: R v Hausman; R v Rostankovski at [161].
In respect of the money laundering offence, Rostankovski's offending was found by the sentencing Judge to be above the mid-range of objective seriousness, being partly as a function of his role relative to Hausman, although he was not a passive investor who merely acquiesced in Hausman and the Offender's dealings: R v Hausman; R v Rostankovski at [57].
Neither Hausman nor Rostankovski had a prior criminal history.
For the purpose of the parity principle, I am satisfied that the Offender's criminality is closer to, but less than that of Hausman. Hausman was the architect of the scheme. However, I do not accept the defence submission that the Offender was "no more than a tool or service provider to serve" Hausman's scheme. This characterisation understates to a significant extent the true role of the Offender.
[14]
Some Other Sentencing Considerations
Hardship to Family
I accept that the evidence demonstrates that a significant degree of hardship will flow to the Offender's family from his imprisonment. The principal evidence in this respect is contained in the affidavit of his wife, Natalya. There is no obligation upon the Offender to demonstrate that hardship to family will be exceptional before it can be taken into account on sentence under s.16A(2)(p) Crimes Act 1914 (Cth): Totaan v R [2022] NSWCCA 75.
There is, however, an additional form of stress which applies in this case. Natalya Chalabian was born in Ukraine and moved to Australia in 2001. She has family members in Ukraine who are at risk as a result of the illegal invasion by Russia of a neighbouring state and the ongoing war. The Russian invasion coincided with the commencement of the trial in February 2022. Although this aspect is unrelated to the trial, I accept that a combination of factors will mean that there are areas of stress and hardship affecting the Offender's family which will be magnified by the Offender's imprisonment.
I take those areas of hardship into account, as part of the process of instinctive synthesis, for the purpose of determining sentence.
In addition, I take into account the prospect of stresses within the prison population, because of the COVID-19 pandemic, which continues to manifest itself and is likely to do so into the future: R v Krivosic (No. 7) [2022] NSWSC 507 at [146]-[148].
Delay
The present offence took place between 1 February and 18 May 2017. The Offender's office at Lands Legal was the subject of execution of a search warrant on 17 May 2017.
The Offender was not charged until 11 July 2018 and he was committed for trial on 25 July 2019.
The trial of the Offender was scheduled to commence on 12 October 2020. On the application of the Crown, that trial date was vacated on 1 October 2020: R v Chalabian (No. 1) [2020] NSWSC 1341. The trial was adjourned given the late change in the Crown's approach so that Hausman was to be called as a witness at the trial, contrary to the Crown's earlier indication. The Offender did not contribute to that delay in the trial.
Thereafter, the trial date was scheduled to commence on 21 February 2022 and that is what occurred.
[15]
Other Sentencing Decisions
The maximum penalty for the offence serves as a sentencing yardstick, and a basis for comparison between the Offender's case and other cases: Markarian v the Queen (2005) 228 CLR 357; [2005] HCA 25.
A number of other sentencing decisions were referred to by the Crown as possible comparable cases in accordance with the principles in Hili and Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [54], [56] and The Queen v Pham (2015) 256 CLR 550; [2015] HCA 39 at [28].
In this respect, the Crown referred to TAN and Ors v R (2011) 35 VR 109; [2011] VSCA 427; Dickson v R; R v Issakidis [2018] NSWSC 378; R v Hammond [2020] NSWSC 888; R v Anquetil [2021] NSWCCA 59 and R v Hausman; R v Rostankovski.
I have had regard to the sentencing outcomes in these cases for the purpose of assisting with the sentencing process in this case.
[16]
Determining the Appropriate Sentence
It is necessary to draw together the findings of fact concerning the offence, the subjective circumstances of the Offender, and to factor in other sentencing considerations to determine the appropriate sentence. This process involves the instinctive synthesis of a wide range of considerations.
The Court may only impose a sentence of imprisonment when satisfied no other sentence is appropriate: s.17A Crimes Act 1914 (Cth). It was acknowledged realistically on behalf of the Offender that a substantial period of imprisonment is inevitable in this case.
I am satisfied that no other sentence other than fulltime imprisonment is appropriate in this case. This was an offence of a high degree of objective gravity which reflected substantial moral culpability on the part of the Offender. The offending was sophisticated and protracted and involved a very large sum of money and multiple transactions. The Offender brought his considerable professional skills to bear in the commission of the offence. He was motivated by substantial personal gain.
The Offender's prior good character is of limited assistance to him in the circumstances of the case. There are aspects of hardship and the personal circumstances of the Offender's family which are to be called in aid on his behalf, together with other factors which have been identified which assist the Offender on sentence.
At the same time, general deterrence is an important factor on sentence having regard to the nature of the offence itself and the fact that it was committed by a solicitor in the exercise of his profession.
In fixing a head sentence of imprisonment, the Court should have regard to the setting of an appropriate non-parole period for the purpose of s.19AB Crimes Act 1914 (Cth). The former practice of imposing a non-parole period in the range of 60%-66% for a Commonwealth offence is, of course, no longer applicable: Hili and Jones v The Queen. The non-parole period to be fixed should constitute what the Court regards as the minimum period which the Offender should serve in custody, having regard to the objective gravity of the offence, the circumstances of the Offender and all other factors to be taken into account on sentence.
Having regard to all relevant matters, I am satisfied that the Offender should be sentenced to a term of imprisonment for 12 years. A non-parole period of seven years and six months is appropriate in all the circumstances of the case.
[17]
Amendments
21 March 2023 - Publication restriction lifted - judgment published.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 21 March 2023
Not every matter urged on a sentencing Judge has to be, or can be, fitted into categories of aggravating or mitigating circumstances. There are matters of human behaviour that lie between those extremes: Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14 at [22]. The Court may be unpersuaded of matters urged in mitigation or aggravation. Of course, the absence of persuasion about a fact in mitigation is not the equivalent of persuasion of the opposite fact in aggravation: Weininger v The Queen at [24].
It has been observed that all money laundering offences should be regarded as serious because of the assistance they provide to other organised criminal activity: R v Lin [2014] NSWCCA 254 at [63]; R v Jiao (2015) 251 A Crim R 236; [2015] NSWCCA 95 at [27]-[32].
As will be observed later in these remarks, a consistent message emerging from the cases is the importance of general deterrence for offending of this type: R v Ly at [86]; Kim v R at [61]; Dickson v R [2016] NSWCCA 105 at [212]; s.16A(2)(ja) Crimes Act 1914 (Cth).
In the sentencing proceedings, the Court was informed that the Offender had offered to plead guilty, at the Case Conference in the Local Court on 25 June 2019, to the lesser offence of recklessly dealing with the proceeds of crime in a sum greater than $1 million contrary to s.400.3(2) Criminal Code (Cth). The Crown did not accept that offer to plead guilty to a lesser offence. The Offender proceeded to trial in this Court upon the more serious offence requiring proof of belief.
Alternative verdicts based upon the lesser offences involving recklessness (s.400.3(2)) or negligence (s.400.3(3)) were left to the jury in written and oral directions provided in the trial (Trial MFI60). The jury had clear directions as to the distinction between belief, recklessness and negligence.
From the verdict of the jury, it is clear that a considered verdict was reached by reference to the totality of the evidence, so that the finding of the jury of belief went very significantly beyond recklessness, to which the Offender had offered to plead guilty in the Local Court.
The Court and the jury were not aware during the trial that the Offender had offered to plead guilty to the lesser offence based upon recklessness. However, the trial was conducted upon the basis that the real issue in dispute was the element of belief, with no detailed submissions being made by the parties concerning the alternative verdicts.
The fact that the Offender had offered to plead guilty to the lesser offence in the Local Court provides a further explanation as to why the trial was conducted efficiently and confined to the real issues in dispute. The other elements of the offence were, in reality, not controversial as the Offender had been prepared to admit them in the context of the offer to plead guilty to the lesser offence based on recklessness.
I mention this for historical purposes only as it serves to explain what happened at the trial, and why the real focus of the attention of the jury was the mental element of belief charged in the indictment.
Some Undisputed Facts
A Statement of Agreed Facts was tendered, by consent, by the Crown which outlined the following significant background events (Trial Exhibit D):
"1. Between about 1 March 2014 and 17 May 2017, Simon Anquetil, Adam Cranston, Jason Onley and Dev Menon together with other people, not including the Accused, (together called 'the Plutus conspirators') obtained large sums of money by fraudulently collecting tax revenue and not remitting it to the Australian Taxation Office (ATO). The Plutus conspirators later dealt with the proceeds of that fraud for their own benefit.
2. In 2014, the Plutus conspirators established a company called Plutus Payroll Australia Pty Ltd (Plutus). Using Plutus as a front, the Plutus conspirators offered payroll services to legitimate businesses (the clients).
3. Payroll services typically involve the following:
(a) Clients pay to the payroll services company (Plutus) a gross sum that includes their workers' wages, superannuation entitlements, and tax required by law to be withheld and remitted to the ATO;
(b) The payroll services company pays the workers' wages and superannuation contributions; and
(c) The payroll services company also remits to the ATO the tax required by law to be paid to the ATO, specifically 'Pay as You Go Withholding tax' (PAYGW tax), and 'Goods and Services Tax' (GST) collected by the payroll services company (collectively the tax).
4. To carry out the fraud, the Plutus conspirators deceived clients into entrusting them with the provision of payroll services and into transferring large sums of money from which the client's workers' wages and superannuation entitlements were to be paid and from which tax was required to be remitted to the ATO (called 'the payroll money').
5. The Plutus conspirators agreed between themselves not to pay to the ATO substantial amounts of the payroll money. They did this with dishonest and fraudulent Intentions and thereby committed fraud under both State and Commonwealth laws.
6. The Plutus conspirators further agreed to deal with the payroll money they dishonestly obtained from clients for their own personal benefit and thereby committed money laundering offences under both Commonwealth and State laws.
7. As part of the fraud, the Plutus conspirators incorporated eight other companies to which the payroll money was transferred (called the 'Second-Tier companies'). In effect, Plutus subcontracted its payroll services to the Second-Tier companies. The Plutus conspirators retained control over the Second-Tier companies by controlling the directors of those companies. Those directors played no role in the Second-Tier companies and were directors in name only (the nominal directors). Many of the nominal directors were recruited and managed by Daniel Rostankovski, who was knowingly participating in assisting the Plutus conspirators in carrying out the fraud.
8. By virtue of the subcontracting arrangement, the Second-Tier companies and its directors became legally liable under relevant taxation legislation to pay the tax to the ATO.
9. The Plutus conspirators implemented a plan to 'phoenix' the Second-Tier companies in order to avoid the scrutiny of the ATO; that is, to wind up the Second-Tier companies when their liability for unremitted tax became too great and to incorporate new companies which could then instead be used to perpetuate the ongoing fraud.
10. During the relevant period, Plutus' clients paid Plutus substantial sums of money of which $141,291,923 was properly due and payable to the ATO as tax. The Plutus conspirators did not remit at least $105,625,304 of that amount to the ATO. The Second-Tier companies paid only $30,883,342 to the ATO at the Plutus conspirators' direction.
11. By this conduct the Plutus conspirators committed a fraud on the ATO and dealt with about $105 million in tax fraud proceeds for their own benefit.
12. On 26 April 2017, the ATO served a garnishee order on the Plutus bank accounts. The effect of the garnishee order was to freeze the Plutus Payroll bank accounts.
13. On 17 and 18 May 2017, Simon Anquetil, Adam Cranston, Jason Onley and Dev Menon and others (but not the Accused) were arrested and charged in relation to the fraud and money laundering offences.
Participants in fraud and blackmail
14. By about August 2015, Daniel Rostankovski became a participant in the fraud. His principal role was to recruit, manage and control the unsophisticated people who became directors of the Second-Tier companies, including Anthony Palumberi, Ashley Mills, Alex Nappa, Angelo Coppola, Angela Yeoland and Ben Alaban.
15. When dealing with some directors, Daniel Rostankovski used the name 'James' instead of his true name.
16. In 2015, Daniel Hausman shared business connections and an office space with Adam Cranston and Jason Onley.
17. In 2015, Adam Cranston introduced Daniel Hausman to Daniel Rostankovski. By late 2015, Daniel Hausman became aware that Daniel Rostankovski was involved in the fraud and that his role was to recruit directors for the Second-Tier companies.
18. Adam Cranston is the son of Michael Cranston. Until 13 June 2017, Michael Cranston held the role of Deputy Commissioner of Taxation at the ATO.
19. Stephen Barrett was a freelance journalist and a long-time acquaintance of Daniel Hausman. He had previously worked as a producer on the television show '60 Minutes'. In January 2017, Daniel Hausman called upon Stephen Barrett to become involved in a blackmail plan.
20. In or around January 2017, Daniel Hausman introduced Stephen Barrett to Daniel Rostankovski.
21. Clamenz Lawyers is a law firm.
22. Between at least 1 March 2014 and 17 May 2017, Dev Menon (one of the Plutus conspirators) was a solicitor at Clamenz Lawyers located at Level 46,19-29 Martin Place, MLC Centre, Sydney. He held the position of Partner at that law firm.
Blackmail by Daniel Hausman. Daniel Rostankovskl and Stephen Barrett
23. Between about 1 October 2016 and 17 May 2017, Daniel Hausman, Daniel Rostankovskl and Stephen Barrett agreed upon and executed a plan to blackmail the Plutus conspirators by making demands for money.
24. On 1 February 2017, meetings took place between Stephen Barrett, Daniel Rostankovskl, Adam Cranston, Dev Menon, Jason Onley and Simon Anquetil, in a meeting room at Clamenz Lawyers.
25. Stephen Barrett informed the Plutus conspirators that he had been told about a tax fraud implicating some of them and was considering doing a media story. Stephen Barrett then left the meeting room and meetings between the other men continued.
26. Daniel Rostankovski demanded that the Plutus conspirators pay $5 million. He said that he was acting on the instructions of the directors of the Second-Tier companies and he threatened the Plutus conspirators with media exposure of the fraud, attention from law enforcement and violence if they did not pay the $5 million. In so doing, Daniel Rostankovski, Daniel Hausman and Stephen Barrett committed an indictable offence of blackmail.
27. The Australian Federal Police (AFP) lawfully recorded these meetings on 1 February 2017.
28. At 12.06pm Rostankovski departed Clamenz Lawyers. He telephoned Hausman and said that the Plutus conspirators would pay 'a million dollars today'.
29. On or about 15 February 2017, after consulting with Daniel Hausman, Daniel Rostankovski made a further demand with threats to the Plutus conspirators for a further payment of $20 million by sending an SMS message to Dev Menon. The message was to the following effect:
'if their accounts get frozen no problem, the $ continues to minimum $20m under (b) (c) (d) etc and these directors will receive the $20m personally to remit off as they are, under the Act Dev, as you are well aware, personally liable for both super and PAYG which your clients Adam Cranston and Jay Onley would never pay. We are fully aware of GST ends up being worn by the company hence not a liable issue personally. So stop the bullshit and keep up the payments I strongly suggest.'
30. In so doing, Daniel Rostankovski and Daniel Hausman committed a further indictable offence of blackmail."
A further significant area of undisputed evidence concerned the flow of funds into and out of the Lands Legal trust account in the period between 1 February 2017 and 18 May 2017 (Trial Exhibit C).
All of these deposits and distributions of funds through the trust account took place with the knowledge of, and at the direction of the Offender.
Between 1 February 2017 and 26 April 2017, approximately $24.2 million was deposited into the Lands Legal trust account. Given submissions made concerning the Offender's state of mind as events progressed from February through to May 2017, it is appropriate to note the date and quantum of some of the payments, especially in February 2017 (Trial Exhibit C, paragraph 4):
Date of receipt Amount Transferor Description
1 February 2017 $250,000.00 Plutus Payroll ATOPAYGFUNDS
3 February 2017 $750,000.00 Plutus Payroll ATOPAYGFUNDS
7 February 2017 $1,304,769.75 Plutus Payroll ATOPAYGFUNDS
9 February 2017 $1,269,873.98 Plutus Payroll ATOPAYGFUNDS
13 February 2017 $794,595.87 Plutus Payroll ATOPAYGFUNDS
14 February 2017 $245,354.03 Plutus Payroll ATOPAYGFUNDS
15 February 2017 $207,684.75 Plutus Payroll ATOPAYGFUNDS
16 February 2017 $519,201.88 Plutus Payroll ATOPAYGFUNDS
21 February 2017 $943,776.05 Plutus Payroll ATOPAYGFUNDS
23 February 2017 $714,369.80 Plutus Payroll ATOPAYGFUNDS
24 February 2017 $584,739.75 Plutus Payroll ATOPAYGFUNDS
27 February 2017 $158,171.83 Plutus Payroll ATOPAYGFUNDS
28 February 2017 $247,922.70 Plutus Payroll ATOPAYGFUNDS
1 March 2017 $227,081.67 Plutus Payroll ATOPAYGFUNDS
2 March 2017 $570,579.68 Plutus Payroll ATOPAYGFUNDS
Finally, the jury was informed, in written directions, that the principal contested issue in the trial was as follows (Trial MFI70, paragraphs 15-17):
"15 The real issue in dispute in the trial is whether the Crown has proved beyond reasonable doubt Element (4), that the accused believed that money or property was the proceeds of crime.
16 The Crown case is that the accused formed the requisite belief by the time the first two deposits were received into his trust account on 1 and 3 February 2017. The Crown submits, however, that if you are not so satisfied, you would in any event unanimously find that by at least 4 May 2017 the accused believed the money in his trust account was the proceeds of crime. If you are so satisfied, the Crown submits that the evidence establishes that the sum of money or other property that the accused dealt with from 4 May 2017 was worth $1 million or more.
17 The defence case is that you would not be satisfied beyond reasonable doubt that the accused formed the requisite belief at any time."
The Way in Which the Crown Put its Case at Trial and on Sentence
Against this background of undisputed facts, and directions given to the jury, I now proceed to the issues which call for factual findings on sentence.
It was the Crown case at trial, and again on sentence, that the Offender formed the necessary belief as to the source of the funds from the beginning of February 2017, with the Offender's belief increasing and hardening as time passed, and things were said to him or by him and things were done by him and others, over the period of time extending through to May 2017.
The Crown addressed the jury, and again on sentence, by reference to certain points in time and events which occurred, which allowed the jury to consider the state of mind of the Offender at those times, by reference to surrounding events.
The defence submissions on sentence invited the Court to consider the evidence by reference to what was said and done at particular points in time between the period 1 February 2017 and 17 May 2017, in support of a submission that the Court should not find beyond reasonable doubt that the Offender possessed the requisite belief until a time in early May 2017. It was submitted that a finding to this effect would accord with the verdict of the jury and that, although there was suspicion before then, the Court should not make a finding to the criminal standard concerning belief with respect to the earlier period of time.
It was submitted for the Offender that the Court should approach the fact-finding task upon the basis that the Offender was "looking through a prism of a legitimate deal to commence with" and that it was not until late April 2017 that there was "a defining moment" (arising from Australian Taxation Office ("ATO") action) which gave rise to belief.
With these competing approaches in mind, submissions were made which I have considered by reference to the oral and documentary evidence given at the trial. In considering defence submissions, I have reminded myself of the oral evidence of Hausman and, in particular, his cross-examination concerning what he told the Offender at different times.
For the purpose of what follows, the findings which I have made adverse to the Offender have been reached by application of the criminal standard of proof. I will move to a series of findings along the way without pausing to repeat the competing submissions made for the Crown and the defence on each aspect.
The submissions are contained in the written and oral submissions which form part of the record of the Court and do not need to be repeated in these sentencing remarks.
The Offender Acting as a Solicitor
It is necessary to keep in mind that the Offender was a practising solicitor and received the money and made the distributions in question through his firm's trust account. He was a director of the law firm, Lands Legal Pty Ltd, and all payments in and out of the trust account were made upon his authorisation (Exhibit C at [1]; Exhibit A, Volume 1, Item 219).
In considering the Offender's state of mind at different points along the way, it is necessary to keep in mind explanations and directions given to the jury concerning the legal and ethical obligations of a solicitor and the conduct of a trust account. These included (Trial MFI4):
1. when acting for a client, a solicitor must comply with a number of legal and ethical obligations;
2. a solicitor must act in the best interests of a client in any matter in which the solicitor represents the client;
3. a solicitor must follow a client's lawful, proper and competent instructions;
4. a solicitor must not disclose information to a third party without the client's consent;
5. with respect to a trust account, a law practice must hold the trust money exclusively for the person on whose behalf it is received and disburse the money only in accordance with a direction given by that person.
Who Were the Clients?
It will be seen from what follows that the true clients of the Offender, at all relevant times, were Hausman and Rostankovski, and not any of the "straw directors". Funds were moved in and out of the trust account from 1 February 2017 to 18 May 2017 in the interests of the true clients (Hausman and Rostankovski), as part of their ongoing course of criminal conduct in which the Offender was a critical and indispensable participant.
Events from December 2016 to May 2017
Even before the period charged in the indictment, on 18 December 2016, the Offender and Hausman discussed a "strategy about the incoming funds" during which the Offender told Hausman that sending the money to a law firm trust account overseas "might complicate matters" and cause "the ATO [to] query it". The Offender suggested "adding another layer by sending to a local law firm's trust account". The Offender said "If someone wanted to query where it went it's going to a lawyer's trust account" and the money "could be to buy a property, it could be for anything". The Offender said that sending it overseas would be fraught with "a bit of danger" and agreed that it would raise "alarm bells" (Exhibit A, Volume 1, Items 19 and 94).
This was an important piece of evidence. It served to set the scene for introducing the Offender to Hausman's plan with an aspect of the discussion involving the avoidance of detection by the ATO.
I accept the Crown submission that the communication on 18 December 2016 was significant evidence that the Offender knew that his role was to assist Hausman to conceal the movement of funds from the authorities, even if he did not have, at the time of that conversation, detailed knowledge of the precise source of the funds. The uses of the Offender's trust account was the mechanism by which Hausman, Rostankovski and the Offender, together with Menon, created the pretence that the money paid was connected with the provision of legal services.
I accept that, from an early point in time, the Offender used his legal expertise and provided advice to Hausman on the best methods to receive and remit the funds so as to avoid detection from law enforcement authorities and that there were signs of this approach being put into place as early as December 2016 (Exhibit A, Volume 1, Items 19 and 94).
It is necessary to keep in mind, as noted earlier, that the evidence is to be considered as a totality and not piecemeal. The Crown case was based upon a combination of direct and circumstantial evidence. This does not mean that later acquired knowledge on the part of the Offender can, in some way, operate retrospectively to events in late December 2016 or early February 2017. However, it is necessary to have regard to all features of the developing evidentiary picture as it unfolded, in chronological form, before the jury.
I have no doubt that the power of the Crown's documentary and electronic case in this respect was an important part of the jury's verdict finding belief to the criminal standard.
From 1 February 2017, the Offender negotiated the drafting of a deed in conjunction with Menon, knowing the purpose of the deed was to provide an appearance of outward legitimacy to the receipt of funds from the Plutus Payroll (Exhibit H, pages 1-24).
Importantly, on 1 February 2017, the Offender received instruction from Hausman as to the identity of his alleged "client" (Anthony Palumberi) ("Palumberi"), directing the Offender not to use Hausman's name. Significantly, the directions from Hausman disclosed that Adam Cranston and Jay Onley ("Onley") were "running this labour hire scam" which Menon from Clamenz Lawyers "has been covering up" due to "substantial evidence". The Offender was informed Palumberi was a "shadow director" and "in breach of the Corporations Act due to [the Plutus conspirators]" (Exhibit A, Volume 1, Items 42 and 43).
The tone and content of this communication from Hausman on 1 February 2017 are especially significant. The terminology being used did not sit comfortably with what may be regarded as an orthodox communication with a lawyer for the purpose of funds passing through a trust account in the course of legal practice. Further, it was sufficiently clear to the Offender at that time that it was Hausman and Rostankovski who were the effective clients and that Palumberi was a token name being introduced as part of a façade being put in place. The whole arrangement at that time possessed a flavour of irregularity and illegality with the nomination of an alleged client (Palumberi) who was a token name only. None of this sits easily with the defence submission that these events should be viewed at the beginning through a "prism" of a legitimate arrangement. The process was surrounded by disguise and deception from the outset.
I am satisfied that the Offender played an integral role in negotiating and drafting the first deed, and that he knew that his role was to structure the deed so that Hausman and Rostankovski could extract the money after payment into the Lands Legal trust account, but at the same time, to conceal their involvement (Exhibit A, Volume 1, Item 94; Exhibit A, volume 2, pages 477-478).
The Offender was aware that the so-called second tier companies had tax liabilities. On 3 February 2017, Hausman had informed the Offender that their only creditor was the ATO (Exhibit A, Volume 1, Item 94).
In understanding the Offender's accumulating knowledge with respect to relevant events, it is appropriate to note other pieces of evidence which provide assistance in determining his state of mind. I have kept in mind the oral evidence of Hausman referred to in defence submissions as to what he told the Offender. However, the contemporaneous communications between Hausman, the Offender and others shed particular light on the Offender's state of mind. They are the primary and best evidence of what information was passing to and from the Offender.
On 1 February 2017, Rostankovski told Hausman to "Get in contact with Sevag and tell him what to say and exactly what is going down" (Exhibit , Volume 2, page 315). Hausman responded "I've left three messages, and I've said they're absolutely urgent … I've clued him up, I've told him …" (Exhibit A, Volume 2, pages 316-317). Although this was a conversation between Rostankovski and Hausman, it sheds some light upon their understanding of the role of the Offender. As the Crown submitted, the Offender did not ask questions that a solicitor may be expected to ask about the money, the company or the underlying transaction had it been a legitimate transaction.
On 3 February 2017, Menon sent the Offender the draft first deed together with a copy of the Commonwealth Bank transaction record which, tellingly, showed the payment of $250,000.00 to the Offender's trust account by "Plutus Payroll Australia Pty Ltd" in respect of "ATOPAYGFUNDS Plutus Payroll" (Exhibit A, Volume 2, pages 341-342). This was a further important piece of the evidence which was provided directly to the Offender, and added to his knowledge and understanding as to what was happening and the source of funds which were being paid into his trust account.
On 8 February 2017, the Offender was informed by Menon that there was an Office of State Revenue payroll tax investigation into the second tier company of which Palumberi was a director (Exhibit A, Volume 1, Item 166).
Thereafter, between 9 and 23 February 2017, the Offender corresponded with the Office of State Revenue, ultimately informing that Office that he did not have instructions to respond to the notice. Yet, as the Crown submitted, at this time, the Offender was purporting to act for the same company settling the deeds referring to monies owed to the ATO by the companies (Exhibit A, Volume 1, Items 192, 254 and 308).
Once again, during this period, the Offender did not query Hausman or Rostankovski about the payroll tax investigation or caution either of them about being involved with a company that was under tax investigation.
An important communication took place on 16 February 2017, with both the tone and the content of it being especially revealing with respect to the role of the Offender and Hausman's approach to him (Trial Exhibit A, Item 251). On that day, Hausman informed the Offender that Plutus would be paying further amounts beyond the initial $5 million and said "If they can do 5M in 10 days - they can do another 15-20 in 8 weeks and we then do lunch". Hausman said "I will pay you $20K per mill if we end up with the additional $20m owed by these poor director bunnies you're gonna get $400K. Or if they do $15m and I decide that's enough although $20m owed by these poor bastards [the "straw directors"] personally according to my accountant through their sudden assessments by 'daddy' [Michael Cranston] as payg and super … We need to exert massive pressure on Dev …". Hausman asked the Offender to "Keep the pressure on scumbag Dev" and that Menon knew that he (Hausman) and Rostankovski had material that, if provided to the "journo [Stephen Barrett, said to be involved in the blackmail]" would result in the Plutus conspirators "all going to long bay", a clear reference to a well-known prison suggesting unequivocally that their activities were criminal in nature.
A further message from Hausman to the Offender on 16 February 2017 spoke of keeping "the pressure on that scumbag Dev … as well as the other 2 Cunts Jay Onley and Adam Cranston, Who's daddy is Michael Cranston, deputy comm of T…". Hausman closed the message to the Offender "Go get them you animal" (Trial Exhibit A, Item 253). This message gives some flavour to the true relationship between Hausman and the Offender in mid-February 2017.
On the face of it, these were telling and extraordinary communications to be sent to a solicitor in the context of the transfer of large sums of money into the solicitor's trust account. It is notable that the Offender did not query or challenge Hausman as to what the "pressure" might be or why the people who were the source of the funds might be "all going to long bay". Clearly, Hausman was not holding back in this communication to the Offender, using language which pointed to the illegality of the activities which produced the funds, and referring to Menon ("scumbag Dev") and the "journo" in ways far removed from any prism of legitimate legal practice.
The Offender, the "Straw Directors", Client Files and Purported Authorities
The Offender opened client files within Lands Legal in the name of Palumberi and later Ashley Mills ("Mills") through which the proceeds of crime were transacted. The Palumberi file (Exhibit F) was opened on 1 February 2017 and the Mills file (Exhibit K) was opened on 22 February 2017.
I accept the Crown submission that these files were false in that the Offender's real clients were Hausman and Rostankovski and not Palumberi and Mills.
The Offender asked for each of Palumberi and Mills to sign trust account authorities at various times in order to record in his file his ostensible authority to distribute the funds.
An important aspect of the evidence was the direct contact the Offender had with several of the "straw directors", who were to be compared and contrasted in all respects with the experienced businessmen Hausman and Rostankovski who were driving the enterprise with the Offender, and with the "straw directors" being mere tools to be exploited for that purpose.
Palumberi and Mills (and others) gave evidence at the trial. The Offender had dealt with each of them directly at relevant times in 2017 and had an opportunity himself to assess their obvious shortcomings as persons involved in company directorships, or indeed in business activities of any type. I accept that the jury was satisfied, as am I, that each of Palumberi and Mills did not authorise any distributions or know that money was held in their respective names in any trust account.
The Offender provided no real legal advice to Palumberi, Mills or the "straw directors" on the terms of the deeds or the legal obligations or liabilities they purported to create. At all relevant times, the Offender complied with the instructions of Hausman and Rostankovski and not any of the "straw directors". As part of this approach, I am satisfied that the Offender operated to conceal the involvement of Hausman and Rostankovski and to perpetuate the outward but misleading appearance that the "straw directors" were directing the transactions.
To the extent that a submission was made at trial, and again on sentence, that the Offender's interactions with Alexander Nappa ("Nappa"), another "straw director", constituted a more open approach to explaining what was occurring, a difficulty is that at least of part of what the Offender told Nappa was untrue in that he advised him that the first deed would absolve any obligation Nappa had to pay outstanding PAYG and GST amounts to the ATO, when in fact the terms of the first deed (if it had any legal force) were to the opposite effect.
On 3 February 2017, the Offender drafted a deed which purported to appoint Mills as the representative of the other "straw directors" and to authorise Mills to deal with the laundered funds (Exhibit H, pages 25-54). The Offender created that deed for the purpose of concealing his lack of authority to distribute the funds on the instructions of the "straw directors". He told Rostankovski that he created the deed to ensure that "No one [could] come back at you or I for making the agreed distributions" (Exhibit A, Volume 1, Items 157 and 161).
The deed of agreement provided that each other "straw director" would, in exchange, be paid $5,000.00 per month and a final payment of $50,000.00. The "straw directors" who gave evidence said that they did not appoint Mills or receive sums in those amounts, and Mills gave evidence inconsistent with him being appointed for the purpose specified in the deed. The evidence of the "straw directors", including Mills, pointed to each of them being prepared to sign documents without knowledge or understanding as to their content, in exchange for some payments.
I am satisfied that this state of affairs was clear to the Offender, at the time of relevant events, and that this was an important aspect to be added to the other sources of knowledge he acquired as to the true nature of his role and functions in depositing proceeds of crime into the trust account and later paying them out.
On 20 February 2017, when requesting that Rostankovski give him the authority to transfer the monies from the Palumberi file to a file in Rostankovski's name, the Offender said "So it's safe!". Both Hausman and Rostankovski informed the Offender not to use Rostankovski's name on a client file with Rostankovski saying that he was "nowhere near this" (Exhibit A, Volume 1, Items 264, 266, 267, 277). Hausman told the Offender to "create another file being one of the head subbies who takes orders from DR [Rostankovski] as all six directors … will go bankrupt due to payg and bas not being done …" (Exhibit A, Volume 1, Items 277, 284). The Offender replied "Ok … that's easy … let's confirm tonight and I can action" (Exhibit A, Volume 1, Item 285).
Once again, the tone and content of these communications speak loudly concerning the true role of the Offender, and his state of mind with respect to the ongoing and unfolding course of conduct from early February 2017.
To the extent that it was submitted for the Offender that he was ignorant that the source of funds by 20 February 2017 was the second blackmail carried out by Rostankovski (given that he wanted to name Rostankovski in the records), this provides little assistance to the Offender with respect to the state of mind question. As the jury were directed (see [42] above), it was not necessary for the Crown to prove that the Offender held the requisite belief with respect to a particular offence, as long as it fell within the broad concept of "proceeds of crime". The source of all the funds entering the Offender's trust account, as part of this course of conduct, arose as proceeds of crime including fraud, money laundering and/or blackmail. It does not provide real assistance to the Offender to point to one aspect where he may not have exact knowledge of the precise and esoteric offence of blackmail which was the source of the funds.
Following the second blackmail of the Plutus conspirators by Hausman and Rostankovski (Exhibit A, Volume 1, Item 250), the Offender negotiated and drafted a second deed between Plutus Payroll and the second tier companies providing for a further $25 million to be paid to the Lands Legal trust account (Exhibit A, Volume 1, Item 303; Exhibit H, pages 55-68).
In this context, on 15 February 2017, Hausman offered to pay the Offender $20,000.00 for each additional million dollars that was paid into the Lands Legal trust account. The Offender agreed to that offer, stating it would be "Absolutely no prob …" and that he would "ensure this gets done!" (Exhibit A, Volume 1, Items 251-253).
This is an important piece of evidence bearing upon the Offender's motive, and the extent of his involvement in effectively washing large sums of money through the trust account with a substantial financial incentive for him to do so. I accept the Crown submission that this arrangement was highly unusual for a solicitor and that this supported the Crown argument that this was not a genuine fee for legal services, but a "deal" between the Offender and Hausman representing what could be seen as being the Offender's "cut" of the proceeds of crime (Exhibit A, Volume 1, Items 251-253).
Some Events in March 2017
On 15 March 2017, Menon sent to the Offender the affidavit of Christian Paul Budd-Madison, which outlined expressly that Adam Cranston, Onley, Patrick Willmott and Peter Larcombe were installing "dummy directors" for multiple entities which collected "100% PAYG payments but failed to pay these forward to the Australian Taxation Office" (Exhibit A, Volume 1 Item 732). I am satisfied that the Offender already had sufficient understanding that this is what had been happening by this time, and that this additional information served to reinforce his existing knowledge and belief in that respect. Significantly, the Offender did not demand any explanation from Hausman or Rostankovski concerning the matters contained in the affidavit.
On 17 March 2017, the Offender consented to a default judgment obtained by a second tier company (Uneek Consulting) in the Supreme Court of New South Wales in the sum of $3,241,647.41 being set aside, without instructions from the company's nominal director, Ben Alaban ("Alaban"). I accept the Crown submission that the Offender's motivation in doing so was to thwart disclosure in the public domain of the Budd-Madison affidavit which outlined, in stark and explicit terms, the Plutus conspiracy. The setting aside of the default judgment by consent meant that the explosive content of the Budd-Madison affidavit would not be read in open court and thus be available publicly. This step was taken in the interests of Hausman, Rostankovski and the Offender, and not in the interests of Alaban or any other person or entity.
It is noteworthy that the Offender was not told of any legitimate commercial reason for Hausman or Rostankovski to be receiving millions of dollars from Plutus Payroll. The Offender did not raise any question about the multiple references in the documents to the ATO. On each occasion when the Offender was told information that alluded to the fraud and blackmail, the Offender did not express surprise or make the kind of enquiries that would have been natural or expected of a solicitor if the Offender did not have knowledge and belief as to the source of the funds from a very early stage.
Scale of the Operation and Benefit to the Offender
The Offender distributed a total of $24,205,416.22 from the Lands Legal trust account at the direction of Hausman and Rostankovski across 22 transactions (Exhibit C, pages 4-8). A large portion of those funds were invested in property development projects involving Michael Teplitsky ("Teplitsky"), who was a then current and longstanding client of the Offender and a close associate of Hausman. The Offender was also acting as solicitor for Teplitsky in respect of some property development projects.
The Offender benefited financially from his role in the offence. On 28 February 2017, 16 March 2017 and 5 April 2017, Lands Legal received a combined amount of $51,597.06 in "legal fees" in respect of the Offender's role in facilitating the receipt of the first $5 million (Exhibit C, pages 4 and 6).
On 28 February 2017, the Offender remitted $506,000.00 directly to KSE Property Pty Ltd ("KSE"), a company of which his mother was sole director and secretary. The Offender was signatory to that company's bank account (Exhibit C, page 4). Whilst these particular funds were repaid to the Lands Legal trust account on 16 May 2017 (once the ATO garnishee notice on Plutus Payroll came to light), the Offender transferred further proceeds of crime on 16 May 2017, being $880,000.00 to Moshav Financial Limited for the purpose of investment on behalf of KSE (Exhibit V).
I am satisfied beyond reasonable doubt that the Offender made this transfer for his own financial benefit, being a reward for his services in facilitating the movement of the proceeds of crime (Exhibit V, Exhibit X).
After the ATO garnisheed the Plutus Payroll bank accounts in April 2017, the Offender asked a number of persons to repay funds distributed to them domestically into the Lands Legal trust account. The Offender requested those persons to falsely describe the transactions as "repayment of loan" in order to conceal the true nature of the distribution and reimbursement of funds (Exhibit R, Exhibit V, Exhibit W).
Overall Assessment of Evidence
In considering the evidence and for the purpose of making these findings, I have taken into account the defence submissions by reference to the evidence of Hausman as to what was said, or not said, to the Offender concerning these events.
Having considered the evidence in totality, I regard the most powerful and telling evidence as being the contemporaneous communications to and from the Offender and Hausman (in particular), taken with the Offender's dealings with the "straw directors" and his communications with other persons with respect to the transfer of funds in and out of the trust account between February and May 2017.
In truth, this was a very substantial sum of money being pumped, over a three-month period, through the Offender's trust account in the interests of Hausman and Rostankovski, in circumstances where criminality was clearly identified from an early time as the source of the funds, and where the Offender was acting for reasons of self-benefit without any questioning or caution of a type which might be expected if his activities were merely those of a solicitor engaged in proper legal practice.
I have kept in mind the need to make a finding to the criminal standard as to belief, and not lesser states such as recklessness or negligence.
Although a finding should not be made to the criminal standard that the Offender, by the end of December 2016, had a clear belief that the sums to pass into the trust account were the proceeds of crime, I am satisfied beyond reasonable doubt that he had acquired an actual belief to that effect by very early February 2017, and that his belief did not diminish thereafter but was, in fact, reinforced by subsequent events.
This is not a case of some lesser state of mind perhaps existing prior to late February 2017 or early May 2017, with belief only crystalising at that time. Rather, the Offender possessed the necessary belief from early February 2017, and acted thereafter with that state of mind during the entire course of criminal conduct which followed.
Some Conclusions Concerning the Facts of the Offence
Over the 12-week period from 1 February 2017 to 18 May 2017, the Offender engaged in a course of conduct by which he received into his solicitor's trust account 53 deposits worth $24,244,740.00, believing those funds were the proceeds of crime, and disbursed the funds in 22 distributions on the private instructions of Hausman and Rostankovski to entities associated with Hausman, with the exception of $880,000.00 which the Offender transferred to a Hong Kong entity as an investment for a company associated with his mother. This payment represented payment arising from his dealings with Hausman for the Offender facilitating the movement of the proceeds of crime (Exhibit W, Exhibit V).
I am satisfied that, over the same period, the Offender created a false paper trail, including the Palumberi and Mills client files, and various documents signed by some of the "straw directors", to provide a veneer that the trust distributions were made on the authority and instructions of company directors who were, in fact, nominal or "straw directors" of companies being used in a fraud operated under the guise of Plutus Payroll. In this respect, the Offender had a clear understanding of the token role of the "straw directors" who were, in reality, manipulated by Rostankovski, Hausman and the Offender as part of the criminal course of conduct involved.
Once the sums had been deposited into the trust account, large sums were transferred to corporate entities, both domestically and offshore, including for the purposes of investment opportunities for which Hausman and Rostankovski intended to derive further profit. There is no doubt they were the true clients and beneficiaries of these arrangements undertaken with the Offender.
The Offender played a critical role in a sophisticated scheme. He was, with Hausman, a joint driving force for the offending in circumstances where the Offender could bring into play and implement as well his professional skills and facilities as a practising solicitor.
I am satisfied that the offence falls within the high range of objective gravity for an offence of this kind having regard to the quantum, duration and other features of the offence which arise for consideration, as noted in the principles summarised earlier in these remarks (see [17] above).
To the extent that the concept of moral culpability is used in an assessment of the objective gravity of an offence, this offence was one of substantial moral culpability on the part of the Offender: Tepania v R (2018) 275 A Crim R 233; [2018] NSWCCA 247 at [113]-[119].
The offending in this case was aggravated by the fact that the Offender was a solicitor and was in breach of his professional responsibilities: Croke v R [2021] NSWCCA 249 at [84]. The Offender applied his legal skills and professional standing as a solicitor as part of the course of criminal conduct involved: Croke v R at [89]. The leniency which ordinarily would apply, as a result of prior good character, is very significantly diminished in this case as that prior good character enabled the commission of the offence with audacity: Croke v R at [40], [88], [125] and [142].
In R v Hausman; R v Rostankovski [2022] NSWCCA 24, Hamill J considered the question of the prior good character of an offender when sentencing for so-called white collar offences. Whilst emphasising the need for individual attention to be given to the particular case in this respect, it is noteworthy that his Honour acknowledged (at [241]) a class of case where an offender's good character or lack of convictions facilitated the commission of the offence, or where an offender's knowledge, skills, qualifications, expertise or standing in the field allowed greater opportunity to commit the offence. The present Offender falls clearly within this category.
I am satisfied that the Offender used his position as a solicitor to lend legitimacy to dealings with the proceeds of crime and to conceal the true nature of the dealings. He exploited the façade, which his role as a solicitor created, to commit the offence. In these circumstances, his prior good character should be given limited weight on sentence.
It is certainly the case that the benefits obtained by the Offender were significantly less than those flowing to Hausman and Rostankovski.
The role of the Offender, with his particular skills, was a critical part of the operation which provided a veneer of legitimacy through the practice of his profession and the use of the trust account. There were elements of duplicity involved on the part of the Offender. His role was closer to that of Hausman, albeit utilising different skills.
I have kept these considerations in mind whilst noting that the parity principle operates ultimately in the nature of a check required of the sentencing court: Director of Public Prosecutions (Cth) v Gregory (2011) 34 VR 1; [2011] VSCA 145 at [31].
This is not a case of inordinate delay in the progress of the proceedings. The Offender has continued to work and to support his family during this period. The delay has assisted the Offender to an extent in support of a claim of rehabilitation and a degree of remorse. I will take the passage of time into account on sentence with those aspects in mind.
Offer to Plead Guilty to Lesser Charge
As mentioned earlier, the Offender offered to plead guilty to the lesser offence based on recklessness at the Local Court Case Conference on 25 June 2019. That plea was rejected by the Crown and the trial proceeded upon the more serious offence, involving the element of belief, in relation to which the Offender was found guilty by the jury.
The Offender is not entitled any statutory benefit arising from these circumstances. However, I have kept in mind the defence approach to the preparation for and conduct of the trial where, as noted earlier, the real issue concerned the mental element of belief charged in the indictment.
This aspect should be taken into account in the Offender's favour by reference to the conduct of the trial, and his facilitating the course of justice by the use of admissions and agreed facts and the confinement of trial issues in the manner described.
The conduct of the trial on behalf of the Offender constituted facilitation of the course of justice warranting recognition in his favour on sentence (in an unquantified way) for reasons recently expressed: R v Milne (2012) 219 A Crim R 237; [2012] NSWCCA 24 at [284].
In addition to the use of the agreed facts and admissions, and the confinement of trial issues to the real issues in dispute, it is noteworthy that this trial was affected significantly by the COVID-19 pandemic which affected many participants in the trial including the Offender, counsel on both the Crown and defence side and jurors.
To the extent that the Offender or his legal team were so affected, there was at all times complete co-operation between the parties and the Court to ensure that the trial could continue to run, including appearances by audio-visual link whenever necessary: R v Chalabian (No. 7) [2022] NSWSC 227; R v Chalabian (No. 8) ]2022] NSWSC 304; R v Chalabian (No. 10) [2022] NSWSC 316; R v Chalabian (No. 12) [2022] NSWSC 432.
I take these aspects into account in the Offender's favour on sentence.
Rehabilitation and Remorse
Contained within the Offender's documentary subjective case are expressions of regret and remorse expressed by him to others for what he has done. I have kept in mind that the Offender has not himself given evidence so that these statements are not able to be tested. Caution must be exercised in these circumstances before any substantial weight is given to evidence of this type: Imbornone v R [2017] NSWCCA 144 at [57].
It has been said that remorse means regret for wrongdoing which an offender has caused because it can be safely assumed that an offender will always regret the fact that he has been apprehended: Alvares v R (2011) 209 A Crim R 297; [2011] NSWCCA 33 at [44].
At the same time, I have kept in mind the preparedness of the Offender to plead guilty to an offence under s.400.3(2) based on recklessness which itself is a serious offence. That preparedness provides some support for the existence of a level of insight and remorse on the Offender's behalf.
In addition, the Offender accepts, as he must, the inevitability that he will be removed from the role of legal practitioners arising from the verdict of the jury for this most serious offence and the sentence to be passed. The Court was informed that there will be no attempt to resist such an application.
Having regard to the age of the Offender, and his likely age when he is in a position to obtain his conditional release in the community, it is highly unlikely that he will be in a position to reoffend. It is certainly the case that he will not be practising law again as a result of this offence.
I am satisfied that the Offender has good prospects of rehabilitation and that he represents a very low risk of reoffending. These aspects will be taken into account in his favour on sentence.
The Offender has not spent any time in presentence custody so that the sentence should date from today.
Sevag Chalabian, would you please stand.
For the offence of money laundering contrary to s.400.3(1) Criminal Code (Cth) for which you were found guilty by the jury on 21 April 2022, I sentence you to imprisonment for a period of 12 years comprising a non-parole period of seven years and six months commencing on 23 June 2022 and expiring on 22 December 2029 with a balance of term of four years and six months commencing on 23 December 2029 and expiring on 22 June 2034.
The earliest date upon which you will be eligible for release on parole is 23 December 2029.
I am required by s.16F Crimes Act 1914 (Cth) to explain to you the sentence I have imposed. I have ordered that you be imprisoned for a period of 12 years commencing on 23 June 2022 and expiring on 22 June 2034. I have fixed a non-parole period of seven years and six months which will expire on 22 December 2029. That means that you will be imprisoned for not less than seven years and six months. If you are granted parole at the end of that time, you will serve the balance of the sentence in the community. If a parole order is made, it will be subject to conditions, and it may be amended or revoked. In particular, it may be revoked if you fail without reasonable excuse to fulfil those conditions, in which event you may be returned into custody, pending further review and possible re-release, depending upon your behaviour and response to any rehabilitation opportunities which may be offered whilst you are in custody.