R v Ellery [2012] VSC 349

2 The offence occurred between 28 June and 19 July 2006. At the time, you were the chief financial officer, and a company secretary, of Securency International Pty Ltd ("Securency").

3 Securency is an Australian company, which is jointly owned by the Reserve Bank of Australia and a British company, Innovia Films BVBA. Securency manufactures and supplies a range of unique substances used in banknotes and security documents. Its polymer substrate product is used by various people, including another Reserve Bank subsidiary, Note Printing Australia Limited ("Note Printing"), in the printing of banknotes.

4 In 1999 and 2000, Note Printing and Securency each negotiated and entered into separate agreements with a Malaysian man, Abdul Kayum Syed Ahmad ("Kayum"), and/or his company, Aksavest Sdn Bhd, appointing them as their agent in Malaysia. The agency agreements provided that the agent was to be remunerated in the form of success-based commissions, based on the contracts which the agent obtained for the relevant company. The agent was to bear the cost of any expenses incurred in order to obtain contracts.

5 In December 2003, Note Printing entered into a contract to supply Bank Negara Malaysia with 160 million 5 ringgit polymer banknotes. Securency was not a party to the banknote contract. Note Printing used Securency's polymer substrate in manufacturing the banknotes, and the contract price of $15.2 million included a price for that substrate. Note Printing paid Kayum substantial commission payments, in respect of the 2003 contract.

6 The Commonwealth Director of Public Prosecutions has brought charges against Securency, Note Printing, and various former officers of the two companies, alleging that they conspired with each other and with Kayum, between October 2001 and December 2003, to offer bribes to officials in the Malaysian bank, in order to obtain the business of supplying 5 ringgit polymer banknotes. The DPP alleges that the bribes were to be paid from the commission payable to Kayum.

7 The DPP does not allege that you were a participant in the alleged Malaysian conspiracy, or that you were involved in it when, in mid-2006, you committed the false accounting offence to which you have pleaded guilty.

8 After the period of the alleged Malaysian conspiracy, Note Printing and Securency were keen to secure further business from the Malaysian bank. As with the 2003 contract, it was proposed that Note Printing - not Securency - would be the party to any future bank contract.

9 Since late 2005, Kayum had been asking Securency to pay him some sort of commission for the substrate used in the production of Malaysian banknotes, even though the party responsible for paying his commission should have been Note Printing, not Securency.

10 You were not a party to the negotiations between Kayum and senior officers of Securency, in relation to the payment of a special commission, most of which seem to have taken place in Malaysia. At all relevant times, you were based at the head office of Securency in Craigieburn, Victoria. However, you were copied in on some internal Securency documents regarding the proposed payment of such a special commission.

11 In December 2005, the Malaysian bank advised that it would be offering Note Printing a contract to produce a further 100 million 5 ringgit polymer banknotes. In March 2006, Note Printing entered into that further contract.

12 Almost as soon as the 2006 contract had been signed, Kayum raised again the question of Securency paying him the special commission, so that he could "disburse certain expenses accrued". In an April email to another Securency employee, Kayum asked that it be remitted in Australian dollars into a nominated bank account in Singapore. Unlike other payments made in relation to legitimate expenses, Kayum did not provide any supporting documents to justify the expenses to which he referred.

13 Kayum continued to pursue the question of payment of such a commission with other Securency employees. Some of his requests for payment were copied, or forwarded on, to you by others.

14 In January and June 2006, you advised several other senior employees of Securency that it was Note Printing, and not Securency, who was and should be responsible for paying Kayum's commission.

15 You were subsequently informed by another senior employee that Securency had agreed verbally to pay Kayum a 5% commission. You sought confirmation of that verbal agreement from the managing director of Securency, to whom you directly reported. The managing director suggested to you that Kayum could be paid either by way of a 3 to 5% commission on substrate price, or Securency could "consider payment against expenses but only to say $80,000".

16 You responded by essentially agreeing that the payment should be made by reference to commission, not expenses. You provided calculations for commission totalling $79,502, based on the substrate price. A few days later, after discussions with other senior employees, the managing director told you that the amount should be paid "for reimbursement of expenses in relation to [Kayum's] ongoing development of polymer in Malaysia."

17 On 18 July 2006, you received from another senior employee a debit note from Kayum's company, Aksavest, for the sum of $79,502. Even though you had calculated that precise sum on a percentage commission basis, the sum was said in the debit note to represent the following costs:

18 You did not sight any supporting documentation for the debit note. The debit note requested payment directly into Kayum's bank account in Singapore.

19 You forwarded the debit note to one of the accounts staff who reported to you, and asked that it be paid promptly. You informed her that one of the other senior employees had sighted the supporting documentation to substantiate the payment.

20 On 19 July 2006, Securency telegraphically transferred the $79,502 into Kayum's Singapore bank account.

21 You did not create the debit note yourself; it appears to have been prepared by Aksavest staff. However, you were well aware, when you forwarded it with a request for payment, that the invoice was false, in that no such marketing expenses had been incurred.

22 Your knowledge that what you were doing was dishonest at that time is evidenced by the steps you subsequently took to try to conceal what had actually occurred.

23 In March 2007, the Securency board was considering proposed changes to its overseas agency arrangements. You prepared a paper for the board, which recorded that commission of $79,502 had been paid to the Malaysian agent.

24 Then, in June 2007, in answer to an inquiry by an assistant governor of the Reserve Bank, you informed him that Securency had never paid any commission to its Malaysian agent. Instead, you said that, in July 2006, Securency had reimbursed Kayum for "marketing expenses" of $79,502.

25 You maintained this deception, when queried in July 2007 by the Reserve Bank auditors. You were asked to provide supporting documentation in relation to the payment. The managing director suggested a response to the auditors' enquiries, which you essentially adopted as your own. It involved a false and elaborate attempt to justify the payment, as a legitimate reimbursement of Kayum's actual expenses.

26 You are not being punished for your later attempts to cover up, but they are relevant as evidence of your earlier dishonesty.

27 Unlike most cases of false accounting, you did not offend for the personal financial gain of yourself or a closely-related person or company. The person who benefited from the offence was Kayum, somebody with whom you had no personal relationship. And the primary motive behind your offending was to assist your employer in its commercial activities, by assisting it to gain the benefit of future contracts. It might be said that part of your motive was to maintain or advance your position in Securency, but that is a far more indirect personal gain than in most cases of false accounting.

28 You did initially challenge Kayum's entitlement to be paid anything by Securency, but eventually succumbed to the requests and assurances of other senior employees that the payment should be made, and in a particular manner. I also accept that you were acting within the culture which seems to have developed within Securency, whereby staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents. Secrecy, and a denial of responsibility for wrongdoing, also seem to have been part of the corporate culture at Securency at that time.

29 The fact remains that you were Securency's chief financial officer, responsible for authorising and making payments. You were also a company secretary. You occupied positions of importance within a subsidiary of Australia's central bank. Your offending involved a serious and dishonest breach of trust. It was done in order to disguise the true nature of the transaction from the board and the owners of Securency. Notwithstanding the lack of personal financial gain, and the relatively modest amount involved, I assess your offending as being in the mid-range of false-accounting offences.

30 You are 56 years old. Since completing university, you have worked your entire adult life as an accountant, in various places in Australia and overseas.

31 You had not been involved in the banknote industry before you started working with Securency in 2003.

32 In May 2009, The Age newspaper started to publish articles about the alleged involvement of Securency and Note Printing in bribing foreign bank officials. In August 2009, you were stood down from your position. In January or February 2010, your employment with Securency was terminated.

33 Like many offenders involved in so-called "white collar crime", you have no prior criminal history and have, prior to this offending, been of good character. The lives of you and your family have been devastated by the consequences of discovery and punishment, particularly given the substantial media attention your case has received.

34 Your career as a respected, senior accountant and corporate officer has effectively been destroyed by your actions. You are now working in a relatively lowly accounting job, in a developing country, in order to support your family (who have remained in Australia, and who only see you periodically).

35 It is unlikely that you will re-offend, and your prospects of rehabilitation are high. Specific deterrence does not feature as a significant sentencing consideration in your case.

36 General deterrence remains an important consideration in cases of white-collar crime; that is to say, there is a need to deter others from engaging in similar conduct. However, the need to deter others may be less significant in a case such as this, where the false accounting was not done for your personal financial benefit.

37 There also remains a need for denunciation and just punishment.

38 There are a number of strong, mitigatory factors in this case.

39 The prosecution accepts that you pleaded guilty to this charge at the earliest possible opportunity. Your plea has a utilitarian value, in that it has saved the time and cost of a trial.

40 I also accept that you are now - after some initial hesitation - genuinely remorseful for what you have done, and have accepted responsibility for your actions and demonstrated a willingness to facilitate the course of justice.

41 Around May 2009, the Australian Federal Police started investigating the activities of Securency and Note Printing, in relation to the alleged offering or payment of bribes to foreign officials. You were one of two officials nominated by Securency to assist the police with their enquiries. Initially, the AFP had concerns that you were not providing all requested documents and were downplaying your own role in events.

42 However, since being contacted again by the AFP in mid 2011, you have co-operated fully with the police. This year, you have voluntarily travelled to Australia from your overseas employment on a couple of occasions, spending several weeks being interviewed extensively by the AFP.

43 You have also provided the AFP with two computer hard-drives, containing electronic material you had down-loaded from Securency. That material has helped corroborate your version of events, as well as providing the AFP with some previously unavailable evidence.

44 Apart from dealing with some specific transactions, you have provided a detailed illustration of aspects of the corporate culture of Securency during the relevant period. You are also assisting the AFP in relation to their ongoing enquiries concerning allegations of the payment of bribes by Securency in another foreign country, which are not yet the subject of any conspiracy charges.

45 The senior investigations officer in charge of the foreign bribery cases is confident that your 72 page witness statement, dated 17 July 2012, is highly accurate. He says that your evidence is not as valuable as somebody in the "inner sanctum" in relation to the alleged bribery activities. Its value is also limited by the fact that you were only employed by Securency between 2003 and 2010, whereas the majority of the current conspiracy charges relate to the period between 1999 and 2004.

46 Nevertheless, he says you will be an important prosecution witness in any committal or trial in relation to the conspiracy charges. I accept and proceed on the basis of his assessment.

47 Conspiracies, such as the ones in which Securency, Note Printing and their senior executives are alleged to have been involved are, by their very nature, often difficult to prove simply by relying on documents; much of what really occurred is either not documented, or documents are not retained. In those circumstances, an offer to give detailed oral evidence against alleged offenders will generally attract a substantial discount.

48 You have undertaken in writing, and to the court, to give full and frank evidence for the prosecution, in accordance with your witness statement, against the alleged conspirators. Your evidence is not limited to evidence in relation to the alleged Malaysian conspiracy, but also in relation to similar conspiracies in some other foreign countries. You have also undertaken to provide, and confer in relation to, any further statement reasonably required of you by the AFP.

49 You are entitled to a substantial discount on the sentence which I would otherwise have imposed on you, in recognition of your early plea. And, in this case, in determining what discount to give you for pleading guilty, I have taken into account that it is inextricably linked with your co-operation with law enforcement authorities.

50 I have also imposed a less severe sentence than I otherwise would have imposed, because of your undertaking to provide future assistance to law enforcement authorities. Pursuant to s 5(2AB) of the Sentencing Act 1991, I direct that there be noted in the records of the court the fact that the undertaking was given, and its details.[1]

51 The maximum penalty for this offence is 10 years' imprisonment.

52 The sentencing statistics and other cases concerning this offence, or similar offences, provide only limited assistance in sentencing you. Most of the cases of false accounting involve offenders creating false accounts either to cover up a theft, or to obtain a benefit (such as a loan from a bank) to which they would not otherwise be entitled. The sentences in such cases reflect the fact that the persons directly benefitting from the false accounting are the offenders themselves, or persons or companies closely connected to them.

53 Although your counsel urged me to consider the possibility of sentencing you to a fine or an adjourned undertaking, I am not persuaded that the purposes for which the sentence is imposed can be achieved by a sentence that does not involve a period of imprisonment. But, having regard to the relevant matters,[2] I have concluded that it is desirable to wholly suspend the sentence I am going to impose.

54 Balancing as best as I can the principles of sentencing enunciated in the Sentencing Act, I have concluded that the appropriate sentence is that you be imprisoned for a period of 6 months' imprisonment. I order that the whole of the sentence be suspended for the period of 2 years.

55 That means you will not be taken into custody today. However, if during that 2 year period, you commit another offence which is punishable by imprisonment (whether in or out of Victoria), it is very likely that you would be taken into custody to serve the whole of the suspended sentence of 6 months' imprisonment.

56 I declare, pursuant to s 6AAA of the Sentencing Act that, but for your plea of guilty, I would have sentenced you to a total effective sentence of 1 year's imprisonment, with a minimum non-parole period of 9 months.

[1] Undertaking dated 18 July 2012, made pursuant to s 5(2AB) of the Sentencing Act 1991.

[2] Contained in s 27(1A) of the Sentencing Act.