R v Emini & Blumberg [2011] VSC 336

CRIMINAL LAW - Sentence - Use position as a director dishonestly with the intention of gaining an advantage - Plea of guilty - Cooperation with law enforcement agencies - Sentence of 12 months' imprisonment, to be released on recognisance after serving six months - Sentencing Act 1991, s 6AAA - Crimes Act 1914 (Cth), ss 16A and 21E.

1 Lirim Emini, you have pleaded guilty to three counts of contravening s 184 of the Corporations Act 2001. Anthony Charles Blumberg, you have pleaded guilty to one count of contravening s 184 of the Corporations Act. The maximum penalty for contravening s 184 of the Corporations Act is five years' imprisonment and a fine of $220,000.[1]

2 Mr Emini, the charges to which you have pleaded guilty are as follows:

(a) Charge 1: In about July 2006, you, being a director of Leveraged Capital Pty Ltd, used your position dishonestly, with the intention of gaining an advantage for Riqueza Holdings Ltd and yourself, by causing a transfer of securities held by Leveraged Capital to Riqueza, namely 23,602,799 units of Bolnisi Gold NL shares and 34,147,750 units of Kings Minerals NL shares.

(b) Charge 2: Between 7 January 2008 and 21 February 2008, you, being a director of Leveraged Capital, used your position dishonestly with the intention of gaining an advantage for Opes Prime Stockbroking Limited and yourself, by causing a transfer of securities held by Leveraged Capital to Riqueza, of the following:

- 4,000,000 units of Coeur D'Alene Mines Corporation shares;

- 1,415,000 units of Coeur D'Alene Mines Corporation shares;

- 25,000,000 units of Citadel Resource Group Ltd shares; and

- 2,200,000 units of Po Valley Energy Limited shares.

(c) Charge 3: On or about 20 March 2008, being a director of OPSL, you were reckless and failed to exercise your powers and discharge your duties in good faith in the best interests of OPSL, when you signed financial documentation on behalf of OPSL with the Australia & New Zealand Banking Group Ltd ("ANZ"), whereby OPSL altered its financial arrangements with ANZ and OPSL pledged its assets as security for the purpose of meeting obligations of Leveraged Capital.

3 Mr Blumberg, the charge to which you have pleaded guilty is as follows:

On or about 20 March 2008, you, being a director of OPSL, used your position dishonestly, with the intention of directly or indirectly gaining an advantage for yourself or someone else by signing financial documentation on behalf of OPSL with ANZ whereby Opes Prime Group Limited and OPSL obtained a term loan from ANZ and OPSL pledged its assets as security for the purpose of meeting obligations of Leveraged Capital.

4 As at 20 March 2008, Opes Prime Group Limited ("OPGL") was a company which held all the shares issued in the capital of OPSL. You, Mr Emini, through a family trust, held 27.332% of the shares; and you, Mr Blumberg, held 27.242% of the shares in your personal capacity. Both of you were directors of OPGL and OPSL. At the same time, Leveraged Capital was a company in which you, Mr Emini, held 50% of the shares. Mr Emini, you were a director of Leveraged Capital. However, Mr Blumberg was not a director, and had no ownership interest in this company.

5 The principal business of OPSL and Leveraged Capital was securities lending and borrowing.

6 Part of OPSL's and Leveraged Capital's business of securities lending and borrowing involved the provision of equity financing. OPSL's and Leveraged Capital's equity financing business operated by clients lodging their shares as security, against which they received cash advanced to them by OPSL and Leveraged Capital, up to a fixed percentage of the market value of those securities. This percentage was known as the loan to value ratio ("LVR"). These transactions were conducted pursuant to an industry standard contract known as the Australian Master Securities Lending Agreement ("AMSLA"). Such a transaction typically would consist of the following:

(a) a client would deposit securities with OPSL in return for cash collateral (effectively a loan, which attracted interest);

(b) OPSL would deliver those securities to a financier and the financier would in turn deposit cash collateral with OPSL;

(c) the amount of cash collateral received by clients of OPSL and by OPSL from its financier would be driven by the relevant LVR that applied to the particular shares. OPSL was able to borrow more from the financier against a particular parcel of shares than it would loan out to its client; and

(d) a client could require the return of its shares (or equivalent securities) upon the repayment of its loan.

This was procedurally similar to margin lending, except that, pursuant to the express terms of the AMSLA, title to the securities that clients lodged passed to OPSL.

7 OPSL and Leveraged Capital were typically willing to lend against a far wider pool of stock and at higher LVRs than traditional margin lenders. Their clients could potentially obtain equity financing from OPSL and Leveraged Capital for large tranches of stock regarded by the market as "illiquid" and for which no other source of financing might be available. OPSL and Leveraged Capital were able to operate this way because there were financiers prepared to offer OPSL and Leveraged Capital financing on the same stocks.

8 In order to loan funds to their clients under securities lending and borrowing facilities, OPSL and Leveraged Capital entered into financing arrangements with financiers. The principal financier used was ANZ. Pursuant to the facility with their financiers, OPSL and Leveraged Capital would lodge shares with the financier, and in return would receive cash or shares. The only financier used by Leveraged Capital was ANZ.

9 Pursuant to the terms of the AMSLA, title to the shares lodged by OPSL or Leveraged Capital with a financier passed to the financier. The amount of cash or shares that could be borrowed would be determined by the LVR that the financier was willing to give OPSL or Leveraged Capital on the shares lodged. Typically, the financier would provide OPSL or Leveraged Capital with a higher LVR than would be provided to the retail client. This provided OPSL and Leveraged Capital with a buffer between the funds it was allowed to borrow from its financier against a particular parcel of shares and the funds it was willing to advance to a client against that parcel of shares.

10 The trading activities of OPSL and Leveraged Capital were intertwined. Although Leveraged Capital was not technically a subsidiary of OPSL or OPGL, from the point of view of ANZ, Leveraged Capital was closely related to OPSL and ANZ managed its relationship with OPSL and Leveraged Capital as if they were part of the same group of companies.

11 Where market fluctuations reduced the value of a client's shares to a level where it no longer provided adequate security for its loan (i.e. the LVR was exceeded), OPSL or Leveraged Capital would ordinarily issue that client with a margin call. On receipt of a margin call, a client would be required to lodge additional cash to reduce its loan size or lodge securities to increase the value of his or her portfolio and thereby meet the required LVR. Alternatively, a client could sell part of his or her portfolio, using the sale proceeds to repay all or part of the loan. If a client did not take these steps, then the terms of the AMSLA permitted OPSL or Leveraged Capital to close out the client's position by selling off all or part of the stock deposited by the client so as to repay the loan.

12 Similarly, where the OPSL or Leveraged Capital loan balance with a financier exceeded that financier's LVR, this could also trigger a margin call, requiring OPSL or Leveraged Capital to lodge additional securities to increase their collateral or deposit additional funds so that the loan balance no longer exceeded the available margin. Both the ANZ/OPSL AMSLA and the ANZ/Leveraged Capital AMSLA contained netting provisions dealing with the consequences of the relevant AMSLA being brought to an end by one of the parties. These netting provisions involved the conversion of contractual obligations into money obligations which would then be set off against each other to arrive at a net amount payable by one party to the other.

13 OPSL was at all relevant times a member participant of the Australian Stock Exchange ("ASX") and a participant of Australian Clearing House Pty Ltd ("ACH"). OPSL was subject to the risk-based capital requirements set out in the ACH Clearing Rules and was required to monitor and calculate regular capital liquidity levels and lodge capital returns in accordance with Schedule 1A of the ACH Clearing Rules. OPSL was required to submit monthly returns on the capital liquidity ratios. Further, it was required to ensure that the ratio of liquid capital to total risk was maintained at 1.2 to 1 or above.

14 A breach of the minimum capital requirements set out in the ACH Clearing Rules was (and is) considered by the ASX to be a serious breach and is an event of default under ACH Clearing Rule 15.1.1(m).

15 For the purposes of assessing OPSL's capital liquidity ratio, the calculation of total risk was required to include OPSL's counterparty risk. Provided that OPSL's clients were within their buffer (determined by reference to the relevant LVRs), there was no counterparty risk in respect of those clients.

16 The liquid capital requirement (or rule 1A, as it was often referred to at OPSL) impacted if a client was in margin call (i.e. the cash loan value exceeded the total security loan valuation ratio). However, the real impact was when a client went into negative equity. The limited balance sheet of OPSL had the potential to affect the business if it sustained a significant loss in any particular client account. Specifically, if a client in margin call could not make good that call, or it could not be covered by the selling of the client's stocks or other assets, and the client did in fact default, the loss in that account had the capacity to affect the solvency of OPSL and its ability to continue trading.

17 In the first half of 2006, a restructuring was occurring in relation to the OPSL and Leveraged Capital finance facilities. As a result of this restructuring, Leveraged Capital and Hawkswood Investments Pty Ltd (an investment vehicle in which, amongst others, you, Mr Emini, had an interest) required additional sources of finance. Specifically, Leveraged Capital required an additional source of finance because, as part of the restructuring, ANZ substantially reduced Leveraged Capital's credit limit.

18 You, Mr Emini, obtained the additional source of finance (ultimately to come from OPSL) by the transfer from Leveraged Capital of stocks which had been deposited by a client, Altinova Nominees Pty Ltd - namely the 23 million plus units of Bolnisi Gold shares and the 34 million plus units of Kings Minerals shares referred to in charge 1 (and valued at approximately $65 million). The transfer of these stocks to Riqueza Holdings Ltd (an entity over which you had control) collateralised loans from OPSL to Riqueza. This transfer thus enabled loans then to be made by Riqueza to Leveraged Capital. Although the transfer of stock from Leveraged Capital to Riqueza was legal under the terms of the AMSLA existing between Altinova and Leveraged Capital and Leveraged Capital and Riqueza, the transfer of stock at your direction, Mr Emini, was dishonest in that the stock was used to support the loans from OPSL to Riqueza and was carried out in circumstances where you could not guarantee the recovery of the shares to meet Leveraged Capital's obligation to return the same to Altinova, if Altinova exercised its right of recall. That said, the stock was eventually returned in or around July 2007 to the Leveraged Capital collateral pool.

19 Between 7 January 2008 and 21 February 2008, you, Mr Emini, caused the transfer of some $45 million worth of securities (being those referred to in charge 2), lodged by clients with Leveraged Capital, to Riqueza. The transfers were dishonest in that they involved transfers to an entity controlled by you for the benefit of OPSL (an entity in which you were a director and beneficial shareholder). Again, the transfers were dishonest, notwithstanding that they were legal under the terms of the relevant AMSLAs.

20 The transfers were made in circumstances (including a falling stock market) where there was a substantial risk that those shares could not be retrieved if the beneficial owners exercised their right under the terms of their loan agreements with Leveraged Capital.

21 Your plea in respect of this charge has been accepted on the basis that you made these transfers in order to ensure that OPSL could meet its ASX 1A capital liquidity requirement and therefore to ensure that OPSL could continue trading. The circumstances faced by OPSL were such that it could not sell down the relevant client accounts in negative equity/margin call, as to do so would crystallise losses in those accounts which the business could not sustain due to its lack of available capital liquidity. Further, it is accepted that the decision to effect the transfers was made in the belief that these individual client accounts would come back into positive equity and continue to be important sources of income for the business as the market improved. In a nutshell, the transfers were seen by you as a short term solution enabling the business to continue trading whilst long term resolutions could be found for these problems.

22 That said, making these transfers was dishonest in circumstances where you were personally conflicted as you were a director and beneficial interest holder in OPSL and you were also a director of another company which benefited from these transfers. However, it should be noted that the material discloses (and it is accepted by the Crown) that you also supported the relevant client accounts in negative equity or margin call with your own stock and personal wealth - a matter that was known by key personnel within OPSL.

23 On 20 March 2008, you, Mr Emini, signed financial documentation on behalf of OPSL with ANZ altering OPSL's financial arrangements with ANZ and pledging OPSL's assets as security for the purpose of meeting obligations of Leveraged Capital. You have pleaded guilty to being reckless and failing to exercise powers and discharge duties as a director of OPSL in good faith in the best interests of OPSL as a result of signing this financial documentation.

(a) First, you were under increasing physical and emotional pressure leading up to 18 March 2008, on which date you were stood down from active duties at Opes Prime.

(b) Secondly, in the days and weeks leading up to 18 March 2008, it was clear to Opes Prime staff that you were not coping with the pressure of your work.

(c) Thirdly, you took no part in various important negotiations and meetings on 19 and 20 March which led to the ultimate altering of OPSL's financial arrangements with ANZ.

(d) Fourthly, there is no evidence that you ever read the relevant documents or that they were ever explained to you.

(e) Fifthly, you signed the documents believing that it was a rescue package for OPSL that involved the injection of $95 million cash into the business of OPSL and the continuing support of ANZ which would enable OPSL to meet its obligations and continue trading.

25 In the circumstances, your recklessness was signing the documentation the subject of charge 3, without having read it and in circumstances where you must have been aware that there was a substantial risk that signing was not in the best interests of OPSL. Having regard to what I will say shortly, it is not necessary for me to say anything further about charge 3 at this stage.

26 Mr Blumberg, on 20 March 2008, you signed financial documentation on behalf of OPSL with ANZ whereby OPSL altered its financial arrangements with ANZ and pledged OPSL's assets as security for the purpose of meeting obligations of Leveraged Capital.

27 On 10 March 2008, you, Mr Blumberg, became aware that a client of Leveraged Capital was requesting re-delivery of a parcel of stock with a then current value of approximately $95 million. By 17 March 2008, you had come to learn that these shares (by various contractual routes) were in the possession of ANZ. Your knowledge of these matters is set out in a statutory declaration you completed in May 2008. Ultimately, after lengthy discussions and negotiations, ANZ agreed to provide a facility to OPSL and OPGL to draw down $95 million. The terms of the agreement with ANZ included (amongst others) a re-writing of the netting off provisions that was favourable to ANZ and unfavourable to OPSL; the release by ANZ of the $95 million worth of client stock that had been demanded from Leveraged Capital; cross guarantees and indemnities from (amongst others) OPSL and OPGL and personal guarantees and indemnities signed by you, pledging all your personal property in favour of ANZ for all money owed by OPSL or OPGL to ANZ up to a maximum of $95 million.

28 The material discloses that you, Mr Blumberg, knew that OPSL was obtaining a facility to discharge an obligation of Leveraged Capital and that this was improper. Further, you knew the effect (so far as OPSL was concerned) of re-writing the netting or set off provisions in the ANZ AMSLA. Additionally, you knew when you signed the relevant documents on 20 March 2008 that there was a very real chance that OPSL and OPGL were insolvent or would not be able to repay the $95 million.

29 Whilst the documents executed on 20 March 2008 were executed after you, Mr Blumberg, were told that Leveraged Capital would release a loan owing personally by you to it, I am not prepared - in the circumstances of your pledging your interest in OPGL and your personal wealth to ANZ as part of the 20 March transaction - to conclude that this was a specific motivating factor. Ultimately, I accept that you knowingly engaged in this improper and dishonest transaction for the purpose of attempting to keep OPSL (a company in which you had a substantial interest) in business.

30 Both of you have pleaded guilty to the offences with which you have been charged. Mr Emini, you indicated as early as April 2008 that you were prepared to plead guilty to an appropriate indictment. Whilst you, Mr Blumberg, agreed to plead guilty at a later time, you provided a statutory declaration in May 2008 in which significant admissions were made. In both your cases, the pleas of guilty made by you were entered at the earliest time. Further, the Crown concedes (correctly) that both pleas facilitate the course of justice and demonstrate remorse.

31 Mr Emini, you entered into discussions with the Australian Securities and Investments Commission in April 2008. In those discussions, you made full disclosure, to ASIC and the Crown, concerning the business model of Opes Prime and of the offending in this case. Your disclosures in this case are all the more significant because, as the Crown puts it, "the offending in this case is of the highest complexity". Further, your disclosures not only assisted the Crown's case against you, but also against Mr Blumberg and another accused who is yet to stand trial.

32 As part of your cooperation, you have provided a 64 page statement, a detailed chronology and a folder of 125 emails of significance. Additionally, you have agreed to give evidence against the remaining co-accused. The Crown, in its submissions, described your cooperation and disclosure as being at the highest level.

33 Mr Blumberg, you have also cooperated, provided a statement and agreed to give evidence against the remaining co-accused. The Crown (correctly in my view) describes your level of cooperation as high, but not as high as Mr Emini's. That said, it must also be noted that you provided assistance from May 2008 concerning the circumstances that led to the signing of the 20 March 2008 transaction documents. Further, I infer that the statutory declaration and assistance provided by you assisted the liquidators of OPGL and OPSL to recover the sum of $226 million together with certain other assets valued at approximately $27 million.[2]

34 In sentencing both of you, it is relevant to consider any injury, loss or damage resulting from your offences.[3] The Crown does not allege any specific loss. The Crown notes that the securities transferred by you, Mr Emini, in July 2006 were returned, and then submits that, as a result of the settlement to which I have just referred, it is difficult to quantify any actual loss to OPSL's creditors as a result of the criminal conduct of each of you.

35 Whilst the collapse of Opes Prime is part of the background and circumstances to your offending, it must be remembered that each of you falls to be sentenced for the offending to which you have pleaded guilty, rather than for some broad and uncharged allegation that you each engaged in fraudulent conduct which caused Opes Prime to collapse. I turn now to consider your personal circumstances.

36 Mr Emini, you are 48 years of age, and married with a family. Your career in finance started in 1981 and continued until the collapse of Opes Prime in March 2008. You were appointed CEO of OPSL in 2006. This appointment involved no additional payment of remuneration to you. You continued to receive the director's remuneration paid to you and other directors.

37 Prior to your offending, you had a previously unblemished record and character. A number of references were tendered on your behalf which spoke to your good character. I have been particularly impressed as to the detail and glowing nature of these references.

38 Medical reports were tendered from a treating general practitioner and treating psychologist. Specifically, the medical evidence is to the effect that in the days leading up to and including 20 March 2008, you were severely depressed, and were likely to have been psychologically incapacitated by that depression. Further, the position now is one where you function at a psychologically low level, suffering from chronic moderate depression with post traumatic stress disorder and cognitive issues. I have had regard to the medical evidence, specifically in relation to your psychological functioning as at mid March 2008, and then from that time to date. It is sufficient to say that there are considerations of the kind referred to in R v Verdins[4] which moderate the sentence that is to be imposed in respect of Count 3, and current issues which moderate the total effective sentence to be given on the basis that a sentence of imprisonment is likely to weigh more heavily on you than a person not suffering from the psychological conditions referred to in the medical evidence.

39 I have already dealt with the issue of your cooperation with the authorities following March 2008. This cooperation, as I have already said, demonstrates remorse. Further, having seen you in the witness box, I am satisfied that your remorse is real and genuine.

40 Following the collapse of Opes Prime, it was put that you have largely been housebound - spending considerable periods of time preparing and providing assistance to the authorities. Your personal wealth has been lost and you have gone bankrupt. Whilst your conduct since the collapse, and the material tendered, shows that you have excellent prospects of rehabilitation, your prospects of future employment will undoubtedly be affected by convictions for the offences for which you have pleaded guilty.

41 Mr Blumberg, you are 43 years of age, and married with two sons who are still in primary school. Like Mr Emini, you were, before you committed the offence with which you have pleaded guilty, a person of unblemished character and reputation. Similarly, as with the references tendered on behalf of Mr Emini, I have been impressed by the detail and high regard in which you have been held as described in the references tendered on your behalf. I have also had regard to the evidence given by your sister, Ms Blumberg-Latham, during the course of your plea.

42 Your career in the finance and business sector commenced in 1992. From that time until the collapse of Opes Prime, you were largely engaged full-time in this sector. Since the collapse of Opes Prime, you have engaged in such employment as you could. Recently, and until the plea hearing, you were working as a forklift driver.

43 It was submitted by your counsel that, whilst you have a close and supportive extended family, every member of the extended family of you and your wife lives outside Australia. Further, it was submitted that knowing that your wife is presently unable to be supported by immediate family in rearing your two sons, during what was described as "any period of extra imprisonment", was likely to make prison more burdensome for you. Whilst I accept this submission, the existence of this burden does not loom large in the overall exercise of the sentencing discretion.

44 I have already dealt with the issue of your cooperation with authorities. This cooperation, as I have already said, demonstrates remorse. Further, having seen you in the witness box, I am satisfied that your remorse (like Mr Emini's remorse) is both real and genuine.

45 Medical reports were tendered from a general practitioner and a psychologist. These set out, amongst other things, your history of heart surgery in 2006 and depression following the collapse of Opes Prime. I accept that you currently suffer from a dysthymic disorder and that this depressive condition, coupled with your other medical ailments, may make any time in prison more burdensome than otherwise would be the case. I also accept that this should moderate any term of imprisonment imposed on you.

46 As was outlined in the plea on your behalf, your financial circumstances, like Mr Emini's, have changed substantially following the collapse of Opes Prime. Having to engage in manual work, rather than work in the finance industry, underscores this change. Again, like Mr Emini, whilst your conduct since the collapse, and the material tendered, shows that you have excellent prospects of rehabilitation, your prospects of future employment will undoubtedly be affected by a conviction for the offence for which you have pleaded guilty.

Sentencing principles and their application to each offence

47 Section 16A of the Crimes Act requires me, in determining the sentences to be passed, to impose sentences or make orders that are of a severity appropriate in all the circumstances of the relevant offence. This is the primary obligation, which is reinforced by s 16A(2)(k), which requires the Court to take into account that the accused is adequately punished for the relevant offence. Section 16A(2) also sets out a number of other matters which the Court must take into account. Insofar as each of them is relevant in respect of each offence charged, I have taken them into account.

48 The offences to which you have both pleaded guilty are serious, and the conduct engaged in by each of you is a serious example of each offence. However, Mr Blumberg, as your counsel submitted, it is to be remembered that your offence was in effect a "one off", rather than forming part of any course of conduct.[5] Mr Emini, of the charges laid against you, charge 2 is the most serious, and then charge 1. Charge 3 (not involving actual dishonesty) is serious, but less so than the dishonesty charges.

49 In view of your pleas of guilty and the high levels of remorse and co-operation shown by each of you, the Crown submits that the following sentencing discounts would be appropriate: for you, Mr Emini, a discount of 60%;[6] and for you, Mr Blumberg, a discount of 50%.[7] Broadly speaking, without being too mathematical, and remembering that sentencing is a process of instinctive synthesis, I accept the Crown's submissions as to discount.

50 You are both entitled to have your previous good character taken into account in the sentencing process. The fact that it is a feature of offending of the kind you both engaged in, that offenders are likely to have no prior convictions, are likely to have good character references, and are likely to have good prospects of rehabilitation, does not gainsay this proposition. Additionally, you are both entitled to have taken into account the fact that you, Mr Emini, are already disqualified, and you, Mr Blumberg, will be (upon conviction) disqualified, from managing a corporation. Further, you are each entitled to have taken into account the additional burden a sentence of imprisonment would impose upon you by reason of the matters to which I have already referred. I also take into account the length of time these matters have been hanging over your heads, and the possibility that as a result of your cooperation with authorities any sentence of imprisonment might be made more difficult for you.

51 Having said all that, the only sentence that is appropriate in the circumstances of these offences is imprisonment.[8] The offences were, as I have said, serious. Sentences which require each of you to spend actual time in custody are necessary having regard to the seriousness of the offending of each of you, and the necessity to deter others from like offending. This is so even though I am satisfied that it is highly unlikely either of you will offend in the future.

52 Mr Emini, as I have already said, charge 2 is the most serious charge to which you have pleaded guilty. Charge 3 is the least serious (although it is still serious). It follows that I will impose a higher sentence on charge 2 (which will be the base sentence) and a lower sentence on charge 1 and a lower sentence again on charge 3. Further, whilst there should be some cumulation in respect of charge 1 on charge 2, in my view, there should be no cumulation in respect of charge 3.

53 Mr Emini, on charge 2, you are convicted and sentenced to a term of imprisonment of 21 months commencing today. On charge 3, you are convicted and sentenced to a term of imprisonment of six months commencing today. On charge 1, you are convicted and sentenced to a term of imprisonment of 12 months starting 12 months from today (being 27 July 2012). This makes a total period of 24 months' imprisonment. However, I order that after you have served a period of 12 months, you may be released on a recognisance in the sum of $5,000 without surety to be of good behaviour for a period of 12 months.

54 I am required by the relevant legislation[9] to explain the purpose and consequences of making the recognisance release order I have just made. The purpose is to reflect the gravity of your offending, but also to take into account the mitigating factors to which I have already referred. You will thus serve 12 months in prison before being released. If you are of good behaviour over the following 12 months, that will be the end of the sentencing process insofar as this Court is concerned. If you are not of good behaviour, you will, in all likelihood, be brought back before this Court and, depending upon the nature and seriousness of your transgression, the Court may impose a fine; or extend the period of good behaviour; or impose a different penalty; or revoke the recognisance release order and send you back to prison for the balance of your sentence; or take no action.

55 Pursuant to s 6AAA of the Sentencing Act,[10] if you had not pleaded guilty,[11] I would have sentenced you to a total term of imprisonment of 5 years, permitting you to be released on a recognisance after serving 2 years and 6 months.

56 Pursuant to s 21E of the Crimes Act, I declare that, but for your undertaking to cooperate in the future, I would (on the assumption you pleaded guilty) have sentenced you to a term of imprisonment of 3 years and 6 months with release on recognisance after 21 months.

57 Mr Blumberg, you are convicted and sentenced to a term of imprisonment of 12 months commencing today. However, I order that after you have served a period of six months, you may be released on a recognisance in the sum of $5,000 without surety to be of good behaviour for a period of six months. Further, I declare that you have already served a period of nine days in custody, and I direct that this fact be noted in the records of the Court.

58 I am required by the relevant legislation[12] to explain the purpose and consequences of making the recognisance release order I have just made. The purpose is to reflect the gravity of your offending, but also to take into account the mitigating factors to which I have already referred. You will thus serve six months in prison before being released. If you are of good behaviour over the following six months, that will be the end of the sentencing process insofar as this Court is concerned. If you are not of good behaviour, you will, in all likelihood, be brought back before this Court and, depending upon the nature and seriousness of your transgression, the Court may impose a fine; or extend the period of good behaviour; or impose a different penalty; or revoke the recognisance release order and send you back to prison for the balance of your sentence; or take no action.

59 Pursuant to s 6AAA of the Sentencing Act, if you had not pleaded guilty,[13] I would have sentenced you to a term of imprisonment of 24 months, permitting you to be released on a recognisance after serving 12 months.

60 Pursuant to s 21E of the Crimes Act, I declare that, but for your undertaking to cooperate in the future, I would (on the assumption you pleaded guilty) have sentenced you to a period of imprisonment of 16 months with release on recognisance after 8 months.

[1] See s 1311 and Schedule 3 of the Corporations Act, and s 4AA(1) of the Crimes Act 1914 (Cth).

[2] See further, Re Opes Prime Stockbroking Limited (No 2) [2009] FCA 813; (2009) 179 FCR 20, [12], [13] and [15].

[3] Cf s 16A(2)(e) of the Crimes Act.

[4] [2007] VSCA 102; (2007) 16 VR 269.

[5] Cf s 16A(2)(c) of the Crimes Act.

[6] Cf R v Johnston [2008] VSCA 133; (2008) 186 A Crim R 345, 350 [18].

[7] Email sent 19 July 2011 at 1443 from Samantha Holmes of the Commonwealth Director of Public Prosecutions, Melbourne office.

[8] Cf s 17A of the Crimes Act.

[9] Section 16F(2) of the Crimes Act.

[10] I take the view that the Court is required to comply with s 6AAA of the Sentencing Act having regard to the decisions of the Court of Appeal in Scerri v R [2010] VSCA 287 and DPP (Cth) v Bui [2011] VSCA 61 and the reasoning of the High Court in Putland v R [2004] HCA 8; (2004) 218 CLR 174. However, it must be said that the difficulties referred to by Kaye J in R v Flaherty (No 2) [2008] VSC 270; (2008) 19 VR 305 in applying s 6AAA are multiplied in a case like the present, where the Court is also required to state a but for sentence in respect of future cooperation pursuant to s 21E of the Crimes Act. One immediately is faced with the problem as to whether the but for sentence under s 6AAA should be stated on the basis that there will or will not be future cooperation (it would be higher in the absence of future cooperation, and lower if there is to be future cooperation). Whilst Flaherty (No 2) (supra) states that an ongoing concern to cooperate with authorities should be taken into account for s 6AAA purposes, a different approach may have been taken in respect of future cooperation by the Court of Appeal in Bui (supra). See further, the approach taken by T. Forrest J in R v Rau [2010] VSC 370, [34]. See also Giordano v R [2010] VSCA 101.

In the circumstances of this case, it is not realistic to provide a but for sentence under s 6AAA that does not take into account the issue of cooperation. Cooperation was, in this case, inextricably linked, and necessarily involved, with the pleas of guilty. Specifically, it is artificial, and unrealistic, to analyse the sentences in this case on the hypothetical basis that there were no pleas of guilty, but that there would be ongoing future cooperation. If there were no pleas of guilty, one could not expect (in the circumstances of this case) cooperation, or at least cooperation of the kind referred to in s 21E.

[12] Section 16F(2) of the Crimes Act.

[13] And therefore not cooperated (see footnotes 10 and 11 above).