R v Kelu; R v Millner

R v Todd (1982) 2 NSWLR 517 R v Van Nhan Nguyen & Huu Duc Phan (1996) 86 A Crim R 521; [1997] 1 VR 386 R v Cranston [2023] NSWSC 454 Sakovits v R [2014] NSWCCA 109 Totaan v R (2022) 108 NSWLR 17; [2022] NSWCCA 75; Tyler v R; R v Chalmers (2007) 173 A Crim R 458; [2007] NSWCCA 247 Category: Sentence Parties: Regina Jonatan Kelu Cedric Adrian Millner Representation: Counsel: G Craddock SC with B Stevens (Crown) M Avenell SC (Mr Kelu) (until 23 November 2023; Mr Kelu self-represented thereafter) S Hall SC (Mr Millner)

Solicitors: Commonwealth Director of Public Prosecutions Bannisters Lawyers (Mr Kelu) KPW Lawyers (Mr Millner) File Number(s): 2018/32462; 2018/67357 Publication restriction: None

JUDGMENT

1. On 11 July 2023 Jonatan Kelu and Cedric Adrian Millner ("the offenders") were each convicted of two offences of conspiring to dishonestly cause a loss to the Commonwealth contrary to s 135.4(3) of the Criminal Code Act 1995 (Cth) ("the Code"). This is the sentencing judgment arising out of those convictions.
2. Mr Kelu and Mr Millner both entered pleas of not guilty to the two charges on the joint indictment as follows: 1. Between about 20 January 2012 and about 21 December 2012 at Sydney in the State of New South Wales and elsewhere, did conspire with each other and divers others, with the intention of dishonestly causing a loss to a third person, namely the Commonwealth. 2. Between about 13 January 2013 and about 29 October 2013 at Sydney in the State of New South Wales and elsewhere, did conspire with each other and divers others, with the intention of dishonestly causing a loss to a third person, namely the Commonwealth.
3. They stood trial before me and the jury (originally consisting of 15 persons but reduced to 12 persons prior to the jury deliberations) during the period 29 May 2023 to 11 July 2023.
4. The conviction of the offenders was the culmination of a long and protracted investigation into tax fraud schemes developed and arranged by the offenders in two discrete periods between 20 January 2012 and 21 December 2012 and 13 January 2013 and 29 October 2013.
5. During this period the offenders worked with each other with the intention of defrauding the Commonwealth of goods and services tax ("GST") revenue, through the purchase and sale of gold which was arranged and organised by them.
6. The conspiracies between the offenders resulted in a loss to the Commonwealth by way of GST revenue in the total sum of $40,911,685. The conspiracy in 2012 resulted in a loss to the Commonwealth of $15,925,956. The conspiracy in 2013 resulted in a loss to the Commonwealth of $24,985,729.
7. According to the Australian Taxation Office ("ATO"), there would then be a general administrative penalty of $36,804,054 and an additional general interest charge of $86,238,856.27. For the purposes of sentence, the relevant figures are the amounts of GST revenue lost in each year rather than the total amount that the ATO says that it is owed at this time. I do not have regard to those amounts in assessing the sentences.
8. Of the total amount lost, the sum of $16,795,280.93 has thus far been recovered, although there are ongoing proceedings seeking further recovery pursuant to the Proceeds of Crime Act 2002 (Cth). The Crown accepts that the fact that not all of the loss to the Commonwealth has been recovered is not an aggravating feature.
9. Further the Crown does not suggest and has not proved that the offenders remain in receipt of large sums of money derived from the gold trading schemes. The Crown has not sought to prove the precise benefit obtained by the offenders, although it seeks a finding that the offenders were motivated by financial greed and did make a substantial gain.
10. It is not known what happened to the substantial sum which has not been recovered. Despite extensive financial analysis, the Crown does not put forward any evidence or explanation as to what happened to the difference between the GST which should have been paid by the offenders and the amount recovered.
11. As I will discuss later, after he withdrew instructions from his legal representatives, Mr Kelu made submissions to the effect that the Commonwealth had not suffered a loss and that he and Mr Millner had not really gained from the schemes, persisting with the explanation that it was really all about a large scale scientific endeavour.
12. The process of sentencing has been extensive, in part because of the volume of material, in part because at the end of the first day of the sentencing hearing Mr Millner sought further time to adduce additional evidence, and in part because, during the second day of the sentencing hearing Mr Kelu withdrew instructions from his legal representatives and sought to tender more material (which he did).
13. On sentence, the Crown relied on the following material in respect of both offenders: 1. the affidavit of Khalie Diegesis, Criminal Investigation Manager at the ATO, sworn 18 September 2023; and 2. the affidavit of Annette Haddad, a Federal Prosecutor employed by the Commonwealth Director of Public Prosecutions ("CDPP"), sworn 18 September 2023.
14. In addition, as against Mr Millner, the Crown relied on his criminal history (which is minor) and his custodial history.
15. The Crown also relies on all of the evidence adduced at the trial.
16. Mr Millner relies on the following material: 1. report of Dr Matthew Jones, Psychiatrist, dated 13 September 2023; 2. letter from Farah Abadi, General Practitioner, dated 15 August 2023; 3. character testimonial of Dr Riesa Ginsberg dated 2 October 2023; 4. joint character testimonial of Mervyn and Eda Millner dated 16 August 2023; and 5. character testimonial of Maryann Young, legal practitioner, dated 3 October 2023.
17. Mr Kelu relied on the following material: 1. mental health report by Dr Travis Wearne, Clinical Neuropsychologist, dated 8 June 2023; 2. mental health supplementary report by Dr Travis Weame dated 29 September 2023; 3. letter of Dr Paul Duff, General Practitioner, dated 25 September 2023; 4. letters of Dr Kevin Cheung (undated); 5. report by Dr Bruce Jones, Clinical Nutritionist, dated 30 September 2023, with screenshots of website and curriculum vitae, and a letter of instruction to Dr Bruce Jones dated 29 September 2023; 6. heavy metal tests sent to Dr Bruce Jones; 7. medical correspondence involving Dr Paul Duff dated 22 August 2019 to 8 September 2023; 8. mineral analysis results conducted by Dr Bruce Jones; 9. extracts of medical notes and correspondence; 10. character reference of Tohsak Mahaworasilpa dated 20 September 2023; 11. character reference of Peter Suchecki dated 1 October 2023; 12. character reference of Guy Glas dated 1 October 2023; 13. character reference of Felicity Sharpe dated 28 September 2023; 14. character reference of Bradley Hughes dated 3 October 2023; 15. character reference of Greg Moody dated 3 October 2023; 16. character reference of Martin Walsh dated 2 October 2023; 17. character reference of Richard Hutchings dated 3 October 2023; and 18. character reference of Michael Sutcliffe dated 3 October 2023.
18. After he withdrew instructions from his legal representatives Mr Kelu tendered a letter dated 22 November 2023 addressed to me with a number of annexures. Following the further sentencing hearing on 7 December 2023 and the Crown's further response to his letter, Mr Kelu then sent in a further lengthy letter dated 11 December 2023. He had wanted to read it out on 7 December 2023 but I cautioned him about the process he was undertaking as I was concerned that he was not making his position any better. He disregarded that caution and sent in the lengthy letter.
19. Following the guilty verdicts, the Crown made detention applications. I accepted the application in respect of Mr Millner (see R v Kelu; R v Millner (No 7) [2023] NSWSC 1543). Mr Miller has been in custody since 13 July 2023. I rejected the application in respect of Mr Kelu (see R v Kelu; R v Millner (No 6) [2023] NSWSC 1542). The Crown made a further application in relation to Mr Kelu on 23 November 2023 which I accepted (see R v Kelu; R v Millner (No 8) [2023] NSWSC 1544). Mr Kelu has been in custody since this time.
20. It is my task to make findings of fact for the purposes of sentencing, the jury having returned verdicts of guilty in respect of both offenders on both counts. Despite the complexity of the conspiracies and the many tasks performed by the offenders to facilitate the tax fraud, some of the facts are not really in dispute.
21. Limited facts were agreed during the trial but the approach of the offenders during the trial was not to challenge much of the evidence adduced by the prosecution but to endeavour (through cross-examination) to present the offenders' conduct in a different light. The jury must be taken to have rejected any suggestion that the offenders' conduct did not involve dishonesty as dishonesty is an essential element of the offence.
22. Similarly, on sentence Mr Millner did not seek to dispute the Crown's submissions on how the two schemes were carried out. There was little reference to the essential elements of the schemes in the offenders' submissions, until Mr Kelu's correspondence.
23. As is their right, the offenders did not give oral evidence at the trial or on the sentencing hearing. After he withdrew instructions from his lawyers, Mr Kelu tendered lengthy letters with annexures in which he sought to explain his conduct on the basis that he had really done nothing wrong, other than waste people's time and create a misunderstanding. He sought an explanation for why he was convicted and sought to challenge the Crown submissions in many respects.
24. There was evidence at trial from a number of people who had been co-opted to play a role in the schemes by one or both of the offenders. However, the focus of their evidence was on what they were told and what they did at the request of the offenders, rather than revealing any statements or admissions from the offenders which might have shed some light on the circumstances which led to the implementation of the tax fraud schemes. For example, it is not possible to glean from the evidence which of the offenders came up with the idea and what steps were taken by each in the planning process.
25. I emphasise that the Crown does not suggest that any other person who may have been involved in the gold trading was involved in the criminal conspiracy.
26. The principles which must be applied for the purposes of making findings of fact were recently set out by Payne JA in another case involving dishonestly causing a loss to the Commonwealth (R v Adam Cranston [2023] NSWSC 1004 ["Adam Cranston"]) which I adopt as follows: "(1) A sentencing judge has a duty to make, as far as possible, findings of fact relevant to the issues that will inform the sentence: The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [1]; Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14 at [16]-[17]; R v Isaacs (1997) 41 NSWLR 374 at 378; (2) Sometimes, however, it may be impossible for the sentencer to resolve a given factual question in a way that tends to either increase or decrease the sentence. In that case, the sentencer must leave that matter to one side and proceed on the basis of what can be found: Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29 at [70]; (3) If a party at sentencing seeks to rely on a particular fact, that party has the onus of proving the fact in question: Olbrich at [25]. There is, however, no general joinder of issue in sentencing and, unlike at the trial, no generalised onus of proof: Olbrich at [25]; (4) If the prosecution seeks to rely on a fact, they must prove it beyond reasonable doubt. If the offender seeks to rely on a fact, the standard of proof is on the balance of probabilities: Olbrich at [27]-[28]; Leach v The Queen (2007) 230 CLR 1; [2007] HCA 3 at [41]; Filippou at [64], [66]; Strbak v The Queen (2020) 267 CLR 494; [2020] HCA 10 at [32]; (5) After a jury returns a verdict of guilty, the sentencer is constrained to making findings of fact that are consistent with the jury's verdict: Cheung v R (2001) 209 CLR 1; [2001] HCA 67 at [14], approving Isaacs at 376-377; (6) A sentencer cannot know, in many cases, exactly what facts the jury found or what evidence they accepted. The sentencer is constrained by a verdict only when that verdict, by necessary implication, reveals that the jury accepted particular evidence or resolved facts in a particular way: Cheung at [17]; (7) Within this constraint, the sentencer can make findings as they see fit: Savvas v The Queen (1995) 183 CLR 1 at 8. There is no requirement to accept all of the Crown's case as put to the jury: Cheung at [7]. Nor is the judge required to take a view of the facts most favourable to the offender: Isaacs at 377D."

The investigation into the schemes

1. On 30 October 2013 the ATO commenced its investigation into the conduct of the offenders. The investigation involved: 1. the taking of 330 witness statements between November 2013 and June 2023; 2. the preparation and execution of 52 search warrants; 3. the completion of 28 bankers' affidavits; 4. the forensic examination and analysis of exhibits and samples obtained from Mr Millner's premises; 5. imaging and examination of 22 devices; 6. uploading more than 20 million image files to Nuix by digital forensic officers; 7. conducting searches and reviews of image files which had been uploaded to Nuix, including a review of millions of items, of which 1,891,481 were identified as relevant; 8. transferring files from mobile phones by digital forensic officers' shared drive locations; 9. obtaining evidence from overseas jurisdictions, including records from the persons known as "the Koreans", who are believed to have been in South Korea at the time of the investigation; 10. instructing a forensic accountant, David Martin; 11. reviewing voicemails and images from phones, as well as text and multimedia messages; and 12. compiling briefs of evidence to the CDPP.
2. On 23 April 2015 the ATO referred the matter to the CDPP. Court Attendance Notices were served on Mr Millner and Mr Kelu on 18 and 30 January 2018 respectively.
3. The work involved in preparing for the trial was extensive. Numerous trial management hearings were conducted.

The physical aspects of the schemes

1. The essential elements of the schemes were that in 2012 and 2013 pure gold bars were purchased on a regular basis from a reputable gold dealer, ABC Gold Bullion ("ABC"), in Sydney. Each time gold bars were purchased they were immediately taken to the premises of Mr Millner at Ashfield. Situated within Mr Millner's residential premises were a number of small furnaces (a total of 18 furnaces were found during the search of the premises) which were then used to melt the gold bars. Smaller gold bars were preferred for ease of melting, despite that fact that the purchase of gold in larger bars might have been less expensive (because of ABC's fee structure).
2. After being melted, each gold bar was then transformed into another gold bar (thereby becoming scrap gold) which was then immediately on-sold to another reputable gold dealer, Focus Metals ("Focus"), operating in Melbourne.
3. Each transaction (being the purchase from ABC and the on-sale to Focus) was generally completed within 48 hours.
4. In respect of each transaction the corporate vehicle used was a company of which Mr Kelu was the sole director and shareholder, being Investrix Pty Ltd ("Investrix").
5. During the period of the first conspiracy in 2012 there were approximately 230 separate purchases of gold bars from ABC. During the 2013 period, there were approximately 166 separate contracts for the purchase of gold. The records show that the quantity of gold purchased from ABC was roughly equivalent to the quantity of gold sold to Focus, thereby negating any suggestion that significant quantities of gold were used for purposes other than re sale to Focus.

The relevant tax law

1. To understand why the offenders put certain things in place as part of the two schemes, it is necessary to say something about the relevant tax law as it applied in 2012 and 2013 (consistently with the direction I provided to the jury). The legislation which governs the payment of GST is the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("GST Act").
2. When sold in its pure form (being 99.99 per cent), gold is a "precious metal". ABC sold gold in its pure form. Sales of precious metals do not attract GST. Therefore, when ABC sold gold, it did not collect GST.
3. After the gold was transformed into new gold bars at Mr Millner's house, the gold was sold as "scrap gold," which is not a precious metal. Investrix was required to and did charge Focus 10 per cent GST on the scrap gold it sold, and Focus was required to (and did) pay that GST to Investrix.
4. Investrix was registered for GST. This is because it was carrying on a business with a GST turnover which exceeded the relevant threshold.
5. Investrix was required to (and did) lodge periodical Business Activity Statements. In some circumstances, a business which has collected GST may be entitled to offset the amount of GST collected through Input Tax Credits.
6. Investrix was a licensed second-hand goods dealer, having become one in January 2012 just before the commencement of the first gold trading scheme. A second-hand goods dealer may be entitled to claim Input Tax Credits for certain purchases and in certain circumstances. These include where the second-hand goods dealer buys second-hand goods from a person who is not required to be registered for (or collect) GST, or provide an ABN or invoice, because the person is not carrying out an enterprise.
7. Second-hand goods do not include precious metals. The gold which was purchased from ABC in 2012 and 2013 was pure gold and, thus, was a precious metal. After it was melted and sold to Focus it was no longer a precious metal.

How was the loss on the Commonwealth perpetrated?

1. The conspiracies between the offenders involved the planning, design, implementation and operation of the two gold trading schemes, with the end product of those schemes being the lodgement of Business Activity Statements by Investrix on a quarterly basis (which occurred seven times) and a claimed entitlement to Input Tax Credits, thereby offsetting the amount of GST which Investrix had received from Focus.
2. The profit Investrix made over the period 2012 to 2013 was, in general terms, equivalent to the GST it received from Focus. The gold trading schemes were otherwise loss-making ventures.
3. The evidence does not permit any finding as to when the offenders commenced planning for their gold trading schemes, who came up with the original idea, or who discovered the purchase of second-hand goods from a person engaged in a recreational pursuit or hobby might, in some circumstances, entitle the purchaser to an Input Tax Credit, such as to offset the GST payable on the sale of the goods. Advice was subsequently obtained from a solicitor in an attempt to legitimise the schemes. Having said that, I am satisfied that Mr Kelu must have investigated and considered in some detail the GST law and the process by which Input Tax Credits could be claimed as an offset to GST received. He sought to demonstrate that in the letters on which he relied on sentence.
4. However, it is known that the implementation of the first gold trading scheme commenced in January/February 2012, with each of the offenders playing different roles in setting up the scheme.
5. On 14 January 2012 Investrix obtained a second-hand dealer licence pursuant to the Pawn Brokers and Second-hand Dealers Act 1996 (NSW). This purported to legitimise Investrix's business as a trader in second-hand goods. Throughout its existence, Investrix had the registered trading name "South Sydney Electronic Repairs and Service".
6. On 23 January 2012 Mr Millner made contact with Janie Simpson, the CEO of ABC, and arranged to meet with her. Ms Simpson was known to Mr Millner through his father, Mervyn "Mickey" Millner, who had dealt in gold. It is evident that Cedric Millner sought to put in place arrangements with ABC, being the business from which the pure gold would be purchased.
7. Around the same time, Mr Kelu sought to establish a relationship between Investrix and the company which would become the ultimate buyer of the gold, Focus. Mr Kelu arranged for the sale of the scrap gold to Focus at a price which would be agreed on the day of delivery, based on the spot price for gold that day. Focus would assay the gold delivered to it and pay Investrix on the pure gold content. Focus would pay an additional 10 per cent on each transaction by way of GST.

1. There is no evidence that any of the friends and relatives had any particular financial acumen, knowledge of gold trading or the wherewithal necessary to participate in such a process. They did not use their own money to purchase the gold bars.
2. Yet, vast sums of money were deposited into their bank accounts and then purportedly used by them to purchase significant quantities of gold from ABC.
3. For example, Mr Phillips, an elderly pensioner, purportedly purchased gold from ABC on 47 separate occasions with a combined gold weight of 739,323.1 grams for a total amount of $39,008,676. In reality, all of these purchases were organised by Mr Millner and Mr Kelu and undertaken by Mr Millner on behalf of Mr Phillips.
4. Mr Kelu told Mr Bakeira that he needed additional names on the accounts as security, as he would be manufacturing large quantities of nanoparticles using a large amount of gold. Mr Bakeira authorised Mr Kelu to operate the bank account which had been established in his name. He never operated the account himself. Mr Bakeira received $600 every time his account was used to purchase gold.
5. Each of the friends and relatives then purported to sell the gold to Investrix pursuant to the gold supply contracts. I set out below another table from Mr Martin's report which summarises the purported supplies made by the friends and relatives to Investrix: Name Date of first gold supply Date of last gold supply Number of gold purchase transactions Total gold weight supplied to Investrix ("scrap" purity) Total Investrix paid pursuant to 201x000xxx-Series contract numbers GST Investrix recorded on purchases GST said to be collected by Gold Supplier g $ $ $ Ms Makowiak 13 Feb-12 20 Jun-13 84 995,801.9 52,474,942 4,770,449 Nil Mr Peter Kelu 22 May-12 21 Nov-12 53 803,550.8 42,489,422 3,862,675 Nil Mr Phillips 14 Jun-12 21 Nov-12 47 737,901.7 39,036,861 3,548,806 Nil Mr Bakeira 15 Aug-12 21 Nov-12 29 512,337.7 27,641,744 2,512,886 Nil Mr Parrott 8 Nov-12 21 Nov-12 5 92,691.5 4,997,248 454,295 Nil SUBTOTAL 218 3,142,283.6 166,640,217 15,149,111 Nil Add: Adjustments 116,435.4 TOTAL 218 3,258,719.0 166,640,217 15,149,111 Nil

1. In 2012 several persons lent money for the purposes of financing the purchase of gold from ABC. Again, records were kept of the money received and all of the payments made by way of interest. There were 28 loans made during the period 21 March 2012 to 15 November 2012 in the sum of $1,057,000. Each of the lenders received weekly finance fees and each of the loans were repaid. Some of the investors were told lies about the nature of their investments. For example, Mr Millner told his friend Mr Grand that he had a contract for dental work and needed funds for that purpose.
2. Similarly, in 2013 a number of persons lent money to the offenders. They received weekly finance fees. The total loans received in 2013 equated to $1,825,000. Again, all of those loans were repaid.
3. The offenders emphasised to the lenders that they must make sure that they disclosed their income to the ATO. This was another step in the process of seeking to legitimise the schemes.
4. Investrix then sold the gold to Focus. Again, I enclose a table from Mr Martin's report summarising the transactions between Investrix and Focus in 2012. Date of first Focus gold purchase invoice Date of last Focus gold purchase invoice Number of Focus gold purchase invoices Gold weight sold - 99.90% median purity Total cost of gold sales Investrix's GST collections on gold sales g $ $ 10 Feb-12 21 Nov-12 81 3,142,216.7 177,567,386 16,142,490

1. All of this was achieved by: 1. Mr Millner and Mr Kelu using the friends and relatives to establish gold trading accounts with ABC and bank accounts through which the money could be processed; and 2. the precision-like operation of the scheme, which required accurate and detailed record-keeping, and ensuring that payments were made by Focus immediately and that the money received was immediately used to fund a new transaction in the name of a friend or relative.
2. The end result of the gold trading in 2012 (and the use of the friends and relatives) was the lodgement by Investrix of Business Activity Statements in which Investrix purported to offset the GST received from Focus on account of Input Tax Credits. This was on the basis that Investrix had legitimately purchased the gold, not from ABC, but from each of the friends and relatives who were not engaged in a business or enterprise but were selling the gold to Investrix (a licenced second-hand dealer) as part of a recreational pursuit or hobby carried on by each of the friends and relatives.
3. The offenders purported to create a legal fiction or veneer of legitimacy by establishing gold trading accounts in the names of each of the friends and relatives and documenting the purchases and sales. False information was provided to some of the friends and relatives and other persons who had peripheral involvement as a means of disguising the real purpose of the gold trading schemes. Suggestions that the gold was being melted for nanoparticle research or dental implants were just ruses to explain the melting of such significant quantities of pure gold.
4. In reality, none of the offenders' friends and relatives were involved in buying or selling gold. Nor did they use any of their own money. The ongoing purchases were funded by money raised from investors and the circulation of money transferred from Focus back to the friends and relatives to purchase more gold. These sham accounts were created and operated for the sole purpose of providing a justification for Investrix keeping the GST it received from Focus and the offenders obtaining a personal benefit through the distribution of the profit.
5. The 2012 gold trading scheme continued to operate until such time as Mr Millner must have become aware that the AFP was making enquiries. The trading then ceased.

The 2013 gold trading scheme

1. Perhaps remarkably, although the offenders must have decided to cease their gold trading scheme in November 2012 due to concerns of an investigation, they established a new scheme in 2013 which was very similar to the 2012 scheme, except this time they co-opted a group of people who came to be known as the Koreans to perform similar roles to the friends and relatives.
2. The offenders established a new scheme whereby a group of Korean nationals, (who were only in Australia on a temporary basis) were paid a minimal amount for their services, which included allowing their names to be used to establish accounts with ABC and bank accounts through which the funds would be transmitted. This was to make it look like Investrix was involved in legitimate transactions.
3. The 2013 scheme had many similar features to the 2012 scheme. The main difference was that the offenders interposed an additional line of people between Investrix and ABC. This could only have been for the purpose of trying to create distance between Investrix and ABC and establish the fiction that Investrix was actually purchasing gold as a second-hand dealer from persons who were selling the gold as a recreational pursuit or hobby.
4. Again, the 2013 scheme must have involved a degree of planning, although it is not possible to make any findings as to who came up with the new and improved scheme and why the offenders settled on the Koreans. All that is known is that Mr Millner introduced Richard Moody, a person known to him, to a man in Bondi who spoke Korean. That person then introduced Mr Moody to Mr Shang Bum Ham, who agreed to be involved and also asked if his friends could be involved.
5. Both offenders were involved in the establishment of the 2013 scheme. Mr Millner met with Mr Moody and arranged for him to deal with the Koreans. On 11 February 2013 Mr Kelu wrote to Mr Moody in relation to the set-up expenses and the fact that the amount of people involved had doubled. Mr Kelu instructed Mr Moody via email about what he needed to do and obtain from the Koreans.
6. Mr Moody assisted with the establishment of ABC accounts by three Koreans. They were then matched with another three Koreans. According to the records put in place by the offenders, the first three Koreans purported to buy the gold from ABC and then sell it to the other three Koreans. The second trio of Koreans then purported to supply the gold to Investrix on consignment. Investrix then sold the gold to Focus in the same way as had occurred in 2012.

1. On a proper analysis, the 2013 scheme presents as an even more obvious attempt to blur the true position of the parties and their relationships to justify the claiming of Input Tax Credits than the 2012 scheme. This is because Mr Ham, who was identified as "A1" in Mr Kelu's records, was not even in Australia when he was purportedly buying gold from ABC. Similarly, Mr Hong, who was identified as "B1" in Mr Kelu's books, was not collecting gold from ABC and then selling it to Investrix, despite the fact that Mr Kelu's records suggest that he was.
2. The Koreans were not genuine purchasers and sellers of gold. Mr Kelu was simply moving money from one account to another to create the impression that there were genuine transactions happening. They were intended to perpetrate a revenue fraud: that is, retention of GST paid by Focus to Investrix.

The "Statement by customer" forms

1. To facilitate these gold trading schemes, the offenders organised for the friends and relatives and Koreans to sign various documents. One such document was a document under Investrix's letterhead titled "Statement by customer as to who is the owner of goods sold". This document was signed by each individual, who was then described as the customer and the owner of the goods, with the goods being described precisely with reference to the gold bars purported to be purchased by the individuals at particular points in time. The form contained what was described as "important information" relating to the offering of second-hand goods for sale by a second-hand dealer. The final paragraph stated: "Under the Pay As You Go (PAYG) legislation and guidelines administered by the Australian Taxation Office I the customer provide you with a written statement that, for the supply I am currently making to you, the supply is made to you in my capacity as an individual and the supply is wholly of a private or domestic nature for me, and/or I am not entitled to an ABN as I am not carrying on an enterprise in Australia. Therefore, I am not quoting you an ABN. You should not withhold an amount from the payment you make to me for the supply."
2. This statement must have been included for the purposes of justifying the claiming of Input Tax Credits. These forms were often signed in bulk to allow Mr Millner to arrange to purchase the gold from ABC. The details on the forms were filled in later. Indeed, in 2013 Mr Moody was given 250 blank forms for the three Korean ABC account holders to sign.
3. Procurement agreements with Sweet Pea (Aust) Pty Ltd (Mr Millner's company) and Kelu Family Holdings Pty Ltd (Mr Kelu's company) were also established as a means of splitting the income.
4. Mr Millner received commission on the sales from ABC but the Crown does not assert that this was part of the conspiracies and I have no regard to that fact in the sentencing exercise.
5. Investrix lodged seven Business Activity Statements during the period of both conspiracies. It claimed Input Tax Credits arising out of the sham transactions every time it lodged a Business Activity Statement.

The roles of the offenders in the conspiracies

1. It is important to identify the roles played by each of the offenders in the conspiracies, although it is not possible to identify every role played by each offender. Some roles were shared and other roles were the exclusive domain of a particular offender.
2. A description of the various roles demonstrates the degree of planning that must have been undertaken by the offenders. That is: 1. Mr Millner dealt with ABC. He attended ABC's premises with the account holders and facilitated the process whereby they became account holders. He was authorised to operate their accounts; 2. both offenders were involved in co-opting the friends and relatives and Koreans to become ABC account holders; 3. Mr Millner placed the orders for the purchase of gold in the name of the account holders; 4. Mr Millner arranged for the collection of the gold from ABC and delivery to his house. He was personally involved in that process; 5. Mr Millner arranged for, and was personally involved in, the transformation of the gold using the furnaces at his house; 6. Mr Millner was involved in the transportation of the gold bars to Focus; 7. Mr Kelu knew that Mr Millner was doing all of these things; 8. Mr Kelu dealt with Focus. That is, from the very commencement of the 2012 scheme, Mr Millner took on the role of establishing the accounts with ABC whilst Mr Kelu took on the role of establishing the relationship with Focus. Whilst Mr Kelu was not personally involved in the transportation or melting of the gold bars, he knew what was going on and he visited Mr Millner's premises whilst this was occurring; 9. Mr Kelu undertook the very extensive task of record-keeping and making payments, ensuring that the money was moved from account to account at all times as required, and that the requisite documentation was in place. This included obtaining the second-hand dealer's licence and attending to all compliance issues, as well as ensuring that money was placed into all of the different accounts at precisely the right times and working out how much profit was being made from the schemes; and 10. Mr Kelu was responsible for the lodgement of the Business Activity Statements.
3. I emphasise that the record-keeping and movement of money was an integral part of the conspiracies. It must have involved extensive work and an ability to focus on the details. Investrix was Mr Kelu's company and he lodged the Business Activity Statements claiming Input Tax Credits on the basis that Investrix had bought gold on a legitimate basis from bona fide sellers.

The sentencing of the offenders

1. The offenders are to be sentenced in respect of each offence of conspiring with each other with the intention of causing a loss to the Commonwealth by way of a loss of GST revenue. The offences are Commonwealth offences and the Court is required to apply Part 1B of the Crimes Act 1914 (Cth) ("Crimes Act"). As set out in s 16A(1) of the Crimes Act, the Court must impose a sentence which is of a severity appropriate in all of the circumstances of the offence.
2. I must consider all relevant matters, including the matters identified in s 16A(2) of the Crimes Act.
3. The maximum penalty for each offence is 10 years imprisonment and/or a fine of 600 penalty units ($108,000). The maximum penalty is an important guide post: Markarian v R (2005) 228 CLR 357; [2005] HCA 25 at [30]-[31].
4. In assessing the extent to which each offender's conduct offends against the legislative objective of ensuring compliance with taxation laws, I must take care to have regard to what each offender actually did: R v Olbrich (1999) 199 CLR 270; [1999] HCA 54.
5. Having said that, the offenders are not being sentenced on assessment merely of the physical acts which they undertook as part of the conspiracy. The specific acts are relevant but the essential element of the offence of conspiracy is the agreement to participate in an organised criminal activity: Tyler v R; R v Chalmers (2007) 173 A Crim R 458; [2007] NSWCCA 247 at [83]-[84].
6. In this matter the offenders performed both separate and shared roles. Their roles were interconnected for the purposes of achieving their common goal, which was the purported justification of the retention of GST paid by Focus to Investrix and achieving financial gain through that means.
7. Tax fraud is not a victimless crime. By their conduct, the offenders have caused loss to the community as a whole, in the sense that they have defrauded the Government of a significant sum of money which could have been used for the benefit of the community: Director of Public Prosecutions (Cth) v Goldberg (2001) 184 ALR 387; [2001] VSCA 107.
8. Further, tax fraud involves a significant breach of trust, in the sense that our modern system of tax collection is one of self-assessment: R v Boughen; R v Cameron [2012] NSWCCA 17 at [73]. Certainly, there are audits and checks undertaken by the ATO but taxpayers are generally trusted to complete honest and accurate tax returns. This is particularly so in the business community where, since the introduction of the GST Act, businesses have become tax collectors on behalf of the Commonwealth; they receive GST in respect of goods that they sell and then must account to the Commonwealth on a regular basis via the lodgement of Business Activity Statements. Because of the nature of the GST-based tax system, and subject to an entitlement to offset, a business is receiving money which does not belong to it. It is merely holding the money on behalf of the Commonwealth until such time that it is required to pay the money to the Commonwealth.

Section 16A(2)(a) - nature and circumstances of the offences

1. The amount involved in the 2013 conspiracy was higher than the 2012 conspiracy. Further, the 2013 conspiracy was more brazen, in the sense that the offenders co-opted persons who were not Australian citizens, were not known to the offenders and who could never have known or understood what they were being paid for.
2. Having said that, there is little to distinguish the conspiracies. I find that both conspiracies were towards the high end of the range although not at the highest point. The 2013 offending was at a slightly higher level than the 2012 offending.
3. Both conspiracies involved repeated acts of dishonesty on the part of both offenders. The period of the 2013 conspiracy extended for a little less than the 2012 conspiracy but, in both years, the offenders involved themselves in a large number of individual transactions with the aim of dishonestly defrauding the Commonwealth of GST revenue. Having regard to the processes adopted at the time they were adopted, no real profit could have been obtained from the transformation and sale of gold to Focus and there was a risk that a loss might be obtained on each transaction.
4. I am unable to find that one was the senior person or driver of the operation. However, I find that Mr Kelu played a slightly more significant role than Mr Millner in the implementation and operation of the conspiracies. Further, he obtained the second-hand dealer's licence and lodged the Business Activity Statements forms and moved the money around to establish the ruse. He was directing what needed to happen the achieve the ultimate aim.

Section 16A(2)(c) - if the offence forms part of a course of conduct consisting of a series of criminal acts of the same or similar character - that course of conduct

1. Each offender's conduct occurred over a period of approximately 11 months in 2012 and 10 months in 2013.

Section 16A(2)(e) - any injury, loss or damage resulting from the offence

1. As I have already stated, tax fraud is not a victimless crime. The community has suffered a significant loss as a result of the conduct by both offenders in both years.

Section 16A(2)(h) - the degree to which the person has cooperated with law enforcement agencies in the investigation of the offence or of other offences

1. The Court may take into account the extent to which an offender has facilitated the course of justice by making admissions and conducting the defence of his case in such a way as to assist with the administration of justice (R v Doff (2005) ACSR 200; [2005] NSWCCA 119 ["Doff"]). The position of the offenders on this issue is identical. By their conduct in reaching agreement with the prosecution on the way in which the trial would be conducted, making some admissions and agreeing to a "case studies" approach, they facilitated the administration of justice; they made the trial significantly less complex and reduced the hearing duration quite significantly.
2. Mr Millner has also assisted the authorities in their efforts to pursue recovery under the Proceeds of Crime Act. I have regard to the assistance he has provided in accordance with s 320A of the Proceeds of Crime Act. On 14 December 2023, I received a letter from the AFP attesting to his assistance.
3. I will have regard to that as mitigatory factor in assessing the sentences.

Sections 16A(2)(j) and 16A(2)(ja) - the deterrent effect that any sentence may have on the person or on other persons

1. As stated in R v Huston; R v Fox; R v Henke (2011) 219 A Crim R 153; [2011] QCA 349, a sentence for tax fraud must do more than pay lip service to the need for general deterrence because tax fraud has an insidious corroding effect on society. General deterrence is more likely to have an effect on those seeking to defraud the Commonwealth because they are often motivated by greed and profit yet are able to plan and consider the consequences of their actions: Director of Public Prosecutions (DPP) (Cth) v Gregory (2011) 34 VR 1; [2011] VSCA 145 at [53]-[54] ["Gregory"].
2. The offenders are unlikely to reoffend and have led purposeful lives since 2013. Specific deterrence does not loom large. I give it little weight in the sentencing of Mr Millner. It may play a slightly bigger role in the sentencing of Mr Kelu who seemingly considers that he has done nothing wrong.
3. General deterrence is a very important factor and any sentence needs to reflect the importance of general deterrence for the reasons I have already outlined.

Section 16A(2)(k) - the need to ensure the person is adequately punished for the offence

1. Mr Millner accepts that he must be sentenced to a term of custodial imprisonment. Mr Kelu did initially but later personally submitted (after he withdrew his legal representatives' instructions) that he should not be. The need to ensure that they are adequately punished, having regard to all of the factors involved, means that the sentences must be of some length.
2. In R v Van Nhan Nguyen & Huu Duc Phan (1996) 86 A Crim R 521; [1997] 1 VR 386, Brooking J observed at 389: "The seriousness of the offence of defrauding the Commonwealth of a large sum of money by not declaring assessable income has in the past, perhaps, not always been sufficiently reflected in the sentence passed. Those who systematically defraud the Revenue of a large sum over a substantial period must in general expect a substantial custodial sentence. The deterrent and punitive effects of that sentence should not be unduly diminished by allowing release from custody at an unduly early stage."
3. In Gregory, the Victorian Court of Appeal per Warren CJ, Redlich JA and Ross AJA observed: "[57] A sentence imposed for fraud upon the taxation revenue is intended to reaffirm basic community values that all citizens according to their means should fairly share the burden of the incidence of taxation so as to enable government to provide for the community, that the revenue must accordingly be protected and that the offender should be censured through manifest denunciation. When these considerations are not reflected in the responses of the courts, the criminal justice system itself fails to achieve its objectives."
4. I accept that a term of custodial imprisonment is the only appropriate sentence for the offenders. In my view, the sentences must be substantial.

Sections 16A(2)(f), (m), (n) and (p) - the personal circumstances of the offenders

Mr Millner

1. Mr Millner is currently 56 years of age. He was 46-47 years old at the time of the offending. Mr Millner's criminal history is limited to offending relating to his former roles in the hotel industry, for example, permitting alcohol to be served to persons under the age of 18 and allowing a minor to use a gambling machine. His criminal history is of no significance for the purposes of the sentence.
2. As is his right, Mr Millner did not give evidence at the trial or on sentence. To the extent that I am able to make findings on his personal circumstances, I am reliant on the psychiatric report of Dr Matthew Jones dated 13 September 2023 and the character testimonials.
3. Mr Millner is an educated man. He has a Bachelor of Science with two majors. He has worked as a biophysicist. He has also worked in the hotel industry. As of 2012, he was an undischarged bankrupt. This appears to arise from his involvement in a building project which failed or, at least, according to the information provided to Dr Jones, was placed into receivership.
4. He appears to attribute the failure of his earlier hotel business and the failure of the construction project to the actions of the receivers more than anything else. He says that after losing the project and the hotel he was not in a great state of the mind, although he was "going okay".
5. For some of the time since 2013 Mr Millner has worked in the disability industry, particularly as a project manager dealing with the National Disability Insurance Scheme ("NDIS"). He has also consulted with companies from time to time.
6. The character testimonials speak of his good character and his dedication to other people. They explain that he has made a positive contribution to society in his later years with his work in the volunteer and disability sector. He has been the main supporter for his partner, Ms Makowiak, despite the fact that she has suffered from a severe mental illness.
7. In their letter to the Court, Mr Millner's parents speak of his support and care, referring to the bleak future they face without him. They ask that he be sent to a correctional centre close to them. It is the sad reality of the commission of serious criminal offences that family members who are left behind suffer considerably. I accept that that is particularly so with respect to Mr Millner, bearing in mind the difficulties that both Ms Makowiak and his parents will face without his ongoing support. I have regard to that in accordance with s 16A(2)(p) of the Crimes Act.

Mr Kelu

1. Mr Kelu is currently 48 years of age. He relies on the reports of Dr Travis Wearne, who is a clinical neuropsychologist, and medical records relating to health problems from which he suffers. He also relies on a number of character references.
2. Mr Kelu is one of three children. He was married for approximately seven years in his twenties. He has no children. At the time of his assessment on 8 June 2023 he was not in a relationship. He was living in share house accommodation.
3. Mr Kelu is also a well-educated man, having completed a Bachelor of Computer Engineering with First Class Honours and a Bachelor of Science. He worked in the computer engineering field for seven years and has recently been working in the information technology field.
4. Like Mr Millner, there is no evidence of Mr Kelu living a lavish lifestyle following receipt of the funds from the tax fraud schemes.
5. Mr Kelu has suffered and continues to suffer from a number of health problems for which he has sought medical assistance. His symptoms have included fatigue, cognitive clouding, gut disturbance and food intolerance. He suffers from skin rashes, eczema, abscesses, irritable bowel syndrome, liver function changes, constipation, inflammation of the sinuses and mood disturbance. This has caused him to be unable to work on a full-time basis since approximately 2008. His symptoms were aggravated by the stress of the investigation and ultimate trial.
6. On 30 June 2020 he first consulted Dr Bruce Jones, a clinical nutritionist. He has been diagnosed with heavy metal poisoning. He embarked on a course of nutritional supplements and detoxification which resulted in significant improvement of his energy levels, cognitive functioning and capacity to undertake paid employment.
7. Mr Kelu is normally required to undertake heavy metal testing every six months, which involves him collecting samples over a 12-hour period and providing stool and hair samples. The need to undergo further testing provided one basis on which he sought (and was granted) bail following his conviction. It is only necessary to say that I accept that Mr Kelu has suffered from significant health problems and will continue to suffer from the effects of his heavy metal poisoning. He will require monitoring, supplements and medication on a long-term basis.

Delay

1. Another relevant and important sentencing factor is the 10-year delay between the initial investigation and the conclusion of the trial. I accept that both offenders were kept in suspense for that period. The investigation was lengthy and complex. The trial was delayed because of COVID-19 and the complexity of the schemes, the amounts involved and the number of transactions involved, which all meant that an extensive investigation was required.
2. Fairness to the offenders requires that some consideration be given to the lengthy period that they have been kept in suspense awaiting their trial: Mill v The Queen (1988) 166 CLR 59 at 66; [1988] HCA 70 per the plurality (Wilson, Deane, Dawson, Toohey and Gaudron JJ); R v Todd (1982) 2 NSWLR 517 at 519 per Street CJ.
3. In R v Schwabegger (1998) 4 VR 649 at 659, the Victorian Court of Appeal per Vincent AJA, observed that delay which is not attributable to the offender constitutes a powerful mitigating factor.
4. I accept that the offenders have been kept in suspense for a significant period. They have both pursued productive work but have essentially been unable to get on with their lives. I take this into account in mitigation. It an important factor in mitigation.

Other cases

1. I have been taken to a number of comparable cases. The Crown provided a summary of a number of cases. These included the Cranston cases (Adam Cranston; R v Onley [2023] NSWSC 1008; Dev Menon; R v Willmott [2023] NSWSC 474; R v Cranston [2023] NSWSC 454), as well as a number of other New South Wales cases: R v Anquetil [2020] NSWSC 995; R v Hammond [2020] NSWSC 888; R v Kitson [2019] NSWSC 1109; Dickson v R [2016] NSWCCA 105 ("Dickson"); R v Issakidis [2018] NSWSC 378 ("Issakidis"); Chang v R [2016] NSWCCA 296; Bennett v R [2015] NSWCCA 56; Liles v R (Cth) [2014] NSWCCA 289; Sakovits v R [2014] NSWCCA 109; R v Mereb; R v Younan [2014] NSWCCA 149; R v Boughen; R v Cameron (2012) 215 A Crim R 476; [2012] NSWCCA 17; R v Ronen (2006) 161 A Crim R 300; [2006] NSWCCA 123.
2. In Dev Menon, Payne JA observed that, per Hili, consistency in Federal sentencing is achieved with regard to what has been done in other cases through the work of the intermediate courts of appeal. His Honour referred to cases such as Dickson, Issakidis and R v Bin Huang; R v See Hon Siu (2007) 174 A Crim R 370; [2007] NSWCCA 259 in that regard.
3. I have had regard to all of the suggested comparable cases but I have not found any case to be identical to this one. This is high-level offending on both counts. It involves large-scale tax fraud involving significant sums of money.
4. Yet it is also a peculiar feature of these matters that there is no evidence of the offenders realising and demonstrating their personal gains by leading lavish lifestyles. Indeed, subsequent to the period of the offending, the offenders have continued to involve themselves in industries which may be of the benefit to the community. The period in which they have been kept in suspense awaiting trial is an important factor.

Imposing the sentences

1. It is important that I give proper consideration to the position of each offender. I have done that.
2. Their circumstances are very similar, except that Mr Kelu's health conditions are such that his moral culpability is reduced slightly and his time in custody will be more onerous because of his conditions.
3. Mr Millner is entitled to some leniency having regard to the effect that his period in custody will have on his family and he has been assisting the authorities in a number of ways.
4. They played roles of similar significance in the offending, although I consider that Mr Kelu's role was slightly more important. Their roles were interconnected. Neither offender has demonstrated remorse but they otherwise have strong subjective cases. Both are persons of prior good character and both have good prospects of rehabilitation. They have both assisted with the administration of justice in the ways I have identified and are entitled to some discount on account of delay. Both have been kept in suspense for a significant period, during which they have attempted to make some positive contribution to society through the work that they have undertaken.
5. In my view, there should be a degree of accumulation between the two offences. This is particularly so in circumstances in which having become aware of an AFP investigation towards the end of 2012, the offenders discontinued the 2012 gold trading scheme only to commence a new gold trading scheme in 2013 with different people. As I have found, the 2013 scheme appears to have been even more brazen in its operation. The total sentence imposed must reflect the criminality involved in both conspiracies.
6. In the end, I consider that the sentences I impose on both Mr Millner and Mr Kelu should be identical. Mr Kelu played a more significant role but he has a stronger subjective case, having regard to his diagnosis of autism spectrum disorder. I give appropriate weight to all of the relevant factors with respect to both of the offenders individually. Questions of both totality and parity are important. I intend to impose the same sentence on each offender.

Mr Millner

1. I impose a sentence of five years for the 2012 conspiracy and six years for the 2013 conspiracy. The effective head sentence is eight years imprisonment.
2. Under s 19AB of the Crimes Act, I impose a single non-parole period for both offences of four years and six months imprisonment. The sentence is appropriate for the offences and provides a minimum period that the offender must spend in custody so as to achieve all of the relevant purposes of punishment, including rehabilitation, the objective seriousness of the offences and his subjective circumstances (including his family circumstances).

Mr Kelu

1. I impose a sentence of five years for the 2012 conspiracy and six years for the 2013 conspiracy. The effective head sentence is eight years imprisonment.
2. Under s 19AB of the Crimes Act, I impose a single non-parole period for both offences of four years and six months imprisonment. The sentence is appropriate for the offences and provides a minimum period that the offender must spend in custody so as to achieve all of the relevant purposes of punishment, including rehabilitation, the objective seriousness of the offences and his subjective circumstances.
3. I make the following orders: 1. For the 2012 conspiracy, Mr Millner is sentenced to a term of imprisonment of five years commencing on 13 July 2023 and expiring on 12 July 2028. 2. For the 2013 conspiracy, Mr Millner is sentenced to a term of imprisonment of six years commencing on 13 July 2025 and expiring on 12 July 2031. 3. Under s 19AB of the Crimes Act 1914 (Cth), a single non-parole period of four years and six months commencing on 13 July 2023 is fixed in relation to Mr Millner's sentence. Mr Millner will be first eligible for parole on 12 January 2028. 4. For the 2012 conspiracy, Mr Kelu is sentenced to a term of imprisonment of five years commencing on 23 November 2023 and expiring on 22 November 2028. 5. For the 2013, conspiracy, Mr Kelu is sentenced to a term of imprisonment of six years commencing on 23 November 2025 and expiring on 22 November 2031. 6. Under s 19AB of the Crimes Act 1914 (Cth), a single non-parole period of four years and six months commencing on 23 November 2023 is fixed in relation to Mr Kelu's sentence. Mr Kelu will be first eligible for parole on 22 May 2028.
4. I am required under s 16F of the Crimes Act to explain the sentences I have imposed.
5. For Mr Millner, I have imposed an effective head sentence of eight years imprisonment commencing on 13 July 2023 and expiring on 12 July 2031. I fixed a single non-parole period for both offences. The single non-parole period is a term of four years and six months also commencing on 13 July 2023. That means that Mr Millner will be in prison for a period of not less than four years and six months. If he is granted parole at the end of that period, he will serve the balance of his sentence in the community. If he is granted parole, the order will be subject to conditions determined by the relevant parole authority and may be amended or revoked. If he fails without reasonable excuse to comply with the conditions of his parole, his parole may be revoked and he may be taken back into custody to serve the remainder of his head sentence.

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: 15 December 2023