With respect to the Offender's conceptual, analytical and strategic skills, Mr Killaly said (Exhibit D35):
"Nick has a demonstrated ability to analyse complex tax issues and distil the assumptions and implications. He has demonstrated this ability to think at a very high level in his academic work, in the private sector as an employee of Mallesons and in his journalism. I have no doubt that he can assimilate several sources of information. He is quick to identify the tax angles and to develop solutions. While he has not had much exposure to public policy I am confident from my discussions with him that he can apply purposive approaches to the interpretation of tax legislation."
28 Mr Killaly considered that the Offender had "demonstrated the ability to thoughtfully weigh up competing arguments and give a considered and well-reasoned view". He considered that the Offender was "well able to contribute to the development of professional skills of staff".
29 In about July-August 1997, Mr Panos introduced Mr Geoffrey Strong to the Offender as part of the developing relationships being formed to advance the business.
30 In the meantime, inside the ATO, the Offender was cultivating associations with persons working in the area of EBAs or employee benefit trusts ("EBTs").
31 On 30 June 1997, Mr Andrew Gardiner posted a message on the ATO GrapeVine system requesting that anyone who had seen an EBT arrangement to contact him. Within a day, the Offender emailed Mr Gardiner, stated that he had come across "a ripper of a scheme in the high wealth projects" which he was investigating and would sit down and review (Exhibit C175). I am satisfied that the Offender took this step, at that time, as part of a process to advance his personal business interests through acts within the ATO which would assist those interests. Before, during and after this time, the Offender intentionally withheld from ATO personnel the true facts concerning his private business interests and relationships. Thus, a process was underway where the Offender was utilising his position, firstly as a consultant and later as a full-time employee within the ATO, to further his private business interests. A clear conflict of interest existed and I am satisfied that the Offender knew that this was the case.
32 The technical nature of advance opinions and private rulings, issued by the ATO, was the subject of directions to the jury (SU52-54; 67-78) and need not be repeated here. It is sufficient to observe that rulings and opinions were regarded as valuable commodities by persons engaged in marketing schemes and tax products in the commercial world. The holder of an opinion or ruling, which expressed the ATO view with respect to the particular circumstances, was perceived as having an advantage for tax purposes. The Offender explained these advantages, in a practical way, to Mr Morgan who was to perform the task of marketing them. I will refer shortly to evidence disclosing the Offender's own perception of the value of holding an opinion or ruling, and the positive features of them which were to be emphasised for marketing purposes.
33 In August 1997, the Offender engaged in email communications with ATO employees including Mr Gardiner and Mr James Targett concerning EBTs. On 4 August 1997, the Offender attended a seminar conducted by Mr Michael Charles at the Dandenong office of the ATO in relation to employee share schemes.
34 I am satisfied that the Offender's contact with these ATO officers was primarily for the purpose of him establishing associations, and acquiring information, to assist his own private business interests.
35 A clear example of the collision between the Offender's private interests and his public duty as an ATO consultant is demonstrated by a document extracted by police, in March 2000, from a storage unit, used by the Offender, in Melbourne under the name of Christopher Marriott, in which a computer hard drive and a large number of documents were located. Extracted from the hard drive was a document dated 17 August 1997 (Exhibit C206, Tab 8). This was a draft application for an advance opinion for the Productivity Incentive Corporation Employee Incentive Plan. On 9 September 1997, Mr Panos sent an application for an advance opinion, marked for the attention of Mr Charles, for the Productivity Incentive Australia Productivity Incentive Plan. This application had been drafted by the Offender. I will refer to this application again later in these reasons.
36 In effect, the Offender was operating on both sides of the tax fence at the same time. He was associating with Mr Charles and others inside the ATO. At the same time, he was preparing an application to be directed to Mr Charles concerning the same subject matter. The Offender's conflict of interest could be seen in stark relief at this time.
37 At various times in 1997, the Offender was reminded of the importance of identification of actual or potential conflicts of interest. On 18 August 1997, a written agreement was entered into between the ATO and the Offender's company, Middleduke Pty Limited ("Middleduke"), in relation to consultancy services for the ATO High Wealth Individuals' Taskforce. The agreement prohibited the Offender from disclosing any Commonwealth material or contract material to any other person without prior written approval of the Commonwealth. In a portion of the agreement headed "Conflict of Interest", the Offender warranted that, at the date of signing the contract, "No conflict of interest exists or is likely to arise in the performance" of obligations under the contract and that "if, during the term of the contract, a conflict or risk of conflict arises", the Offender undertook to notify the ATO immediately in writing of that conflict or risk (Exhibit C15).
38 It was submitted for the Offender that I should find that his status as an ATO consultant in 1997 gave rise to some uncertainty, and grey areas, with respect to actual and potential conflicts of interest. I do not accept this submission. I am satisfied that there was, by August 1997 if not before, a clear bright-line test of actual or potential conflict of interest of which the Offender was well aware. This was not a grey area. The obligations of the Offender were, I am satisfied, clear to him at that time. His failure to disclose areas of actual conflict of interest demonstrate the foundation for actual impropriety found by the jury for the purpose of its verdict with respect to the second count.
39 On 19 August 1997, a day after he signed the Middleduke contract, the Offender was communicating by email with Mr Targett concerning an employee benefit trust. He requested Mr Targett to obtain a copy of the trust deed from the relevant entity.
40 On 28 August 1997, a document entitled "The Mechanics of the Productivity Incentive Plan" was created by the Offender on his hard drive (Exhibit C206, Tab 11). I am satisfied that this was a marketing document, further evidencing the active part being played by the Offender in the development of the scheme of marketing EBAs for commercial gain.
41 I accept the evidence of Mr Morgan that the Offender met with him and discussed marketing approaches with respect to the Productivity Incentive Scheme. An entry in the Offender's diary for 30 August 1997 (Exhibit C227) evidences the fact that the Offender met with Mr Morgan at that time.
42 A further incident occurred in early September 1997 which emphasised, once again, the importance of the Offender identifying areas of actual or potential conflict of interest. A question arose concerning the Offender's use of ATO facilities for non-ATO purposes. An innocuous event triggered a meeting between ATO officers and the Offender. A memorandum dated 2 September 1997 (Exhibit C16) was prepared following that meeting. The memorandum was entitled "Future Arrangements Regarding Nick Petroulias". It indicated that the Offender would "focus most of his attention on the review of international issues". It said "Where Nick in his private consulting work, represents a client which involves an ATO matter, the general nature of the matter should be communicated" to nominated senior personnel and this would "avoid any potential or perceived conflicts of interest". The memorandum stated "Nick's dealings with ATO people outside the high wealth individual task force will always be in conjunction with HWI people" and that this would ensure that "other ATO staff have a proper introduction to Nick's function in HWI". Once again, this document emphasised to the Offender the lines of demarcation and communication which were appropriate to guard against actual or perceived conflicts of interest given his role in the High Wealth Individuals' Taskforce. The rules were clear and emphatic. I am satisfied that there was no room for honest controversy or debate concerning the construction and application of these rules. Once again, the Offender was on clear notice of his obligations in the area of conflict of interest.
43 Within days of this memorandum, the Offender was in contact with an ATO officer, Mr Lowman Chow, concerning an application for an advance opinion made by Mr Panos for Productivity Incentive Australia Pty Limited (Exhibit C17). The Offender had social dealings with Mr Chow, by way of yum cha, on 7 September 1997. Over the next two days, the Offender prepared a lengthy facsimile which was sent to Mr Chow on 9 September 1997 supporting the issue of the advance opinion (Exhibit C18).
44 False and misleading statements were made to Mr Chow in September 1997 with respect to the alleged activities of Productivity Incentive Australia Pty Limited. The application of 2 September 1997 for an advance opinion had been directed by Mr Panos to Mr Chow. Mr Chow spoke to Mr Panos by telephone and informed him that Mr Chow's area within the ATO related to media and communication industries. Thereafter, Mr Panos sent a facsimile to Mr Chow stating that the Productivity Incentive Trust Plan would be developed mainly for prospective clients in the media and entertainment industry. It was asserted that Productivity Incentive Australia Pty Limited was seeking to develop the product for entities such as News Corporation, Fairfax, Village Roadshow, the Hoyts Group, Greater Union, Video Ezy, Civic Video, Dymocks and Angus & Robertson. I am satisfied that this was a false statement by Mr Panos communicated for the purpose of ensuring that Mr Chow retained the application. The Offender wished the application to remain with Mr Chow so that the Offender could exercise his influence to ensure a favourable outcome. Given the intense involvement of the Offender with this application, I am satisfied that he well knew of this contrivance even if he had not proposed it himself, in the first place, to Mr Panos.
45 There were further communications between Mr Panos and Mr Chow with respect to the application in September-October 1997. At the same time, the Offender was communicating with Mr Chow supporting the issue of the advance opinion. At no time did the Offender inform Mr Chow of his personal business association with Mr Panos, let alone his personal interest in the application then before Mr Chow. On 8 October 1997, Mr Chow issued a favourable letter of advice in response to the application (Exhibit C27; Exhibit C95, Tab 1).
46 The nature of the Offender's conflict of interest was illustrated starkly by a document related to Mr Chow's letter issued on 8 October 1997. Located on the Offender's hard drive found in the Melbourne storage unit was an unformatted draft letter created on 24 October 1997 and directed to Mr John McLaren. I am satisfied that the Offender was the author of this document. Mr McLaren was a business associate of the Offender in the scheme to market EBAs. The draft letter urged Mr McLaren to contact Mr Norman Draper, whom the Offender had met at a seminar on 14 October 1997.
47 It is important to note, at this point, that the letter issued by Mr Chow on 8 October 1997 contained what was described as a "Part IVA sign off", a reference to Part IVA of the Income Tax Assessment Act 1936 (Cth). The document addressed to Mr McLaren, and written by the Offender, provides powerful evidence of the existence of a business arrangement, in which the Offender was a central figure, and the use by him of his position within the ATO to further those business interests. The document included the following (SU115):
"Things to note: speeding things along, Accountants tend to be driven by deadlines (ISD, ATO, ASC returns, etc) and therefore are slow to move on product. In order to motivate them to move quicker it should be pointed out that it should not be left to end of year because it looks like a sham/Part IVA; and most importantly, it costs the client money each and every month that it is not implemented in the form of PAYE instalments, payroll tax, Super guarantee charge and workers comp. IE, for even a small company, these on-cost savings pay for the plan. Second opinions: If possible, it would be handy to arrange for second opinions in Melbourne to be done by Andrew Gray rather than the client's other solicitors/advisers. The object would be to minimise potential plagiarism and at the same time ensure that a consistent message is being given. Andrew's number is [XXX] . You could tell the client that being familiar with the product, the costs of any second opinion would be smaller than to take it to someone who is not familiar with it. Competitors - comparison. We are the only ones with an advance opinion which includes a Part IVA sign-off. Arthur Andersen have an advance opinion on their product which sells for $40,000 but does not have a Part IVA sign-off. Part IVA as you know, is very important to accountants so it is a difference that is worth noting. Also, ours is the only advance opinion which is under the new 1997 Act. That is, it is not open to the ATO to argue that the wording of the new Act is different and therefore the advance opinion does not apply."
48 The document continued and referred to some competitor schemes as "shockers". The Offender continued (SU116):
"These schemes are a total disaster. Note that even if it did work, there would be indexation for CGT purposes merely on the $1 rather than in our case, on the full value of the contribution. It is important to point out that price should not be a consideration for a scheme that will work for next 10 years or so to reduce tax - particularly when it carries no tax audit risk. If the cheaper end of the market sells theirs at $5,000 less than us for example, that is a small price to pay over a substantial period for avoiding audit risk. If the clients do get audited, they will also have to spend at least the difference on advisers fending off the ATO. They will also be disrupted from their business activities where they should be making money."
49 I am satisfied that the Offender, in this document, was urging Mr McLaren to market the Productivity Incentive Scheme by reference to the letter issued by Mr Chow on 8 October 1997. The Offender was emphasising what are said to be advantages of the scheme including "Part IVA sign off" and "avoiding audit risk". I am satisfied that the Offender caused Mr Chow to issue the letter of 8 October 1997, and thereafter ensured that the letter would be used by his business associates, on the other side of the tax fence, as a marketing tool. This involved a blatant and actual conflict of interest. The fact that the Offender was a consultant, and not a full-time employee, at this time makes no difference to this conclusion. By this time, there was a clear conflict of interest and flagrant breach of trust on the part of the Offender with respect to his public duties as a consultant with the ATO.
50 Events soon after demonstrated the use of Mr Chow's letter for selling purposes. On 6 November 1997, Mr McLaren met Mr Draper in an attempt to market the Productivity Incentive Scheme. Amongst the materials provided by Mr McLaren to Mr Draper was a copy of part of the letter of Mr Chow issued 8 October 1997. I infer that the letter was provided to Mr McLaren by the Offender or by Mr Panos. The use by Mr McLaren of the Chow letter for marketing purposes, in my view, confirms that the Offender's marketing suggestions to Mr McLaren (contained in the 24 October 1997 draft) had been implemented.
51 I am satisfied that the Offender applied a combination of subtle and unsubtle pressure to Mr Chow, which led Mr Chow to issue his letter of advice on 8 October 1997. The Offender's efforts in this respect were intense and continued for a period of time. Mr Chow, of course, was completely unaware of the Offender's personal interest in the application.
52 The circumstances surrounding the issue of this letter by Mr Chow provide a graphic illustration of the impropriety of the Offender which forms part of the second count. I am satisfied that the involvement of the Offender in this episode sets the scene for what continued over many months in 1997 and 1998. It provides a clear and reliable insight into the activities of the Offender, surrounding the issue of advance opinions and private rulings, in circumstances of gross conflict of interest and clear impropriety.
53 On 9 September 1997, Mr Panos made application for an advance opinion for Productivity Incentive Australia Pty Limited Productivity Incentive Plan. The application was marked for the attention of Mr Charles. I am satisfied that this application had been drafted by the Offender in and after August 1997. As mentioned earlier, a draft of this document was located on the Offender's hard drive seized from the Melbourne storage unit by police on 23 March 2000 (Exhibit C206, Tab 8).
54 The Offender played a part in settling a favourable response by Mr Charles to the application. On 25 November 1997, Mr Charles issued a favourable letter to Mr Panos (Exhibit C95, Tab 2). This was a further clear example of a gross conflict of interest by the Offender. He had drafted the application sent by Mr Panos to Mr Charles, and then involved himself in the charade where he purported to assess the application and advise Mr Charles as to the outcome. Like his involvement in the application to Mr Chow, the acts of the Offender with respect to this application involved serious impropriety.
55 I accept that the Offender told Mr Charles that he (the Offender) had advised Mr Panos to forward the application to Mr Charles because it was in his area of experience and that the Offender told Mr Charles that he knew Mr Panos (SU133). This was not much of a disclosure. The evidence demonstrated that very many people knew each other in the tax industry. What was critical was the true nature of the relationship. This limited disclosure to Mr Charles was the extent of any disclosure by the Offender to any of Messrs Charles, Chow or Targett. I am satisfied that it was a grossly inadequate and misleading statement which omitted the true nature of the relationship between the Offender and Mr Panos.
56 On 11 November 1997, the Offender and Mr Morgan together visited an accountant, Mr Calligeros, for the purpose of marketing EBT schemes. Although the Offender was still a consultant to the ATO at that time, I am satisfied that he well understood that actions of this type involved an actual conflict of interest. The visit to Mr Calligeros was for the purpose of the Offender, together with his business associate Mr Morgan, marketing schemes for personal gain.
57 On 24 November 1997, the Offender commenced permanent employment with the ATO, for a fixed term of four years, at the level of Senior Executive Service Band 1, Office of Chief Tax Counsel.
58 On 14 October 1997, the company, Morgan HR Pty Limited, was registered. This was a corporate front to be utilised by Mr Morgan for marketing purposes. At all relevant times in 1997 and 1998, Mr Morgan operated, on his own, out of his small flat in Elizabeth Bay. He had no employees or other staff. I am satisfied that the registration of Morgan HR Pty Limited was effected to further the private business plan of the Offender, Mr Panos and Mr Morgan.
59 On 25 November 1997, Mr Panos made application for an advance opinion for a Productivity Incentive Trust Plan for Morgan HR Pty Limited. The application was marked for the attention of Mr James Targett. The Offender had been in contact with Mr Targett for purposes relating to EBTs since at least August 1997. I am satisfied that the Offender told Mr Panos to mark the application for the attention of Mr Targett.
60 Following the receipt by Mr Targett of the application of 25 November 1997, the Offender communicated with Mr Targett with respect to the application. I am satisfied that the Offender spoke to Mr Targett on about 15 December 1997 and told him, with respect to the application, to "let this one go … we will be looking at these in the new year … we are going to issue a public ruling" (Exhibit C87). On 12 January 1998, Mr Targett issued a favourable advance opinion to Mr Panos with respect to the Productivity Incentive Trust Plan for Morgan HR Pty Limited (Exhibit C95, Tab 3).
61 The application made to Mr Targett on behalf of Morgan HR Pty Limited by Mr Panos included extravagant and clearly false statements concerning that company and its alleged activities. Although it was Mr Panos who wrote the letter in question, I am satisfied that the Offender had knowledge of the falsity of this information, and the fact that it was being proffered to the ATO. It was the Offender who had introduced Mr Morgan to Mr Panos and who was, I am satisfied, the mastermind of the private commercial arrangements put in place between these men, and others.
62 On 2 December 1997, Mr Targett spoke to Mr Panos concerning the application he had received for Morgan HR Pty Limited. Mr Panos informed him that the application had been directed to Mr Targett because Morgan HR Pty Limited was an adviser dealing mainly with Large Business and Industry and Property and Construction clients whereas the Productivity Incentive Australia Pty Limited request sent to Mr Chow had mainly dealt with media clients. At that time, Mr Targett worked in the Large Business & Industry (Property and Construction) part of the ATO. I am satisfied that the Offender had proposed that the application be sent to Mr Targett, with whom the Offender had been in contact on EBT issues. I am satisfied that the false statements by Mr Panos were made at the suggestion of the Offender to ensure that Mr Targett retained the application. That this was plainly false is demonstrated by the fact that Morgan HR Pty Limited had no clients at all. The company, in effect, was Mr Morgan operating out of his small flat in Elizabeth Bay. His sole role was to market schemes. All this serves to demonstrate a level of deceit used in communications with the ATO of which the Offender was, I am satisfied, well aware.
63 On 12 January 1998, Mr Targett issued a favourable advance opinion with respect to the Morgan HR Pty Limited Productivity Incentive Trust Plan (Exhibit C95, Tab 3).
64 I note that the Crown did not contend, nor do I find, that there was any impropriety whatsoever on the part of Mr Chow, Mr Charles or Mr Targett with respect to the applications in which the Offender became involved. I am satisfied, however, that the Offender directed Mr Panos to mark applications for the attention of these persons in circumstances where the Offender had developed an association with these persons, and could thereafter play an active part in promoting a favourable response to the applications.
65 The Offender met Mr Emmanuel Aivaliotes in about April 1997. Mr Aivaliotes had commenced working at the ATO in February 1996. Before then, he had worked for some 18 years as a solicitor in private practice and in other capacities. The Offender asked Mr Aivaliotes to work with him in the SRA and he commenced to work there in late 1997. He had an office on the same floor as the Offender in the ATO's Centrepoint office in Sydney.
66 Mr Aivaliotes was called as a Crown witness at committal proceedings, in the first trial before Sully J and a jury in 2005, and was in the witness box giving evidence when the second trial before me and a jury was aborted in May 2007: Petroulias v R [2007] NSWCCA 134. By that time, I had acceded to an application by the Crown for leave to cross-examine Mr Aivaliotes as an unfavourable witness under s.38 Evidence Act 1995: R (Cth) v Petroulias (No. 16) [2007] NSWSC 506. During the course of the evidence in chief of Mr Aivaliotes before the jury that convicted the Offender, I granted the Crown leave under s.38 to cross-examine Mr Aivaliotes, as an unfavourable witness, with respect to seven specified topics: R (Cth) v Petroulias (No. 29) [2007] NSWSC 1005.
67 It is appropriate that I record my findings concerning the evidence of Mr Aivaliotes. As will be seen, for a period of months after January 1998, Mr Panos (and others associated with the business, including Mr Morgan, Mr Strong and Mr McLaren) directed applications for private rulings and advance opinions for the attention of Mr Aivaliotes. I am satisfied that these, and other related applications, were made as part of the private business arrangements involving the Offender. Some 65 private rulings or advance opinions were issued by Mr Aivaliotes pursuant to these applications between January 1998 and October 1998. It was the Crown case that the Offender had effectively controlled Mr Aivaliotes over a period of time and exercised influence over him, directly and indirectly, in the issue of favourable rulings and opinions. The evidence of Mr Aivaliotes at committal proceedings and in the 2005 trial demonstrated, in a number of respects, that he had been acting under the effective control and direction of the Offender with respect to the issue of these rulings and opinions.
68 However, Mr Aivaliotes altered his evidence in a number of respects at the two trials in 2007. In those trials, Mr Aivaliotes said that much of the work was done by him and that he acted in a way which reflected his own independent views on matters, rather than following the views given to him by the Offender. The effect of this change in evidence of Mr Aivaliotes was to elevate his own role in the decision making, and to reduce significantly the role of the Offender. It was in areas touching this change that Mr Aivaliotes was cross-examined, by leave, by the Crown at the trial.
69 I am satisfied that the jury accepted, as the truth, the earlier accounts given by Mr Aivaliotes at committal proceedings and the 2005 trial which demonstrated the significant controlling role of the Offender in the issue of favourable rulings and opinions in 1998. In my view, Mr Aivaliotes gave a most unconvincing series of explanations for his changes in evidence. At times, he gave a tangled and confused account of the changes in his evidence. Indeed, his capacity to change positions in the witness box served to highlight an element of malleability which, I am satisfied, existed in 1998 in his role in issuing advance opinions and private rulings whilst under the influence of the Offender. I am satisfied that the jury concluded that Mr Aivaliotes was, in truth, a puppet used by the Offender as a means of ensuring speedy and positive outcomes for applications for advance opinions and private rulings for applicants associated with the Offender's own private business interests. I am satisfied that the Offender selected Mr Aivaliotes as the person to whom applications should be directed because he had assessed Mr Aivaliotes as a compliant individual who would act in accordance with the Offender's wishes.
70 Many of the advance opinions and private rulings issued by Mr Aivaliotes were cut-and-paste efforts which, I am satisfied, were not the product of any independent legal assessment. Rather, if the Offender indicated to Mr Aivaliotes that opinions or rulings should issue, Mr Aivaliotes proceeded to act in accordance with the Offender's wishes.
71 It is not necessary, for present purposes, to refer to each and every advance opinion or private ruling issued in 1998, formally or notionally by Mr Aivaliotes. It is sufficient to observe that applications for rulings and opinions which received favourable outcomes were made by, amongst others, Mr Panos, Mr Morgan, Mr McLaren and Mr Strong.
72 On 19 January 1998, the Offender was appointed Acting Assistant Commissioner, SRA, within the ATO.
73 The evidence of Mr Morgan came under strong challenge by the Defence at trial. The jury was given warnings and directions under s.165 Evidence Act 1995 concerning the evidence of Mr Morgan (SU407-409). I am satisfied that the jury accepted the evidence of Mr Morgan concerning the existence of the business arrangements in and after 1997 involving the Offender, Mr Morgan, Mr Panos, Mr McLaren, Mr Strong and Mr Gray. The evidence of Mr Morgan did not stand alone. There was a powerful documentary case which, in my view, supported the direct evidence of Mr Morgan concerning the role and activities of the Offender with respect to these persons, and their business arrangements, in 1997 and 1998.
74 It is the case that the only direct evidence of payment of money to the Offender, as a result of his involvement in this business arrangement, emanated from Mr Morgan. It is also the case that Mr Morgan's account with respect to payment of money to the Offender varied. This was a factor referred to in the course of the s.165 warnings given to the jury. I have regard to the s.165 warnings concerning Mr Morgan for the purposes of my own fact-finding function on sentence.
75 I have carefully considered Mr Morgan's evidence and the arguments advanced with respect to it at the trial and on sentence. In my judgment concerning directions to the jury (R (Cth) v Petroulias (No. 34) at [32]-[46]), I gave reasons for giving certain directions to the jury concerning the evidence of Mr Morgan. I referred to a number of pieces of evidence independent of Mr Morgan which, in my view, supported his account in significant respects. It was not necessary for the Crown to prove actual payment of money to the Offender to secure a conviction on the second count. An agreement to receive money was sufficient. However, I am satisfied, beyond reasonable doubt, that the sum of $41,000.00 in cash was paid to the Offender as part of this business arrangement, but that the Offender returned the money at a later time when investigations of his conduct were underway. The Offender was a controlling figure in the arrangement. He was so involved for financial gain.
76 I am satisfied that Mr Morgan's evidence provides an essentially accurate account of what was happening with respect to the business arrangements outside the ATO in 1997 and 1998, including dealings with the Offender, Mr Panos and others concerning the implementation and advancement of those business arrangements. The documentary evidence, as I have said, provides substantial support, viewed from the ATO side of the fence, for Mr Morgan's account of events. I am satisfied that the only rational explanation for the Offender's involvement in these arrangements between 1997 and 1999 was personal financial reward.
77 As 1998 unfolded, applications for advance opinions and private rulings came in marked for the attention of Mr Aivaliotes. The Offender was directly involved in the favourable consideration of these applications. I am satisfied that, at no time did the Offender reveal to Mr Aivaliotes either the fact, or the nature, of his business association with Mr Panos, Mr Morgan, Mr Strong or Mr McLaren. I do not accept the evidence of Mr Aivaliotes, expressed for the first time at the second trial in 2007, that the Offender had disclosed in late 1997 an association with Mr Panos and others. This was a topic in relation to which the Crown was granted leave under s.38 to cross-examine Mr Aivaliotes: R (Cth) v Petroulias (No. 29) at [64]-[67], [83]. He had previously said on oath that the Offender had not disclosed any association with these persons. I am satisfied that the earlier evidence of Mr Aivaliotes, that there had been no disclosure, was the truth. I reject his late and unconvincing account to the contrary.
78 In and after January 1998, the Offender held the position of Acting Assistant Commissioner within the ATO. The trust and responsibility vested in him in that senior office was manifest. In breach of that trust, the Offender continued to involve himself, and effectively control, the outcome of applications for advance opinions and private rulings processed through Mr Aivaliotes.
79 On 31 March 1998, the Offender completed a Statement of Registration of Private Interests which required disclosure of any areas of actual or potential conflict with public duty (Exhibit C203). No disclosure was made despite the clear existence of actual conflict. This served as yet another reminder to the Offender of his obligations. He ignored them.
80 Whilst all applications for advance opinions and private rulings by the Offender's business associates met with favourable outcomes, with the Offender playing an influential role in these outcomes, the evidence demonstrated a different approach was taken by the Offender to six applications by other interests. These applications were declined in 1998, with the Offender playing a significant role in that outcome. Although it was submitted for the Offender that these applications could be distinguished in various ways from those made by the Offender's associates, I am satisfied that no relevant distinction can be made. This was powerful evidence of favouritism by the Offender towards his business associates.
81 On 26 March 1998, notices under s.264 Income Tax Assessment Act 1936 (Cth) were directed to Morgan HR Pty Limited and Productivity Incentive Australia Pty Limited through Mr Panos (Exhibits C116 and C117). Thereafter, Mr Morgan wrote to Mr Aivaliotes on 14 April 1998 concerning the s.264 notice to Morgan HR Pty Limited (Exhibit C118). On 21 April 1998, letters were sent by Mr Aivaliotes with respect to these s.264 notices indicating that material in relation to the arrangements had been examined and that the ATO agreed with the tax consequences outlined by the companies and that, accordingly, "We will not be auditing your clients as part of this current project" (Exhibits C120 and C121).
82 I am satisfied that the Offender was aware that these s.264 notices had been sent to the two companies through Mr Panos, and that powers under s.264 were being utilised with respect to these companies, Mr Morgan and Mr Panos. I am satisfied that this was a façade, by which the s.264 power was utilised resulting in letters being provided to Mr Morgan and Mr Panos which were capable of being utilised for marketing purposes. I am satisfied that the involvement of the Offender in this area involved a misuse of an important statutory power under tax legislation.
83 In May 1998, the Offender formed the view that documentation should be created to provide a veneer of authenticity to the process of assessment by the ATO of Productivity Incentive Corporation applications. Located in the hard drive of the Offender's computer seized from the Melbourne storage unit in March 2000 was a non-formatted version of a document headed "Productivity Incentive Corporation Re Meeting on Wednesday 28 January 1998 and Thursday 29 January 1998" (Exhibit C206, Tab 30). It was a draft of a document which, in settled form, was entitled "Memorandum of Understanding Re the ATO Attitude Toward the Taxation Treatment of Incentive Structures" on the letterhead of Productivity Incentive Corporation (Exhibit C146).
84 This document purported to be minutes of a meeting on 28 and 29 January 1998 attended by the Offender, Mr Strong, Mr Panos and Mr Aivaliotes. When investigations were underway in late 1998 and early 1999, the Offender handed copies of this document to senior ATO personnel. I am satisfied that no meeting took place on 28 and 29 January 1998 as alleged in this document. This was a further topic in relation to which the Crown was granted leave to cross-examine Mr Aivaliotes at the last trial: R (Cth) v Petroulias (No. 29) at [23]-[28], [79]. I accept, as the truth, Mr Aivaliotes' earlier sworn evidence that he had no recollection of being at such a meeting.
85 I am satisfied that this document is a contrived document. Substantial parts of it involve a cut and paste from promotional material for Productive Incentive Corporation which, I am satisfied, was created by the Offender. If the document was genuine, it indicates that a meeting took place between Mr Panos and Mr Strong (representing the Productivity Incentive Corporation interests) and the Offender and Mr Aivaliotes (representing the ATO) at which lengthy and detailed discussions took place concerning Productivity Incentive Corporation activities leading to a "Memorandum of Understanding". I am satisfied that the Offender was the prime mover of the Productivity Incentive Corporation, with Mr Panos and Mr Strong being secondary players to the Offender in this respect. The content of the document serves to demonstrate its implausibility. I am satisfied that the document was created by the Offender for use in the event that some record was required to seek to explain the ATO's consistently favourable approach to Productivity Incentive Corporation applications. The fact that it was deployed by the Offender in late 1998 and early 1999 to assist with such an explanation, supports this conclusion. I am satisfied that the document was not created until some time in and after May 1998. So much is demonstrated by the document located on the Offender's hard drive in the Melbourne storage unit. There had been no such meeting in January 1998.
86 The fact that the Offender went to such elaborate lengths to create a false document of this type speaks eloquently of the true nature of his relationship with Mr Panos and Mr Strong, and the manner in which he was in a grave and continuing conflict of interest throughout 1998. The fact that the Offender was fabricating such a document, at a time when he held one of the most senior positions in the ATO, points starkly to his abuse of trust at that time.
87 I have mentioned, in general terms, that applications for advance opinions and private rulings by the Offender's business associates were addressed to Mr Aivaliotes in the ATO in 1998. The evidence revealed that some applications came in batches and favourable rulings and opinions were issued frequently in batches. For example, five applications for private rulings were made on 1 May 1998. Mr Aivaliotes issued four private rulings on 3 June 1998 and four more on 5 June 1998. Four private rulings were issued by him on 17 June 1998. Thirteen applications for private rulings were made on 30 June 1998 and 12 rulings were issued by Mr Aivaliotes on 8 July 1998. Five more applications for private rulings were made on 9 July 1998. Seven private rulings were issued by Mr Aivaliotes on 10 July 1998 with two more on 15 July and three more on 16 July 1998. All of these rulings were made by or on behalf of entities associated with the Offender's undisclosed business interests.
88 On 25 July 1998, a meeting took place at the Airport Sheraton Hotel in Sydney between the Offender, Mr Panos, Mr Strong, Mr McLaren, Mr Gray and Mr Morgan. Senior Counsel for the Offender at trial accepted that such a meeting took place, but contended that it was a meeting attended lawfully by the Offender, in his ATO capacity, with these persons to discuss tax issues. I reject this submission as, I am sure, did the jury.
89 I accept the evidence of Mr Morgan that this was a meeting between business associates to discuss products and marketing strategies for the sale of tax schemes. I am satisfied that the Offender was not present for any lawful purpose. Rather, the meeting was to advance his own private business interests and those of the other persons present. This was a further manifestation of the grave and continuing conflict of interest involving the Offender throughout 1998.
90 I am satisfied that it was about the time of the 25 July 1998 meeting that the Offender provided to Mr Morgan documents, being client lists, containing information which had been obtained in the exercise of the Offender's duties with the ATO. The provision of these documents to Mr Morgan by the Offender founded the conviction by the jury on the third count. The documents provided by the Offender contained summaries of taxpayers and tax agents whom the Offender considered ought be contacted by Mr Morgan for marketing purposes. It was submitted for the Offender that the documents provided by the Offender contained relatively innocuous information which was otherwise generally available. If this was so, it is difficult to understand why the Offender would have bothered to provide the documents to Mr Morgan, his salesman.
91 The irresistible inference is that the Offender considered that there was a substantial advantage in Mr Morgan having this material for marketing purposes given that it summarised persons and entities who were likely to be receptive targets for marketing of tax schemes. The Offender's intention was that the information be used to exploit a marketing advantage which possession of this information gave the Offender and his associates over their business competitors. I am satisfied that the Offender provided these documents to Mr Morgan for the purpose of advancing his personal interests. I am satisfied that the information contained in these documents had been compiled from information gathered by use of the ATO's compulsory powers.
92 This was a clear and serious breach of the tax secrecy provisions which had bound the Offender from the beginning of 1997. He could have been in no doubt that these were confidential documents, the supply of which to a third party would constitute a criminal offence.
93 This was not a technical breach of the law. By this time, the Offender occupied high office in the ATO. The information contained in the documents had been gathered by use of statutory powers, including s.264 notices. The Offender was motivated by private financial gain in handing these documents to Mr Morgan. The fact that Mr Morgan did not, in the end, use the documents for marketing purposes does not assist the Offender, in any material way, on sentence. The Offender intended that the documents be put to use in this way. The provision of these documents, in clear breach or the law, constituted a further example of a grave abuse of trust by the Offender in his office with the ATO.
94 On 25 September 1998, the Offender was appointed First Assistant Commissioner, Strategic Intelligence Network, within the ATO.
95 On 20 October 1998, the Public Rulings Panel of the ATO met in Melbourne to discuss the forthcoming issue of a draft public ruling concerning the associate test. The Offender was in attendance at this meeting (Exhibit C194).
96 On 21 October 1998, Mr Aivaliotes issued six advance opinions or private rulings with respect to non-complying superannuation funds, all in response to applications by Mr Morgan or Mr McLaren. An advance opinion and a private ruling concerning non-complying superannuation funds were issued by Mr Aivaliotes to Mr Strong on 23 October 1998 (Exhibit C95, Tabs 72, 73).
97 On 28 October 1998, the draft tax ruling was issued at a press conference held by Mr Carmody, the then Commissioner of Taxation. At this time, the Offender informed Mr Carmody that there would be a reaction because of rulings that had issued. Thereafter, a process of investigation commenced during which the Offender was asked to identify rulings and opinions which had issued.
98 During this investigation, I am satisfied that the Offender provided incomplete and misleading explanations to ATO personnel who were seeking from him the true facts concerning what had happened. It was during these investigations that the Offender proffered the fabricated "Memorandum of Understanding" said to have arisen from a meeting on 28 and 29 January 1998, to which I have already made reference.
99 I am satisfied that the Offender was in a position to provide, if he saw fit, a full and frank account of the opinions and rulings which had been issued. He did not provide that information to ATO personnel. Located in the Melbourne storage unit in March 2000 were a large number of original ATO documents and copy documents. They constituted a substantial, if not complete, record of applications by the Offender's business associates for advance opinions and private rulings, and the opinions and rulings themselves. The fact that the Offender had retained, taken away from the ATO and secreted these documents in Melbourne, was significant incriminating evidence at trial. The fact that the Offender did not produce these documents to ATO investigators, nor use them to provide a complete account of events to them, indicates the continuation of a pattern of deceit, motivated by self-interest and now self-protection on the part of the Offender.
100 The Offender's deception during the investigation extended beyond the suppression of ATO documents which he had in his possession. At the suggestion of the Offender, a meeting took place between Mr Aivaliotes and the Offender at Coogee Beach on 16 March 1999. According to Mr Aivaliotes, whose evidence I accept in this respect, the Offender was somewhat agitated. I am satisfied that the Offender's state of agitation was the product of a guilty mind and his awareness that the investigation may reveal the true facts of his association and dealings with Mr Morgan, Mr Panos, Mr McLaren, Mr Strong and others associated with his business arrangements.
101 At this meeting, the Offender handed to Mr Aivaliotes a document (Exhibit C147) which identified six "problem areas" and suggested, with respect to each area, a "possible response". This was an overt attempt by the Offender to persuade Mr Aivaliotes to provide an account in these areas which was consistent with that of the Offender and which might constitute, in the Offender's eyes, an exculpatory account. One of the problem areas was, tellingly, "Why all applications look the same". Another picked up the misspelling of the name "Aivaliotes" on a document which, the Crown contended, had been created by the Offender, and not Mr Aivaliotes, who would not be likely to misspell his own name. Another problem area concerned the Ashley Cain applications which bore the date "25 March 1998", but looked exactly like the "Geoff Strong application of 30 October", and referred to a Deed of Contribution which had not existed as at 25 March 1998.
102 I am satisfied that the preparation and production of this document by the Offender provides powerful evidence of his knowledge of contrivances used in 1998 with respect to applications for, and the grant of, favourable advance opinions and private rulings to persons with whom the Offender had private business interests. If the process was all above board, and the Offender believed it to be above board, it is difficult to understand why the Offender would not simply present all the material to ATO investigators. Instead, he went to extraordinary lengths to suppress it and to seek to persuade Mr Aivaliotes to get his story straight, and to align it with the Offender's story.
103 The Offender resigned from the ATO effective on 6 April 1999.
104 On 8 April 1999, the Offender handed to Mr Brown, an ATO investigator, a laptop computer which had been issued to him by the ATO. Technical examination of the Offender's computer revealed a letter described in the trial as the "Nick to Nick" letter (Exhibit D42). I am satisfied that this letter was prepared by the Offender and was directed to Mr Panos, clearly prior to 8 April 1999. This letter was a powerful piece of evidence against the Offender. It sheds substantial light on the true relationship between the Offender, Mr Panos, Mr Strong and Mr McLaren. I am satisfied that it demonstrates the controlling and pivotal role of the Offender in his secret (from the ATO) business arrangements with these persons.
105 The document provides potent evidence of the Offender's impropriety (relevant to Count 2) and the provision of ATO documents in breach of the law for private purposes (relevant to the second and third counts). As this letter provides a telling insight into the Offender's mind, his motives and acts, it is appropriate to set it out in full:
"Nick,
The DPP has now become involved. They are looking at favouritism towards certain people. There are a number of loose ends that need to be sorted out.
These are:-
Geoff and his mates. As you know, they have been giving us the problems in what they have been saying. It is important that you sort out the position with Geoff.
Further, the meeting in January - the 2 day one where you, me, Geoff and Emmanuel met in the York Street offices to discuss how PIC would operate its plans and that PIC would be sending in a number of plans. It is important that you and Geoff get familiar with those notes. These are notes prepared by either Geoff or you and sent to me. (They are very suspicious of those notes).
The client lists - if Geoff has any, make sure they are destroyed.
McLaren: I believe they now know about Global Growth. What is the relationship with PIC? I don't know, I am going to say that they are some sort of copycat as Geoff and Mclaren swap ideas and letters. But I would not know the full story. That is for you to sort out.
There is a problem with the Ashley Cain application. It is dated 25 March (as are all PIC applications - eg Co Ltd by Guarantee and ETP Plan). Further, answers questions that have not yet arisen until October. Ie the Deed of Contribution is in response to the Commissioner's ruling in October - they can't have predicted it back in March.
The only answer I can suggest and please make sure that McLaren has memorised, is that because when they called in October, and I raised the FBT concerns, the [sic] amended the application but not the original date. Ie they changed their submission on the FBT point, without changing the date of the original application and faxed it a few times to the ATO to make sure that they got it.
Money - This is particularly important. Everything must be accounted for, even if as loans to Geoff and others. No HK shit. It smells bad. The idea of investing in HK was to set up a major superfund as a spin off from the existing operations."
106 There are a number of features of this letter which call for comment. Firstly, the Offender is conscious that the authorities are investigating "favouritism" towards certain people and that, in that context, "a number of loose ends … need to be sorted out". I am satisfied that the Offender is here acknowledging favouritism towards others in the issue of advance opinions and private rulings. This lies at the heart of the impropriety involved in the second count. The Offender recognises the existence of a conflict of interest and the need to hide the true facts to guard against its discovery.
107 The Offender is directing Mr Panos to "sort out the position" with Mr Strong "and his mates". There is reference to the notes of the alleged meeting in January 1998. I am satisfied that no such meeting took place. The reference to the alleged meeting in this letter involves recognition by the Offender that there is a need for all concerned to familiarise themselves with the alleged minutes (which I am satisfied were a contrivance), to prepare for the investigation.
108 The Offender directs Mr Panos that, if Mr Strong has any "client lists" he should "make sure they are destroyed". This direction sheds considerable light upon the role of the Offender with respect to the conduct of the business. This bears upon both the second and third counts.
109 The reference to "money" being "particularly important" and that "everything must be accounted for, even as if loans to Geoff or others" points strongly towards the Offender's involvement in a business for financial gain. The question may once again be asked - if all was above board, and the Offender believed it was above board, why write a letter such as this to Mr Panos? I am satisfied that the only rational response to this question is one that incriminates the Offender, in a clear way, with respect to the second and third counts.
110 Telephone conversations between the Offender and other persons were recorded in September and October 1999 under telephone intercept warrants and were tendered before the jury at trial. A number of statements of the Offender during these telephone conversations were incriminating. During a conversation between the Offender and Mr McLaren on 24 September 1999, there was discussion concerning what police investigators should be told concerning Productivity Incentive Corporation. The Offender directed Mr McLaren not to mention Mr Morgan to the police. The Offender suggested to Mr McLaren a possible explanation to police as to how he (McLaren) obtained information as the ruling requests "were exactly the same". The Offender suggested that he tell police that he obtained them on disk from Mr Panos (Exhibit C198). This evidence portrays the Offender in a controlling and central role with respect to the business arrangements, and the persons involved in those arrangements. Once again, if all was above board, why did the Offender wish to suppress information about Mr Morgan from the police? The response is clear and is damaging to the Offender.
111 On 23 March 2000, police executed a search warrant on the Melbourne storage unit held in the name of Christopher Marriott and seized a large number of original and copy ATO documents and the Offender's hard drive. The Offender had rented this storage unit in April 1999 and had placed the documents and hard drive in the storage unit.
112 The Offender was arrested and charged by police on 24 March 2000.