Mr McMahon (Counsel for the offender)
File Number(s): 2017/331537
[2]
Judgment
White collar crimes often involve a serious breach of trust and they are usually only able to be committed because of the previous good character of a person who has been placed in a position of trust. White collar fraud by people employed in law firms is particularly serious, as they are entrusted by the law and the community with a special position. When they abuse that trust they call into question the public's confidence in the profession and the legal system. It is necessary that the courts impose stern penalties to ensure that other people in the legal profession will be left in no doubt that serious consequences follow such offences.
This is a case of a man born in January 1974 who started work with a large Sydney law firm previously known as Gadens which is now part of the world's largest law firm, Dentons. Over the period of about 11 years, between January 2006 and early 2017, he defrauded the firm of about $2 million. Following the seizure of his assets there is a current deficiency of about $1.4 million. He is bankrupt and facing, as his counsel concedes, a lengthy term of imprisonment. The prospects of any further recovery are remote or slim at least.
The offending involves 12 separate charges with a number of matters attached to various charges under a Form 1. In short, as Mr McMahon, counsel for the offender, helpfully summarises it, the funds were obtained by under reporting of stamp duty or from excess funds that should ordinarily have been refunded to various borrowers. The facts are set out in great detail in the agreed facts which are part of the Crown bundle but it is unnecessary for me to do other than summarise them in this fashion.
Mr Woods, as a longstanding employee since 2001, was trusted and generally considered knowledgeable in property and conveyancing transactions and he was relied upon by the staff to be competent to maintain the conduct of complex transactions. He was promoted through the firm and by 2016 he was the client relationship manager.
His offending was uncovered in early 2017 when the firm implemented a new electronic funds transfer safeguard and he was confronted with a number of suspicious matters at a meeting in April 2017. Shortly after the meeting he confessed to a colleague that he had intentionally transferred some money and said that he had trouble with gambling debts. Investigations continued by the law firm and by the Law Society's trust account investigators. By late April there had been some 80 transactions identified involving about $1.6 million. In May 2017 he consented to judgment in favour of Dentons in civil recovery proceedings.
His modus operandi was generally to misappropriate funds from the Trust account by preparing fraudulent payment requests which directed funds purportedly being transferred to third parties into his own bank accounts, and additionally on some occasions he asked for bank cheques to be drawn to third parties and he misappropriated these funds for his or his associate's benefit. In most instances the funds were held on trust for payment of mortgage duty or stamp duty and he would provide fraudulent stamping instructions in order to reduce the stamp duty payable and then cause the excess funds to be transferred to his personal account. There were also some schemes identified where he misappropriated Trust funds relating to Dentons' fees, registration fees, interest retentions and other items. His scheme was close to being detected on several occasions but in order to avoid detection he endeavoured to retrospectively stamp the mortgage and pay the applicable duty using either funds held on trust for an unrelated matter or out of his personal funds.
The detail of the offences including the dates on which the offences occurred and the amount involved in each offence will be set out in a schedule and will be provided with these remarks. They are as set in the agreed facts. The total loss according to the agreed facts involved 135 transactions totalling $2,034,836. Dentons had also incurred a cost of $78,000 in professional fees for reviewing the losses. As I have indicated, judgment has been entered in favour of Dentons with the consent of the offender. There was almost $14,000 in annual leave and salary entitlements which were withheld at the time of his termination and they have been incorporated into his estate.
The only matter on his record is a low range PCA in September 2013 which was dealt with by a s 10 bond. As the Crown indicated, technically that is an aggravating factor but it is of very little significance in the scheme of this case.
The Sentencing Assessment Report records, following contact with his family, that he has a supportive relationship with his immediate family. He is currently engaged in tertiary studies and works fulltime for Legacy, a job which he obtained immediately after his termination from Dentons. He said that his offending was as a result of attempting to keep up with the lifestyle of his colleagues and friends and he had been addicted to cocaine and he saw no alternative options to fund his lifestyle. He had begun using cocaine in a social context in 2003 with work colleagues and had used that until 2015. The evidence establishes a number of counselling sessions to address cocaine abuse and other factors since 2012, well before his offending was uncovered. He acknowledged the impact of the actions on the people around him, including his colleagues and family. Since 2012, he has consistently attempted to address the factors relating to his offending and demonstrated a willingness to engage in continuing treatment.
As is frequently the case in this type of matter the risk of further offending is extremely low, both in my assessment and in the assessment of Community Corrections officers.
The particular offences are four sequences under the old s 178BA of the Crimes Act 1900 (NSW), which carried a maximum penalty of five years with no standard non-parole period, and eight offences under the relatively new s 192E(1)(b) of the Crimes Act 1900 which carries a maximum penalty of ten years with no standard non-parole period. Those penalties, of course, are yardsticks in the sentencing process which must be carried out as the Crown helpfully acknowledges in its written submissions in accordance with s 3A of the Crimes (Sentencing Procedure) Act 1999 (NSW), bearing in mind the purposes of sentencing. Section 5 of the Crimes (Sentencing Procedure) Act 1999 of course provides that a term of imprisonment must not be imposed unless the Court is satisfied, having considered all the possible alternatives, that there is no other appropriate penalty. Mr McMahon concedes that a term of imprisonment is mandated by the circumstances of this case and it is unnecessary for me to consider any alternatives.
I have regard to a very lengthy and helpful report of a psychologist, Adjunct Professor Stephen Woods, who identified poly substance use disorder, alcohol use disorder, other specified personality disorder and trauma and stress related disorder, revealing noteworthy features of a pervasive personality disorder with a poorly developed and only partially integrated sense of self. These developed in response to early life trauma inclusive of but not limited to separation from primary carers and an inability to personally come to terms with his sexual orientation. His offending was also identified by Mr Woods as having been underpinned by a desire to feel accepted and thus gain a vicarious sense of status as part of a group of qualified lawyers in the law firm. In short, he was living well beyond his means.
To amplify his background, he had been attending TAFE studies in property and justice and then engaged in the Legal Profession Admission Board course for some time but discontinued this due to work demands. He devoted himself solely to his work and began to socialise almost exclusively with work colleagues and accompanied them on trips and expensive social outings. His somewhat troubled background is set out in detail and need not be repeated in the course of these remarks. He has only had one long-term interpersonal relationship and one long-term homosexual partnership and acknowledged that he first informed his parents of this in 2017. He has one sibling, a 47 year old sister, who along with her husband was in the military and lives in Queensland. His mother and step-father live in the ACT and are here to support him today. He hopes to be able to return to Brisbane to care for his elderly grandmother upon his ultimate release.
Professor Woods helpfully summarised the medical records going back to 2012 to which I referred briefly earlier, which support his history of regular counselling and record his reactions to his fraud being uncovered by the law firm. I note a report from his current treating clinical psychologist, Mr Kalitowski and a number of references from family members and friends including Kevin and Denise Woods, his sister and a number of close friends including Mr Kelleher who, I am told, has remained in Australia after a trip from New York to support him today. Not surprisingly, they all speak with one voice of his prior good character and their surprise at his offending, their acceptance of his expressions of remorse and willingness to attempt to right the wrongs that he has committed to the best of his ability and they offer him continued support.
I have been assisted by helpful written submissions by the Crown Prosecutor and by Mr McMahon. The Crown notes that the Form 1 matters should be dealt with in the way suggested by the Chief Justice in the guideline judgment by giving greater weight to first, the need for personal deterrence and, secondly, the entitlement to extract retribution for serious offences. It is common ground that 38 days of pre-sentence custody should be taken into account and since his release on bail he has been under what Mr McMahon described as reasonably onerous bail conditions, but not unduly or exceptionally onerous.
The Crown helpfully points to a number of matters which support Mr McMahon's concession that these are objectively very serious matters and they are helpfully summarised as being that he was a long term and trusted employee was promoted during the period of offending and. it was only through technology updates that his offending was ultimately uncovered. The charges that were laid are representative of 136 identified transactions involving a very significant sum of $2.834 million and a net deficiency of about $1.4 million. His moral culpability is high given the extended period of offending, the abuse of the position of trust, the use of fraudulent documents and the use of numerous bank accounts to conceal the true recipient of the money.
There is no contest from Mr McMahon that the aggravating factors identified by the Crown are appropriate, namely that the loss was substantial and that he abused a position of trust and the offending was part of planned activity. As mentioned, the fact that he is on conditional liberty is of very little significance. The fact that the offences were committed for financial gain is either an element of the offence or an inherent characteristic of the offending. He is entitled to a 25% discount for the utilitarian value of the pleas of guilty at an early stage. It is common ground that an aggregate sentence is appropriate and that such aggregate sentence will involve accumulation of sentences and then a finding of special circumstances is appropriate and will be made.
Mr McMahon's submissions note that the undoubted damage to his reputation and future career prospects as a result of the offending may be regarded as a form of extra curial punishment: Silvano v R (2008) 184 A Crim R 593.
His mental conditions as diagnosed are relevant to the sentencing process in accordance with DPP (Cth) v De La Rosa (2010) 79 NSWLR 1 and do operate to ameliorate to a limited extent the need for general and specific deterrence. He admitted his wrongdoing and expressed his remorse at an early stage and his expressions of remorse and contrition are clearly genuine and accepted by the Court. The risk of re-offending is very low and his prospects of rehabilitation are good and are demonstrated by his attempts at reimbursement and his immediate move to full time employment and further study notwithstanding his knowledge that his fate will prevent him from engaging in that for some time.
Although cases such as R v Gentz [1999] NSWCCA 285 acknowledge that good character can generally carry less weight in this type offending I take account of what was said by Hoeben CJ at CL in Elomar v R [2018] NSWCCA 224 as to the positive evidence of good character as distinct from simply an absence of prior convictions.
It is correct that a large portion of the offending dates back many years to as early as 2006. While that may be described as stale and calling for a degree of understanding and flexibility of approach; on the other hand, of course, it must be recognised, that at the time the offending only carried a maximum penalty of five years and the legislature has seen fit to double the sentence for similar conduct during the course of this offending.
Mr McMahon accurately summarised the position as involving a 44 year old man whose life has unravelled through his own misdeeds. He is now bankrupt, without assets and living on the kindness of his best friend. For the purposes of sentencing the Court is required to recognise his substantial good character, his good future prospects, his genuine remorse and the role played by his various mental conditions together with his attempts at reimbursement to date. However, general and specific deterrence remain important for objectively serious matters such as these. There is no alternative, as is conceded, to a term of imprisonment. I have taken account of the fact that as the offending progressed each further offence requires in a sense a degree of further punishment as well as recognising the increasing amounts taken on various occasions. There is no precise science about the exercise but that is the way in which in the exercise of discretion I have approached the sentencing process.
The orders that I will make are as follows:
1. The offender is convicted of each offence.
2. The indicative sentences, taking into account the relevant Form 1 offences are:
Chronological Order Sequence/date Referable Form 1 sequence/date Maximum penalty Amount Indicative Sentences
2 1 (23/11/06 & 12/08/09) 5y (178BA) $52,973 2 years
5 (17/05/08 & 17/02/09) 5y (178BA) $7,541
6 2 (12/05/10 & 30/12/14) 10y (192E) $176,731 3 years
10 (24/01/12 & 03/09/12) 10y (192E) $4,394
12 (30/05/11) 10y (192E) $5,149
3 3 (21/12/07 & 25/01/10) 5y (178BA) $79,766 2 years
8 4 (08/05/12 & 2/12/16) 10y (192E) $379,417 3 years, 9 months
13 (19/11/10 & 30/09/12) 10y (192E) $20,241
5 6 (24/3/10 & 23/12/10) 10y (192E) $36,046 2 years, 6 months
15 (22/10/10 & 08/01/14) 10y (192E) $30,865
7 7 (09/02/12 & 13/03/15) 10y (192E) $224,407 3 years, 3 months
16 (22/11/07 & 15/02/10) 5y (178BA) $24,847
19 (11/02/14 & 18/02/14) 10y (192E) $19,102
12 8 (10/12/15 & 03/01/17) 10y (192E) $316,058 3 years, 3 months
17 (22/08/08) 5y (178BA) $14,523
11 9 (20/4/15 & 3/1/17) 10y (192E) $265,450 2 years, 9 months
18 (31/07/09) 5y (178BA) $5,450
1 14 (09/01/06 & 14/10/09) 5y (178BA) $50,922 18 months
9 20 (20/08/14 & 02/12/16) 10y (192E) $171,456 3 years
10 22 (13/3/15) 10y (192E) $55,000 18 months
21 (11/3/14) 10y (192E) $10,582
4 24 (11/12/09 & 18/12/09) 5y (178BA) $83,916 2 years, 2 months
TOTAL: $2,034,836
[3]
I impose an aggregate sentence of imprisonment of 6 years, to commence on 30 November 2018 and expiring on 29 November 2024.
2. I impose a non-parole period of 3 years, expiring on 29 November 2021. The offender is eligible for release to parole on that date.
3. I find special circumstances.
Note - These ex-tempore remarks were revised without access to the court file
[4]
Amendments
13 March 2019 - Anonymised unique personal identifier on cover sheet.
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Decision last updated: 13 March 2019