The Facts
8 My first task is to outline the facts revealed by the evidence in the trial relating to the ongoing conspiracy between the three offenders. In undertaking the fact finding exercise the Court is prohibited from taking facts into account in a way that is adverse to the interests of the offenders unless those facts have been established beyond reasonable doubt. On the other hand, if there are circumstances which the Court is urged to take into account in favour of the offenders, it is enough if those circumstances are proved on the balance of probabilities (R v Olbrich (1999) 199 CLR 270.
9 The offenders were involved in and operated a highly successful and well established clothing business that traded under the name of Dolina. At various times, each of the offenders were, or are directors and shareholders of a number of companies trading under the Dolina name in the retail and wholesale clothing industry. These included Dolina Enterprises Pty Limited, Dolina Fashion Group and a joint venture operation between the two companies. These corporations and entities were involved in the manufacture and sale of garments which were in turn retailed through major outlets such as Coles Myer, David Jones and Rockmans.
10 In addition to the sales at the major outlets, the Dolina companies supplied garments to their own factory outlets. They operated as conventional retail shops. The shops were managed by Mrs Ida Ronen. Those outlets retailed garments to the public generally. Initially there were two, Ronen Young Fashions at Commonwealth Street Surry Hills and Dolina On Fovo at Foveaux Street Surry Hills. As the years passed a new shop opened at Surry Hills called Fashion Bargains and later a retail outlet opened at the factory premises at Epsom Road, Rosebery. This last business was known as "Warehouse". Three of the shops returned their income for income tax purposes through On Fovo Pty Limited. The income of Ronen Young Fashions however was returned in the tax return of Ida Ronen. The retail shops were heavily involved in discounting and the offering to the public of garments at very reasonable prices. As might be anticipated, the businesses had substantial turnovers including a substantial cash turnover.
11 In essence, the Crown alleged the existence of an agreement between the offenders to defraud the Commonwealth of income tax by concealing from the revenue a substantial proportion of cash income from the takings of the original two clothing outlets and later from the Bargain and Warehouse outlets as they came into existence.
12 The substantial argument raised by the defence at trial, although not the only matter relied upon, related to a reasonable possibility that the distribution of a substantial amount of cash takings from the retail outlets to Nitzan Ronen and Izhar Ronen may have been no more than the rightful return of the proceeds of sale of consignment stock to the consignor companies Dolina Enterprises Pty Limited and Dolina Fashion Group Pty Limited. I am however satisfied beyond reasonable doubt, consistently with the jury's verdict, that no such arrangement existed and that the distribution of cash from the retail shops was done in implementation of the agreement alleged by the Crown to be the conspiracy between the co-offenders, namely an agreement to conceal the true takings from the Commissioner of Taxation.
13 In addition, I am satisfied beyond reasonable doubt that the agreement existed from about the end of 1991 to the date of the arrest of the offenders namely, 7 February 2001. Although it is not possible to be absolutely precise as to quantum, I am satisfied beyond reasonable doubt that during these years the amount concealed, in implementation of the agreement, was somewhere between 15 and 17 million dollars.
14 The Crown's expert witness Georgina Wade compared the figures in the front of the "red books" kept by Mrs Ronen with tax returns and other statutory and accounting records. Her evidence, which I accept, estimated that the undeclared income was $14.8 million for On Fovo Pty Limited and $2.12 million for Ronen Young Fashions. These estimates were not precise for the entire period of the conspiracy but were very close to the entire period. On this basis the scope of the fraud represented by unpaid tax was approximately $8.125 million.
15 Ms Fullerton SC suggested that, as amended assessments have now issued for the financial years 1994 to 1999 in the case of On Fovo Pty Limited (and the years 1993 to 1999 for Mrs Ronen) it is possible to state with more certainty the amount undeclared at least in those years. These figures amounted to $12.76 million approximately. There are also estimates made in recent times of the tax liabilities for On Fovo Pty Limited and Mrs Ronen in the financial years 2000-2004. The preferred position argued on behalf of the offenders was that the undeclared income during the period of the conspiracy was not less than $15.5 million although, again, the precise amount could not be exactly stated. On the basis of this approximate estimation, it was submitted that the tax lost by virtue of the fraud would have been approximately $7.44 million.
16 As I have said, in the end I am not able to reach a conclusion that is absolutely precise in terms of quantum. Generally, I accept the evidence of Ms Wade, however, as providing a more accurate estimation of the figures involved. But whether the amount concealed is closer to $16 million than to $17 million, it is quite apparent that the dimension of the conspiracy was that of a fraud on a very large scale.
17 I propose now to make findings in a little more detail. These will relate to the participation by the individual offenders in the conspiracy and in so doing I will describe, by way of findings, the steps taken by the offenders on a regular basis to implement their agreement.
18 As I have said Mrs Ronen managed the businesses for herself and, in effect, for her sons. Customers of the retail outlets paid for the garments they purchased by cheque, EFTPOS, credit or cash. The precise method varied over the period of the conspiracy. The method of implementation of the agreement was simple in the extreme. In general terms Mrs Ronen, on behalf of herself and her sons, skimmed from the takings most, if not all, of the cash and later distributed it to her sons and herself for their own purposes. So far as her sons Nitzan and Izhar Ronen were concerned, the cash distribution was made available to them to use for their own personal purposes, for the purposes of their companies if they wished, or it was sent overseas for their benefit. For example, in the period of surveillance between April 2000 and 7 February 2001, there was approximately 74% of the cash skimmed sent overseas or kept in the safe. Of the total cash skimmed $753,400.00 was sent overseas for the benefit of the sons. In addition, at the time of the arrest an amount of $209,525.00 was seized from the safe, it being ready for distribution to Nitzan Ronen, presumably with a view to its being sent overseas as well.
19 I have described the cash skim as simple and indeed it was. Mrs Ronen would arrange for the cash takings from the shops to be delivered to the On Fovo shop. The offender would then, either herself or by someone on her behalf, arrange for the takings to be brought to her home at Darling Point prior to any banking taking place. At her apartment, Mrs Ronen would sort out the takings into cash and other forms of payment. A substantial proportion of the cash would be set aside and this amount would not be banked in the ordinary course of business. Banking would be done generally by the staff on Mrs Ronen's instructions. This extended to the non-cash part of the takings of the retail shops together with a very small part or proportion of the cash taken on a weekly basis. Although the cash skim itself was simple and straightforward, Mrs Ronen herself was a most meticulous book-keeper. She recorded the actual takings of each of the shops and the subsequent distribution of cash in a set of books kept at her home. These were described at trial as the "red books". They included books for each of the shops owned by On Fovo Pty Limited and a book also for her own shop Ronen Young Fashions.
20 Mrs Ronen recorded in precise details the actual takings of each of the shops and in the back of the books, following careful calculations, she detailed a split of the cash between Nitzan Ronen, Izhar Ronen and at various times Mrs Ronen herself.
21 Examination of the red books makes it perfectly clear that a formula based on total sales in the retail outlets was used as the basis of the distribution between the two sons. The cash to be distributed to them was retained in a safe in Mrs Ronen's bedroom until distribution took place. Bundles of money to be distributed to either Nitzan Ronen or Izhar Ronen were wrapped in paper on which were recorded precise details including the breakdowns of the calculations and distribution amounts. In general, these details tallied with the details in the red books. As I have already said, in the period under surveillance it is clear beyond reasonable doubt that a substantial proportion of the un-banked cash was remitted overseas on behalf of each of the two sons in a manner so as to make it undetectable by the authorities. It is open to me to infer beyond reasonable doubt in the circumstances revealed by the evidence that this system of remitting money overseas had been going on for a considerable time and, although it is not possible to be precise, generally speaking in reasonably substantial amounts. I am unable to be satisfied beyond reasonable doubt, however, that the amounts in the earlier period were necessarily as substantial as the amounts remitted in 2000/2001.
22 During the surveillance period there were a substantial number of telephone calls intercepted. These intercepts centred on Mrs Ronen's home telephone at her premises at Darling Point. The telephone calls included calls between the offenders; and between Mrs Ronen and an accountant who plainly had a role to play in the sending of substantial amounts of money overseas.
23 The skimmed and un-banked cash was not recorded or declared as income by On Fovo Pty Limited nor by Mrs Ronen, Nitzan Ronen or Izhar Ronen. The corporation and individuals filed or caused to be filed tax returns during the relevant period. Returns were filed from the financial year ending 30 June 1993 up to and including the financial year ended 30 June 1999. I accept beyond reasonable doubt that the offenders intended to deprive the Commonwealth of income tax, or at least the opportunity to obtain income tax, in relation to the un-banked cash throughout the entire period of the conspiracy including the years I have specifically mentioned.
24 A complication arose in the middle of the 2000 calendar year. As from 1 July 2000 the Goods and Services Tax regime was introduced. This posed a considerable problem for the offenders because proper compliance with the requirements of the GST laws would have revealed in a dramatic manner the amount of cash takings received in each of the retail shops. The intercepted telephone calls to which I have made reference show the substantial concerns each of the offenders had about this situation. They show their attempts to devise a system to overcome the problem that they perceived might well bring about their undoing.
25 Ultimately, Mrs Ronen took two additional steps in relation to the concealment of cash at this time. First, her then de-facto husband, Mr George Segal, joined the conspiracy. Mrs Ronen sought his assistance in making additional calculations for the purposes of the distribution which took into account the GST. These additional calculations were recorded in spreadsheets produced by a computer kept at the Darling Point residence. The involvement of Mr Segal was kept secret by Mrs Ronen from her two sons as she feared they would not approve.
26 The second step taken by Mrs Ronen was a more substantial one. This was the notion of creating a set of false till rolls for each retail outlet. These would show a reduced amount of cash from that actually taken in each retail outlet. These false till rolls were created on a cash register which was kept at Mrs Ronen's apartment for this purpose. The cash register was found and seized at the time of the execution of the search warrant on 7 February 2001 shortly before Mrs Ronen was arrested and charged. The system for the creation of false till rolls necessitated the involvement of another person, one Mark Talbot, who set up a computer system. It had, as one of its consequences, the facilitation of a system for creating false till rolls. Both Mr Segal and Mr Talbot gave evidence at the trial for the prosecution. Mr Segal was an indemnified witness.
27 The system adopted by Mrs Ronen and approved by each of her sons after the introduction of the GST was a system which required the banking of ten per cent of the cash takings of each of the shops but no more. The banking and the creation of false till rolls was intended to give the impression to the authorities, should they investigate, that the shops were regularly banking cash as well as other forms of takings related to each of the shops. These additional steps reflected the continuing nature of the conspiracy and its further implementation in circumstances designed to conceal the fraud from the authorities.
28 The conspiracy came to light only by chance. It appears, as a result of telephone intercepts being placed on another person's telephone service, that the Ronens' involvement in the distribution of large amounts of money from Australia to overseas locations was detected. This in turn led to the surveillance at Mrs Ronen's home to which I have made reference and subsequently to the execution of search warrants on 7 February 2001 and to the arrest of the offenders.