On 10 August 2018, the NSW Supreme Court sentenced cousins: Robert Agius and Anthony Castagna to jail, for 2 counts of what could broadly be called defrauding the Commonwealth (count 1 under s29D of the Crimes Act 1914 and count 2 under s135.4(3) of the Criminal Code 1995) and a 3rd count of dealing with the proceeds of crime, with a value of over $1m (s11.5(1) and s400.3(1) of the Criminal Code) [paras 1-3 of the Court’s reasons].

This followed Jury verdicts on 18 April 2018 on the counts mentioned. The Court, however had to sentence the ‘offenders’ and the decision records the facts supporting the verdict, sentencing considerations and the sentences finally pronounced. They are as follows:

  1. Robert Agius: a total of 7 years and 6 months in jail, ending on 30 September 2014, with a non-parole period ending on 30 March 2021 [para 125]. He was 68 years of age at the time of sentence [para 92].
  2. Anthony Castagna: a total of 7 years in jail, ending on 17 April 2015, with a non-parole period ending on 17 April 2022 [para 126]. He was 71 years of age at the time of sentence [para 98].

Robert Agius will be known to many as the partner of the accounting firm, then known as Moore Stephens, in Vanuatu, who was arrested for tax related offences of fraud and money laundering, because of his involvement in a number of ‘fake invoice’ round robin transactions, engaged in by clients of an Australian accounting firm: Owen T Daniels. The trial of Mr Agius and three co-offenders took 22 weeks, before Simpson J: R v Agius; R v Zerafa [2012] NSWSC 978. He was convicted, sentenced to 8 years and 11 months in jail, expiring on 30 June 2021, with a non-parole period expiring on 30 March 2019 [see 2012 case]. After these convictions, he will have to serve another 2 years, before he is eligible for parole.

These later convictions are separate, from the earlier ones, but similar.

Mr Agius was a career accountant, having worked in Australia, London and then Vanuatu [para 6]. Dr Castagna had a PhD in Finance, had worked in Silicon Valley, in venture capital, before coming back to Australia, to consult to Macquarie Bank. The men were cousins. Both were born in Ethiopia, both migrated (at a young age), with their families, to Australia. Mr Agius even lived with the Castagna family, for a period [paras 92 & 98].

The offending, for which they were charged and convicted, extended over about 11 years, from 1998 to 2009. Its basics can be described simply enough.

  1. Macquarie wanted the services of Dr Castagna, full time, but had a policy of only engaging a company, which would then supply the relevant person’s services, to Macquarie, for a fee, which was, in this case, about $250k per annum.
  2. Mr Agius suggested, to his cousin, that he use a UK incorporated company (Billbury) as the contracting entity. This company was a subsidiary of Moore Stephens’ Vanuatu incorporated Trust Company, which he know about, being the local Vanuatu partner.
  3. Macquarie paid fees of about $22k per month, to an account of Billbury, in New Zealand, from which the funds ultimately passed to Vanuatu accounts of the Trust Company.
  4. The arrangement was that Dr Castagna would receive, and declare, as taxable, an amount of $8,800 pcm, as ‘advisory fees’. The Vanuatu Trust company paid these moneys through accounts of many companies before Dr Castagna received them into his account. The total amount declared (over the 11 years) was about $0.85m.
  5. The balance of the fees paid by Macquarie (over the 11 years) was about $5m, which the Dr Castagna claimed was retained as a ‘retirement fund’. It is not clear whether those funds found their way back to Dr Castagna (but I suspect they did).
  6. The tax on this undeclared $5m amount would have been about $2.6m.
  7. The $2.6m of lost tax was the ‘loss to the Commonwealth’ which, was caused by the offender’s dishonest conduct.
  8. And, the handling ‘proceeds of crime’ involved the handling of fees, which could have (and should have) been used to pay the tax.

These facts might seem to raise many issues.

  1. For instance, generally speaking, a person who helps a company earn money, does not have to declare the company’s income as their own (short of ‘personal services income’ deeming or international transfer pricing considerations).
  2. Likewise, a company could use some of its income, in rewarding the person who helped it earn that money, and retain some, if it liked. It could do this, for instance, to create a retirement fund. Again, there is no immediate reason why the individual, whose services the company provided, should have to declare this retained amount as his/her own income. On the face of it, this is not illegal, much less ‘dishonest’.
  3. However, one must remember that this was a Jury trial and the Jury heard all the evidence and found, as a matter of fact, that the fees paid overseas, and not declared as income, was the income of Dr Castagna.

There were, no doubt many, many facts that contributed to their conclusion, but some of them might involve the following.

  • The Vanuatu location was a tax haven and had secrecy laws that resulted in the prosecutors getting no information, with which to bring the charges.
  • The cash flows often involved transfers between many companies – both inbound to Vanuatu and outbound, back to Australia, in a manner that might be designed to obfuscate the underlying situation.
  • Neither Dr Castagna nor Billbury ever rendered invoices, either to Macquarie or to each other, for services relating to the consultancy agreements.

The sentences do act as a deterrent (as they were intended to).

The decision was significant enough for a joint ministerial statement by the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP and the Minister for Law Enforcement and Cyber Security: The Hon Angus Taylor MP.

  1. They wanted the public to know of the convictions, for the purpose of increasing their deterrent affect.
  2. These convictions were, after all, the culmination of 5 years work, just on this case, and the work of prosecuting and charging Mr Agius, went back to 2009 (9 years) and involved overcoming many problems.
  3. The ministers lauded the investigative efforts of the Serious Financial Crime Taskforce, which includes: include the ATO, AFP, Commonwealth Director of Public Prosecutions, Australian Criminal Intelligence Commission, Attorney-General’s Department, Australian Transaction Reports and Analysis Centre, Australian Securities and Investments Commission and Australian Border Force.

(Rv Agius; R v Castagna (No 14) [2018] NSWSC 1248, Supreme Court New South Wales, Adamson J, 10 August 2018).

FJM 21.8.18

[LTN 154, 13/8/18; Tax Month – August 2018]

 

Comprehension questions (answers available)

  1. Were Agius and Castagna sentenced to 7 years and 6 months jail and 7 years respectively?
  2. Are they the minimum terms they must serve?
  3. Was this Robert Agius’ only conviction?
  4. Did the dishonest scheme involve simply invoicing for services through a company and then Dr Castagna not returning all of those amounts as his own income?
  5. Did they offend against a tax law?
  6. Was ‘obfuscation’ an element in the Jury’s finding of facts?
  7. Was it the Serious Financial Crime Taskforce that did all the investigation and overcame significant obstacles to assembling enough evidence.

[Answers:1.yes;2.no(eligibleForParole30March2021And17April2022Respctively;

3.no(similarSenctenceFor’FakeInvoicing’RoundRobins);4.yes(atItsSimplest);

5.notReally(JuryFoundItWasCastagna’sIncomeAndShouldHaveBeenReturned);

6.yes(see1st&2ndBulletPoints);7.yes]

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