R v Stone aka Devoy [2016] NZDC 15958 (17 August 2016)

	Home \| Databases \| WorldLII \| Search \| Feedback District Court of New Zealand

Hearing:	17 August 2016
Appearances:	T Simmonds for the Crown Q Duff for the Defendant Stone (AKA) Devoy D Dickinson on behalf of B Sellars for Defendant Mehran Ghorbani Mehrzad Ghorbani appears in Person Mehrdad Ghorbani appears in Person C Maxwell as Amicus Curiae for the unrepresented defendants
_Judgment:	_{17 August 2016}

[1] For approximately three years between 2007 and 2010 there was a sophisticated mortgage fraud perpetrated on six banks and a building society, mostly in Auckland, at various times by a number of the defendants. The role played by each of the defendants and the time during which they were part of the frauds, of course, varied but the overall defendant clearly in control of the scheme was Mrs Devoy whom I convicted of 20 counts following a lengthy trial, and who had earlier pleaded guilty to four counts concerning these mortgage frauds. She was the

community and it involved, as Crown counsel has said, the controlled ownership of various properties and sales and purchases from within the group and within the Persian community by persons who were associates or related to some of the defendants in various ways.

[2] Including Mrs Devoy there are three other members of her family, her brothers Mehrdad, Mehrzad and Mehran are for sentence today. Ms Kardani was at various times a long-term girlfriend or wife of Mr Mehran Ghorbani. The evidence was not quite clear on that point. All face sentencing for varying numbers of charges ranging from the three that Ms Kardani will subsequently be sentenced by me in three weeks’ time, for reasons which I will not outline, as a pre-sentence report with an appendix was not available, that being Ms Kardani’s fault, but she will not be sentenced with the others today.

[3] The facts are set out in a decision giving my reasons for verdicts which I released on 17 June 2016 and my reasons set out the history of the scheme and the way various defendants and family members and members of the Persian community interacted over the properties to be purchased and sold, and with mortgage applications containing various misleading information being presented to the banks either directly or through the use of mortgage brokers, and also in the way by which solicitors and the banks were misled over payments of deposits. Those reasons have been fully given and I do not propose to repeat them here.

[4] Overall, however, the bank made advances of $5,823,912.91 in respect of transactions which fell within the counts for which the defendants have been convicted or pleaded guilty. Many of the mortgages were obtained by the use of earlier names or combinations of names and misleading information, and clearly all were co-ordinated, as I found, by Mrs Devoy.

[5] The level of pure deceit and dishonesty, in my view, was high and that extended to the Court where explanations were given by various accused, and particularly Mrs Devoy, that I simply did not accept. Overall, I agree with the Crown submission that the scale of the offending, its ongoing nature, as well as the losses the bank suffered, are relevant factors for sentencing. There is a clear abuse of

trust in the relationship between bankers and clients, and with Mrs Devoy when she acted as the facilitator of the lending. She was also trusted by solicitors, and clearly abused that relationship.

[6] There was a considerable degree of premeditation. A considerable amount of planning must have gone into the frauds. False documents were created that were presented to the banks and they included false bank statements, references and many other such documents. For Mrs Devoy there is the further aggravating factor that her offending was committed, in part, while she was still under sentence for earlier offending involving frauds and the obtaining of pecuniary advantages and the misleading of social welfare officers.

[7] The overall amounts obtained by the individual defendants varied. For Mrs Devoy it was a sum of $759,170.45. Mr Mehrdad Ghorbani obtained approximately $288,000. Some of the other defendants obtained little or no monies but the overall loans that ought not to have been advanced and were advanced because of the nature of the applications were in excess of $5,000,000. Some of that money has, of course, been recovered by the banks through various civil processes.

[8] Mrs Devoy had been employed as a broker for a local mortgage broker, an accountant who had a broking side to his business, for some time, 18 months or so as I recall from the reasons for verdicts. Her husband was at various times a mortgage broker, she was familiar with the documentation needed for banks. She was familiar at various times, through that role, as to individual bank lending criteria as were other defendants, Mr Mehrdad Ghorbani, for example, having given evidence of making his own enquiries as to lending criteria. He devised a way of circumventing the bank’s refusal to accept income earned from Iran as part of the income available to a client for mortgage servicing purposes. So that not only illustrates a degree of premeditation and planning but a willingness to circumvent the bank’s lending requirements. That was only one instance of the several in which he was involved.

[9] Crown counsel suggests in his written submissions that there was no lack of brazen self-confidence on the part of Mrs Devoy. In some ways that could be said to be an understatement but nevertheless her role was clearly pivotal to the success of

the scheme until the time it was ultimately detected. In fact at one point, as I have noted in my reasons given for my verdicts, Mr Mehrdad Ghorbani and Ms Kardani presented themselves as, or were thought by a bank employee, to be a couple when they were applying to obtain a mortgage.

[10] As is well-known for this type of offending there is no tariff decision. Circumstances vary and for that reason it is difficult for the Court to establish a tariff case for fraudulent conduct and for the type of offending of which the defendant’s have been convicted.

26 June 2003; and R v Jones & Harrison, CRI-2004-004-12785, High Court Auckland, 12 December 2006 cited by the Crown in Mr Simmonds’ written sentencing submissions are of course very well-known, and counsel refer to them also at various parts of the submissions, but it is well worth repeating some of the remarks in those decisions. In R v Rose, a case which involves serious financial offending by an employee against an employer, the Court of Appeal said, at page 642 of the reported decision in the criminal reports:

In many cases of sentencing for white collar crime the risk of re-offending by the particular offender is not great. The safety of the community ... nevertheless, requires a sentence which may be a deterrent to others.

Culpability is to be assessed by reference to the circumstances and such factors as the nature of the offending, its magnitude and sophistication; the type, circumstances and number of victims; the motivation for the offending; the amounts involved; the losses; the period over which the offending occurred; the seriousness of breaches of trust involved; and the impact on victims.

[13] And the Court went on to state that the authorities clearly indicate that in cases of major defalcations, misappropriations, schemes dishonestly to obtain money or property or where recidivism indicates the need to protect the community, imprisonment is appropriate.

[14] So that, without laying down a tariff for this type of offending, is how the Higher Courts see this type of wide scale fraud committed against persons in the community as well as institutions such as banks and building societies.

[15] I have read the victim impact reports and the various reports make the very well founded comment that significant financial crime such as this has a negative impact on the reputational damage of all financial institutions who operate in a highly competitive market, and I should add that public confidence in those institutions is also to an extent undermined.

[16] Mrs Devoy you are 47 years of age. You have a previous history of dishonesty. The range of offending covered by your earlier convictions was some two and a half years from 2003 through to 2006 and you were sentenced in 2008 so that some of the offences on which you have been convicted by me were committed while you were already under sentence for offences of dishonesty. There is a complete absence of remorse on your part. You continue to protest your innocence. In my view those protestations verge really on fantasy and an unwillingness to confront your role in what occurred. Imprisonment is the only realistic option as the pre-sentence report notes and appropriately recommends.

[17] Mr Duff, on your behalf, seeks a sentence of two years’ imprisonment as a starting point as would enable me to consider a sentence of home detention, as if a sentence reaches that point I am obliged to consider other options as there is a presumption against imprisonment. He refers me to the medical report provided on your behalf and to other matters. He submits that this is a victimless crime but having discussed that with Mr Duff the submission is not as wide as it would initially appear and he accepts, on your behalf, the range of monies involved, and that you received $759,170.45 as a result of your offending and accepts, quite appropriately, that there has been fraud found for which you played a significant part.

[18] He notes that you apologised to the Court, but that is not really an expression of remorse if you do not accept what you did was wrong and continue to blame other people for the offending. So there is limited value in terms of remorse as a mitigating factor. I accept from what has been written and what has been put before

me that you want to move on and you are attempting to do so and that you are understandably concerned as to the effect of publicity and the impact of a gaol sentence on members of your family. Many references have been provided on your behalf. I accept that you have a dominant and probably magnetic personality and that assisted you to a considerable extent in the offending, but also accept what has been said of your good qualities in the references that attest to that, in particular your willingness to help others. I note that you have been a volunteer for a community organisation and that has extended over a number of years. I have read all of the references including your parent-in-law’s references as to your personality. Also what your husband has said. I do not propose to dwell too much on that as much of it I consider to be inappropriate and not of assistance in determining an appropriate sentence.

[19] I have to deal with you on the basis of your culpability as I have found it to have been established and as you have accepted through your four guilty pleas. I accept that you have had difficulties in your life and you have made attempts to overcome those and to the extent that you have what you have done is commendable, in particular you no longer use alcohol and you have taken issues to deal with other problems that have arisen. Those are all matters that mean that you are concerned as to the way you present and do try to take some effort to moderate problems as they arise, but nevertheless, this is plainly a considerably dishonest level of offending against a background of earlier offending involving dishonesty and those are aggravating factors as well as the other matters that I have already mentioned.

[20] The starting point of course is a matter that needs to be considered. The overall loss is a factor but it is not the only factor. The sophistication of the scheme is a factor, abuse of trust is a factor, the length of time over which the offending occurred, the amount you actually received is a factor, and I have taken account of the victim impact reports. Probably the most useful collection of authorities cited to me for you are the mortgage fraud cases, an example of which is Mayer v R [2015] NZCA 206. The starting point for that matter was seven years’ imprisonment. It involved 36 counts, 10 of which had been laid as alternatives but the losses and the amount of property involved were higher than here. It was approximately $19 million and seven years’ imprisonment was the starting point in that case.

[21] R v D’Villiers [2010] NZCA 85 was another case referred to by the Crown and also by other counsel. There were twenty one charges, 19 of them were property transactions. $4.65 million was advanced. Mr D’Villiers received $373,000; a starting point was four and a half years’ imprisonment.

[22] R v Letele [2016] NZDC 4365, DC Manukau, 16/3/16 is another case which is of assistance. The starting point there was four years’ imprisonment. There were

10 charges of dishonest use of a document. Dummy purchasers were used for those mortgage transactions and property transactions in the similar way they were used here, and $3.76 million was obtained with Ms Latele receiving $512,340.

[23] Overall, I see the starting point as less than Mayer v R, but slightly higher than the starting point adopted in the two cases I have just referred to. In my view is the starting point for you should be five years’ imprisonment before adjustments are made.

[24] Your previous relevant convictions are aggravating factors for the purpose of sentencing and justify an uplift as does your offending while still under sentence. I ascribe three months each to those two factors which leads to an end sentence before any discounts of five years, six months.

[25] I accept that imprisonment will be difficult for you personally but that is no different from many people who appear before the Courts who are sentenced to periods of imprisonment and who have a family and young children. However, looking at the matter in the round and without dwelling in particular on your personal circumstances, I allow a credit of six months. So the end sentence is one of five years’ imprisonment on these counts.

[26] The Crown seeks a minimum period of imprisonment and that is often imposed for fraud offences where relatively lengthy sentences are imposed and where I consider that a release on parole after one-third of your sentence, which is when you would otherwise be entitled to seek parole, would be insufficient to hold you accountable or to deter and denounce your conduct, to protect the community from you, or any one or more of those factors. In your case you need to be made

accountable. Your conduct needs to be denounced, and others need to be deterred. In many ways these types of offences are offences which lending institutions are exposed to given the degree of trust that is reposed in applicants and in the documents they provide, and so a minimum period of imprisonment in your case is justified.

[27] In terms of the length of that minimum period of imprisonment I need to consider your personal circumstances. You did not plead guilty to more than four counts and the rest went to trial. You have, to some extent, received a discount for your personal circumstances and I have mentioned some of them already. Your personal circumstances are relevant to the length of the minimum period of imprisonment but overall, having regard to the need to hold you accountable and the need to deter and denounce your conduct, a minimum period of imprisonment of at least one-half of the sentence of five years’ imprisonment will be imposed.

[28] Mr Mehrdad Ghorbani. You pleaded not guilty to the counts you faced and had not, in contrast to others, pleaded guilty to any counts on earlier indictments and you were convicted by me of six counts. I will not traverse my reasons again, they are fully set out in my verdict. I note you are 49 years of age. You have no previous convictions. Again, you maintain your innocence, even given the detailed verdict I have delivered. I cannot accept in those circumstances there is any real remorse other than regret at the position you now find yourself in.

[29] I have already mentioned what I consider, to use a well worn phrase, to be a sense of entitlement in circumventing the bank mortgage criteria in terms of applying to a bank to obtain money to purchase your own property and I think that is relevant to the way in which you have entered into this offending. I accept that the offending occurred some years ago and you have not committed any further offences. That is a matter that I do agree goes to your credit. You are a capable and intelligent man. Your employer gave evidence as a Crown witness during the trial and he clearly thought highly of you and in fact has provided a written reference for me. And you have attributes that indicate you could have, and possibly still will, lead a successful life. I recall the evidence that was given as to the success at various

times your business interests had in Iran and how those ultimately failed and left you bereft of funds.

[30] Nevertheless, home detention is the recommendation in the presentence report. That is only a factor, as you no doubt now understand, if the end sentence reaches two years or less.

[31] The Crown seeks a starting point of three and a half to four years’ imprisonment. Ms Maxwell in her helpful submissions referred to several cases including R v Fatu [2007] NZCA 430. A number of properties were involved in that case. In your case three properties were involved and four counts related to your own family home, on one of which you were convicted as a party. Overall, however, and taking into account what has been mentioned in terms of Cooper v Serious Fraud Office [2014] NZHC 831, a case brought to my attention by Ms Maxwell, I think the appropriate starting point for you is three years’ imprisonment.

[32] Your culpability for some of the counts on which I convicted you was higher than on others. Some were as a party and perhaps not quite as great as others but nevertheless three years’ imprisonment considering your overall offending seems to me to be the appropriate starting point. You are entitled to a discount for not having previous convictions and at 49 years of age that is something that needs to be taken into account because it means that for a great period of your adult life, at least, you have not fallen foul of the law. So I ascribe approximately 15 percent as a discount for that which leads to an end sentence of two years and seven months’ imprisonment which will be the sentence I impose on you. I will not impose a minimum period of imprisonment.

[33] Mr Mehrzad Ghorbani, you were found guilty of four counts, counts 1, 2, 3 and 4 in the indictment, and had earlier pleaded guilty to count 5. I accept the Crown analysis of the level of culpability of the various offenders with Mrs Devoy at the top, your brother Mehrdad next, and then you. You are 44 years of age. You have got no previous convictions. The same comment I made in relation to your brother, Mr Mehrdad Ghorbani, in terms of acknowledgement of that applies. To some extent I think you were led into this offending but you clearly knew what you

[34] The Crown suggest a starting point of three years, but for you I am going to take a starting point of two and a half years. You have written to the Court and apologised. Again, the same comment has to be made in relation to the level of remorse I can ascribe to that apology as you are still effectively denying the offending by saying you had no intention to mislead, which of course plainly is an ingredient of the counts on which you are convicted.

[35] I do accept that your offending occurred a number of years ago and there has been no repetition, as far as I know, of this type of offending or in fact any offending since.

[36] Overall, I give you the same discount, 15 percent, which takes the matter to two years and one month’s imprisonment but round it down, in my discretion, to two years’ imprisonment. That means I can consider whether I should impose a lesser sentence on you as there is a presumption against imprisonment if a sentence of two years or less is the notional sentence of imprisonment.

[37] I take into account the need to apply to you the least restrictive outcome, bearing in mind the need to apply a deterrent sentence which adequately denounces your conduct and deters others. I think that a sentence of home detention meets that end. A sentence of two years’ imprisonment commutes generally to a sentence of one year’s home detention but the sentence does not have to be arithmetically one- half, and I take into account that you clearly are a good and valued employee, and hope the Probation Office will assist you in maintaining your employment by allowing your employment to continue while you are serving that sentence. Overall, I adjust the period of home detention to one of 10 months’ home detention on the terms set out in the presentence report.

[38] Mr Mehran Ghorbani you are 38 years of age. You are for sentence on one count, having pleaded guilty to other counts in an earlier indictment which are reflected in counts 6 and 7 of the indictment that was presented at trial. I

acknowledge you pleaded guilty early in the process and generally that entitles you to a generous discount in terms of the authority for discounts for guilty pleas given in Hessell v R [2010] NZSC 135, probably in your case of at least 20 percent, but that has to be tempered against the evidence you gave at trial where you were called by your sister as a witness and effectively denied the charges to which you had earlier pleaded guilty and again, as you do now, say that you did not have the requisite intention. I take that into account and it will reduce the notional credit for your guilty plea but having selected a starting point for you of two and a half years’ imprisonment and adjusted it to two years’ imprisonment to take account of the fact that not only did you not benefit financially but that you have no previous convictions, the sentence for you will be a sentence of home detention.

15 percent but the end sentence, of course, for you will now be two years’ imprisonment. There is some confusion in the pre-sentence report. It seems not to recognise that you had pleaded guilty and that explains why there was a recommendation for imprisonment, but I think in your case home detention is the appropriate recommendation. Having regard to the need to impose the least restrictive outcome and to your own circumstances, as I have just said, the sentence of home detention does not need to be arithmetically one-half and so taking into account where the Crown says you fit in the hierarchy of culpability, and which I agree with, the sentence you will serve as a home detention sentence will be one of seven months’ home detention on the terms set out in the pre-sentence report.

District Court of New Zealand

R v Stone aka Devoy [2016] NZDC 15958 (17 August 2016)