Inland Revenue Department v Frost [2017] NZDC 4276 (1 March 2017)

Last Updated: 19 June 2017

_{EDITORIAL NOTE: NO SUPPRESSION APPLIED.}

IN THE DISTRICT COURT AT WAITAKERE

CRI-2016-090-002018 [2017] NZDC 4276

INLAND REVENUE DEPARTMENT

Prosecutor

v

RICHARD JOHN LEWIS FROST

_Defendant

Hearing:	1 March 2017
Appearances:	N Goodger for the Prosecutor M Kan for the Defendant
Judgment:	1 March 2017

_{NOTES OF JUDGE J JELAS ON SENTENCING}

[1] Mr Frost, you are here today for sentencing after a sentence indication was given to you on 30 November 2016 by me. You accepted that indication. The indication given is that on all charges you receive a sentence of imprisonment of four years eight months’ imprisonment.

[2] Since that indication was given I have received and read a report from the Probation Service. That report describes you as a high risk of re-offending and that is attributed to your gambling addiction which has been longstanding. You accept the circumstances of the offending and that your compulsive gambling is the driver to most of your re-offending.

[3] There is nothing in the report which, of its own, warrants additional credit or a reduction being given from your sentence indication. Mr Kan does not seek to

_{make any submissions on that point.}

INLAND REVENUE DEPARTMENT v RICHARD JOHN LEWIS FROST [2017] NZDC 4276 [1 March 2017]

[4] Mr Kan does seek, however, for your fines which presently stand at $563 to be remitted. He makes that submission on the basis that you are about to be sentenced to a lengthy period of imprisonment and will obviously have no financial means while you are serving that sentence. I accept that is an appropriate submission by him to make and I remit all your fines. There will be no additional penalty imposed in light of that remission.

[5] The background circumstances of your offending I will not go through but will attach to these sentencing notes my earlier sentencing indication decision which includes all of the circumstances of the offending.

[6] On all the charges before the Court, Mr Frost, you are sentenced to four years eight months’ imprisonment. All those sentences will be concurrent, which means they run at the same time, so your final sentence is four years eight months’ imprisonment.

J Jelas

District Court Judge

ANNEXURE

NOTE: PUBLICATION OF THE JUDGMENT AND OF THE REQUEST FOR A SENTENCING INDICATION IN ANY NEWS MEDIA OR ON THE INTERNET OR OTHER PUBLICLY ACCESSIBLE DATABASE IS PROHIBITED BY SECTION 63 OF THE CRIMINAL PROCEDURE ACT

2011 UNTIL THE DEFENDANT HAS BEEN SENTENCED OR THE

CHARGE DISMISSED IN THE DISTRICT COURT CRI-2016-090-002018

AT WAITAKERE

THE COMMISSIONER OF INLAND REVENUE DEPARTMENT Prosecutor

v

RICHARD JOHN LEWIS FROST Defendant

Date: 30 November 2016

Appearances: N Goodger for the Prosecutor

M Khan for the Defendant

_{NOTES OF JUDGE J JELAS ON SENTENCING INDICATION}

[1] Mr Frost, you are aged 49 years and you are here today seeking a sentence indication in respect of the following offences. All charges allege representative offending by you.

[2] The offending includes 16 charges of dishonestly and without claim of right using documents, those documents being personal tax summaries and IR3 returns. It is alleged that you used those documents in order to obtain a pecuniary advantage. The maximum penalty for each of those charges is seven years’ imprisonment.

[3] There are 13 charges, of making false documents which are the numerous donation receipts. It is alleged you made those documents also with the intention, of

obtaining a pecuniary advantage. The maximum penalty for those charges laid under

s 256 Crimes Act 1961 is 10 years’ imprisonment.

[4] Finally there are 13 representative charges of knowingly using forged documents, those documents being the donation receipts, again to obtain a pecuniary advantage. Those 13 charges are laid under s 257 Crimes Act and also carry the maximum penalties of 10 years’ imprisonment.

[5] The summary of alleged facts refers to your self-employment as an accountant. Over a five and a half year period between 25 June 2010 and 12 January

2016 you completed numerous false documents and falsified documents in order to enable you to claim refunds from the Commissioner. You completed 110 false personal tax summaries. They were in the names of various persons. All of those tax summaries claimed refunds which were ultimately paid to you.

[6] In addition, there were 52 false IR3 income tax returns, some in the name of yourself but many in the names of other persons. Again, those returns were filed in order to claim refunds which were ultimately paid to you which you were not entitled to receive.

[7] To facilitate other tax credit claims you falsified 296 donation receipts. Those receipts were then used to file 207 false IR526 tax credit claim forms. Some of those were in your name and some of them in the names of other persons. And again, it enabled you to claim refunds that you received and were not entitled to.

[8] The names utilised by you were names of various individuals that you had obtained through your client database and also through employment advertisements. In total, during that period you wrongly received the sum of $494,711.21.

[9] As a result of this offending your personal tax liability has been reassessed. The quantum of the core tax that you owe is $578,118.65.

[10] This offending represents significant offending by you over a lengthy period of time involving a large number of false documents.

[11] In R v Adams,1 Harrison J cited with approval France J in the Marsters2 decision. It is accepted by the Court that this type of crime is not a victimless crime but a criminal activity which ultimately affects the whole of society. As a result, a sentence that combines the purposes of accountability and denunciation is required.

[12] The factors relevant to the offending which have assisted me in identifying the relevant nominal starting point sentence are the following:

(a) The period of time over which this offending occurred. It was over a five and a half year period which is a significant length of time.

(b) The level of harm resulting from the offending. There are two main factors to have regard to there. Firstly the amount of taxpayers’ funds that you improperly and unlawfully received being $494,711.21. In addition to that significant amount there is a core tax shortfall of

$578,118.

(c) A further significant factor is the gross breach of trust. The system that you utilised to carry out your fraud is a self-assessment tax system that is based on voluntary compliance. Your fraud puts in issue the integrity of the system. Your professional background has also been misused by you. IRD are entitled to rely on persons with the appropriate professional qualifications to carry out their functions lawfully but you failed to do so in this case. Further, client details that were held by your business were misused by you in breach of your clients’ trust that you would hold their private details

_{confidentially and for legitimate purposes.}

1 _{R v Adams [2006] NZCA 65; (2006) 22 NZTC 19,872 (CA) at [26].}

2 R v Marsters HC Auckland CRI-2002-092-30868, 13 May 2005.

(d) A final significant feature of the offending, which has been emphasised by the Commissioner, is the level of premeditation. I accept the Commissioner’s submission that this was offending that was highly premeditated. Over time you devised and re-utilised a scheme for defrauding the Commissioner.

[13] Both counsel have referred to numerous cases to assist in setting the starting point. For the Commissioner, as it is submitted the appropriate starting point is more in the range of six years’ imprisonment. On your behalf, Mr Khan submits the starting point is more in the range of four years’ imprisonment. In my view, having

regard to in particular to the Lamont v R3 decision, I have concluded the appropriate

starting point is five and a half years’ imprisonment.

[14] From that the notional starting point I need to make both upward and downward adjustments to have regard to the factors that have been discussed during the course of this sentence indication.

[15] As you would have appreciated from the submissions made, your criminal history is highly relevant. You do have a significant amount of like offences. In

1999 you were convicted of six charges of using a document for pecuniary advantage. You received a sentence of 18 months’ imprisonment suspended for a period of two years. Unfortunately you went on to reoffend and in 2003 you were convicted for 44 charges of using a document for pecuniary advantage and on that occasion you received a total sentence of seven years’ imprisonment.

[16] Both counsel rightly acknowledge that because of your prior convictions it increases your culpability. There is also a greater need for a deterrent sentence. In those circumstances, a Judge is warranted in uplifting what would otherwise be the appropriate starting point to have regard to your criminal history. In my view, the starting point should be increased by 10 months which brings it to six years, four months’ imprisonment.

[17] There are no other factors relevant to you or the circumstances of the offending which would warrant the starting point being increased further.

[18] I must then look at factors that would require the starting point of six years, four months to be reduced. There are two factors that are relevant. First of all, your assistance to the Commissioner. I have been advised that you went to the Commissioner’s office and disclosed a significant level of offending. It was not all of the offending that you committed but a significant amount that was estimated to have resulted in you unlawfully receiving approximately $250,000.

[19] At that point in time, the Commissioner had no inkling of your offending and you were not under investigation. It is accepted that without your voluntary disclosure of a level of a high level of offending, none of this offending would have come to light. In those circumstances, you are entitled to credit for that assistance. You will receive credit in the amount of six months which reduces the sentence down to five years, 10 months’ imprisonment.

[20] The final factor, for which you would be entitled to credit, if you were to take that course, is if you pleaded guilty. If a guilty plea was entered following this sentence indication then you will receive additional credit in the range of 20 percent for those guilty pleas. Mr Khan, seeks a higher level of credit 25 percent but in my view that is not warranted.

[21] The Court of Appeal in Hessell4 refer to various factors that can be taken into account in determining the level of credit. One of those factors is the inevitability of the outcome if the prosecution were to proceed. Given the nature of your offending, which is primarily paper-based, and the admissions that you have made, there is a high likelihood that you would be convicted of most if not all of these charges if they were to go to trial.

[22] Having said that, you are entitled to a significant amount of credit because if these charges had to be proved, it would involve a significant amount of resources by the Commissioner. There are great savings to be had if this prosecution were to be resolved by you pleading guilty. I am prepared to give you credit of 20 percent which would reduce your sentence by a further 14 months, bringing it down to one of four years, eight months’ imprisonment.

[23] That is your sentence indication on all charges, four years, eight months’

imprisonment.

J Jelas

District Court Judge