Longest NZ tax case sentences  

Sentencing on 17 August 2012 by Kós J in R v Rowley and Skinner, CRI-2010-085-6205; [2012] NZHC 2087, High Court, Wellington

Sentencing of Rowley on:

• 75 counts of dishonestly using a document to obtain a pecuniary advantage,
• seven counts of wilfully attempting to pervert the course of justice, and
• five counts of knowingly providing false information to the Inland Revenue Department, 

Sentencing of Skinner on:

• 80 counts of dishonestly using a document to obtain a pecuniary advantage,
• seven counts of wilfully attempting to pervert the course of justice, and
• five counts of knowingly providing false information to IRD

Both entered not guilty pleas.

Counsel:

1. D La Hood for Crown
2. M R C Keating for Rowley
3. M T Lennard for Skinner 

Background 

The circumstances of their offending were set out in detail in the reasons for the Judge’s verdicts delivered on 20 July 2012. (To see more, click: R v Rowley and Skinner )

The defendants were accountants who devised a scheme to falsely invoice clients for services (and in some instances goods) where there was either no underlying supply at all, or supply to an extent well below the face value of the invoices rendered. The scheme was sold to their clients as a means of sheltering them from tax.

Rowley received a benefit of at least $500,000, and Skinner at least $1.3 million.  The false invoicing, totalling $9,271,650, had a potential resultant tax loss of $2,973,815. Possibly more than half of this will not be recoverable from the defendants (both now bankrupt) or from their clients, who will have to pay their tax twice, once to the defendants (who had deducted 33% for themselves) and now, correctly, to IRD.

Both gave perjured evidence at their trial, and produced an exhibit (a portable computer hard drive) which they had deliberately tampered with before the  trial. This was done to establish a false foundation for expert defence evidence as to the creation dates of false transactional documents they had created to conceal their fraudulent invoicing. The Judge described this conduct as disgraceful, and said he would have increased their sentences to reflect the Court’s disapproval of it, but he did not legally have power to do so. The conduct became relevant, however, in assessing possible sentence discounts for their remorse or previous good character.

The attempted perversion of the course of justice offending arose when they jointly set about trying to persuade clients to justify and explain their invoices to the IRD in terms of new fictitious transactions.  The false information charges related to their personal income tax returns, which were very substantially understated: Rowley evaded tax of about $101,514, and Skinner about $410,998.

Held

The substantive fraud offences were the lead charges for sentencing purposes. 

The attempts to pervert the course of justice were distinct culpable acts in their own right, so would attract a discrete cumulative sentence, thereby uplifting the sentences for the fraud charges. 

The personal income tax evasion charges did not materially add to the total criminality, and were dealt with by concurrent sentences.  

Aggravating features

The aggravating features taken into account in sentencing were:

1. the offending was deliberate and premeditated,
2. it extended over about five years,
3. it was undertaken repeatedly,
4. it was sophisticated, involving at the outset, and then subsequently, efforts to conceal true nature of transactions involved,
5. it involved serious breaches of trust in relation to those of their victims who genuinely believed they were participating in legitimate tax planning schemes,
6. it also involved breach of the trust placed in them by the IRD; they had preferential status as tax agents, with all the dispensations and privileges going with that status,
7. their actions had caused substantial harm and loss: they had intended the IRD (and thus the community) to incur a loss of just under $3 million; though the tax loss had been defrayed by voluntary disclosure and reversal by their clients, the effect of that had simply been to shift the loss from IRD to them, and
8. none of the loss had been recovered from the defendants

Culpability differences

There was a slightly different degree of culpability between the defendants. It was clear that the frauds were led by Skinner: he was the promoter, dealt with most of the clients, and had the "gift of the gab", but he would not have been able to promote the scheme effectively without Rowley's fully knowing assistance in undertaking documentation.  The major point of distinction was that a much greater part of the fraudulent profit was received by Skinner, and the minor point of distinction was that Rowley had been convicted of five fewer counts than Skinner.

Sentence starting points

The starting points for the sentences were six and a half years' imprisonment for Rowley and seven years' imprisonment for Skinner.

Attempting to pervert the course of justice resulted in cumulative uplifts of 18 months' imprisonment for each of them.

The personal tax evasion added concurrent sentences of two years' imprisonment for Rowley and two and a half years' imprisonment for Skinner.

There were no relevant personal aggravating factors, and none were mitigating:

• no genuine remorse was shown,
• no discount was available for previous good character in view of their prolonged and premeditated offending, giving false evidence on oath, and tampering with a trial exhibit, and
• no discount was available for guilty pleas, or for any substantial and effective reparation offer 

Final sentences

Rowley

Rowley was sentenced to eight years' imprisonment, being six and a half years' imprisonment for fraud, a further and cumulative 18 months for his attempted perversion of the course of justice, and a concurrent two years for tax evasion. 

Skinner

Skinner was sentenced to eight and a half years' imprisonment, being seven years' imprisonment for fraud, a further and cumulative 18 months for his attempted perversion of course of justice, and a concurrent two years for tax evasion.

No minimum period of imprisonment was deemed necessary; the sentences were seen as sufficient in themselves to condemn their conduct, hold them accountable, and deter others. 

IRD  media release,  17 August 2012:

IRD Tax advisors sentenced in multi-million dollar tax evasion case

Inland Revenue has welcomed the prison sentences handed down to two Wellington tax advisors today involved in a multi-million dollar tax fraud. The sentences are the longest ever handed down in a New Zealand tax case. To read more: IRD media release

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