Mr Adam Cranston has been sentenced to 15 years jail for his involvement in conspiracies to deprive the Commissioner of Taxation of over $105m in PAYG and GST taxes.[1] In what appeared to be an explanation for his criminal conduct, Mr Cranston thought that, having worked in insolvency liquidating companies with large tax debts, with directors driving away in their Ferraris without penalty, his own conduct, while immoral, was not illegal.
Not so.
In imposing the sentence, Justice Payne said Cranston was an instigator or architect of these conspiracies and one of the primary financial beneficiaries, with a direct financial gain of at least $6.8 million which he used to acquire luxury houses, motor vehicles and other goods: R v Adam Cranston [2023] NSWSC 1004 (22 August 2023) (austlii.edu.au).
The conspiracies fell towards the highest range of objective seriousness of offences of that kind. Mr Cranston’s role was
“at the top of those conspiracies. [They] involved a high degree of sophistication, planning, deception and dishonesty … The offences were committed not out of need but out of greed”.
His conduct included setting up companies with straw directors who were not capable of performing the role of company director, Cranston describing one as “illiterate” and with “an IQ of like fifty four …”.
Ferrari driving directors walking away from corporate tax debt
A report of a psychiatrist, Dr Henderson, was relied upon by Mr Cranston for the purposes of his sentencing. In what appears to be an explanation for his criminal conduct, Mr Cranston is recorded as saying this:
“… I worked in insolvency, liquifying (scil. liquidating) companies with a large tax debt. I worked for Rodgers Reidy insolvency accounting. I saw directors walk away from companies without any possibility of paying their tax debt, keep their assets without a penalty and driving Ferrari’s. I was always told that it’s immoral but not illegal”. Mr Cranston added, “Plutus was to be a legitimate start-up company in 2014. I knew if it failed, if it couldn’t meet its obligations second-tier companies could be liquified (scil. liquidated) so Plutus could continue to grow”.
Justice Payne recounted the history and nature of Plutus and said that
“Plutus was never a legitimate and profitable company and Mr Cranston knew that throughout”.
The Judge also said:
“Can I be clear. Installing vulnerable drug addicted people as directors of companies, running up massive tax debts in those companies by taking money from them which should be paid to the tax office and then planning to liquidate those companies with large tax debts is a very serious crime. If there are any members of the commercial or insolvency communities who engage in such activities and regard the subject matter of these conspiracies as “immoral but not illegal”, those individuals should expect, when they are apprehended, to face a lengthy sentence of imprisonment. The notion that the present conduct could ever be regarded as “immoral but not illegal” is false. For that reason, general deterrence must be at the forefront of the sentence to be imposed here”.
[Indeed, directors may walk away from companies without any possibility of the companies paying their tax debt, or other debts, and directors may keep their assets without a penalty and drive their Ferraris. Given that the company is a separate legal entity, the directors’ conduct need not have been either immoral or illegal. That was clearly not the case here. Nevertheless, that is a common negative community perception of how company and insolvency law works].
Deterrence and tax fraudsters
General deterrence was a fundamental consideration in this sentencing exercise.
In that respect, given the nature of tax fraud on the Commonwealth revenue – “easy to commit, difficult to detect and comes at a great cost to the community” [2] – a sentence of full-time imprisonment was the only appropriate sentence.
Tax fraud is also often committed by white collar criminals. Justice Payne noted that this group is more likely to be first time offenders, fearful of incarceration and capable of rational cost-benefit analysis, such that there is a real prospect that a substantial sentence will deter offenders with similar characteristics from committing similar crimes. Money laundering, similarly, involves serious criminal activity; it is vital to the success of conspiracies such as the present, because it moves the proceeds of crime to third parties, making the detection of the underlying crime more difficult. It also prevents the recovery of funds even if the original fraud is detected, as here. The need for general deterrence is therefore considerable.
Mental ill health
While Mr Cranston displayed certain mental health conditions, no
“rational link was established in the evidence between Mr Cranston’s ADHD, Major Depressive Disorder, mixed anxiety disorder or substance abuse disorder and these vast, three-year-long conspiracies to defraud the Commonwealth and launder the proceeds of that fraud”.
No criminal record, prior good character
Mr Cranston is 36 years of age and had no criminal record. Where the need for general deterrence in sentencing is strong, as here, less weight is given to good character and good character is of less significance as a mitigating factor in the face of systematic defrauding of revenue.
White collar crime is rarely committed by people with a criminal history. Good character can be of less significance where the offender’s character, lack of convictions, knowledge, qualifications or standing in their field facilitated or assisted in the commission of the offence.
Here, Mr Cranston used his prior good character to assist in committing the offences. He
“used his knowledge of potential vulnerabilities in Australia’s system of taxation collection to design and operate the conspiracies”.
PAYG and GST
For example, he had explained to his co-conspirators that by reason of structural differences in approach within the ATO, they should concentrate on paying a higher percentage of PAYGW rather than pay GST which was owing because, the ATO gives GST collection a lower and separate attention from PAYG collection.
Impact on family
While the impact of a sentence on an offender’s family is relevant, when sentencing for offences such as tax fraud where general deterrence is of particular importance, the personal circumstances of an offender, including the effect of the sentence on their family or dependants, may attract somewhat less weight than they otherwise would. Here, the very serious nature of the offences, and other issues about Mr Cranston, went “vastly beyond the impact upon him and his family”.
[See also R v Lauren Cranston [2023] NSWSC 454 (1 May 2023) (austlii.edu.au) as to the impact of imprisonment on Lauren Cranston, Adam’s sister].
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[1] Pay As You Go Withholding (PAYGW) and Goods and Services Tax (GST). The offences were under section 135.4(3) – conspiracy to defraud a Commonwealth entity – and sections 11.5(1) – conspiracy – and 400.3(1) – money laundering – of the Criminal Code (Cth).
[2] Citing Hili v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [63].
