R v O'Carrigan[2013] QCA 327

SUPREME COURT OF QUEENSLAND

[1] MARGARET McMURDO P:  The applicant, Damian O'Carrigan, was employed by Leighton Contractors Pty Ltd for 30 years, most recently as manager of finance and administration of its northern region.  Over 12 years between 1999 and 2012, he defrauded Leightons of more than $20.7 million, most of which has not been recovered.  He pleaded guilty to fraudulently falsifying a record between 1 November 1999 and 10 May 2000 (count 1); fraud as an employee to the value of $30,000 or more between 1 May 2000 and 30 November 2008 (count 2); and fraud as an employee to the value of $30,000 or more between 1 December 2008 and 31 October 2012 (count 3).  He was sentenced to 12 years imprisonment on count 3, 10 years concurrent imprisonment on count 2 and three years imprisonment on count 1, cumulative on count 3.  A parole eligibility date was set at 7 November 2018, six years from sentence.  Presentence custody of 151 days was declared as time served under the sentence.  The applicant contends that the sentence was manifestly excessive.

[2] The applicant was 58 at sentence and between 46 and 58 during the lengthy period of offending.  He had no prior convictions.  He entered guilty pleas at a very early stage.  He naturally lost his employment when he was arrested and was in custody until sentence.  He has been married for many years and has an adult daughter.

The circumstances of the offending

[3] In the first half of 1999, he and his wife purchased a three hectare property, Acorn Cottage, at Lilydale, Tasmania to breed dogs and grow herbs and vegetables.  On 1 June 1999, he applied to the Australian Tax Office (ATO) for sales tax registration for the carrying on of primary production on the property under the business name Acorn Cottage.  Some time prior to 18 May 2000, his romantic dreams for Acorn Cottage went sadly awry and he fraudulently registered it with Leightons as a supplier and had it allocated a supplier ID number.  This conduct constituted count 1 and carried a maximum penalty of 10 years imprisonment.

[4] Leightons' maintenance account, which he administered, was primarily used to pay for corrections and warranty claims against completed projects.  He had authority to approve payments up to $5 million.  Sometime before 18 May 2000, he submitted an invoice in the name of Acorn Cottage for $28,500 and payment was duly made.  In all, he completed 308 false invoices resulting in him fraudulently receiving $20,765,570.20.  Count 2 covered the period from 1 May 2000 up until November 2008 when the maximum penalty was increased from 10 to 12 years.  Count 3 covered the period from November 2008 until his arrest.

[5] During the period of his offending, the applicant spent $7 million acquiring and maintaining many thoroughbred racehorses in Australia and New Zealand with a monthly expenditure of about $75,000.

[6] He also purchased four properties jointly with his wife and two properties in his own name, together with furniture and fittings.  He assisted his daughter to acquire a property.  Most of the properties were mortgaged to the Commonwealth Bank.

[7] He also spent $1.4 million on his mistress.  He assisted her financially in acquiring and improving an outer Brisbane rural property and in building a house on it.  This property was also mortgaged to the Commonwealth Bank.  He gave her a credit card to use as she wished and paid its debits on her behalf.

[8] Only between 10 and 20 per cent of the amount defrauded was likely to be recovered from the sale of his assets.  Additionally, Leightons has had to repay the ATO the amounts it claimed as credits for the GST component of the misappropriated funds.  It has also expended considerable amounts on legal and accounting fees in tracing its funds.

[9] The frauds were uncovered during an internal review of expenditure.  As soon as he was confronted, he admitted his offending.  He was arrested on 7 November 2012 and pleaded guilty to an ex officio indictment two weeks later.  Whilst in custody he assisted Leightons in asset recovery.

The submissions at sentence

[10] The prosecutor at sentence contended that the applicant should receive a sentence of between 14 to 16 years imprisonment by imposing the maximum penalty on count 3 and a cumulative term on count 1.  Recognition for his cooperation could be given by an early parole recommendation.  The offending in counts 2 and 3 was within the worst category of offending and warranted the maximum penalty.  His conduct was greedy, audacious and a breach of trust.  He lived an extravagant lifestyle on the proceeds of his $20.7 million fraud for more than 12 years, increasing the amounts of his fraud over the years.

[11] The first count allowed him to perpetrate the frauds constituted by counts 2 and 3.  The offending in count 1 warranted a separate cumulative period of imprisonment of between two and four years imprisonment.  The applicant's cooperation with the authorities, remorse and early guilty plea should be reflected in a parole eligibility date earlier than that provided by statute.  A sentence in excess of 12 years (the maximum on count 3) is supported by the sentences imposed in R v Hinterdorfer;[1] R v Daswani;[2] R v Kawada;[3] R v Lovell;[4] R v Ollis & Anderson;[5] R v Heiser & Cook; ex parte A-G (Qld)[6] and R v Morehu-Barlow.[7]

[12] Defence counsel at sentence tendered a psychological report from Dr Ronald Frey who interviewed the applicant on 16 and 23 March 2012 and also spoke with his wife and daughter.  Dr Frey concluded that the applicant was a man who, after a successful career, decided in his late 40s to defraud the company which employed him.  It seems he was disillusioned with Leightons and felt it had not given him the recognition and appreciation his hard work had merited.  He had unsuccessfully attempted to leave the company on at least one occasion on the urging of his wife and daughter.  His most difficult task would be to rebuild the trust of his wife and daughter, especially as he had paid the living expenses of a professional sex worker for many years.  Dr Frey identified no psychological or mental health reason to explain, let alone excuse, the offending.

[13] Defence counsel emphasised that the applicant and his innocent wife and daughter had been severely publicly shamed.  He had had a successful and productive working life, most recently with Leightons.  His cooperation with the administration of justice and his timely guilty plea to an ex officio indictment, which was notified to the authorities within days of his arrest, was extraordinary.  Whilst in custody he prepared affidavits to assist Leightons recover funds through the realisation of assets purchased with the misappropriated money.  He has assigned all his interest in his assets to Leightons.  A review of comparable cases, particularly Lovell and Morehu-Barlow, supported a head sentence structured in the way suggested by the prosecutor but of 13 rather than 14 to 16 years imprisonment.  The applicant's high level of cooperation with the authorities and extremely early guilty plea warranted a parole eligibility recommendation after having served up to four years imprisonment.

The judge's sentencing remarks

[14] The judge took into account the applicant's guilty pleas and cooperation, both with the administration of justice and with Leightons.  His Honour noted the applicant's antecedents, the circumstances of the offending and his presentence custody.  He had received $20,765,570.20 from his frauds.  He spent the money on racehorses, real property and a mistress.  The offending was a breach of trust and persisted over 12 years.  There will be a large shortfall between the amount defrauded and the amount realised from the sale of assets.  It is estimated that between 10 and 20 per cent of the defrauded amount will be recovered, with an overall loss of about $16 million.  Leightons has also spent considerable funds on legal and accounting fees in tracing the defrauded funds and defending the claims brought by the applicant's family and mistress.  It has had to repay the ATO amounts claimed as credits for the GST component of the misappropriated funds.

[15] The applicant's behaviour since the discovery of his frauds was all indicative of remorse.  The totality of the offending, however, required a sentence in excess of the maximum penalty available on counts 2 and 3.  The case does fall within the worst category of this type of offending.  The penalty on count 1 should be cumulative on the penalty on count 3.  The offending was audacious and he spent the defrauded money in an outrageous way.  His Honour took into account the cases relied on by counsel, particularly Morehu-Barlow.  That case was distinguishable because he had prior convictions for dishonesty; there were committal proceedings (although it was a full hand-up committal without cross-examination) and involved public moneys.  But the present case involved the funds of a publicly listed company in which the applicant held a very responsible position.  Further, in Morehu-Barlow, a good deal of the misappropriated money had been recovered, whereas here only a small fraction was likely to be recovered.  The present case was more serious than other cases relied on by counsel.  Conscious of the need to give proper recognition to a timely guilty plea, his Honour considered that a global sentence of 15 years imprisonment was appropriate.  He imposed the maximum penalties on count 2 (10 years imprisonment) and count 3 (12 years imprisonment) concurrently and on count 1 he imposed three years imprisonment, cumulative on count 3.  His Honour fixed parole eligibility after six years and declared the 151 days in presentence custody as time served under the sentences.

The submissions in this application

[16] The applicant's counsel emphasised that the applicant's offending constituted a single course of conduct.  It was no more complicated than that in Daswani, Lovell or Morehu-Barlow.  Unlike Morehu-Barlow and Lovell, he had no prior convictions.  Unlike Lovell, he was not preying on the life savings of vulnerable small investors.  The sentencing judge's approach of imposing the maximum term of imprisonment on count 3 and a cumulative term of imprisonment on count 1 was appropriate but the cumulative term should be one year not three years.  This Court should set a parole eligibility date at about the one-third point to reflect his very high level of cooperation with the authorities and his remarkably early plea of guilty to an ex officio indictment.

[17] The respondent emphasises that although there are only three charges, the applicant dishonestly completed 318 invoices.  The direct loss to Leightons will be in the vicinity of $16 million but in addition it had to repay GST credits of almost $2 million to the ATO and has incurred extensive legal and accounting fees in pursuing the defrauded funds.  The applicant dissipated the money not in an attempt to keep a business afloat as in Lovell and Daswani but simply to live the high life.  The offending constituted a high level breach of the trust placed in him by his employer.  The sentence imposed appropriately recognised the relevant competing factors.

Conclusion

[18] Counsel in this application agreed that this 15 year sentence is presently the highest imposed in Queensland for offences of fraud.[8]  That is not surprising in light of its size and circumstances.  In considering whether a sentence is manifestly excessive, the parole eligibility date must be considered as an integral part of the overall sentence imposed: R v Shrestha.[9]  In determining the critical question of whether the effective global 15 year head sentence with parole eligibility after six years is manifestly excessive, it is useful to briefly analyse the three cases to which counsel have referred that approach the scale and seriousness of this record-breaking fraud: R v Daswani;[10] R v Lovell;[11] and R v Morehu-Barlow.[12]

[19] In Daswani, the applicant pleaded guilty at an early stage to an ex officio indictment containing 15 counts of dishonestly using his position as a director under the Corporations Act 2001 (Cth) (counts 1-15); 11 counts of dishonestly inducing a person to deliver property valued at more than $5,000 under s 408C Criminal Code 1899 (Qld) (counts 16-26); and one count of dishonestly obtaining a benefit of more than $5,000, namely, $8,650,000, under s 408C Criminal Code (count 27).  On counts 1-14, he was sentenced to two years imprisonment with a recognizance release order after eight months.  On counts 16-27, he was sentenced to 10 years concurrent imprisonment, with parole eligibility recommended after four years and three months.  On count 15, he was sentenced to two years imprisonment with a recognizance release order after eight months to be served cumulatively on the other terms of imprisonment.  The effective global sentence imposed was therefore 12 years imprisonment with parole eligibility after four years and three months.

[20] Daswani was the controlling mind of a group of companies selling jewellery and clothing in various centres in eastern Australia.  When his companies ran into financial difficulties, he directed his personal assistant to prepare false invoices which he used to obtain money for his own purposes, claiming he would repay it on receipt of family funds.  By October 2000, his companies were in the hands of liquidators or administrators and he and his family left Australia.  He was arrested in Hawaii in February 2003 and returned voluntarily to Australia in June 2003, cooperating with the authorities.  Counts 1 to 15 were instances of him effectively stripping company funds to finance his flight from the jurisdiction and subsequent living expenses.  Counts 16 to 26 were instances of dishonestly inducing lenders to deliver property to his companies through false invoices which he used to support finance applications for sums from $62,493 to $900,000.  He committed these offences in an attempt to keep his businesses afloat.  Count 27 was his preparation of a false contract to purchase a business as a result of which he obtained $8.65 million finance from the ANZ Bank.  The total amount misappropriated in the offending was over $11 million of which almost $6 million was unrecovered.  He had no prior convictions and was aged between 45 and 47 at the time of the offending.

[21] After considering R v Kawada,[13] where the 10 year sentence imposed for a less serious fraud was held not to be manifestly excessive, this Court concluded that Daswani's 12 year sentence with parole eligibility after four years and three months was not manifestly excessive. It allowed the appeal, however, as the sentence on count 15, a Commonwealth offence, could not lawfully be ordered to be served cumulatively on terms of imprisonment imposed for Queensland offences.  The Court indicated that it was disposed to grant the application, allow the appeal and restructure the sentences to lawfully reflect the intention of the sentencing judge.  Consistent with the spirit of Neal v The Queen,[14] however, the court gave Daswani's counsel the opportunity to obtain instructions as to whether he wished to pursue his application for leave to appeal or instead have the Court make a declaration as to the lawful effect of the sentence imposed below.  Unsurprisingly, Daswani sought that declaration but otherwise abandoned his appeal.  For comparable purposes, his sentence should be considered as one of 12 years imprisonment with parole eligibility after four years and three months.

[22] In Lovell, the applicant pleaded guilty to three counts of aggravated fraud, two counts of forgery and two counts of uttering.  His offending commenced in his early 20s and ended when he was 30.  He incorporated a company, apparently with an intention to build a genuine business, but his business model could not be legitimately sustained and he began defrauding his investors through a "Ponzi" scheme.  His frauds continued over six and a half years causing losses of almost $11.5 million to relatively unsophisticated investors, many of whom lost their life savings.

[23] He had prior convictions.  In 1999, he was placed on probation and ordered to perform community service for 15 counts of fraud and eight counts of stealing.  In 2000, he was convicted and fined for breaching those orders.  In 2008, he was fined without conviction for possessing dangerous drugs and property suspected of having been used in connection with the commission of a drug offence.  He had never before been sent to prison.  He gave some cooperation to the authorities.  The committal proceedings were conducted by hand-up statements without cross-examination and he pleaded guilty at an early time.  The sentencing judge, however, was not prepared to accept he was genuinely remorseful.  He had the support of his sister and girlfriend in his rehabilitation when released from prison.

[24] This Court found Lovell's effective global sentence of 13 years with parole eligibility after four and a half years was manifestly excessive and reduced it to 11 years imprisonment with parole eligibility after four years.

[25] Morehu-Barlow, on which the sentencing judge in the present case placed considerable reliance, is of limited use in this Court for two reasons.  First, it is not a decision of a superior appellate Court.  Second, counsel informed this Court that Morehu-Barlow has applied for leave to appeal against the severity of his sentence.[15]  That said, its usefulness is derived from the comparability of its facts to the present case.  Morehu-Barlow pleaded guilty at an early stage to numerous counts of fraud and dishonesty offences and offences against the Drugs Misuse Act 1986 (Qld).  He was 38 at sentence.  He defrauded the State of Queensland of almost $17 million in 62 fraudulent transactions over about four years.  He submitted fraudulent vouchers from an entity which he controlled, causing the Department of Health to pay $5.6 million to an account to which he had access.  The Department believed it was providing funds to a community program established to provide dental care to Indigenous people.  He also prepared false documentation to defraud the Department of a further $11 million which it believed was for dental services delivered through James Cook University in Townsville and Cairns.  The frauds were not complex and would inevitably have been detected but Morehu-Barlow's knowledge of the workings of the Department and his position of trust within it enabled him to effect the frauds.  His conduct was a most serious breach of trust owed both to his employer and to the community.  He used the proceeds to maintain an opulent and extravagant lifestyle.  He had a troubled and difficult background and had pleaded guilty at an early stage.  He was remorseful.  The judge noted a letter from a doctor and ex 10, although the sentencing remarks do not disclose their contents.  Much of the misappropriated money was recovered through the sale of assets.  He was sentenced to an effective term of 14 years imprisonment with parole eligibility after five years.

[26] In the present case, the applicant's offending was unquestionably one of the largest and most serious examples of fraud to come before Queensland courts.  At $20.7 million, the fraud regrettably set a new record.  He dissipated almost all his ill-gotten gains in leading an extravagant and, in some ways, dissolute lifestyle.  Most of the misappropriated funds will not be recovered.  In addition, Leightons, a public company in which small and large shareholders had invested, has had to repay the ATO the amounts claimed as credits for the GST component of the misappropriated funds and has expended considerable amounts on legal and accounting fees in tracing the funds.  Whilst the fraud was unsophisticated, the fact that it was not discovered for 12 years was because of Leightons' high level of trust in the applicant who held a senior managerial position.  The 12 year period over which the fraud continued diminishes the significance of the applicant's lack of prior criminal history.

[27] The case is more serious and warranted a heavier penalty than in both Daswani (12 years imprisonment with parole eligibility after four years and three months) and Lovell (11 years with parole eligibility after four years).  This fraud was for a larger amount over a more extended period and did not commence in an attempt to keep legitimate businesses operating.  The proceeds were solely used to support a grand lifestyle.  It is true that Lovell had prior convictions but that is countered by Lovell's youth and the long period over which this applicant offended.  Morehu-Barlow (14 years imprisonment with parole eligibility after five years) was a comparable fraud in scale and circumstances.  Whilst Morehu-Barlow had a criminal history, he had an unfortunate background, was able to repay most of the misappropriated funds and his offending occurred over a shorter period.  On the other hand, his cooperation was not as extensive and his guilty plea was not as timely and nor was it to an ex officio indictment.

[28] The applicant's sole mitigating feature was his extraordinary cooperation with the administration of justice.  Once confronted, he made immediate admissions.  He assisted Leightons to recover its funds, albeit ultimately with limited success.  He communicated his intention to plead guilty within days of being charged and did so to an ex officio indictment.  The effective administration of justice relies on sentencing courts giving proper credit to offenders who plead guilty, especially at an early stage and who cooperate extensively with the authorities: see s 13(1) and (2) Penalties and Sentences Act 1992 (Qld).  Had this case proceeded to trial, it is likely that it would have taken several weeks of court time and caused inconvenience and financial loss to many prosecution witnesses.  The otherwise much more costly investigation, both by the police and Leightons, and the court process was commendably and extensively reduced through this cooperation.  There is no reason to conclude otherwise than that his cooperation and timely guilty plea were indications of remorse.

[29] Had he proceeded to trial, he would have been sentenced to an effective global term of imprisonment in the range of 15 to 16 years with parole eligibility at the half way point.  It follows that the sentencing judge, in setting an effective global head sentence of 15 years, did not significantly discount the head sentence to recognise these critical mitigating factors.  The only credit given was to set parole eligibility at six years, 18 months earlier than the statutory norm.  I do not consider this modest mitigation gave sufficient weight to the applicant's extraordinary cooperation and timely plea to an ex officio indictment.  Unless sentencing judges give proper weight to such cooperation, offenders will have no incentive to do so and the criminal justice system will require additional and expensive resources to remain efficient.  If imposing a head sentence at the top of the appropriate range, as his Honour did, in this exceptional case of cooperation, parole eligibility should have been set no later than at the one-third point.

[30] The sentencing discretion miscarried and this Court must now re-exercise it.  The sentence must be sufficiently condign to punish the applicant who, as a mature, trusted, well-paid managerial employee, defrauded his employer of $20.7 million over 12 years to live a lavish lifestyle.  He repaid very little and has rightly been shamed in the community.  The sentence imposed must be sufficient to publicly denounce his anti-social conduct and to show others that on a cost-benefit analysis crime does not pay.  The sentence, however, must give credit to the applicant's extraordinary cooperation.  I consider these competing considerations are most effectively met by imposing an effective head sentence of 15 years imprisonment structured in the manner undertaken by the sentencing judge.  The applicant's most commendable cooperation and timely plea to an ex officio indictment should be recognised by setting parole eligibility after five years.  When released he will continue to serve his sentence with appropriate restrictions on his freedom, including the return to prison if he breaches his parole.

[31] I would grant the application for leave to appeal and allow the appeal to the limited extent of setting aside the fixing of the parole eligibility date at 7 November 2018 and instead fixing the parole eligibility date at 7 November 2017.

[32] MULLINS J:  I agree with the President.

[33] HENRY J:  I have read the reasons of the President.  I agree with those reasons and the orders proposed.