Plenty of problems are now apparent in the decade-long prosecution that has seen the ATO’s fraud squad firmly told to pull up its socks.
The Australian Taxation Office has sought to reassure its investigations staff that it has their back when it comes to potentially high-profile or controversial prosecutions over tax fraud. The soothing follows the Queensland Supreme Court handing down a shellacking to the revenue agency, booting a criminal action brought against a therapeutics entrepreneur for allegedly inflating research costs.
In a series of scathing findings against the ATO in the case of The King vs Julie Clarke, Justice Paul Smith on October 3 stayed a prosecution mounted by the ATO dating back to 2019 on the basis that an ATO officer engaged in misconduct in the gathering of evidence in the matter.
The decision by Justice Smith publicly identifies several ATO officers, whom The Mandarin has not named because the ATO may still appeal the matter.
The case revolves around whether the ATO transgressed boundaries by requiring the defendant to provide evidence for civil investigations, contravening the right to silence for those additionally facing criminal investigations.
“The court concludes that the defendant was unlawfully subjected to a hybrid audit/criminal interview because the audit team did not have the power to investigate a breach of the Commonwealth Criminal Code as agents of the crime team, or at all, and the crime team did not have the power to compel the defendant to answer questions put to her concerning the criminal matter.
“The court concludes that this undermined [the defendant’s] fundamental right to silence. The court concludes that the defendant has thereby been deprived of her forensic choices in the way in which she can defend this criminal trial,” the decision by Justice Smith said.
“[An ATO criminal investigator] was given a transcript of the compulsory interview on 27 February 2018 and the court finds that this interview informed him in his investigation. The interview was also relied on to approve the criminal investigation and for the issue of the search.”
The decision goes on to say that “at the interviews, the defendant was cross-examined by audit team members about the alleged fraud.
“She was directed to answer questions and was advised that if she did not, she would be committing an offence. The defendant did not have a right to silence in this interview as it was purportedly conducted for a civil law purpose, namely administering taxation laws, and thus the right to protect oneself against self-incrimination was inapplicable.
“However, the court finds that the substantial purpose of the interview was to question the defendant about the alleged fraud — a criminal offence.”
The decision sent shockwaves through accounting and financial circles last week after it detailed 10 findings of misconduct against the ATO criminal investigation.
On Tuesday, October 7, ATO second commissioner of the Compliance and Engagement Group Jeremy Hirschhorn wrote to all of his division’s employees to console the Queensland excoriation.
“We try our best, although not always successfully, to not have officers under SES level reported on publicly. We are providing appropriate support to employees who may be directly impacted by this judgment. It is important that all ATO employees continue to feel supported to work on behalf of the Australian community,” Hirschhorn told staff in a carefully worded internal ATO email.
“The ATO is committed to ensuring the wellbeing of our people, and maintaining a safe and professional environment for our officers to continue to carry out their duties.”
Hirschhorn said that, “over the past few days, there has been some media attention on a recent court decision relating to a long-running tax-related fraud matter being prosecuted by the Commonwealth Director of Public Prosecutions.
“A judgment was issued late last week, which stayed the prosecution. Over the weekend, we saw media attention surrounding the court’s adverse findings as to the ATO’s use of its powers, and broader implications from the decision relating to investigative processes.
“I suspect that many of you are interested to know more about the matter, and may even have been asked questions by family members or friends.
“Unfortunately, it is very difficult to provide you with more information at this time for a variety of reasons. Firstly, the CDPP will need to consider whether it appeals the decision, but also, there are elements of taxpayer confidentiality and ‘need to know’, as well as employee privacy considerations,” Hirschhorn said.
In the event the CDPP does opt to hit the re-spin feature, it will need to be a fulsome appeal, given the 10-point defect-list of findings issued by the Queensland courts. With names redacted, it looks like this:
The decision goes on to say that the court found that numerous “no case submissions were made by the defence to the CDPP to discontinue the state fraud charge, which were either not responded to or responded to in any meaningful way.
“The court finds there was no case to answer on the state charge as particularised. The CDPP was, several times, presented with compelling evidence that there was no case to answer, but provided no answer to this.”
Hirschhorn told staff the “ATO’s responsibility to collect revenue is fundamental to the functioning of government, and it must be done with fairness, transparency, and respect for the rule of law.
“We should always strive to be trustworthy for the Australian community, particularly given the powers we are granted.”
