Taxation Law - The Glen Wheatley Case - The Value Of Coming Forward - Was It An Unprompted Voluntary Disclosure?

For some time now the papers have been full of the Glen Wheatley case, and the following types of comments have been made by a number of commentators:

(i) Nick McKenzie, 20.7.07  "Justice and Customs Minister, David Johnson said Glen Wheatley's conviction and jailing sent a message to others using illegal offshore tax schemes …….  The Age believes that several clients of Mr Egglishaw have recently been served "264" notices by the Tax Office, which requires them to answer questions about their tax affairs.  A legal source told the Age the notices pointed to the ATO's desire to move more quickly"

(ii) By staff writers and wires, 22.7.07, news.com.au  "the Federal Government does not believe the conviction of music promoter, Glen Wheatley for tax evasion will prevent other people who may be under suspicion of tax offences from coming forward. Wheatley, 59, was charged yesterday for 15 months after pleading guilty to three charges."

 Justice and Customs Minister, David Johnson said "you seek to do anything internationally - bring money through our borders, avoid tax, or to launder drug money - we will catch you, you can be assured"

 Leading Australian Tax Lawyer, Mark Leibler said "Wheatley's jailing would make it more difficult to entice other tax evaders to come forward... Wheatley had co-operated with investigators and pleaded guilty."

Comment:  This completely misses the point.

(iii) Alison Caldwell, ABC Online 18:22 Thursday 19.7.07  "Glen Wheatley faces music, jailed for tax fraud" 

Mark Colvin: In the end though, his guilty plea and his co-operation with investigators weren't enough to keep him out of prison.

Judge Tim Wood said general deterrence was the most important sentencing factor and added that all taxpayers were victims of Wheatley's offending.

Alison Caldwell reports: Glen Wheatley had been hoping for, possibly even counting on, a suspended sentence, after pleading guilty to three offences, then by assisting investigators and finally repaying the $318,000 he failed to declare to the Tax Office.

He is the first scalp of Operation Wickenby, which is targeting offshore tax havens.

Wheatley was represented by one of the country's top criminal barristers, Robert Richter QC. "To send him to prison in these circumstances would send a message to people" he said, "fight to the death".

The judge rejected the bid and said the message he needed to send was one of deterrence. Had Wheatley not co-operated, the Judge said he would have been jailed for at least two years without parole. His confession and his co-operation with investigators were supposed to earn him a suspended sentence along with confidentiality.

Comment:  The protection originally afforded him was withdrawn as he did not qualify for an indemnity against prosecution as his fraud was sustained and sophisticated exhibiting a significant degree of criminality.

Ali N. Noroozi, tax counsel for the Institute of Chartered Accountants  "his sentence was reduced because of disclosure. But it wasn't completely quashed and arguably, rightly so."

Alison Caldwell: the Commonwealth Director of Public Prosecutions said that indemnity may be granted to people in certain circumstances, it all depends on the criminality of the offence.  Is that a message that also should be encouraging people?

Ali Noroozi:  "Yes… they can't completely overlook certain criminal activities no matter how much of a full and frank disclosure you make."

(iv) Samantha Donovan, 12:45 Friday 20.7.07: The World Today ABC On Line.

Eleanor Hall "Wheatley's lawyers say that by reneging on a deal with their client, the Tax Office will find it more difficult to get others to co-operate on tax avoidance investigations."

Comment:  This was never a case about tax avoidance but tax evasion.

In Melbourne, Samantha Donovan reports:

Mark Leibler "if it wasn't associated with Operation Wickenby, all of my experience tells me... you're much more sensible in terms of coming forward and making a full disclosure"

Comment:  Once again Wheatley fell foul of the authorities not because this was an operation Wickenby matter but because it was tax evasion practiced through a sophisticated fraud.

(v) Natasha Robinson 1:20am AEST 21.7.07 - Prosecutor killed off Wheatley deal. The Australian.

"The Commonwealth Director of Public Prosecutions personally intervened to overrule deal under which tax cheat Glen Wheatley would have received a suspended in return for helping authorities chase other high profile frauds.

Despite his Melbourne deputy agreeing to terms with Wheatley's lawyers, the Weekend Australian can reveal that CDPP Damian Bugg QC decided that the music guru's crimes were too significant for the agency to argue that a judge spare him jail time.

Mr Bugg was also of the view that a suspended sentence for Wheatley would be out of step with case law, with those who had committed similar white collar crimes receiving heftier penalties.

Wheatley's lawyers yesterday lodged papers with the Victorian Court of Appeal, arguing that the sentence was excessive, contained errors of fact and law. 

The Weekend Australian understands that central to the appeal will be whether Wheatley's co-operation with authorities was given sufficient weight by sentencing - Judge Tim Wood.

Wheatley's hefty sentence attracted widespread criticism from the legal community which argued that his tough treatment would deter other tax evaders from confessing and paying up just as Tax Commissioner, Michael D'Ascenzio was offering an amnesty from prosecution for offenders."

Comment:  this last paragraph overlooks a number of factors:-

1. The Wheatley case was determined according to law administered by a Court of Law.
2. The presiding judge correctly pointed out the consequences of tax evasion.
3. The law has always treated tax evasion seriously e.g. the Ronen case.
4. This was not a case of unprompted voluntary disclosure but a case of full and frank disclosure following detection and a raid on Wheatley's home.
5. As the sentencing judge said, without Operation Wickenby this fraud may never have seen the light of day.
6. Public policy and Wheatley co-operation were balanced and taken into account.
7. His counsel agreed that this matter was so serious that it deserved a custodial sentence arguing that his co-operation meant it should be suspended.
8. The Commissioner has at no point offered a tax amnesty as reported.

(vi) 5:22pm 20.7.07 - Wheatley appeals jail term - National - theage.com.au

"Lawyers for jailed entertainment guru, Glen Wheatley have lodged an appeal against his 15-month sentence for tax avoidance... the appeal papers have been filed."

"Wheatley... was sentenced to 2½ years in jail after pleading to dodging $318,092 in tax, plus an unknown amount to creditors... While other people have been charged as a result of the same investigation, Wheatley is the first to be sentenced."

Comment:  It remains to be said that persons who engage in tax evasion where the amount involved exceeds $100,000 regularly go to jail for terms exceeding 2½ years.

In the Ronen case given the size of the fraud and the period of time over which it was practised this led to a head sentence for Ida Ronen and her two sons of 8½ years each.  In her case she was given a non parole period of four years six months and her two sons five years six months each. 

The message is in the gesture i.e. come forward and you will be treated leniently.  Wait to be detected and you will be prosecuted.  The ATO is committed to stamping out tax evasion.  In all cases where taxpayers are contemplating making a voluntary disclosure they should seek competent legal advice from a tax lawyer - call Frank Egan of LAC Lawyers for assistance.