ASIC enforcement trend in Q1 2022: increased criminal risk for fraud, dishonesty

In enforcement activity in the first quarter of 2022, ASIC has demonstrated its willingness to pursue individuals for conduct breaches by seeking penalties and taking criminal action.  We summarise and analyse these actions, and highlight some emerging themes.

Three key takeaways

• ASIC will pursue criminal convictions and jail sentences for individuals involved in crimes of dishonesty, such as fraud, across a wide range of industries and scale of misconduct.
• Despite “headline” jail sentences, none of these regulatory actions resulted in any of the targets serving any immediate or additional imprisonment – which poses the question whether this regulatory “stick” is as big as it seems.
• ASIC is taking a strong stance against individuals that provide it with false information, even outside the investigative context.  As a result, it is imperative that company directors and credit and financial services licensees and representatives, ensure that every form lodged with ASIC is accurate.

Jail sentences for fraud and other dishonesty

This quarter saw no less than five individuals be criminally penalised for dishonesty offences, including fraud, following ASIC investigations.  Three of the actions related to company directors, while the remaining to were taken against a liquidator, and a finance broker.  

The actions touched on varying industries, ranging from an employment agency, white goods retailing, resources and mining, and used-car finance.

Andrew Eric Young, former company director

Mr Young was sentenced to 3 years’ jail for fraud (such sentence being immediately suspended, having already served 336 days in jail) as well as six months jail for insolvent trading with immediate release on a recognisance.  In layman’s terms, this means Mr Young will not serve any additional jail time.

The sentence followed a guilty plea from Mr Young for aggravated fraud and insolvent trading charges in connection with the collapse of the Kleenmaid group of companies.  Mr Young dishonestly took $330,000 from a Kleenmaid company bank account for the benefit of himself and his wife.  He also engaged in insolvent trading by incurring debts with a logistics company at a time when the Kleenmaid group company could not pay its debts.

Upon sentencing, Judge Byrne QC noted as follows:

“…the timing of Mr Young’s plea and lack of prior offer to do so indicated his lack of remorse and that despite character references, in the hour of need Mr Young showed himself to be a man of greed.”

‍

Amanda Young, former registered liquidator

Ms Young was convicted and sentenced to 3 years’ imprisonment to be served by Intensive Correction Order along with 350 hours of community service.  

Ms Young took $28,500 from the liquidation bank account for Mamak Pty Ltd, and attempted to disguise the misappropriation by falsifying internal records and tampering with an email from a lawyer.  Mr Young also took a further $165,000 from the liquidation bank account of St Gregory’s Armenian School.

Rachel Edwards (also known as Konito Pakoti), former company director of an employment agency

Ms Edwards was convicted of breaching her directors duties under section 184 of the Corporations Act 2001 and sentenced to 11 months imprisonment, released immediately on a three-year good behaviour bond.  

ASIC said that, over a period of almost 2 years, Ms Edwards took over $600,000 from the bank account of the employment agency, which shortly after went into liquidation owing creditors over $930,000 including over $730,000 in taxes owed to the ATO.

Peter James Dykes and Peter Alan Torney, former company directors

Mr Dykes and Mr Torney, former directors of previously ASX-listed Capital Mining Limited, were charged with dishonestly using their positions as directors, under section 184.

Between them, Messrs Dykes and Torney allegedly dishonestly used their positions to gain a financial advantage for themselves or others on 22 occasions, in the combined amount of over $2.6 million.

Daniel Wilson, former used-car finance broker

In the “lightest touch” criminal penalty during this period, following a guilty plea Mr Wilson was convicted and fined just $1,000 regarding four counts of obtaining financial advantage by deception (in essence, fraud).

Mr Wilson submitted used car loan applications for customers totalling $56,000 using false supporting documents that had not been provided to him by the customers, for which he received commissions on the loans.

Criminal consequences for providing false information to ASIC

In Q1 2022, ASIC took action against three directors for false statements in forms lodged to deregister companies, relating to outstanding debts and involvement in legal proceedings.  It also acted under relatively new laws prohibiting the improper backdating of director’s resignations.

Shiwei (Darren) He, former director

Mr He pleaded guilty to making a false statement to ASIC in a credit licence annual compliance certificate, facing a maximum fine of $12,600 and/or 12 months imprisonment.

Mr He certified that none of the “fit and proper” people under his Australian credit licence, including himself, had had their accreditation suspended or cancelled by a lender.  This was false, because Mr He knew his accreditation with all Big Four banks had been suspended or cancelled.

‍

Andrew Ross Eddy, company director

Mr Eddy, following a guilty plea, was convicted of making a false or misleading statement in a form lodged with ASIC, a breach of section 1308 of the Corporations Act 2001, and ordered to pay a fine of $1,500 plus court costs.

In the form, requesting the voluntary deregistration of Mr Eddy’s building and construction company, Mr Eddy falsely declared that the company was not party to and legal proceedings at the time.  In fact, the company was in legal proceedings in the Queensland Civil and Administrative Tribunal.

Tom Thompson, company director

Mr Thompson pleaded guilty to two counts of making false or misleading statements in documents lodged with ASIC by his companies, which were involved in producing and distributing film and television programs.

Similar to the situation with Mr Eddy, Mr Thompson stated in the documents to deregister the companies that they did not have any outstanding liabilities and were not a party to legal proceedings.  In fact, the companies were involved in legal proceedings, in which they were liable to pay costs.

Julia Falcone, former company director

Ms Falcone was sentenced, without conviction, upon entering into a recognisance order in the sum of $1,000, to be of good behaviour for 12 months.

Ms Falcone knowingly lodged a form with ASIC lying about the date of her resignation from her company, backdating it to some 7 years earlier than her actual resignation, which occurred shortly before the company was placed into liquidation.  Through her actions, Ms Falcone had attempted to alter her position and obligations as a director of the company.  

This action follows the introduction, on 18 February 2021, of new laws prohibiting directors from improperly backdating their resignations or leaving their company with no directors.

Daniel Dixon, former company director

Mr Dixon was sentenced without conviction upon entering into a recognisance order in the sum of $1,000 to be of good behaviour for 24 months.  Mr Dixon was also ordered to pay over $30,000 to creditors for outstanding debts.

Again similar to Mr Eddy and Mr Thompson, Mr Dixon lodged a form with ASIC to deregister his company, but falsely claimed that the company had no outstanding liabilities when, in fact, it did.

‍

The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.

‍