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- [00:02]
Ben Wills Johnson
The Australian Federal Police is Australia's national policing agency. Its aim to protect Australians and Australia's way of life. The AFP works with Australian and international partners to combat cybercrime online, child sexual exploitation, transnational serious organised crime, fraud and corruption and terrorism, espionage and foreign interference. Recognising that money is the lifeblood of organised crime, AFP members target illegally obtained wealth. This includes tax fraud and money laundering. Between July 2022 and June 2024, the AFP led Criminal Assets Confiscation Task Force, or CACT, restrained over $500 million in criminal assets and AFP criminal investigation teams arrested 97 people for money laundering offences. These are the real stories of the afp. Everyday people doing legendary work. Before we start, a word of warning that this episode discusses themes of suicide. Listener discretion is advised. Operation Beaufighter was a joint investigation by the Australian Federal Police and the Australian Taxation Office into Australia's largest tax fraud. Two businessmen set up a complex scheme to defraud the Australian taxpayer of over $300 million. Ben Wills Johnson is a federal agent with the AFP, currently an acting team leader investigating foreign bribery and corruption. When Operation Beaufighter landed on his desk, it came from the Australian Taxation Office.
- [01:56]
Rosanna Chalona
The offending itself had stopped by the time it was referred to us, but the ATO had done a lot of work in piecing together what had happened from a tax perspective. And in that they were relying obviously on all of the documentation that the players involved had lodged with that agency. The ATO was able to give us their case theory as to what they believe had happened and how it had happened. And it was then up to us to use our powers and resources to investigate the matter ourselves independently and determine what had happened from a criminal perspective in all of these matters. The role of the AFP is to investigate what happened and the role of the ATO is to provide a statement that sets out what effect that activity had on the tax base of Australia.
- [02:43]
Ben Wills Johnson
Essentially, Rosanna Chalona is a senior forensic accountant with the Australian Federal Police. With a job like Operation Beaufighter, someone with her skills is essential to its success.
- [02:57]
Ian Durant
Oh, it's one of those occasions where they required a forensic accounter to start looking at the money flow in the job and what was involved. And usually when that occurs, they'll request assistance and basically tap on the shoulder and say, you're it, Rosanna.
- [03:16]
Ben Wills Johnson
While the unusual financial activities of the offenders in Operation Beaufighter had already come to the attention of investigators, the case gathered momentum when the brother of an offender who we're Going to call the deal broker contacted the AFP with a strange tale of special deals and shelf companies moving money around the world. The company was run by his brother and another man who we are going to call the trusted elder because he presented as an elder statesman in business and with that perception of him came trust.
- [03:51]
Ian Durant
At that particular point in time, the brother had provided some banking documentation so we could in fact start looking at the tracing quite early on and in essence also verify any truth that what the brother was alleging.
- [04:08]
Ben Wills Johnson
Ben flew to Hong Kong to meet with the brother.
- [04:12]
Rosanna Chalona
So as luck would have it, when the money was needed to come back when the deal broke, when the trusted elder needed to buy their apartments, their boats, their cigars, their many, many, many cars, the deal broker would contact his brother, send the brother an email with a coded message on it which when decoded would tell him how much money he wanted to be brought back to Australia by telegraphic transfer and where that money was meant to go. Thankfully, he printed the email off. He decoded the email, he wrote the result on the email, took it to the bank, requested the transfer, took the receipt of the transfer, stapled it to the email and then filed it. This worked well for over a year and the deal broker and the trusted elder essentially collected $60 million worth of assets and the fraud and the money laundering scheme. After a while, however, the brother started to become disgruntled. He was looking at the sheer amount of money and became concerned that his name was all over it and the deal breaker's name was nowhere on this money. And he became legitimately concerned that if this was criminal proceeds, it would be him that would be in the sights of law enforcement. So he came forward and said, I'm concerned, I don't know what's going on, I want to talk to someone about this. So that someone was me. I traveled over to Hong Kong a couple of times. I met with him, I engaged with him as a witness. He provided to me several boxes of these emails and telegraphic transfer receipts. And I spent a week in Hong Kong sitting on my bed in the hotel room putting it all together and found that I was able to trace pretty much every cent that had started in pneumatics. Health bank account in Australia and ended up back in Australia as shopping centres. Rolls Royces, Powerboats, cigars and houses.
- [06:11]
Ben Wills Johnson
New Medics was a medical technologies company owned by the deal broker and trusted elra. What the brother was alleging was that millions of dollars were being moved through bank accounts around the world and it came from a source that he felt the AFP and the ATO would be very interested in. What makes Operation Beaufighter intriguing was that the crime was committed by two men who had held trusted positions in the business world, positions that had already made them a lot of money, but they chose to commit fraud on a huge.
- [06:45]
Rosanna Chalona
Scale prior to the offending that was referred to us. The deal broker had had a long history in the consulting and banking environment within Australia, predominantly New South Wales, and he had come up with a scheme that he had pitched to clients of consulting firms that he worked for. And then on seeing how lucrative that those schemes were for the clients, took the decision to basically go into business himself and become what we would describe as a facilitator of tax evasion through the process of being a promoter of tax evasion schemes. So he had taken that step to move away from the consulting world and to go into business for himself.
- [07:39]
Ben Wills Johnson
The large scale fraud and tax evasion began with a simple idea.
- [07:45]
Rosanna Chalona
The deal broker approached one of the big four banks and pitched a scheme to them that would allow the bank to make a large profit in fees and interest and would allow a customer of the bank to improve their cash flow. So the deal broker would go to the bank and say, do you have a client who has a low cash flow but some valuable assets? And most banks do. So the bank would say, yes, we have this major manufacturer based in New South Wales who is experiencing those difficulties. The deal broker then agrees to establish a partnership with a subsidiary of the bank. That partnership borrows money directly from the bank. In this case, let's say it's $200 million. The partnership then purchases the factory from the manufacturer, allowing the manufacturer to have $200 million directly in cash flow. To alleviate the issues that they're having now, the manufacturer still needs to have use of the factory they've just sold. So they lease the factory back from the partnership, which is commonly referred to as a sale and leaseback agreement. They're very, very common in corporate Australia and all over the world. Perfectly legitimate way of doing business.
- [09:08]
Ben Wills Johnson
And that's the thing about this case. Some of the components were legitimate until they weren't. When the corporation set up by the dealbroker purchased the $200 million factory. The leaseback arrangement serviced the loan, but there was a tax liability that the deal broker agreed to take on.
- [09:29]
Rosanna Chalona
The partnership, who now owns the factory, receives the leasing fees from the manufacturer and uses those leasing fees to then repay the principal and interest loan that they've received from the bank. So so far, nothing Particularly complex or problematic, the partnership has invested in a factory and is receiving income in the form of leasing fees. The complication that the deal broker introduces to this scenario is the one that's required to take advantage of the tax laws as they existed at the time. He established a unit trust. And the units of the trust are split between the bank subsidiary and New Medics, which is owned by the deal broker and the trusted elder.
- [10:20]
Ben Wills Johnson
The trusted elder was a man who had a long established career in business, which meant his name added a further level of trust to the deal. He had a convincing level of wealth and respectability. There was nothing to suggest their company, New Medics, was anything but legitimate.
- [10:39]
Rosanna Chalona
The splitting up of the units meant that the bank subsidiary was entitled to all of the profits of the partnership and EU Medics was entitled to all of the tax obligations of the partnership. Which meant that New Medics agreed to pay all of the tax for the partnership and the bank's subsidiary agreed to take all of the profits. The effect of that was the partnership itself didn't have to pay any tax on the income it was receiving through the leasing payments. So it was effectively tax free income for the bank subsidiary. Now, a great portion of that obviously had to go back to repaying the loan and interest. But effectively, if you remove a tax obligation from any company, you're increasing their profit by 30% straight away. That's the actual effect of evading taxes. And you increase your profit by 30% because that's the corporation tax rate. Now, none of that is fraudulent. All of that is allowed under Australian tax law.
- [11:47]
Ben Wills Johnson
But here's where things begin to get murky. With everyone profiting from the loan of $200 million, the bank, the company that sold the factory and the tax free subsidiary paying off the loan, the onus was on new Medics to pay the taxes, or in this case, avoid them. Any close look at New Medics would ring alarm bells.
- [12:11]
Rosanna Chalona
Where the fraud comes into it is the way that New Medics dealt with the tax obligations it was now required to pay. So on paper, Pneumatics had a bill to the ATO each year of 30% of the income the partnership was receiving. So Numetics needs to find a way for any of this to be profitable. They need to lower their tax obligations. Numedics itself was what we would call a medical technologies company. It had its websites, it had an office, it had employees, not many of them, but to all intents and purposes, it was constructed to look like a going concern. They had a fellow who identified Himself as a professor, he wasn't. He admitted to me that his degree was from the Internet and his one qualification was in TAFE qualification from the 19. The 1960s, I think. So pneumatics itself purported to have a medicine that could cure, amongst other things, cancer, hiv, dengue fever and a range of other maladies. And this was an invention made by the professor and it consisted essentially of tea tree oil that had been extracted and aerosoled. And also he turned it into a skin cream that he said could cure all sorts of things. Really Difficult claims to back up. And I guess you wouldn't attempt to do this unless you had some way of convincing everyone that this invention was legit. And this is why we have the trusted elder at the head of the company. So the trusted elder had been around for a long time. He was a property developer, in fact, owned a lot of property around Queensland, the Gold coast in particular. He always dressed in immaculate suits and he drove around in a Rolls Royce. So through the appearance and trappings of wealth and his longevity in business in Queensland, he was used as the face of new medics. And without him, and without the deal broker, who himself was trusted within the finance industry and consulting world, none of this would have been able to take place, is my opinion.
- [14:33]
Ben Wills Johnson
So how did new medics try and lower their tax obligation from the $200 million purchase of the factory and the subsequent leasing agreement?
- [14:42]
Rosanna Chalona
If we get back to the tax obligations that Neumedics had, they needed to lower those. So the scheme that was created by the deal broker was this. They advertised on the Internet. They were looking for inventors, preferably doctors, who had an invention that they wanted further fund so that they could develop, manufacture and distribute whatever it is that they created. Not surprisingly, pneumatics got a lot of responses from various doctors and professors and tinkerers from around the world. And they settled on inventions that they decided to invest in. There was a genetic test for colon cancer developed by a British doctor. There was a cancer vaccine that was being developed by an Australian doctor. There was a surgical clip that was being developed by a New Zealand engineer, I guess you would call him. He wasn't a doctor, he had no medical training at all, but he had invented a plastic clip that he said could be clipped onto the spine of a human and alleviates spinal injuries.
- [15:48]
Ben Wills Johnson
The deal broker and the trusted elder offered these three men around a million dollars each to further develop their ide.
- [15:56]
Rosanna Chalona
None of the products were even close to even being proof of concept. They were simply ideas that the Doctors had had that were they were trying to develop further. In return for the money, New medics got the rights to market the finished products across various regions in the world. And the inventors themselves, they weren't going to profit enormously from their own inventions after taking Pneumedics as money.
- [16:27]
Ben Wills Johnson
It was here the complex money trail began, because the inventors weren't actually paid by new medics, but rather another company called Athena Health, which was set up in the Cayman Islands, a well known tax haven.
- [16:42]
Rosanna Chalona
On paper, the money flowed not from Pneumatics Australia, but a company called athenahealth registered in the Cayman Islands on all of the contracts that the inventors signed. They were assigning the rights to their intellectual property over to athenahealth Cayman Islands. Athenahealth Cayman Islands was a shell company, didn't really exist other than on paper, and was constructed in such a way that investigators such as myself find it very difficult to discover who is the actual legal owner of the company. So if you think of athenahealth simply as an empty shell whose only purpose is to obfuscate the link between Pneumatics and the inventors. So on paper, the inventors sell the rights to their inventions to athenahealth, Athenahealth pays them the million dollars and the inventors get on and continue to develop their ideas.
- [17:38]
Ben Wills Johnson
So for the cost of around $3 million, New Medics and Athenahealth became purchased the intellectual property of three medical inventors. The next step was to get a false valuation on these inventions.
- [17:52]
Rosanna Chalona
Athenahealth then employs a company called Karkala, based in Hong Kong, to provide them with a estimate as to what these inventions might be worth on the open market. Karkala is again another shell company. Doesn't exist. Had a website, but didn't exist physically at any stage. Karkala presented itself as a medical IP valuation firm, but in fact it was run by the deal broker and the trusted elder. They put together valuations and they essentially plucked figures out of the air for the cancer vaccine they imagined. Okay, well, a vaccine that stops the entire world from getting cancer would probably be worth a few billion dollars. They put that on paper, put in a few graphs, a few pie charts, a few rows of figures, and told Athenahealth Cayman Islands that the invention they had purchased for $1 million was in fact worth $2 billion. Athenahealth then entered into an agreement with New Medics Australia to sell the inventions to New Medics Australia for the now inflated valuation provided by Cocala. So Pneumatics was buying the inventions for billions. Of dollars, rather than the two to three million dollars that had actually been paid to the inventors. So, on paper, Pneumatics Australia owns the intellectual property rights to all of these inventions and the rights to commercialise those inventions once the doctors and inventors come up with a finished product.
- [19:30]
Ben Wills Johnson
This is the point where the scheme takes advantage of tax laws in Australia.
- [19:36]
Rosanna Chalona
To encourage research and development in Australia. The ATO allows accelerated depreciation of medical intellectual property. So what that means to a normal person is if Neumedics purchases an invention for a billion dollars, it is allowed to depreciate the value of that invention down to call it half a billion dollars over the course of one or two years. As there's no income coming into New Medics Australia, the loss in the value of the medical IP can be claimed as a loss on your tax returns, which means, out of thin air, Numects Australia now has a loss of whatever figure that they decide to make up. And lo and behold, unsurprisingly, the figure that they made up was pretty much the same as what what their tax obligations were through their partnership with the bank's subsidiary.
- [20:38]
Ben Wills Johnson
And this is how the tax fraud came about.
- [20:41]
Rosanna Chalona
So through the payment of $3 million to three doctors and inventors Numerics Australia magically was able to offset the tax obligations they had from the income they'd received through application of the losses on the medical ip. And that's it, that's the scam. There's nothing further than that. It requires the three innocent inventors, it requires a bank to suspend disbelief, I guess, and go into partnership with a company that on paper has tax losses of billions of dollars and no income. But at the end of the day, it's simply a shuffle of paper and figures that are made up and attributed to medical technology.
- [21:24]
Ben Wills Johnson
In Operation Beaufighter, the offenders were paid a lot of money by the bank through which the deal was done.
- [21:32]
Rosanna Chalona
Now, in return for all of this chicanery, Pneumatics Australia obviously within the terms of the contract and the partnership was able to collect a fee. And to put it simply, the fee over the course of the life of these arrangements was about $60 million. So through all this process, the end result was Numedics Australia was owed $60 million by the bank. The bank paid, of course, and that's where the tax fraud morphs into a money laundering scheme. Pneumatics Australia could have just taken the money into their bank accounts, claimed it as fees from their business, paid tax on it, and then they wouldn't have had to engage in the money laundering scam. But they didn't want to do that. They wanted to keep all the money for themselves. So they sent the money offshore, it travelled around the world, got itself cleaned, came back into the bank accounts of the deal broker and the trusted elder for the purchase of luxury goods and assets.
- [22:29]
Ben Wills Johnson
From the moment the case had come to the afp, it was Rosanna Chalona's job to trace the movement of the money. Copies of the documents handed over by the deal broker's brother were passed on to her.
- [22:43]
Ian Durant
Well, I like to start from a point, you know, and sometimes in relation to what we obtained from the brother was really only the money that was landing in Hong Kong because there were the bank accounts which he controlled. So that was really the third or fourth step in the money trace. But that was a starting point. So you look at that and then that's one side because we had the bank accounts, then you look into what the Australian bank accounts and then we would start requesting those documents from the banks and having a look at that. And we've got a system in Australia called Yostrac. They collect a lot of data in the AML regime that we have in place in Australia and there's equivalent around the world. So I was able then also to conduct further searches and identify the banks that were in the uk. And then once we got the UK bank accounts, we can see that money then going into the Hong Kong bank accounts and then on forwarded. That was the early days. Then it got added further jurisdiction as.
- [23:54]
Ben Wills Johnson
The time went past to a forensic accountant. The very movement of the money from the UK to Hong Kong to Dubai was, was in itself suspicious.
- [24:06]
Ian Durant
The total amount was some somewhere in the city of 63 odd million. But what was really evident in this is that they have documentation as to explaining why they're moving money to a bank account in uk. And that was basically, that's the finance company, that's a finance company that is lending us the money to buy these IPs. And so what you expect to see is when you see the money payments so that you might have the documentation for an explanation. But there was no finance in fact in place and in its totality it didn't gets moved to the Hong Kong bank account. So there was no what you expect the finance company to do, there was no other sources of money coming in there. There was only this one source of funds coming in. So you know, finance company just wouldn't have the one client. You expect to see other clients money going in there, and also an array of different type of company bank accounts in the same name. So while they set up all this appearance of explaining the money movement, doing that tracing and following that money tells you a different story. And that's. And that's what we're after. We want to see is there truth there and if the financial tracing will confirm that.
- [25:27]
Ben Wills Johnson
While Rosanna studied the movement of the money, she discovered a new transaction in the Isle of Man, another well known tax haven.
- [25:36]
Ian Durant
For me, that particular moment occurs when you find something out from the tracing that no one else has actually picked up in the investigation. And that's a real, wow, I've done my job. As you uncovered something. And in this case, it was uncovering money that went to Isle of Man and that was a tracing. Why did it go there? Who is that person and how does that person fit in to this whole scheme that's been put in place? And it had a few light bulb moments for other people around when they saw it, because that came in after we first started it. So we're still doing the tracing and we haven't got the bank accounts from Dubai yet, so. And this money went from Dubai across. So we hadn't identified that link at that point in time. So they've already gone in, they've got it all planned out, who they're risked and who's involved. And then you had this little person on the side which just finished a picture, really on the money side of it.
- [26:39]
Ben Wills Johnson
Ian Durant is a Senior Constable with the afp. Operation Beaufighter was his introduction to Ben's unit.
- [26:47]
Penny Snowden
Within my first week, Ben explained to myself and another new member who had also come into the team about how Beaufighter worked. He had a whiteboard and he drew a number of symbols and words and arrows. And as he was explaining it to myself and this other member, our mouths, I think they were actually open in shock that such nonsense could exist.
- [27:12]
Ben Wills Johnson
For Ian, the case hit a nerve. The two offenders were successful businessmen, but chose to use their knowledge of the system to roar it.
- [27:22]
Penny Snowden
I was infuriated that people with knowledge and access to publicly listed companies and to banks and the know how to do so, which they generated over the course of their careers in the finance industry, how they could be allowed to just manufacture money from nothing. When you go to work every day and you look after your family and you pay your taxes, to see these people earning money hand over fist for what amounts to absolutely no benefit to anyone is infuriating. I think at that very moment, when I understood how this particular matter was working was the very moment that I decided that fraud and corporate crime were my raison d' etre for being in the afp.
- [28:11]
Ben Wills Johnson
Ian was tasked with investigating the third man with the bank account in the Isle of Man whose connections to the case were there, but they were harder to pinpoint.
- [28:21]
Penny Snowden
There was another gentleman who was insinuated in involvement in it as well, and he would be what we would call the numbers man. He was mainly responsible for working out the interest rates and the treatment for depreciation and all kinds of other mathematical equations and algorithms to determine how things would work and how the publicly listed company and the bank could have some comfort about the efficacy of the scheme being the sale and leaseback transaction through the Trust. So I was tasked by Ben with looking into any conduct and any evidence that was held as a result of search warrants being executed in Queensland and New South Wales and a number of premises, including business premises and residential premises.
- [29:13]
Ben Wills Johnson
Rosanna was at one of those search warrants and found a single document that suggested a link between this associate and the scheme under investigation.
- [29:23]
Ian Durant
They were aware of that person's existence. They knew that he was in the picture, but they had painted him somewhat as a different role, that he was holding some assets for our deal broker. So even though the assets weren't in a deal broker's name or entities associated with him, that was a case theory. So they were aware of him, but they had got his role wrong or wasn't quite right. And basically the reaction that the associate had when those papers were served on him and saying that believe you hold these assets on behalf of the deal breaker. And he was in total shock and adamant that now these are my assets. So when you see that reaction, you, you're going, well, he's definitely not holding it for the deal breaker. And there's another story here. And the beauty was that when he had that reaction, I had already found a piece of paper at his premises that indicated that I think he holds a bank account and on demand. But there was no other documentation in his premises to provide any further details. At that point in time, we definitely weren't talking peanuts. It was a healthy $6.6 million.
- [30:44]
Ben Wills Johnson
When Rosanna found that single piece of paper during the search warrant on the associate's house. Sometimes it's the smallest details that can be the most damning. This one was around an Australian anti money laundering or AML requirement because of our AML requirements.
- [31:03]
Ian Durant
And banks have to ask the question, when you open up a bank account, what is the source of the funds. And in handwritten notes to answer that question, the associate had put there the sale of IP intellectual property. And so, well, we got that connection and we got the connection of what the whole scheme's about was all about intellectual property and the purchase of this intellectual property which didn't in fact exist. And here he is putting that the source of money was a sale of intellectual property. And then we just have to go, okay, we've got the bank account, let's go and see how that money got in there. And we were able to backtrack. We went and paid a visit to his accountant, which told the story.
- [31:47]
Ben Wills Johnson
Operation Beaufighter always had two sides, the criminal and the civil. When the man associated with the two offenders was found to have $6.6 million in his bank account in the Isle of Man traced back to the fraud and money laundering case, there wasn't enough evidence of his involvement to warrant criminal charges. But the civil side was another matter. But the finding also had a ramification for Rosanna's work on the case. Initially, she was involved in gathering evidence for the criminal charges.
- [32:23]
Ian Durant
I honestly believe if I wasn't at that warrant executed at the associate premises, we never would have uncovered that $6.6 million. That was that exciting moment when we got back and I remember going into Penny's office, I say, I think there's $6.6 million in the isle of Man. She goes, well, we need more evidence. I go, the accountant, we have to go to the accountant. Hold on. I think if I rubbish through all that stuff we just seized, there might be some reference to who the accountant was. And we identify the accountant and off we went. We executed a warrant a few days out. So once I started going down that track, I was getting away from the criminal aspects of the job and really looking closely at this Islander man and tracing those funds. So the focus had changed. And as a result of all the work I had done in relation to tracing the money, well, I swore the affidavit to restrain those assets, that particular bank account. So once you do that in a civil manner, you cannot go back.
- [33:26]
Ben Wills Johnson
So now that she was no longer working the criminal side, Rosanna used her forensic accounting skills to assist the civil litigation.
- [33:36]
Ian Durant
This is where some of our legislation is fantastic, is that you don't necessarily have to charge someone criminally to go after their assets.
- [33:43]
Ben Wills Johnson
Penny Snowden, who Rosanna mentioned earlier, was at that time the Deputy General Counsel for Proceeds of Crime Litigation in New South Wales. Command in the af. The origins of the task Force Penny joined came from a government election promise.
- [34:01]
Unnamed Trusted Elder
In 2010, the government had made an election commitment to tackling serious and organised crime. And one of the facets of that was to really pursue taking the profit out of crime. So they wanted to really focus on proceeds of crime work. And the model that they come up with was based on actually the Criminal Assets Bureau in Ireland, but to have all of the relevant streams and professional skills co located within the one agency. So the task force, it was going to be led by the afp, co located within the afp, but bring together skills of AFP investigators, forensic accountants, lawyers, the ACIC and the ato, all working within the one task force so that the relevant skills could really be aligned and all focused in the one direction.
- [35:01]
Ben Wills Johnson
Putting a stronger focus on removing the proceeds of crime from criminals makes a lot of sense.
- [35:08]
Unnamed Trusted Elder
People can't be seen to be profiting from fraud and criminal activity even if they're prosecuted, but they still get to keep their ill gotten gains. Then you're not really having a fully deterrent effect. There was some defendants where it was obvious that they were willing to do some jail time as long as they still had their assets and their toys when they came out, as long as the family members still got to enjoy the fruits and of that criminal lifestyle and the trappings that went with it.
- [35:43]
Ben Wills Johnson
The task force was the perfect landing place for Operation Beaufighter.
- [35:48]
Unnamed Trusted Elder
It required forensic accounting to trace the assets and really work through both the money laundering aspects that had been done in an attempt to disguise the transactions, but also to then trace through and locate the assets. It was very apparent it was going to be large scale litigation by any measure, so it was sort of perfect for trialling, that first model of having your lawyers in house. The work had previously been done by the Commonwealth Director of Public Prosecutions, but the focus was always really on the prosecution rather than the asset confiscation. And there was a recognition that if you wanted to be truly effective in deterring serious and organised crime, you had to remove the money, that profit making element which is what was driving these sophisticated financial crimes. So there needed to be that focus on the assets. It needed to be from the beginning and it needed to be seen as an important limb of the action that was being taken against the defendant, not just an adjunct to a prosecution. Once that prosecution had been completed, the.
- [37:06]
Ben Wills Johnson
Investigators of Operation Beaufighter traced some of the assets that had ended up in Dubai. While there is a formal process to retrieve the assets, it can take some time. Fortunately for the team, there was a power under the Proceeds of Crime act that allowed the courts in Australia to make an order for repatriation of the assets. They just needed to have someone in Australia with access to the Dubai bank accounts who would comply with that order.
- [37:35]
Unnamed Trusted Elder
It aligned perfectly because there was an employee who had been probably quite trusted and used to transfer a lot of the flows of funds and he still had access to the accounts and he was within the jurisdiction. So we were able to get this order that ordered him to access those accounts and repatriate the funds back to Australia. That was really significant. It had never been done before at that time, and it was a real, really streamlined way of ensuring that assets got returned. I think in the past, probably there would have been a feeling that those assets were gone and probably deliberately placed in a jurisdiction that wasn't going to be as ready to recognise tax offending as we are here.
- [38:25]
Ben Wills Johnson
As the civil case came together, the asset confiscation component presented some unique problems. Both offenders were lavish with their spending, which meant that the proceeds of crime list was very long.
- [38:39]
Unnamed Trusted Elder
They found an incredible range of assets, from personal lifestyle assets through to commercial business type of of assets. And it really was a journey for us in this new task force learning how to properly manage those assets and what needed to occur. Because even though the proceeds of crime regime had been around for many, many years, those provisions really hadn't been tested. They'd never done a case like this. They'd never had the sort of asset management issues that then presented themselves in this matter. So under the Proceeds of Crime act, there's a provision to appoint the official trustee in bankruptcy as the formal manager of assets, because the focus here was getting to the assets at the outset before they could be dissipated. We had to work through all of.
- [39:39]
Ben Wills Johnson
Those things because of the size and scale of the asset seizures. It presented the AFP and its partners with some logistical challenges, particularly in terms of managing and maintaining deceased assets over a period of many years.
- [39:55]
Unnamed Trusted Elder
The co conspirators had your luxury mansions, just the most ostentatious sort of waterfront homes, and they had several other holiday homes and pieces of real property as well. There were Rolls Royces, there were BMWs, there were Lamborghinis, every sort of brand of luxury car that you can think of, it was picked up in this case. They had to hire flatbed trucks to load them on. They had to arrange the insurances in advance. They had to hire suitable premises that were undisclosed so that they couldn't be targeted. But where vehicles of this cost and value could be properly spent, stored pending the final outcome of the proceedings. They had to be maintained for years. So, you know, someone would have to start the cars and keep them turning over so that they just didn't go to rack and ruin. I don't think any of us really had an idea at that stage of just the logistical arrangements that needed to be put in place.
- [41:02]
Ben Wills Johnson
During the long investigation and subsequent court cases. Ben stepped aside from the case. Ian took it on.
- [41:11]
Penny Snowden
He basically said, who wants Operation Beaufighter? And as I was already working on an aspect of Beaufighter, it seemed logical. So I put my hand up and said, I'll take it. And from there I put the matter through court, which took quite a while. Four trials we ended up having.
- [41:27]
Ben Wills Johnson
While the huge array of assets was being maintained by the official trustee in taking on the biggest fraud case seen to date in Australia, the AFP and its partners were playing the long game. The four trials and the civil components took the best part of a decade.
- [41:46]
Penny Snowden
We had two offenders who were charged with a conspiracy to cause a loss. There was also a money laundering charge. So we had two accused persons in the conspiracy.
- [41:57]
Ben Wills Johnson
A fair way into the joint trial, an issue arose where the trusted elder was excused. The trial then went ahead with the just the deal broker who was found guilty.
- [42:09]
Penny Snowden
Subsequent to that, the DPP decided it was in the public interest to prosecute the trusted elder. So another trial was laid down. That trial commenced the year after the guilty verdict on the deal broker. But within the first week, one of the jurors came into the jury room with a printout of an Internet search he had done in relation to the entities involved in the matter after the Crown opening. So you're not allowed to do that. You're not allowed to look at open source information because it's prejudicial. A jury is required to make a verdict only upon the information provided by the court. So that jury was discharged due to juror misconduct. Then another trial was set down for a few months later. That trial went through its full life but was abandoned because the jury were unable to find a verdict. So then we had another trial, which it was the fourth trial and that again went through its full life.
- [43:03]
Ben Wills Johnson
At the end of this trial, the trusted elder received a guilty verdict. Meanwhile, the deal broker had been remanded into custody to await sentencing.
- [43:14]
Penny Snowden
When he was found guilty, his honour immediately remanded him into custody. And that was the only time that I saw the deal broker lose his veneer of self confidence. So in that instance he was immediately remanded into custody to await sentencing. Which I imagine was quite a shock for him on that day. In the case of the trusted elder, because he resided in Queensland and in the household it was him and his wife and because of his advanced age as well, his honour allowed bail to continue to allow the trusted elder to go and get his affairs in order prior to being remanded into custody.
- [43:54]
Ben Wills Johnson
On the day of sentencing in a Sydney court, the trusted elder didn't show up.
- [44:00]
Penny Snowden
Everyone was there except for the trusted elder and proceedings commenced. His honour asked the defence representative where his client was. No one knew where the trusted elder was. Court was adjourned for 30 minutes to allow inquiries to be made. Reconvened. No one still knew where he was. His Honour. Then he issued a bench warrant for the trusted elder.
- [44:23]
Ben Wills Johnson
Ian had a bad feeling about the absence.
- [44:27]
Penny Snowden
I then went back to my office and I made inquiries with Queensland police in the local area to where the trusted elder lived. Now he lived in a very large home with a very high fence and it was a security fence. It took quite a while to get in and it wasn't until around 4pm that police were able to gain access to his premises. They found the trusted elder and his wife passed out in the garage. The trusted elder and his wife were in hospital for quite some time. A extradition process was then undertaken which resulted in myself and another member flying up to Brisbane to take custody of the trusted elder and return him to Sydney for sentencing.
- [45:11]
Ben Wills Johnson
The first of the offenders to be sentenced was the deal broker. Given the relative newness of the crime type and the fact that it was the biggest fraud case on record, the dealbroker's sentence was originally 11 years and six months. In an ironic twist, the Commonwealth appealed the sentence as being too lenient and the deal broker appealed it as being too harsh.
- [45:38]
Penny Snowden
Initially it was an 11 years and 6 months I think which was the head sentence. With sentencing there's a head sentence and then there's a non parole period. The date at which they may be eligible for parole depending on their conduct in jail. So that sentence was appealed by the CDPP as being inadequate for the offending and the value of the offending, the lack of remorse and the efforts undertaken to obfuscate the criminality. That appeal was heard in conjunction at the Court of Criminal Appeal with the deal brokers appeal against his sentence and conviction. The deal broker, even in his sentencing remarks to the court, refused to believe that he had done anything wrong and railed against the justice system, the criminal code, the ato, the afp. He Just completely convinced himself that he had done nothing wrong and he was the subject of a witch hunt from the Australian government for the sole purpose of taking his financial assets, which was just a ridiculous proposition. The evidence against both the accused persons was overwhelming. Still the largest fraud in Australian history and third longest custodial sentence for a white collar crime. It was a good moment because historically, society and the courts tended to, in my view, look at fraud against the Commonwealth as a victimless crime. And I have very strong views on why that's not the case. So it was quite encouraging that the appeal against the length of sentence was successful for the dpp and the deal broker had an additional two to three years added to his head sentence.
- [47:23]
Ben Wills Johnson
In the end, the deal broker was sentenced to 11 years jail, later increased to 14 years on appeal. In his sentencing remarks, the judge said one can have sympathy for the position of the offender. He finds himself broke, professionally ruined and incarcerated. He was a person who had much to lose and he has now lost it. The consequences for him and his family are severe. However, his situation is not a product of circumstances, but of a conscious decision on his part to pursue a dishonest and fraudulent tax scheme on a large scale. He engaged in the conduct the subject of the offences, while holding an unshakable belief in his intellectual superiority to all those around him and the ATO, it was his undoing. The trusted elder, at 73 years of age, was sentenced to 10 years and three months imprisonment for tax fraud and money laundering. After the trials, the proceedings for the criminal assets confiscation would take several more years to be completed.
- [48:36]
Unnamed Trusted Elder
It ran for the best part of 10 years in terms of the asset proceedings. And there were multiple applications for special leave to appeal to the High Court. The High Court didn't provide that leave in each of those instances, but there were multiple applications. So multiple appeals, multiple attempts to take it to the High Court on various aspects. And that final confiscation order, because it leveraged in this case off the conviction that was obtained that followed the prosecution outcome. So it was almost waiting for the six years or so until the criminal proceedings were finalised and then the appeals that ran from that. And then the final civil confiscation aspect started.
- [49:27]
Ben Wills Johnson
For Rosanna, as a forensic accountant, she wonders about the motivations behind the crime types featured in Operation Beaufighter. After all, the perpetrators were wealthy and successful before they began this kind of activity.
- [49:42]
Ian Durant
That's what this is all about, isn't it? It's excess greed, but it's about, how can I do this, but I'm not a criminal. So they've got this air about this sophistication. I'm a financer or I'm an entrepreneur, look how much money I earn. But it's all a facade. And this wasn't the first structure that they put in place. They did little ones, see how they went with it until we're getting in the big game. Now, it is greed, but it's also that prestige and that social standing that they want and they're trying to get. And money, unfortunately, is something that everybody looks up to. Oh, he must be successful. Look at the car he drives or look at the house to live. And it's on possession. That's unfortunately, that's what you put people on pedestals if they have all these great assets in possession.
- [50:36]
Ben Wills Johnson
Even though Operation Beaufighter was greatly aided when the brother of the deal broker came forward, the actions of the company had already come to the attention of the Australian Tax Office. Ian has nothing but praise for the ATO's diligence.
- [50:52]
Penny Snowden
It's not just the AFP, it's a whole of government. This matter and many other matters I've been involved with were referrals from the Australian Tax Office. So obviously the Australian Tax Office is not a law enforcement agency. The Tax Office noticed that the company formed by the deal broker and the trusted elder was carrying massive losses from offshore and didn't appear to have any assets and wasn't creating or manufacturing or doing anything and had brought those losses back onshore, which was available to them as an Australian registered company, to be liable for profits made offshore to some extent. But more particularly, there were certain circumstances which allowed that Australian company to bring its losses obtained offshore back into the Australian entity's financial concerns. In this particular case, as a result of that audit, just proven in the court, was that documents were falsely created in order to make the Tax Office go away. But the Tax Office didn't go away. In these kinds of investigations, the ATO in is quite often staffed by highly intelligent and dedicated people who do their best to protect Commonwealth revenue from fraudulent activity. And this is one such case for Penny.
- [52:17]
Ben Wills Johnson
At the end of the decade of court proceedings and appeals, it was professionally satisfying to see the confiscated assets finally sold off and the money returned to the Commonwealth where it could do more good for more people.
- [52:31]
Unnamed Trusted Elder
Yeah, we followed the outcome and sort of always noted with interest where you'd see sales of some of the jewellery and things like that coming up in various cases, because, yeah, it was a large part of the team's working life over years. So there was that attachment and that sort of interest to see how it all played out. It was very satisfying in terms of feeling that we were getting a return for the community and that that money would be put to good use. So, yeah, certainly it always felt good getting to report up the line that another couple of million had been deposited into the confiscated assets account because of the hard work of the team. That was. Yeah, it was sort of that thing of being able to sort of point to a really tangible outcome for all the hard work that had gone in. So it was. Was satisfying.
- [53:27]
Ben Wills Johnson
And for Ben Wills Johnson, the great result reinforced the importance of teams like his.
- [53:34]
Rosanna Chalona
When people join the police, they generally don't join because they want to investigate white collar crime. They want to kick indoors and lock baddies up. And that's all well and good. I was the same when I joined the AFP. Back when I was 27, I worked in drug investigations. I did a lot of work chasing cocaine smugglers around the world. I never would have considered myself to be someone who might be interested in financial crime or particularly tax fraud. However, I fell into it through my work in investigating money launderers for drug syndicates and I gradually morphed over into tax crime. And by that stage I was completely enamoured in the crime type. It was fascinating to investigate. It's not all about spreadsheets and bank records. Through my work, I've travelled all over the world investigating crimes like this. I deliver training in various parts of the world and across the country to various agencies. It gives you a broader scope of experience. It's easy to prove that drugs are criminal. It's more difficult to prove that tax evasion is criminal. So when you gain experience, you gain opportunity to do the sorts of things that I've been able to do.
- [54:41]
Ben Wills Johnson
The AFP offers a lifetime of opportunities with over 200 diverse roles across Australia and the world. Interested in learning more about how the AFP works to protect Australians against major fraud and money laundering, visit afp.govau the AFP everyday people doing legendary work.