Some stories started twenty or so years ago …
Petroulias almost got away with the tax fraud
6 Dec 2001
A senior tax officer, Michael O'Neill, denied under cross-examination in Sydney's Downing Centre Local Court that he had been spiteful, vindictive and unduly ferocious in his treatment of former first assistant tax commissioner, Nick Petroulias. O'Neill is emerging as a central witness in the committal hearing of fraud charges against Petroulias.
A barrister for the defence, Neil Clelland, questioned O'Neill about a clash he had with Petroulias four years ago, how he and Petroulias had once applied for the same promotion, and his role in the Australian Federal Police (AFP) investigation of Petroulias. O'Neill rejected Clelland's suggestion that there had been enmity between the two since 1997. "I didn't particularly trust him but my relationship with him was professional," he said.
O'Neill was on the selection committee that recommended Petroulias's appointment in March 1997 as a consultant to the Australian Taxation Office (ATO) taskforce on high-wealth individuals. O'Neill was a director of the taskforce. Petroulias had been a consultant for just four months when he and O'Neill applied for promotion to the same position as senior tax counsel.
The first of Petroulias's many dramas in the ATO began in August 1997, when he travelled from Sydney to Canberra for a meeting with a deputy tax commissioner, Jim Killaly, in an effort, according to Clelland, to further his prospects for advancement.
O'Neill and another director of the taskforce on high-wealth individuals, Chris Sonter, phoned Petroulias in Canberra to inform him that he was to be interviewed for a potential security breach. Petroulias was told not to re-enter the Sydney headquarters of the ATO until an inquiry was conducted (which was to take a week). While Petroulias was in Canberra, Sonter and O'Neill had a security guard open Petroulias's locked steel cupboard at the Sydney headquarters and removed his private correspondence.
O'Neill and Sonter then inquired into concerns by some tax officers about a possible security risk and perceived conflict of interest over Petroulias's dual role as an ATO consultant and a private tax solicitor with his own clients. These officers had expressed uncertainty about how to deal with Petroulias. (At the end of the inquiry, Petroulias was issued with a written protocol about handling his dual role. Within a few months, he was appointed to the full-time staff and rapidly promoted.)
Clelland: That inquiry, I suggest, was conducted by you in an overbearing and highly personalised way.
O'Neill: No, not at all.
Clelland: To the point of being quite spiteful, I suggest.
O'Neill: No, that wasn't the case at all.
Clelland: You know Mr Sonter described the way you conducted that interview as being unduly ferocious.
O'Neill: I don't agree with that at all.
O'Neill denied evidence by an earlier witness, ATO officer Emmanuel Aivaliotes, who agreed that O'Neill had led the "charge to get dirt" on Petroulias after his arrest last year.
A former first assistant tax commissioner's criminal trial has begun in New South Wales.
The criminal trial of a former senior tax officer, Nick Petroulias, began dramatically in the Supreme Court of New South Wales on February 7 with his lawyers immediately applying for an order to permanently stop his prosecution. Petroulias is arguing that the trial would be "so unfairly and unjustifiably oppressive as to constitute an abuse of process".
Petroulias, a former first assistant tax commissioner and head of the Australian Taxation Office's (ATO) strategic intelligence unit, is on trial for allegedly defrauding the Commonwealth by using his position to gain favourable private tax rulings and opinions for the tax schemes of his business associates.
A central part of the fraud charge is that his actions allegedly prevented the commissioner of taxation from critically assessing applications for the rulings and opinions before the approved documents were issued to tax scheme promoters.
Petroulias is also charged with providing confidential Taxation Office information to a business associate, Richard Llewellyn Morgan, and with agreeing to receive money that would affect his duties as a Commonwealth officer.
Petroulias is applying for the prosecution to stop on all charges. His legal team, led by a corporate crime barrister, Neil Clelland, SC, and a Melbourne solicitor, Bill Coady, claim in their application that:
ATO and Australian Federal Police (AFP) officers conducted the investigation in a biased, illegal and improper manner.
* The volume and complexity of the issues being presented by the prosecution "will result in an unmanageable and unfair trial". The application questions the ability of the jury "as humans" and the defence to cope with the amount of material.
* The prosecution does not intend to call competent witnesses to support Morgan's evidence. In the committal hearings, Morgan was one of the main witnesses against Petroulias.
In its criticism of the way the investigation was conducted, the defence claims that a senior tax officer, Michael O'Neill, who was heavily involved in the investigation and had been sworn in as an agent of the AFP, had long held a personal animosity towards Petroulias. It is claimed that O'Neill frequently provided investigators with damaging and untrue allegations about him.
"The investigation was a juggernaut," according to the application to stop the trial. "It involved execution of 120 warrants which contained allegations either known to be false or not believed to be true ... and some of the warrants were used to intimidate witnesses."
The defence's application is particularly critical of how investigators allegedly treated Morgan, who had been the salesman for the tax schemes.
During a raid of Morgan's premises in March 2000, an AFP agent read to him a search warrant that claimed that Morgan had conspired with Petroulias and others
to defraud the Commonwealth.
"It was later conceded by police," the defence claims, "that there was no intention to charge Morgan; the police intended to use the warrant as a form of leverage to persuade him to co-operate."
The defence points out that the prosecution claims that six people were involved in the tax schemes given the favourable private tax rulings and opinions through Petroulias's efforts, yet it intends to call only Morgan as a witness. Further, Morgan's evidence was so unreliable that it should be excluded.
The volume of evidence for the trial includes more than 100 allegations about the conduct of Petroulias, or allegations connected to him, as well as 107 witness statements. And the prosecution intends to call 64 witnesses.
Justice Brian Sully will give a decision on the application to stop the trial after hearing the response for the prosecution from Peter Hastings, QC. A jury is yet to be appointed.
The case, so far
March 2000: The Australian Federal Police arrest Petroulias at Melbourne Airport.
July 2002: After a 39-day committal hearing, Magistrate Debra Sweeney, in Sydney's Downing Centre Local Court, commits Petroulias to trial on fraud and two other charges.
December 2002: Justice Carolyn Simpson, in the Supreme Court of New South Wales, finds errors in law in the conduct of Petroulias's committal hearing, allowing him to appeal against the committal.
March 2003: Justice Simpson quashes the fraud charge.
October 2003: The NSW Court of Appeal sets aside the decision of Justice Simpson, deciding that there is enough evidence to warrant committal for trial on fraud.
December 2003: The NSW Court of Appeal confirms its decision that Petroulias should go to trial.
February 2005: Petroulias's criminal trial begins before Justice Brian Sully in the NSW Supreme Court.
The corruption watchdog has found former assistant tax commissioner Nick Petroulias engaged in corrupt conduct by masterminding bogus property deals to sell off more than $12 million worth of Aboriginal land near Newcastle and stole the identity of a dead person to conceal his involvement in the transactions.
The ICAC also made corruption findings against two directors of the Awabakal Local Aboriginal Land Council and Petroulias’ long-time partner, Despina Bakis, a solicitor who admitted she had masqueraded under the fictitious identity of Daphne Regina Diomedes.
The ICAC recommended the Director of Public Prosecutions should consider charging Petroulias and Bakis with fraud, aiding and abetting misconduct in public office and conspiracy to defraud.
It also recommended potential charges against Petroulias for corruptly receiving commissions and Bakis with aiding and abetting the receiving of those commissions.
The ICAC announced the public inquiry in March 2018, six months after an investigation by the Newcastle Herald shone a spotlight on the intricate web of property dealings.
The investigation raised questions about Petroulias’ multiple aliases and how a dead company director, Johan Latervere, managed to sign agreements a year after he was cremated at Rookwood cemetery.
Petroulias’ ventures in Newcastle followed a spectacular rise and fall from grace. He was hand-picked to serve as assistant tax commissioner by the age of 30 but was jailed in 2008 for bribery and corrupt conduct in the plum position.
On Wednesday, the ICAC released the findings of Operation Skyline, ruling the property dealings in Newcastle masterminded by Petroulias breached multiple requirements of the Aboriginal Land Rights Act 1983.
The commission also made corruption findings against the former chair of the Awabakal Local Aboriginal Land Council, Debbie Dates, and deputy chair Richard Green.
However, the ICAC recommended the DPP should only consider laying fraud and misconduct charges against Green and did not recommend charges be laid against Dates.
The report found that between 2014 and 2016, Petroulias worked to create the illusion that a company he secretly controlled, Gows Heat, had an option over Awabakal land that could be on-sold to third parties.
A developer called Sunshine Property Investment Group took the bait and agreed to buy the option for more than $1 million.
It was found Dates and Green signed the sales contracts on behalf of Awabakal’s board without informing them or having the authority to do so.
Sunshine was under the mistaken impression the sale proceeds would go to the land council.
Instead, the ICAC found, the spoils were shared by Petroulias, Green and Bakis, who pocketed $600,000, $244,000 and $179,000 respectively.
It found Petroulias stole the identity of a friend, Johan Latervere, who was appointed as a director of Gows Heat after his death in 2013.
“The deliberate fabrication of a corporate history for Gows ... was intended to conceal his own involvement in the company,” the report said of Petroulias.
The report found Bakis, who was in a relationship with Petroulias, was engaged as the land council’s lawyer and prepared sham documentation to give the transactions a “veneer of respectability”.
Bakis was also found to have adopted the fictitious persona of a Slovenian woman, Daphne Diomedes, to open bank accounts and avoid incurring demerit points racked up in her Mercedes.
The report made 15 corruption prevention recommendations, finding the graft took root in an environment of entrenched poor governance, communication breakdowns and a failure to adhere to the Aboriginal Lands Right Act.
Among those recommendations was that the Aboriginal Affairs Minister should review the funding of the office of the registrar of the Aboriginal Land Rights Act to ensure it has the capacity to investigate misconduct by land council board members and staff.
Consideration should be given to applying the recommendations statewide, the report said.
The long-running inquiry, presided over by former chief commissioner Peter Hall QC, occupied 53 hearing days across three years. 38 witnesses gave evidence.
Accountant Terry Lawler, who red-flagged the suspicious transactions after he took over as the land council’s administrator in October 2016, described it as a “great result for the community”.