Friday, October 10, 2025

Fraud case halted after ATO investigator found to have altered evidence

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: 
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:
  1. [ATO officer] failed to disclose the existence of the 22 January 2018 meeting in his statement or in the ATO audit statements which he prepared.
  2. [ATO officer] failed to disclose documents that showed the existence of this meeting.
  3. [ATO officer] deliberately altered JV052 by leaving off words that the expenses had been approved by the board and gave the altered document to the QPS, thus undermining the defence of the accused.
  4. [ATO officer] was involved in the preparation of a false statement from [a person] stating she had not been paid, when in fact she had. This statement was placed on the brief of evidence.
  5. [ATO officer] provided misleading information in his statements and in affidavits to obtain search warrants, where he alleged the defendant claimed to have invented DBH. [ATO officer] thereby misled numerous judicial officers.
  6. [ATO officer] failed to disclose relevant emails before the state fraud trial in September 2020, which proved that the defendant did not claim to have invented DBH.
  7. [ATO officer] lied in a briefing note to the Queensland Bar.
  8. [ATO officer] prepared a statement from [a person] which falsely claimed that the defendant claimed to have invented DBH.
  9. [ATO officer] failed to disclose emails between himself and the BA before the state fraud trial in September 2020, which bore on the nature of his relationship with [another person].
  10. [ATO officer] failed to obtain potentially exculpatory evidence in the ATO fraud prosecution.
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.”

 Judge rules ATO officer lied and tampered with evidence

The Queensland Supreme Court has ordered the ATO to stop a years-long fraud probe into a medical researcher after ruling a tax officer had lied and tampered with evidence during the investigation.



Fraud case halted after ATO investigator found to have altered evidence 

TAX

The Supreme Court of Queensland has halted a tax fraud case after finding an ATO investigator altered evidence and helped prepare false statements.

By Emma Partis  • 08 October 2025 

Last Friday (3 October), the Supreme Court of Queensland ordered a stay on the proceedings of an ongoing tax fraud case, after it found an ATO investigator deliberately altered evidence, helped prepare false statements, and became involved in an “abuse of process.”

In 2017, a medical researcher was accused of tax fraud by the ATO after she lodged a R&D tax application, which claimed she had spent $11,380,900 on raw materials and product development. The ATO considered this claim to be false and got its audit team involved.

The defendant, known as Julie Clarke in court documents, had wished to develop a drug treatment using the chemical (R)-3-hydroxybutyric acid (DBH) to manage conditions including cancer and obesity.

In December 2016, investment group, the Brisbane Angels (BA), invested $185,000 into Clarke’s company, Apagein, to conduct clinical trials using DBH as a weight loss product. Pharmaceutical regulatory expert Sue Akeroyd was engaged to advise regarding requirements for TGA approval.


Following the clinical trials, Akeroyd said that satisfying TGA requirements would be a ‘protracted and expensive process,’ which led the BA to withdraw from the project. A civil dispute commenced between BA and Clarke, in which BA wanted its money back, and Clarke wanted the return of intellectual property.

Clarke subsequently lodged the $11 million R&D application with the ATO, spurring the tax fraud investigation, according to court documents. 

ATO criminal investigator Anthony Rains was nominated as the lead investigator for the case on 22 January 2018. That day, he participated in a meeting with the ATO’s audit team regarding Clarke’s alleged fraud.

 

On 23 January 2018, Clarke was subject to a ‘compulsory tax interview’ by three ATO audit officers. She was directed to answer questions and warned that if she didn’t, she would be committing an offence, the court found. 

“These [compulsory interview] notices made it clear that the defendant could not claim privilege against self-incrimination. She was required to give evidence. If she refused to give information or attend and answer questions, she would be guilty of an offence,” court documents noted.

The court determined that the audit team had intended to share the interview with the ATO’s criminal investigations team, despite telling Clarke that it would remain confidential.

In doing this, the court found that the ATO officers had undermined Clarke’s right to silence in any criminal proceedings and unlawfully subjected her to a ‘hybrid’ audit and criminal interview. 

“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 allegation,” the judgment summary read.

“The court concludes that this undermined her fundamental right to silence.”

Throughout the investigation and subsequent proceedings, the court found that Rains had deliberately altered evidence, failed to properly document meetings, and provided “misleading” information in his statements to obtain search warrants.

In his prepared statements, Rains failed to disclose that the 22 January 2018 meeting had occurred. The court inferred that he had tried to cover up the meeting as it had been unlawful.

He was also allegedly involved in an “abuse of process” when he pushed for a state fraud charge with the Queensland Police Service (QPS), regarding alleged misappropriation of the BA investment. This was additional to the ATO’s tax fraud case.

In April 2018, Rains formed a view that Clarke had allegedly defrauded the BA of $185,000 and used the funds for personal expenses, court documents said. That July, he referred the case to the QPS without a complaint by the BA and failed to provide exculpatory evidence that indicated the funds had been used for legitimate business expenses, the court said.

“Rains ignored the fact that funds were spent on legitimate Apagein expenses,” court documents read.

“He also ignored the fact that clause 4.6 of the shareholders agreement entitled the defendant to reimburse herself for business expenses incurred and to pay herself remuneration.“

The court concluded that it was “doubtful” that there was ever a case to answer as alleged, with respect to the state fraud charge.

Rains also allegedly helped prepare a false statement from Akeroyd, which claimed she had not been paid, when she had been.

He also allegedly altered the expenses sheet Clarke had sent to the BA, omitting words that indicated the expenses had been approved by the board, and gave this altered document to the QPS to undermine Clarke’s defence.

The court said that this type of conduct was unacceptable from a government official and warned the justice system would be placed at a significant risk if the courts could not rely on the integrity of government institutions.

“The court should not tolerate this type of conduct by this ATO investigator or the ATO more broadly, or any government authority for that matter,” court documents read.

“The defendant must have been absolutely fearful of being unjustly convicted on the State fraud charge which would carry a sentence of several years in jail and she must have felt that no-one was listening to her.”

The courts ordered for the prosecution against Clarke to be stayed, finding that it was the only way to protect the integrity of the court’s process in such “exceptional” circumstances.

“Although it is a serious charge and such charges should ordinarily be tried as a matter of public interest, the court cannot be seen to tolerate the use of compulsory interviews for an ulterior unlawful purpose such as this,” court documents read.

The ATO acknowledged the ongoing proceedings when contacted for comment.

“The ATO acknowledges the judgment which relates to a prosecution conducted by the Office of the Director of Public Prosecutions (Cth) (CDPP),” an ATO spokesperson told Accountants Daily.

“The community should be assured the ATO takes all decisions of the Courts seriously and will consider the broader impact of the decision on staff and operations. However, it would be inappropriate to comment any further while an appeal period remains in place.”

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