The Courts White collar crime warning

Press, 20 August 1983, Page 6

The Courts

White collar crime warning

It was important for the Court not to set double standards and give some appearance of respectability to white collar crime, and the ignorant and gullible had to be protected from fraud, Mr Justice Hardie Boys said in the High Court yesterday. His Honour jailed John Graham Williams, aged 45, a food manufacturer, of Auckland, for nine months on nine charges of fraud involving $555,583. Williams has lodged an appeal against the sentence to the Court of Appeal and has been released on bail pending the hearing. After a seven-year police investigation and a twoweek trial Williams was found guilty by a jury on July 29 on three charges of theft by misappropriation, three of theft by failing to account and three of issuing a false prospectus. The charges arose from the collapse of Pacific Syndicates (New Zealand), Ltd, set up about 1970 to finance real estate developments and, after the law was changed, it funded exotic cattle breeding. One of its schemes, the Chateau Commodore project, exceeded its cost estimate by several million dollars.

Messrs P. G. S. Penlington, Q.C., and G. K. Panckhurst appeared for the Crown and Messrs B. McClelland, Q.C., and G. Gotlieb, of Auckland, appeared for Williams, who spent two days in the witness box. Mr McClelland said that the probation officer and others had described Williams as an opportunist and ideas man who was not able to cope with the nuts and bolts of his schemes. This was not the case of a professional man taking money from an unsuspecting public. He lacked educa : tion in business matters.

Unfortunately for Williams, unlike others involved, he kept a cashbook in which the receipt of all moneys was recorded, as were the details of what was done with the funds.

For some years Pacific Syndicates had been successful while dealing in real estate ventures and a lot of people made a lot of money. Then after the law was changed investors were happy to go into exotic cattle syndication.

The firm’s troubles started with Donald John Stewart Reid’s idea of postdated cheques, and that was compounded by the failure of the Chateau Commodore project, Merbank and Securitibank getting into financial difficulties and the pressure being put on Pacific Syndicates. Harry Holt let down Williams very badly and then left the country, and Reid resigned as a director. Stupidly, Williams tried to do what he could to save investors’ money.

Neither Holt or Reid had been charged and it was left to Williams to face the music on his own. As a result Williams had given personal guarantees and lost all he possessed. Unlike Holt and Reid, he did not receive an income of $lOO,OOO a year from Parklands Hospital.

Williams had attempted to trade his way out of the difficulties and had he been able to complete the Australian venture, creditors’ prospects would have been much better, but without warning the Pacific Syndicates had been placed into liquidation. Personally Williams had gained very little from the money which was lost. He faced claims of many hundreds of thousands of dollars in civil actions which were pending. He was bound to submit,

Mr McClelland said, that Williams’ trial was extremely unfair because the inexcusable delay put the defence in an impossible position in trying to obtain documents and other evidence after such a long period. In those circumstances it was impossible for Williams to get a fair trial. Now Williams was a shattered man, convicted on nine charges. His credibility was gone, his marriage had broken up and he faced a very bleak future. Since his wife had left him he had been looking after their four children and he Was also running a business in Auckland which required his personal involvement. As a result of the convictions Williams would be prevented from operating a company or running a business for five years. The matter had been hanging over his head for years. He was the only one of the directors who had been treated in this way. After quoting at length from the Court of Appeal decision on the J.B.L. case, Mr McClelland said there was a lot in common between the two cases but J.B.L. was a lot worse. Williams was not the instigator of the offences but he was the one who had ‘to carry the can” while others went “scot-free.” The whole thing had been absolutely tragic for Williams. He had a good probation officer’s report which stated that Williams was a likeable, intelligent man who possessed a strong entrepreneurial spirit. However, while having considerable ability in that area, it was clear that he also had serious weaknesses which had been prominent in the offences.

With the responsibility of caring for his children and with his present business in

a somewhat precarious position, imprisonment would undoubtedly hae a severe impact on Williams and his family, the probation officer had stated. In the circumstances, Mr McClelland submitted that a fine would be an appropriate penalty. Williams did not have the money to pay it but members of his family had, and he had money coming from an estate.

Mr Justice Hardie Boys said that it was a tragic case for Williams and his family, as indeed it was for lot of other people as well, and he could not fail to be moved by the very forceful submissions made by Mr McClelland.

“I have been greatly troubled over the past three weeks as to the proper course I should take this morning. Counsel and the probation officer have pointed out the consequences, not only to you but most especially to your family, of a prison sentence,” his Honour said.

He was convinced that it was his duty to impose a sentence of imprisonment but ample reasons had been shown for it to be shorter than otherwise would be appropriate. The jury’s verdicts on the six most serious charges of theft was a finding not just of recklessness or foolishness, but of dishonesty which extended over a period of two years and involved a substantial sum.

That amount was probably exaggerated by the additions of the totals in the charges because there was some doubling up. “I cannot accept the submission, and it is repeated in one of the testimonials, that you did not receive a fair trial or that it was not a proper verdict. You had a fair trial and ample oppor-

tunity to explain to the jury what occurred,” said his Honour.

It was most important in a case like this to show that the Court did not have double standards; that it did not give some appearance of respectability to what was called white collar crime; that it did not appear to extend undue sympathy to the business or professional man who stole, while the unemployed youth who committed a’ burglary was treated severely as if his was a more serious category of crime. “After all, what you have been convicted of is serious indeed. It was the deception and abuse of trust of a considerable number of members of the public, mostly, you told us, of small investors, who I suppose were giving you their life savings, people who relied on promises which in some insances, on your own evidence, you had no immediate intention of carrying out,” his Honour said. He regarded it as important for the maintenance of commercial morality, for the protection of the ignorant and gullible, that dishonesty in the business community be recognised for what it was, just as unequivocally as dishonesty in humbler walks of life.

That was why he was unable to accede to the plea that a sentence short of imprisonment should be imposed. If there was money to pay a fine, ought it not go to the people whose savings had been lost?

“I am not very sympathetic to a suggestion that a family trust set up for Williams’s benefit should be used to pay your way out of your present predicament,” his Honour said. The offences would normally warrant a sentence measured in years rather than months but there were

a number of mitigating factors.

He accepted that Williams did not begin with any fraudulent intent. His activities were lawful and at the outset the businesses were properly run and successful.

“You set out with high hopes and enthusiasm and you were caught up in the spirit of the times,” said his Honour.

Williams had .personally profited to only a limited and perhaps indirect extent from his manipulation of the funds under his control. He had embarked on a series of frantic attempts to rescue the operation which was his life’s work from disaster. He chose to use other people’s money for the purpose.

“I accept you were caught up in something beyond your ability to control and you were certainly used by at least one other for his own purposes, and you have been left to carry the consequences,” his Honour said. Credit should be given to Williams for his strenuous attempts to rectify the situation, which certainly resulted in some of the investors being protected. He had made voluntary contribution of his own assets for the benefit of his creditors.

Whatever other persons might have lost in the disaster, he accepted that Williams had lost everything he had at that time. Williams had sought to re-establish himself and his family. It would be wrong and cruel to impse a penalty that would destroy what Williams had sought be rebuild. Williams had the personal resources to ensure that the penalty imposed would be only a temporary setback, said his Honour.