Crown alleges sham deals made for GST claims

Press, 8 March 1989, Page 11

Crown alleges sham deals made for GST claims

Sham agreements were used to defraud the Inland Revenue Department of about $3 million in goods and services tax, the Crown alleged in the High Court yesterday. Seven men are facing a charge that between June 1, 1987, and October 9, 1987, they conspired together to defraud the Inland Revenue Department of input tax.

The defendants are: David John Dickson, aged 42, a self-employed consultant (Mr P. B. Hall and Mrs C. M. Hey); Derk Johan Frederikus Te Groen, aged 56, a selfemployed administrator (Mr P. M. James); Romeo Margaritis, aged 33, a barrister (Mr N. A. Till and Dr W. G. G. A. Young); Ivan Kwasza, aged 59, a property developer (Mr J. F. Burn and Mrs A. Grant); Richard Tilsley Dickson, aged 41, a psychiatric nurse (Mr D. C. Ruth); Terence Richard Lucas, aged 42, a property trader (Messrs C. A. McVeigh and M. J. Callaghan); and Garry Leonard Davies, aged 37, a manager (Mr P. J. Rutledge).

Five of the men face a further similar charge relating to the period between October 9, 1987, and November 15, 1987.

They are: David Dickson, Te Groen, Kwasza, Richard Dickson, and Lucas. Messrs G. K. Panckhurst and B. M. Stanaway, Crown solicitors, appear for the Inland Revenue Department. The case, before Mr Justice Hardie Boys, is expected to take about three weeks.

The Crown prosecutor, Mr Panckhurst, said yesterday that using sham agreements, the group obtained $3,055,315 from four GST returns presented to the Christchurch office of Inland Revenue. He said that $2.9 million, or 95 per cent, of this was claimed by the group on the basis of four property transactions.

These transactions were based on grossly inflated prices and delayed settlement dates, with in some cases payment not due for 250 months (more than 20 years) from the date of possession. “What the Crown sets

out to prove is that these four contracts were contrived; that there was never a genuine intention that they be acted on except for being used as a foundation in false refund claims to the Inland Revenue Department,” said Mr Panckhurst. Refunds had been claimed through three companies — Leaders Success International, Ltd; Lennon Builders, Ltd; and Katrina Tanya Leon, Ltd — all of which were connected in some way to the accused, said Mr Panckhurst.

In spite of the extended settlement dates the companies had proceeded immediately to apply to the department for a refund based on the inflated property price, he said. Outlining the form of the property deals, Mr Panckhurst said that one of the group — an individual who did not have to pay GST — bought a property then sold it to one of the companies. One property, some shops in Worcester Street, had been bought by David Dickson for $llO,OOO, and was sold by him to

Leaders Success International, Ltd, the next day, for $6.9 million. Another property, valued at about $4OO, was sold to Katrina Tanya Leon, Ltd, for $15.4 million.

Explaining GST to the jury, Mr Panckhurst said that companies did not have to pay tax on goods used in their business and could claim refunds of GST paid for goods bought to make an end product. “The system is noted for its simplicity and it may be that it’s that simplicity that made it open to abuse.” The case was a “classic example” of conspiracy because it needed numbers of people to act as property buyers who could then sell to the various companies, said Mr Panckhurst. “The Crown is saying that a significant feature of the case is that we have a small group involved in the control of the companies and who know one another on a personal basis,” he said. “From this group of seven in the space of a few months, paper con-

tracts were written for $31.9 million that were not to be setted for 20 years.”

Letters from the companies to the Inland Revenue Department justifying the GST refund claims had claimed that the properties purchased would be renovated to “an extremely high standard” to gain returns in the form of higher rentals, said Mr Panckhurst.

Money refunded by the department had gone but it had not been spent on improving the properties nor had any provision been made to meet the settlements in 20 years, he said.

Investigations had been started by the department in October, 1987, and it was then that an auditor had discovered the delayed settlement dates, said Mr Panckhurst. At that point Margaritis and Davies had distanced themselves from what was happening and a further fraudulent claim had been made by the other five men. This had led to the second count of conspiracy, said Mr Panckhurst.