Thursday, March 08, 2007

A 22-year-old accountant has been jailed for defrauding the Inland Revenue
Department of more than half a million dollars in one of the biggest GST
frauds in the country's history. Roydon Glenn McLaughlin, who left school at
16 to study accounting at university and "kept needing challenges in his
life", used a network of bogus partnerships, trusts and companies to
mastermind a scheme described as "basic fraud on a grand scale". He filed
false GST returns for the fake entities over 2 years, evading detection by
keeping the returns to a modest level and thereby ensuring refunds were
automatically generated by the IRD's computer system. But despite a talent
for accounting and no previous convictions, McLaughlin also had a serious
gambling problem and frittered away nearly all of the money. Of more than
$540,000 in GST refunds he received, only $16,000 was recovered, the rest
swallowed by an addiction to betting on horses and other gambling. The fraud
was discovered when a receptionist at the department's Palmerston North
office became suspicious of new IRD numbers for different entities sharing
the same postal address in Hastings. McLaughlin had been employed by
accounting firms in Napier and Hastings and most recently worked in
Tauranga. In the Tauranga District Court yesterday, he was sentenced to two
years and 10 months in prison. He displayed a range of emotions as the court
heard about the fraud. McLaughlin faced 44 charges of dishonestly using a
document, with many of the charges covering multiple false GST returns.
Judge Louis Bidois said the crimes were deliberate and highly premeditated.
He said McLaughlin had created an "elaborate scheme that must have taken
time and effort and could be described as a complex web".
McLaughlin shook his head as the judge said that a probation report had
shown he had little remorse. In a psychiatric report his family paid for,
McLaughlin was also assessed as lacking confidence and suffering from
chronic depression, but possessing full cognitive function. His mother,
Diane, flew from Australia to speak at the sentencing, sparking tears from
her son as she recalled his precocity as a child. "He was very quick to run
before he could walk," she said. "He kept needing challenges in his life to
keep him interested in what he was doing." Addictions in the family were
also "numerous" and he accepted gambling as "something you do as part of
your natural daily life", she said. In a six-page letter to the court,
McLaughlin claimed the fraud was unplanned.

"There was no elaborate plot, no massive scheme to get this money," he
wrote. "It was something that simply happened."

Creating the various entities had been part of a plan to better understand
the accounting profession, and he claimed it worked.

"My understanding became greater than anyone else with a similar
experience."

Crown prosecutor Rob Ronayne rejected the claim as "disingenuous nonsense",
saying it was incompatible with McLaughlin's guilty plea.

Mr Ronayne also rejected a statement by McLaughlin that he wanted to turn
his life around, saying the 22-year-old had filed further false returns
totalling $8000 while on bail and all of the money had disappeared.

"The offending was simply motivated by greed," Mr Ronayne said. "This man
took the money and gambled it away."

The loss incurred by the IRD had been huge - "indeed, one of the highest the
department has come across," Mr Ronayne said.

The prosecutor suggested a starting point of five years' imprisonment but
McLaughlin's lawyer, David Bates, argued for a community-based sentence,
saying his client's letter was "from the heart" and he accepted "full
responsibility".

Mr Bates said McLaughlin's guilty plea had saved taxpayers the further
expense of a trial.

Last night, the department said the tax system relied on voluntary
compliance but IRD had recently formed a new risk and intelligence unit to
improve monitoring.

Richard Phelp, assurance manager of investigations, said McLaughlin's prison
sentence was a warning for fraudsters that they would get caught. "It's a
question of not if, but when."