Australian Capital Reserve
The defendants were Directors of Australian Capital Reserve Ltd, namely Murray John LAPHAM (Executive Director), Steven John MARTIN (Non-executive Director) and Samuel Jonathon POGSON (Executive Director). Australia Capital Reserve Ltd was the effective owner of a group of companies involved in real estate development. Castle Investment Company was the parent company with some 20 subsidiary companies including Australia Capital Reserve which was the fund-raising arm of the group.
Between 2000 and 2003 Australia Capital Reserve had been able to successfully raise from investors funds for the use of the group, for which unsecured deposit notes were issued. The investment moneys came largely (if not entirely) from small investors or self-managed superannuation funds. This flow of investment funds had been achieved by the use of a series of 5 prospectuses, all of which had referred only to financial information for Australia Capital Reserve itself, and not for the group of companies as a whole. Prospectus 6 falsely represented the profitability of the company to be $7.4 million. The profit figure was falsely improved by the creating and backdating of contracts for the sale of units at Gosford to companies associated with LAPHAM and POGSON and a contract for the sale of a block of land at Polkolbin to a company associated with MARTIN.
On the first day of trial, all three defendants pleaded guilty to 1 count of making a false statement pursuant to section 178BB of the Crimes Act 1900 (NSW) and POGSON pleaded guilty to a further charge of making a false or misleading statement pursuant to section 1308(2) of the Corporations Act 2001.
On 7 March 2012 in the NSW District Court the defendants were sentenced as follows:
LAPHAM: 2 years imprisonment to be served by way of an intensive correction order in the community
MARTIN: 1 year and 4 months imprisonment to be served by way of an intensive correction order in the community
POGSON: 2 years imprisonment to be served by way of an intensive correction order in the community
The CDPP appealed against the manifest inadequacy of these sentences. On 22 October 2012 the NSW Court of Criminal Appeal (CCA) dismissed the appeals and indicated, in relation to LAPHAM and POGSON that if they were sentencing at first instance, a term of full time custody would be been imposed. The CCA stated that the level of dishonesty was such that a sentence of a lesser severity was manifestly inadequate, however decided not to exercise their residual discretion to intervene in relation to the sentences.
The CCA stated:
“Sentencing courts have a responsibility to ensure that the sentence imposed punishes the offender, denounces their criminal conduct and provides sufficient disincentive to others who may be tempted to offend, to ensure that they refrain from criminal activities. Although some statements have been made suggesting that in relation to some offences general deterrence may be controversial, this is not the case with respect to crimes involving the market or other forms of business dealings…
It is of the utmost importance that when sentencing for market-related offences, the courts impose sentences of sufficient severity to ensure, as far as possible, that others who may be tempted to engage in dishonest conduct to the benefit of themselves or a company in which they have an interest, are dissuaded from criminal activity.”
In relation to MARTIN the CCA found the lesser criminality of his conduct made an intensive correction order appropriate.