Operation Elbrus prosecutions are drawing to a close
The story of one of Australia’s largest and most complex criminal tax fraud enterprises is almost complete after years of the conspiracies operating, blackmail by co-offenders, a subsequent AFP/ATO investigation including surveillance and finally numerous prosecutions by the CDPP.
From early 2014 a group of offenders conspired to skim taxes that were to be paid from Australian workers and companies to the ATO for their own benefit. In total they defrauded the Commonwealth of more than $105 million, but by 2016 the ATO and AFP were onto them and now eight offenders have served or are serving prison sentences, while five others are awaiting sentence, following successful prosecution by the Commonwealth Director of Public Prosecutions.
On 21 March 2023, after an 11-month trial which included 23 days of jury deliberations, the verdicts for a core group of the conspirators were delivered in a large-scale tax fraud and money laundering conspiracy trial prosecuted by the CDPP in the NSW Supreme Court.
This trial found five co-offenders, Adam Cranston, Lauren Cranston, Dev Menon, Jason Onley and Patrick Willmott, conspired to funnel workers’ payroll through various ‘subcontracting’ companies and then siphon off, for their own benefit, the money that was to be paid to the ATO as PAYG tax and GST.
The conspirators planned for the parent company, ‘Plutus Payroll’, to appear legitimate while the subsidiary ‘subcontracting’ companies would process the payroll and retain the PAYG and GST liabilities. These subsidiaries had straw directors who were installed to conceal that the entities were in fact controlled by the conspirators. The agreement was that these subcontracting companies would be periodically phoenixed with new subsidiaries created, to avoid ATO attention and allow the scheme to continue.
The scale of the fraud was so large, in covertly recorded conversations the conspirators themselves described it as “the biggest thing since Ben Hur” and one commented “if this was fully uncovered… it would be the biggest tax fraud in Australia’s history”. Between 2014 and 2017, the conspirators were able to collect over $140 million in PAYG and GST and caused a loss to the Commonwealth of over $105 million.
The subsequent arrest and trials arose from Operation Elbrus which was a joint investigation carried out by CDPP partners the Australian Federal Police and the Australian Taxation Office as part of the ATO-led Serious Financial Crimes Taskforce. The CDPP is one of nine Commonwealth agencies that are part of the SFCT which was set up in 2015 to tackle the most serious forms of financial crime. The SFCT looks at a range of financial crimes but particularly crimes relating to COVID-19 stimulus measures, phoenixing, cybercrime against the tax and superannuation systems and offshore tax evasion.
The ATO and AFP worked side by side to piece together the entities being liquidated substantially assisted by the AFP’s use of covert recording devices at key offices used by the offenders.
The Prosecution case in the latest Elbrus trial lasted over six months with CDPP prosecutors presenting approximately 70 hours of surveillance recordings and 28,000 pages of documentary evidence. There were 31 witnesses called at the trial including witnesses from the AFP and ATO with expertise in forensic accounting and tax analysis.
The five co-offenders were each convicted of one count of conspiring to dishonestly cause a loss to the Commonwealth, contrary to s135.4(3) of the Criminal Code, and one count of conspiring to deal with the proceeds of crime being $1 million or more contrary to s11.5(1) and s400.3(1) of the Criminal Code. Lauren Cranston is expected to be sentenced in April 2023 with the others to follow. The maximum sentence for an offence against s135.4(3) is 10 years’ imprisonment, while the maximum sentence for an offence against s400.3(1) is 25 years’ imprisonment.
Related Elbrus matters
These five convictions add to the convictions of eight other related offenders (seven of whom pleaded guilty). In particular, the Plutus trial was heard back-to-back with the successful Operation Elbrus prosecution of Sevag Chalabian, who was a solicitor who was laundering almost $25 million of the proceeds of the tax fraud through his trust account in exchange for about two per cent. Chalabian’s client, Daniel Rostankovski, had been recruited to the conspiracy to manage the straw directors of the Plutus subsidiaries but turned on his co-conspirators and, with Daniel Hausman, blackmailed them to the tune of $25 million in exchange for keeping quiet. Chalabian was sentenced in June 2022 to 12 years imprisonment with a non-parole period of seven years and six months. Mr Rostankovski was sentenced in March 2021 to 10 years and five months imprisonment for blackmailing, money laundering and fraud charges. Mr Hausman was sentenced in March 2021 to eight years imprisonment on blackmailing and money laundering.
Plutus co-founder Simon Anquetil pleaded guilty in 2019 to conspiring to dishonestly cause a loss to the Commonwealth and knowingly dealing with the proceeds of crime with a value of $1 million or more and is currently serving a seven year and six month prison sentence with a non-parole period of five years.
Former Plutus general manager Joshua Kitson pleaded guilty in 2018 to conspiring to dishonestly cause a loss to the Commonwealth and was sentenced to four years and six months’ imprisonment with a non-parole period of three years.
Fellow conspirator Dev Hammond pleaded guilty to conspiring to dishonestly cause a loss to the Commonwealth and knowingly dealing with the proceeds of crime with a value of $1 million or more and was sentenced in July 2020 to four years’ imprisonment with a non-parole period of two years and six months.
Aaron Paul pleaded guilty to recklessly dealing in proceeds of crime in excess of $100,000 and was sentenced in February 2020 to three years’ imprisonment with a non-parole period of one year and 10 months.
Between the fraud, money laundering and blackmail cases arising from Operation Elbrus, 16 people have been charged. To date, seven have pleaded guilty, six have been found guilty at trial, one was acquitted and a further two await trial.
These massive tax fraud, money laundering and blackmail cases are incredibly complex and require dedicated, specialist investigative and prosecutors. The Elbrus matters have involved effective multi-agency collaboration through the Serious Financial Crimes Taskforce, enabling the successful investigation and prosecution of such complex criminality.
Read more about the various Elbrus matters
Serious Financial Crime Taskforce – More information about illegal phoenix activities