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Money laundering conviction for insolvency offences by adviser

This is going to make a lot of people sit up and take notice.

Across the world, some but not all jurisdictions have included either by default in all crimes legislation or expressly in lists offences that some people like to call "asset protection."

So, it's probably best to start to panic now if you are in that industry because just as everyone in Australia was going off for the evening before the day that doesn't happen often, ASIC released a bombshell. Asset protection advice can land you in jail.

In Brisbane, Stephen O’Neill practised as a "pre-insolvency adviser." What that means, in summary, is the he advised the owners and directors of distressed companies how to reduce the impact on them, personally, of the collapse of their companies. Of itself, that's no bad thing.

But it's a very bad thing when the schemes he proposes amount to defrauding creditors. Working with one John Narramore from a company called "SMEs R Us Pty Ltd, O'Neill advised one Richard Ludwig, then a director of Cap Coast Telecoms Pty Ltd. The scheme was simple: companies under the control of O'Neill and Narramore issued fraudulent invoices to Cap Coast and those invoices were paid. The result was that a total of AUD743,050 was paid out of Cap Coast's accounts shortly before the company formally entered into liquidation owing creditors some AUD2,955,128.

O'Neill pleaded guilty to one offence of "intentionally dealing in proceeds of crime" last year. He has now been sentenced to five years in prison.
Narramore, who was also charged with dealing in the proceeds of crime, previously pleaded guilty and was sentenced to four and half years jail for his part in the criminal enterprise.

The case against Ludwig continues: charged with one count of money laundering and ten counts of breaching his directors' duties, he is awaiting trial.

This author, when in legal practice in London in the 1980s and 1990s, frequently came into contact with insolvency practitioners who would assist, particularly owners of small businesses, to extract cash out of the business. It was sold as a benefit for the family, often because the director - owners of small businesses had for some time foregone salary and may be facing personal hardship and, even, the loss of a family home. However, it's a crime and this case demonstrates that the motive for committing that crime is irrelevant. If creditors are defrauded, there are proceeds that will be treated as laundered.

The only question that this case leaves open is at what stage during the life of such a business does such asset protection become criminal conduct. The logical answer is that, if it is done at any time and has the effect of defrauding the Revenue, then it's always an offence. Far better, it would seem, to take salary and not to try to be clever about hiding capital outside the business.

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Author: 
World Money Lau...

 


 

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