By Neil Chenoweth From Financial Review

A former Ernst & Young principal has been jailed for 11 years for his part in a $450 million tax fraud that involved the ANZ Bank and three of the bank’s corporate clients, Bluescope Steel, Incitec Pivot and failed Tasmanian timber group Gunns.

Justice Robert Beech-Jones sentenced Anthony Dickson on March 20 to a minimum seven years jail on two fraud charges relating to an elaborate scheme that involved creating up to $750 million in fictitious tax deductions for medical technologies held in the Cayman Islands.

The scheme, which cost the government $135 million in lost tax, involved the creation of fake identities, sham agreements and forged signatures.

In the trial, which concluded in December, Mr Dickson testified that he used codes and operated under the name “Ronnie Wang”, which were “all security measures designed to avoid persons such as criminal gangs becoming aware of [bank] transfers”, Justice Beech-Young said in his sentencing remarks on Friday.

While Bluescope, Incitec Pivot and Gunns (now in liquidation) were not party to the fraud, the Tax Office has pursued them under tax avoidance laws citing the artificiality of the transactions even if they had been based on genuine losses.

Grand scheme

Mr Dickson was a bank executive with St George, Westpac and National Australia Bank, and worked as a principal with Ernst & Young from 2000 to 2004 before setting up a private business to market lease-back packages to businesses.

In 2005 and 2006, Mr Dickson negotiated a financing arrangement with ANZ, in which ANZ clients including Bluescope, Incitec Pivot and Gunns sold property assets in sales funded by the ANZ. The assets were then leased back to the companies.

The buyer of the assets was a partnership composed of ANZ Investment Holdings Ltd and a company set up by Mr Dickson, Neumedix Health Australasia. While the lease payments received went to payments on the ANZ debt raised to fund the asset purchases, these costs could not be claimed against the income.

This would have increased the cost of a conventional leaseback deal. But Mr Dickson and his partner, who cannot be named, instead claimed $450 million in depreciation on rights to three medical technologies allegedly owned by a Cayman Islands company, Athena Health Patents Inc, which Mr Dickson owned.

If not detected the scheme probably would have accounted for all of the $750 million income due to flow from the lease-back deals, the judge found.

“The offender repeatedly assured the ANZ that those deductions had been or would be generated by NHA assuming obligations to pay very large amounts to acquire certain medical technologies,” Justice Beech-Jones said.

Non-existent president

Athena had acquired the rights for several million dollars, although it’s not clear if this money was ever paid. They were then revalued at $US3.4 billion in valuations by the Karkalla Biotechnology Group, which were signed by “Peggy Wong PHD President Karkalla”.

While Mr Dickson and two other witnesses testified to meeting Ms Wong, Justice Beech-Jones found that she did not exist.

While the scheme allowed Mr Dickson to offer better terms to ANZ clients for lease-backs, his company NHA retained 9 per cent of the income, with $US63.7 million traced from NHA to the UK and Hong Kong, then back to bank accounts in Australia and New Zealand.

“Clearly the fraud sought to be perpetrated was a very large one,” Justice Beech-Jones said. He found Mr Dickson had given false evidence and had fabricated documents for the trial.

In his submissions about his prospects of rehabilitation, Dickson had stated that he “has learned that he should avoid doing business in Australia”.

Justice Beech-Jones concluded: “These contentions do not assist the offender in obtaining a favourable assessment of his prospects of rehabilitation and the absence of a need for personal deterrence.”

IMAGE: Anthony Dickson involved ANZ in a scheme that aimed to accumulate $750 million in fictitious tax deductions for medical technologies. Anthony Dickson involved ANZ in a scheme that aimed to accumulate $750 million in fictitious tax deductions for medical technologies. Glenn Hunt

Fraser for the Dismissal

For more on this story go to: http://www.afr.com/news/policy/tax/anz-bluescope-incitec-embroiled-in-450m-tax-fraud-by-ey-principal-20150323-1m5qvn