Dragons' Den star, associate and mystery businessman sentenced for tax fraud

A Dragons' Den star and a mystery businessman have been ordered to serve home detention for tax evasion while an associate was jailed and their marina-related companies fined more than $100,000.

Paul Webb, who rose to prominence in 2006 as a dragon on the entrepreneurial reality TV show Dragons' Den, along with his business partner David Tauber, a Mr X who cannot be named, and companies Honk Barges Ltd (HBL) and Honk Marine Ltd (HML) were today sentenced by Justice Mary Peters in the High Court at Auckland.

The convictions came after a judge-alone trial where the group was accused of providing false information to the Inland Revenue Department (IRD) in its income tax returns.

However, Tauber's lawyer argued the offending was nothing more than the "clever tricks" tax accountants use and indicated he will appeal Justice Peters' verdicts.

Webb, who reportedly made his millions during the 1990s through residential property developments and with airline City Jet, was sentenced to nine months' home detention and 400 hours' community work.

He was declared bankrupt at the turn of the century.

His lawyer, Marc Corlett QC, said Webb had no intention of appealing the judgment like his associate.

"He accepts that what he did was wrong ... he will try to redeem himself in life," Corlett said.

However, Tauber's lawyer Mike Lennard - who also represented the two companies - maintained his client's crimes were just clever accounting tricks.

"This was not blatant tax fraud, it was complex tax planning that has crossed the line in your honour's verdicts," the tax barrister said.

Justice Peters replied: "I know you're going to appeal your convictions ... if you think I've got it wrong."

Lennard told the court he would do so.

"If there was a legitimate way of doing it, why didn't they do it?" Justice Peters asked Lennard.

"This answer, ma'am, is they didn't because they didn't think they needed to."

Justice Peters disagreed and said the New Zealand community doesn't see the group's crimes as creative accounting, "they see it as fraud".

Lennard said Tauber had "one lapse" in an otherwise completely unblemished career as a tax adviser and since the offending has "led a blameless life".

Justice Peters sentenced him to three years and three months' imprisonment.

Tauber was also before the High Court in 2012 as he attempted and failed to settle $95.9 million of debt for his event management business APG Holdings.

On behalf of his client, Lennard applied for bail pending Tauber's appeal next year.

But, Justice Peters denied the bid.

"It's only in an exceptional case that bail is to be granted pending appeal, especially when sentence has been passed," she said.

Mr X's lawyer, Christopher Gudsell QC, also asked who was the architect of the scheme?

Justice Peters later said Tauber was responsible for the fraud's genesis.

Gudsell argued his client, whose identity remains suppressed, was "not involved in any instrumentation or formulation of this scheme, at all".

Mr X, an accountant, was sentenced to 12 months' home detention and 400 hours' community work.

Justice Peters said she thought "long and hard" about whether to send him to prison.

The public gallery for today's sentencing was filled with supporters of the three men.

"This is not a one-victim crime, this is about as many victims as you can get," Justice Peters said, adding the New Zealand taxpayer will be burdened with the bill for IRD's lengthy and complex investigation.

HBL was fined $125,000 and HML fined $100,000.

All of the unpaid tax has been repaid to IRD, the court heard.

The case and trial

In 2008, IRD began its investigation into the tax affairs of Webb and Tauber, a former partner at Ernst & Young.

The pair had invested in an Auckland's Westpark Marina and barges for dredging.

They were raided by IRD in March 2011, which led to a series of failed appeals over the legality of the search warrants after a child's bedroom was searched and an open underwear drawer was photographed.

However, according to the IRD, the photo was taken because inside the drawer was a BlackBerry phone.

Webb sought a court order for IRD to return the seized documents and destroy any photographs or videos taken.

Webb and his wife, Rosemary Webb, were later convicted and fined $15,000 each for obstructing the taxman's search of their home.

In late May this year, Webb, Tauber, Mr X, HBL and HML went to trial over a total of 36 tax evasion charges.

Justice Peters found Webb guilty of three of nine charges, Mr X guilty of six of nine charges, and Tauber guilty of all the charges he faced.

HML was also found guilty of four charges, and HBL of five.

HML provided false information to IRD in its income tax returns for the financial years ending from 2007 to 2010, Justice Peters found.

The returns were false after HML claimed deductions for interest on "bogus loans" from a now deceased lender of $3.62m, $3m and $2.65m, made in July 2006, September 2007 and September 2008.

"I have likewise found that HBL provided false information to the Commissioner [of IRD] in its income tax returns for the years ended March 31, 2007 to 2011," the judge ruled.

Justice Peters was satisfied Webb intentionally aided or abetted the offending, however, she discharged him on six of the nine charges he faced after IRD failed to prove guilt.

Tauber and Mr X knew the claims were false and intended for the information to be provided to IRD to evade both companies' tax, the judge said.