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A 22-year-old accountant has been jailed for defrauding the Inland Revenue Department of more than half a million dollars in one of the biggest GST frauds in the country's history.
Roydon Glenn McLaughlin, who left school at 16 to study accounting at university and "kept needing challenges in
his life", used a network of bogus partnerships, trusts and companies to mastermind a scheme described as "basic fraud on a grand scale".
He filed false GST returns for the fake entities over 2 years, evading detection by keeping the returns to a modest level and thereby ensuring refunds were automatically generated by the IRD's computer system.
But despite a talent for accounting and no previous convictions, McLaughlin also had a serious gambling problem and frittered away nearly all of the money.
Of more than $540,000 in GST refunds he received, only $16,000 was recovered, the rest swallowed by an addiction to betting on horses and other gambling.
The fraud was discovered when a receptionist at the department's Palmerston North office became suspicious of new IRD numbers for different entities sharing the same postal address in Hastings.
McLaughlin had been employed by accounting firms in Napier and Hastings and most recently worked in Tauranga.
In the Tauranga District Court yesterday, he was sentenced to two years and 10 months in prison.
He displayed a range of emotions as the court heard about the fraud.
McLaughlin faced 44 charges of dishonestly using a document, with many of the charges covering multiple false GST returns.
Judge Louis Bidois said the crimes were deliberate and highly premeditated.
He said McLaughlin had created an "elaborate scheme that must have taken time and effort and could be described as a complex web".
McLaughlin shook his head as the judge said that a probation report had shown he had little remorse.
In a psychiatric report his family paid for, McLaughlin was also assessed as lacking confidence and suffering from chronic depression, but possessing full cognitive function.
His mother, Diane, flew from Australia to speak at the sentencing, sparking tears from her son as she recalled his precocity as a child.
"He was very quick to run before he could walk," she said.
"He kept needing challenges in his life to keep him interested in what he was doing."
Addictions in the family were also "numerous" and he accepted gambling as "something you do as part of your natural daily life", she said.
In a six-page letter to the court, McLaughlin claimed the fraud was unplanned.
"There was no elaborate plot, no massive scheme to get this money," he wrote. "It was something that simply happened."
Creating the various entities had been part of a plan to better understand the accounting profession, and he claimed it worked.
"My understanding became greater than anyone else with a similar experience."
Crown prosecutor Rob Ronayne rejected the claim as "disingenuous nonsense", saying it was incompatible with McLaughlin's guilty plea.
Mr Ronayne also rejected a statement by McLaughlin that he wanted to turn his life around, saying the 22-year-old had filed further false returns totalling $8000 while on bail and all of the money had disappeared.
"The offending was simply motivated by greed," Mr Ronayne said. "This man took the money and gambled it away."
The loss incurred by the IRD had been huge - "indeed, one of the highest the department has come across," Mr Ronayne said.
The prosecutor suggested a starting point of five years' imprisonment but McLaughlin's lawyer, David Bates, argued for a community-based sentence, saying his client's letter was "from the heart" and he accepted "full responsibility".
Mr Bates said McLaughlin's guilty plea had saved taxpayers the further expense of a trial.
Last night, the department said the tax system relied on voluntary compliance but IRD had recently formed a new risk and intelligence unit to improve monitoring.
Richard Phelp, assurance manager of investigations, said McLaughlin's prison sentence was a warning for fraudsters that they would get caught. "It's a question of not if, but when."
Giant GST Fraud
* Roydon McLaughlin set up 34 bogus partnerships, trusts and companies, and filed fraudulent GST returns.
* He kept the returns modest to ensure they were not reviewed by the IRD and the department's computer system automatically generated refunds.
* Businesses listed for the fake entities included horse breeding, babywear retailing and internet shopping.
* He filed 340 false returns, claiming $578,331 between January 2004 and May last year.
* McLaughlin gambled away most of the $540,000 he got.
