Client had 'blind trust' in accountants, fraud trial told

A Napier businessman remembers making “big payments” after being invoiced by his accountant, but “can’t recall why”, Wellington High Court has heard.

Edward Roberts, a contractor who worked for the Whirinaki mill and also owns a scrap metal business, is one of 48 witnesses giving evidence in the fraud trial of Wellington accountants David Ingram Rowley and Barrie James Skinner.

Mr Roberts apologised to Justice Stephen Kos as he left the courtroom.

“I am sorry that I am not very intelligent on this, but I can only tell you what I honestly believe,” he said.

Messrs Rowley and Skinner face more than 100 charges of fraudulently using a document to obtain a pecuniary advantage, attempting to pervert the course of justice and tax evasion.

Crown lawyer Dale La Hood alleges the pair used their roles as directors of Wellington accountancy firm Tax Planning Services to set up sham transactions to create tax deductions and credits for 27 clients, including lawyers and company directors.

These allegedly took place through MCK Holdings Ltd and included a complicated scheme in which clients paid deposits on properties and received their money back shortly afterwards.

The scheme was presented to clients as a legitimate way to reduce tax liability, and even if they were aware of the alleged scam - which would see them benefitting from tax advantages - it would be difficult to prove criminal intent.

The Crown accuses Messrs  Rowley and Skinner of instructing clients what to tell an IRD investigation about the transactions later, and many only learned then that the transactions involved property deals.

The pair are also accused of invoicing clients, usually for consultancy or subcontracting work, which never existed.

However, it was difficult for Mr La Hood to get a clear answer from Mr Roberts about $290,000 worth of subcontracting work he was charged for - Mr Roberts either couldn’t recall what had happened, or responded: “I relied on Barrie [Mr Skinner]."

“I relied on Barrie 100%. I had nobody else to rely on, that was it really,” Mr Roberts told the court.

He told Justice Kos whenever Mr Skinner visited him, on average five or six times a year, Mr Roberts would make out cheques because he “trusted what Barrie was doing”.

When Mr Roberts was eventually left with a $620,000 tax bill, Mr Skinner told him he would “sort it out” and Mr Roberts would only be liable for $250,000.

Mr Roberts was also advised to put a deposit on a building on Boulcott St, Wellington, after which he would receive the bulk of the money back.

However, he was unable to give any details about the arrangements, or when discussions took place about the deal, and while he “didn’t understand it”, he “hoped what Barrie was doing was above board”.

“We were going to put a deposit down and as soon as the building was built, we would sell and maybe make 10% to 15% on the deposit price. At least that was my understanding of it,” he says.

Software developer Douglas Leyser, who had used the services of Tax Service Planing for 17 years, told the court he had no recollection of whether or not he had received a $20,000 payment after putting a $29,000 deposit on an apartment in Taranaki St, Wellington.

“I told the IRD that during that time I was under an awful lot of pressure and it would have been something I would not have given a lot of thought to, to be honest,” Mr Leyser says.

The court will be interested to hear the testimony of convicted fraudster, Shaan Stevens, the former Wellington Free Ambulance chairman who is one of  33 witnesses still to be called to give evidence.

Stevens last year pleaded guilty to 22 charges of fraud, tax evasion and attempting to pervert the course of justice in a related case.

He was struck off the New Zealand Institute of Chartered Accountants register last week as a result of his convictions.

Stevens is believed to have referred clients to Messrs Skinner and Rowley while he was an accountant at Guinness Gallagher, allegedly knowing they would take part in the alleged fraud.

He is expected to testify later this week.

The trial continues.