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123RF
John Bracken claimed to have shipped more than $ 133 million worth of goods to the Pacific Islands. I did not do it. (File photo)
A Gisborne farmer who submitted false invoices for more than $ 133 million over four years was convicted in New Zealand’s largest tax fraud case.
54-year-old John Richard Bracken ran the scam through his company Bracken Enterprises Ltd, leading him to receive $ 17.4 million in GST refunds that he was not entitled to.
A Bracken’s employee contacted the Serious Fraud Office in 2017 after he was concerned that the tax bills he was preparing for the company might not be legal. The SFO referred the matter to the Police and the Department of the Treasury.
In mid-2019, the IRD filed 39 charges against Bracken in connection with the GST statements the company filed between September 2014 and August 2018.
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Lawrence Smith / Stuff
Judge Graham Lang issued his decision on Saturday. (File photo)
BEL was created to export various materials to the Pacific Islands. Bracken or his wife Margaret filed invoices with a Gisborne accounting firm at the end of each month. The company would check the invoices against the transactions shown in the company’s bank accounts and then send copies of the GST statements to the Bracken for approval before submitting them to the IRD.
After the suspicions arose, the investigators contacted various entities that had dealt with BEL to provide the IRD with information and documents relevant to those deals.
The Crown said BEL’s GST statements were false because they related to fictitious product purchases and were supported by invoices created by individuals acting on Bracken’s instructions.
The Crown also said that the company falsely claimed to have exported the products it received to the Pacific Islands. This meant that the company had the right to claim input tax credits for the products it purchased and was not required to pay the production tax on the product it sold abroad (selling goods for export is an activity with zero rate for GST purposes).
Tom Pullar-Strecker / Stuff
The IRD began investigating Bracken in mid-2019. (File photo)
Bracken would withdraw cash from BEL’s account or obtain a bank check made out to himself or the company. Then, I would immediately re-deposit those funds into another company account, or into an account operating under the name of ‘Mobile Veges’.
The Crown said this created a “money order” that allowed the company to claim that it was paying for products when that was not the case at all.
This “crude but effective scheme” allowed the company to falsely claim that it had purchased a product worth more than $ 133 million and exported almost all of it during the four years.
The plan involved Bracken contacting various companies and asking about purchasing their products. This would imply that the companies present a pro forma invoice establishing the terms of trade. In most cases, the companies did not hear from Bracken again.
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Bottled water was one of the items that were the subject of false invoices sent to the IRD. (File photo)
These pro forma invoices were later copied and modified and used by Bracken to falsely portray large purchases that never took place.
They covered items like UHT milk, kitset houses, bottled water, wood, honey, and logs.
Bracken was the architect of the plan and knew that what the company was doing was dishonest.
Records held by the New Zealand Customs Service showed that BEL had exported only $ 478,000 goods to Niue under its own name between 2011 and 2018.
Bracken was tried before Judge Graham Lang in Gisborne Superior Court earlier this month.
The trial heard directors and owners of several of the companies that allegedly supplied the invoices.
They denied having provided the products, or invoices, claimed by Bracken and said the invoices were very similar to the pro forma they had provided.
Some of the invoices were for amounts that the directors said were much higher than their annual sales figures.
Judge Lang issued his reserved decision on Saturday.
Inland Revenue (IRD) New Zealand / YouTube
Changes designed to simplify the tax system resulted in an additional workload for the department last year. (First published January 2020)
He said that “Bracken was the architect of the plan because he organized the creation of the invoices that showed both the purchase and the subsequent export of the fictitious product. He also physically carried out the banking operation and the re-deposit of the funds into BEL’s bank account to create the impression that the transactions were genuine. “
Bracken was convicted of all 39 counts of dishonest use of a document for financial gain. He was placed in preventive detention and will be sentenced in May.
There is an ongoing legal action against the Bracken under the Criminal Assets (Recovery) Act by the Police Commissioner in relation to their assets, including their farm in Matawai, near Gisborne, valued at around $ 7 million.
