Tax adviser Gilchrist found guilty in false invoicing scheme

Friday 26th July 2013

High-profile tax adviser and former Inland Revenue Department official Brent Gilchrist has been found guilty of six charges of helping orchestrate a fictitious invoice writing scheme that sought to route funds through Vanuatu as part of a tax avoidance scheme.

In two judgments relating to different tax avoidance schemes, delivered by Justice Simon France, Gilchrist is characterised as an adviser with "a propensity to destroy records" and "someone always conscious of covering their tracks."

"Particularly when Mr Gilchrist is involved, the evidence is replete with examples of documents being created solely for the purpose of creating a false paper trail," Justice France says.

However, Gilchrist was found not guilty on six other charges relating to tax evasion of around $1.5 million by Dr Paul O'Connor, the one-time owner of media clipping services firm Media Search, because Justice Simon France considered Gilchrist's involvement from 2004 onwards was late in the piece.

O'Connor was found guilty on 14 charges relating to the way he managed the affairs of various Media Search-related entities to evade tax throughout an extended period in the 1990's and 2000's.

Name suppression on O'Connor was lifted this morning, but the identity of the accountant, known in the other case only as AB, remains suppressed.

A third man charged in both cases, Scott Anderson, was found guilty on two charges in the O'Connor case and guilty of the same six charges as Gilchrist in the fictitious invoicing case, in which Justice France found that Anderson and Gilchrist had been involved in creating and amending documents to try to obscure a relevant chain of events in 2005 and 2006.

The judgment rejected Gilchrist's defence in the fictitious invoicing scheme of "peripheral innocent involvement", although he admitted surprise Gilchrist had participated in what Gilchrist himself had described to the court as "a naked fraud with no tax credibility of sophistication."

"Mr Gilchrist is plainly an aggressive tax adviser willing, the evidence irrefutably establishes, to create false paper trails to mislead IRD and willing to create false invoices to mislead a bank.

"None of this reflects well on him at all," the judge said of the former newspaper columnist on tax matters. "The limited surprise I feel stems from the fact that there is no sophistication or tax skill in the present scheme. But that element of surprise just leaves me unsure about why engaged in it, not whether he did."

The scheme involved some $137,812.50 of invoices issued between March and July 2006 which the defendant, AB, believed was allowing him to buy tax losses which would be routed through bank accounts in Vanuatu and the funds repatriated in New Zealand.

Much of the case turned on Justice France's decision to believe AB over Gilchrist and Anderson, whom he found had created backdated documents to make it appear as if AB had been investing in a software development venture rather than the original scheme, which was to have him access the tax losses by issuing invoices for accounting services which were never performed.

AB testified that he was never aware he was investing in a software development venture, and did not have documents purporting to show that he did, which Anderson produced during the trial, despite having apparently kept virtually no other records relevant to the proceedings.

Companies associated with Anderson, who had interests in Vanuatu, were involved and Gilchrist advised on the transactions, having promoted Vanuatu as a tax haven for New Zealanders seeking to minimise their tax obligations.

Justice France said the evidence showed the bank in Vanuatu had been unwilling to make the transfers because it was dissatisfied about the reasons, leading to "increasingly frantic effort by the defendants" to release the funds.

"Eventually the problem was solved by AB issuing a false invoice to Mr Anderson's Vanuatu company."

Justice France was critical also of Anderson, whom he said "did not impress as a witness."

"There were many times when seemed to be making things up as he went."

Anderson told BusinessDesk that an appeal on the verdicts was "certain."

BusinessDesk.co.nz

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