Court slaps former CEO of collapsed Compass Hotel Group with three-year jail sentence

The former chief executive of West Australian hotel chain Compass Hotel Group has had his original sentence quashed by the NSW Court of Criminal Appeal and has received a tougher sentence of three years and six months’ imprisonment.

Bryan Northcote pleaded guilty to breaching directors’ duties and submitting false and misleading documents to the Australian Securities and Investments Commission after the Compass Hotel Group collapsed in 2011 with debts of $100 million.

The chain consisted of 12 hotels and taverns including the Carine Glades Tavern, the Belmont Hotel and the Albion Hotel.

Following an ASIC investigation, Northcote pleaded guilty to dishonestly withholding information from the Compass Hotels Group board and using his position to gain a financial advantage after he siphoned more than $1.5 million in hotel broker commissions into his own private company.

Northcote was initially sentenced by the Sydney District Court to two years’ imprisonment on the charge of breaching directors’ duties and one year for each of the two counts of submitting false and misleading documents to ASIC, with the sentence to be served by way of Intensive Correction Order.

The Commonwealth Director of Public Prosecutions, in consultation with ASIC, appealed the sentence on the basis that it was manifestly inadequate.

The NSW Court of Criminal Appeal agreed and quashed the sentences imposed by the District Court.

Northcote was re-sentenced to a term of imprisonment for a period of three years and six months for breaching his directors’ duties and one year imprisonment for each of the lodging false and misleading documents offences.

Northcote is now due to be released on September 26, 2015, upon entering a recognisance that he be of good behaviour for the balance of the term of his sentence.

The court said the original sentence was manifestly inadequate “because it did not reflect the seriousness of the offence, the extent to which the respondent personally was financially advantaged by the offence, the need for general deterrence and to the need to impose a sentence which both punished Mr Northcote and denounced his criminal conduct.”

ASIC Commissioner John Price said the regulator is committed to ensuring company directors act appropriately as this is integral to ensuring fair and efficient markets.

“Directors who step over the line by abusing their position for their own dishonest purposes need to know that they are risking jail time for their actions,” he said in a statement.

Ian Ramsay, professor of commercial law at the University of Melbourne, told SmartCompany ASIC is likely to be happier with the tougher sentence.

“What’s clear is that the sentence of imprisonment has gone up significantly from a total of two years to three-and-a-half years, what is unclear is how it is to be served,” he says.

“The original sentence was an Intensive Correction Order, which is essentially serving it in the community, there’s a vast difference between an ICO and serving your time in jail.”

Ramsay says if the revised sentence is to be served in prison “then this is a very substantial repudiation of the original sentencing decision”.

He says it indicates a willingness on the part of ASIC, when it does believe sentences are significantly adequate, to work with the DPP to seek an appeal.

“The conduct here was obviously very significant, this was a very blatant conflict of interest, where Northcote personally profited by taking funds that otherwise belonged to the company of which he was CEO.”