The Australian Federal Police confirmed this morning it has made another arrest in its pursuit of an alleged tax fraud ring that fleeced the Commonwealth of $165 million.
The AFP has confirmed it arrested a 34-year-old man upon his return to Australian on Thursday, who will now face up to 10 years in prison after being charged with conspiracy to defraud the Commonwealth.
“It will be alleged that the man was a former director of the payroll company who continued to manage it during the conspiracy,” the police said in a statement.
Ten people have now been charged after a joint investigation between the AFP and Australian Taxation Office uncovered a case authorities are calling one of the most significant alleged white-collar crimes in the nation’s history.
The arrests has reportedly sent shockwaves through the ATO after deputy tax commissioner Michael Cranston and two of his children were linked to the scheme.
Police have described the case as a complex web of legitimate companies and illegal activities, which resulted in a number of individuals allegedly obtaining funds illegally to fund “lavish lifestyles”. At the centre is Plutus Payroll, a “legitimate” payroll business that formed the starting point of the scheme.
Here’s what we know so far about the business.
In a press conference yesterday, AFP Deputy Commissioner Leanne Close explained the alleged fraud started with a legitimate payroll company.
This business, which is understood to be Plutus Payroll, was controlled by alleged members of the syndicate and served legitimate clients, including a number of IT contractors across the country. From here, it is alleged payroll funds were transferred to “Tier 2 companies” that had ‘straw directors’ but were actually ultimately operated by alleged members of the tax fraud syndicate.
These second tier companies are alleged to have not paid the full amount of Pay-As-You-Go tax required by the ATO, and instead funds were siphoned off back into the syndicate, to the tune of $165 million.
Plutus Payroll serviced contractors in the project management and IT space, and several former clients have reported this week that large recruitment firms had recommended Plutus Payroll’s services.
Government departments and the ABC reportedly also used the service, according to The Australian.
Individuals report this morning they felt they were getting a great deal with the provider, until payments stopped abruptly when the provider’s accounts were frozen in May (see below).
One of the unusual and attractive features of Plutus was that it charged a zero percent commission on its services and offered low-cost tie-ins with services like health insurance. Other large payroll providers take commissions of up to three percent.
Business Insider reports this morning that Plutus was purchased in mid-2016 by private equity firm SYNEP, for which Adam Cranston, who was arrested on Wednesday in relation to the tax syndicate, is alleged to have controlled.
Plutus Payroll’s business model has been discussed at length by potential and current clients in forums like Whirpool over the past few years.
In this thread, users argue in 2014 and 2015 over how the company is able to turn a profit if it doesn’t charge commission, with some asking whether it was “too good to be true”.
“I assume that this is where they make their money on commissions from selling other financial services,” said one user.
Another Plutus client insisted they’d had “no drama’s [sic] so far” when using the service at the start of 2015.
However, in May 2017, Plutus clients stopped receiving their salary payments, and the company removed information from its website, saying it had stopped operating due to a “commercial dispute”.
At the time, Fairfax reported the business sent an email to clients explaining the ATO had frozen its accounts “without notice” and contractors were unable to contact the company.
A number of contractors had also raised the issue with New South Wales Senator Doug Cameron, who said yesterday this had prompted himself and Shadow Small Business Minister Katy Gallagher to help pursue Plutus with the Australian Securities and Investments Commission and the ATO.
“We thought there were significant problems with this company. Thanks to those constituents who drew my attention to the company’s failure to process wages to individual workers,” Cameron said in a Facebook post yesterday.
This morning, Cameron said some staff members at the ABC continue to be caught up in the scandal, and he called on contractors who had not been paid to contact his office for assistance.
In a press conference on Thursday morning, AFP deputy commissioner Leanne Close explained that the investigation into the alleged tax fraud, named Operation Elbrus, had focused its investigations on activities from June, 2016.
When asked whether it was possible the alleged fraud scheme extended beyond this time frame, she said there is still a significant amount of evidence to examine to determine the exact scale of the alleged fraud.
“We’ll take time to examine the evidence to determine if it goes further,” she said.
The AFP says that while the investigation was a joint operation, it was the Australian Taxation Office’s systems that “identified” something irregular could be occurring in relation to the companies involved, and then the two organisations pooled resources to pursue the case.
So far a “significant” amount of assets have been seized in relation to the case, including 18 residential properties, $15 million in cash, 100 bank and share trading accounts, firearms, aircraft, luxury vehicles, jewellery and $1 million in a safe deposit box.
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