17 December 2015

Fraud: Wynyard v. R

The Court of Appeal overturned convictions entered against Glenda Mary Wynyard for alleged fraud in attempting to stem a 2009 cashflow crisis in her advertising agency, Media Counsel Ltd.
Media Counsel is in liquidation.  The liquidators’ report states that a lack of working capital and excessive drawings taken by Ms Wynyard contributed to the company’s failure.  Double pledging of invoices by Media Counsel led to a Serious Fraud Office investigation and to charges laid under the Crimes Act.  The Court of Appeal ruled seven of the Crimes Act convictions could not be sustained; Wynyard could not be guilty of fraud in directing that billings be paid to the Marac Finance since Marac was entitled to receive payment.
The court was told Media Counsel’s business grew rapidly from inception with billings of $4.2 million in 2007 reaching $33.9 million in 2009.  The profit margin on billings is slim.  Agencies must pay for advertisements on placement, unless accredited with the Print Media Accreditation Authority.  Terms for accredited agencies is payment on the last day of the month following publication.  Media Counsel gained accreditation in November 2008.  Prior to that, the company used a “place-through” agreement with accreditated agency Aegis, paying a fee to place advertisements through Aegis and to get the benefit of extended credit terms.
Evidence was given that Media Counsel negotiated a three million dollar credit line with Marac Finance after gaining its own accreditation.  Marac purchased selected client billings, immediately paying Media Counsel 80 per cent of the invoice face value.  The client was then instructed to pay Marac.  On receiving payment, Marac paid the 20 per cent balance due to Media Counsel, less fees and an interest charge.
A severe cash crisis struck in 2009.  Media Counsel lost its accreditation.  The “place-through” agreement with Aegis was reinstated.  This resulted in Aegis (apparently unaware of the existing financing arrangement with Marac) instructing Media Counsel clients to pay it direct, while Marac was expecting to receive these same payments.  Marac had registered its financing agreement on the personal property securities register.  Aegis is deemed to have notice of Marac’s rights to collect the invoices.  Marac, with Wynyard’s assistance, acted promptly to collect payment on its pledged invoices, leaving Aegis out of pocket.  At a Serious Fraud Office interview, Wynyard said she was desperate to prevent Marac from putting her company into liquidation and wanted to see Marac paid since she had guaranteed the Marac debt.
The Court of Appeal ruled that Wynyard’s convictions on seven of the counts could not stand.  Ensuring that pledged client billings were paid to Marac, the rightful recipient, was not fraud.  She had not honoured promises to Aegis that it could collect the same invoices, but that was not a crime she had been charged with.
At trial, Wynyard was sentenced to eight months home detention.  She has been on bail pending appeals.  The Court of Appeal said bail is to continue while sentencing is reconsidered in respect of four other convictions not appealed.     
Wynyard v. R – Court of Appeal (17.12.15)

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