Automatically disqualified from acting as a company director after conviction for a $1.7 million customs fraud, Paul Clarke got High Court reinstatement to management of his Dunedin heavy machinery business because it operated as a ‘one man’ band and jobs of 33 employees and several sub-contractors were otherwise at risk.
Companies Act rules automatically disqualify from management for five years any person convicted of fraud. Paul Clarke was convicted in 2021 of customs fraud, undervaluing the invoice price of heavy machinery imported primarily from Japan. It was a long-running fraud involving forged documents for some 74 importations since 2013. False invoices meant GST was underpaid by some $1.75 million.
Seeking a sentence indication before trial, Clarke was told he was facing a likely sentence of two years’ imprisonment and a $30,000 fine. Coughing up GST underpaid plus penalties together with his promise to also immediately pay any fine coupled with a plea of guilty resulted in a reduced sentence: six months’ community detention and a $30,000 fine. The trial judge said this would enable Clarke’s business to keep operating. Jail or home detention would result in business operations closing down, with staff job losses. Community detention imposes a night-time curfew, but otherwise allows people to continue working.
While the more lenient sentence was intended to allow Clarke to keep working, Companies Act rules automatically blocked involvement in management because of his fraud conviction. These rules are intended to protect the public. The High Court permitted his return to management, subject to tight restrictions. For future heavy machinery importations, a strict paper trail was imposed. Purchase details, customs entries and bank records for all importations must be centralised at the firm of chartered accountants completing GST returns for his business. Clarke was warned any failure to comply with these requirements would result in an immediate ban from managing his business.
Customs recommended the High Court require a second director be appointed to the company, providing a check on Clarke’s activities. The court was told no-one approached was willing to take on the role.
re Clarke – High Court (9.11.21)
21.182