IN THE COUNTY COURT OF VICTORIA AT … COURT OF VICTORIA 250 William Street, Melbourne !Undefined...

COUNTY COURT OF VICTORIA 250 William Street, Melbourne

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IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CRIMINAL DIVISION

Revised Not Restricted

Suitable for Publication

Case No. CR-12-02395 COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS v MARK RONALD LETTEN

--- JUDGE: HIS HONOUR JUDGE MCINERNEY

WHERE HELD: Melbourne

DATE OF HEARING: 12, 13, 14, 15, 16 and 29 May 2014

DATE OF SENTENCE: 14 August 2014

CASE MAY BE CITED AS: DPP (Cth) v Letten

MEDIUM NEUTRAL CITATION: [2014] VCC 1285

REASONS FOR SENTENCE

--- Subject: CRIMINAL LAW Catchwords: Sentence – operate an unregistered managed investment scheme contrary to

s601ED(5) of the Corporations Act 2001 (Cth) – carry on financial services business without a licence contrary to s911A(1) of the Corporations Act 2001 (Cth) – use position dishonestly with the intention of gaining an advantage contrary to s184(2)(a) of the Corporations Act 2001 (Cth)

Legislation Cited: Corporations Act 2001 (Cth); Commonwealth Criminal Code 1995; Crimes Act (Cth) 1914

Cases Cited: Australian Securities and Investments Commission v Letten & Ors (No 7) (2010) ACSR 401; Australian Softwood Forests Pty Ltd & Ors v Attorney-General (NSW) (1981) 36 ALR 257; Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 170 FLR 388; Attorney-General (NSW) (1981) 36 ALR 257; Brookfield Multiplex v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; Hallett v R [1969] SASR 141; R v Storey [1998] 1 VR 359; R v Olbrich (1999) 199 CLR 270; SAJ v R (2012) 36 VR 435; R v Rau [2010] VSC 370; R v Sellars (Unreported, District Court of South Australia, 8 May 2008, No DCCRM-08-383); Hudson v R (2010) 30 VR 610; Hasan v R (2010) 31 VR 28; Director of Public Prosecutions v DJK [2003] VSCA 109; Director of Public Prosecutions v Toomey [2006] VSCA 90

Sentence: 5 years and 8 months’ imprisonment; non-parole period 3 years. ---

APPEARANCES:

Counsel Solicitors

For the DPP (Cth) Mr C Beale Solicitor for Commonwealth Director of Public Prosecutions

For the Accused Mr N J Clelland QC with

Mr A Lewis Baker & McKenzie

VCC:AA/LP/AS 1 SENTENCE

DPP (Cth) v Letten

HIS HONOUR:

1 This matter was originally listed as a trial to last some six weeks. The matter

was managed by this Court from 5 December 2013. Ultimately, after a

number of directions hearings, the matter resolved on 28 January 2014 when

Mr Letten entered a plea of guilty to 27 counts of breaches of the Corporations

Act 2001 (Cth) (“the Act”).

2 The matter was adjourned for plea on 12 May 2014. The plea was conducted

on 12, 13, 14, 15, 16 and 29 May 2014. The plea was, to say the least,

extensive, and during such plea, the prosecution tendered Exhibits A to J, and

the defence tendered Exhibits 1 to 13. All exhibits were marked for

identification; however, for the purpose of this sentence, I will treat them as

being exhibits on the plea and refer to them as such.

3 Mr N J Clelland of her Majesty’s Counsel, with Mr A Lewis, appeared for Mr

Letten. Mr C Beale of her Majesty’s Counsel appeared for the

Commonwealth Director of Public Prosecutions.

4 Mark Ronald Letten was born on the 14th day of September 1953 and is now

aged sixty. He pleaded guilty to 21 charges of operating an unregistered

managed investment scheme contrary to s601ED(5) and s1311(1) of the Act.

The period of operation of such unregistered schemes was from 1 July 1999

through to 30 July 2010. The penalty provided is 200 penalty units or five

years’ imprisonment, or both.

5 Mr Letten also pleaded guilty to one charge of carrying on a financial services

business without a licence, specifically, that from March 2002 through to

February 2010, by way of aiding and abetting the commission of the offence

by the company LGH Holdings Ltd (“LGH Holdings”), such company being

involved in the issue of interests in the 21 managed investment schemes

which are the subject of the earlier referred to 21 charges. Such is an offence

against s911A(1) and s1311(1) of the Act. The penalty provided is 200


DPP (Cth) v Letten

penalty units or imprisonment for two years or both.

6 Mr Letten also pleaded guilty to five charges of dishonestly using his position

as a director of LGH Administration Pty Ltd (“LGHA”) with the intent of gaining

advantage for himself or others. The total sum involved was $533,686 which

had been lodged by four investors for specific purposes and the criminality

was the use by Mr Letten of such monies in a manner contrary to previous

representations. Each such crime is an offence against s184(2)(a) of the Act.

The penalty provided is 2000 penalty units or five years’ imprisonment or both.

Crown Opening

7 In regard to the first 21 charges, screeds were issued in the name of LGH

Holdings. In Australian Securities and Investments Commission v Letten &

Ors (No 7) (2010) ACSR 401, tendered by the defence, Gordon J concluded

that the 21 schemes were operated in such a way that it was not possible to

say what assets were acquired by what scheme, using what money, because

of the gross intermingling of assets.

8 There were 916 investors involved in the schemes throughout the period 1998

to 2009. In regard to the schemes, none were identical, although each bears

a certain like style; however, each had individual form, timing, documentation

and various mechanisms of capital contribution.

9 As best as I am able to analyse the schemes, they demonstrate in totality

what can be described as an economic shamble or shemozzle, which was

doomed to failure. This whole enterprise, which was overseen by Mr Letten,

had more severe structural defects than the Titanic. Like the Titanic, it sank

ignominiously.

10 In trying to analyse these schemes and the structure thereof, I was assisted

by the details set out in the Prosecution Opening and also by the analysis of

the projects, insofar as Charges 1 to 21 are concerned, undertaken by Gordon

J in Letten (No 7).


DPP (Cth) v Letten

11 Given the background, experience and reputation of Mr Letten, it is hard for

me to contemplate how Mr Letten could have been so negligent, uncaring or

obdurate with the investors’ funds.

12 What stands out is:

(a) Grossly inappropriate and inadequate accounting practices;

(b) The utilisation of the funding of each of the particular 21 projects,

sourced from a variety of persons, in a way which makes it difficult to

trace such investments;

(c) Screeds offering unusually high returns, by way of both income and

capital; however, when such schemes were documented by way of a

joint venture document, which was the formal document evidencing

each scheme, normally there was no provision for any income

payments to be made. However, despite this fact, in many instances

regular income payments were made to the investors;

(d) A failure to properly identify the actual projects relevant to each joint

venture document;

(e) Returns of funds by way of income payments to investors over and

above the value of the subscribed funds, in each particular scheme, by

way of the use of a centralised treasury, conducted by Mr Letten;

(f) A central treasury conducted by Mr Letten, under the guise of a

corporation known as LGH Administration Pty Ltd, which effectively

allowed him unfettered utility of the substantial funds invested.

13 Insofar as the business practices of Mr Letten and, indeed, the operations

throughout this period of the Letten companies, a number of statements were

tendered which were of employees of Mr Letten, such statements being given

in evidence at the committal. I must say with the oversight that I now have, I


DPP (Cth) v Letten

am somewhat mystified how such evidence could seriously have been given

by such employees, as it smacks of total financial ignorance. It may well be

that the whole enterprise was so totally controlled by Mr Letten, insofar as its

defects were concerned, that the operative employees, on a day-to-day basis,

felt they were in fact conducting what appeared to be a regulation business.

14 This aspect of the defence submissions was contained in Exhibit 3, being the

operation of the LGH Group. Reference is made to the opinion proffered by

one Susan Brumby, at page 5 of such submission, with reference to her

committal transcript. Ms Brumby is not an accountant, nor qualified

professionally in financial management. It appears to me that she has no

knowledge whatsoever of the obligations under the Act or the importance of

the individual duty and responsibilities to investors. Her statements affected

me as showing no real knowledge of the individual projects and how they

should have been run according to the law, as she stated it was indeed Mr

Letten who was responsible for the high level management and control of

companies.

15 At page 8 of the submission, there is a reference to one Rosemary Pope, who

was apparently subcontracted to LGHA and was one of the primary contacts

with investors during the period. It is noted that she was in receipt of

commissions from the investments, and spent her time involved in the various

21 projects. She indeed invested her own money in the projects and her

evidence at committal spoke of the probity of the manner in which the projects

were operated. I conclude that she obviously had no idea whatsoever of

relevant legal obligations. She makes the comment that the projects were

good; it would appear there is no issue about that. It was not, apparently, the

individual projects that were the problem, it was what Mr Letten did in regard

to the invested capital funds in such projects, although I suspect the Heritage

Golf Club project may have played a disproportionate crucial role in the

collapse.


DPP (Cth) v Letten

16 Jan Banner is a qualified accountant and her evidence was referred to at page

12 of the submission. She has a Bachelor of Business from Monash

University. Ms Banner originally began work with Mr Letten in an accountancy

firm which he ran, and worked in that capacity from 1988 to 1994. Ultimately,

insofar as LGHA is concerned, she was an independent contractor working on

a monthly retainer of $5,000, plus commission. Ms Banner stated that she

believed wholeheartedly in the projects, and had no reason to doubt the

integrity of LGHA at all.

17 David Honey is a qualified accountant who became the general manager of

LGHA. Specifically from 2003, being involved with the Heritage Golf and

Country Club, where apparently he still works as the general manager of

finance. While not involved with the individual projects, he was involved with

managing and authorising payments of creditors, payments of commissions,

and the execution of the joint venture agreements. Mr Honey was involved in

the running of an actual registered managed investment scheme at HGCC.

He said that at no time was he aware, specifically when he was involved in the

projects up to 2003, of any direction from Mr Letten for, or actuality of,

accounts being falsified or misrepresented. His understanding was that the

aim of the property projects was to operate and complete successfully,

thereby ensuring a return on investment and capital gain to the investors. On

page 15, at paragraph 3.61, Mr Honey stated:

“Because of the operation of the projects and the need sometimes for more money than an individual project would have in its subscription base, extra monies were supplied by Mr Letten. He states that based upon his experience he knew that LGHA was effectively operating a central treasury.”

18 There was reference to a Mr Paul Lane, at page 18 of the submission,

Mr Lane being apparently the CEO or general manager of all of the LGH

projects. He did not give evidence at committal and has made no statement.

19 Generally, it is difficult to come to terms with the comments made by these

operatives. No doubt self-interest and retrospectivity may play a part in their


DPP (Cth) v Letten

statements. It may be that their participation in the totality of the projects and

the earning of commission blindsided them to what was going on. I am not, of

course, suggesting that any of them were involved in any criminality

themselves. However, there seems to have been a complete subservience to

the will of Mr Letten and/or an ignorance of the legal and fiduciary duties

which applied to these investors, victims, and, in particular, the invested

funds.

20 The use of the central treasury, and lack of appropriate accounting by

Mr Letten, smacks of total arrogance. The materials indicate that Mr Letten,

over many years prior to this time, had been involved in successful property

management and development, and had acquired for himself and his

investors much wealth. Whether his arrogance in his system emanated from

blind faith in his prior success and belief in his ultimate success I am unsure.

However, his actions put at grave risk the investments of all of the 916 people

involved. There is no doubt, in regard to the fiduciary duty that he had to his

investors, that he gravely breached it. What the motive was no one will ever

know; however, clearly, he was desperately trying to maintain his “empire”.

21 As detailed in the numerous authorities that were tendered, the relevant

provisions, of which we are dealing with in the Act, generally form a regulatory

system intended to guard against: investment or market risks (the risk that

investment will decline in value); institutional risk (the risk that an institution

operating the scheme might collapse), and compliance risk (the risk that the

operator of the scheme might not follow the rules of the scheme’s constitution

or laws governing the scheme, or would act fraudulently or dishonestly). In

understanding such regulatory system, I was assisted by the statement of

Pamela Hanrahan, ASIC Regional Commissioner of Queensland (Exhibit B),

which analysed the schemes, the manner of their operation and purpose. I

find that each of those risks, which the regulations are designed to guard

against, not eliminate, were gravely exacerbated by the manner in which Mr


DPP (Cth) v Letten

Letten ran the organisation over such period.

Concurrency – 21 schemes or 1?

22 In considering the issue as to concurrency in this sentence, one of the issues

raised was how should the Court look at the various projects? It was the

submission of Mr Clelland, on behalf of Mr Letten, that, in effect, there was

only one property trust, which was conducting 21 projects, and that such trust,

pursuant to the authorities, was, in fact, registrable in such form.

23 The written submission of the defence in this regard is set out in Exhibit 9A

and was spoken to by Mr Clelland.

24 Essentially, at paragraphs 5.16 to 5.21 of such submission, it was put that the

reality of the LGHA involvement, as arranged by Mr Letten, was that all of the

individual schemes should, in reality, be seen to be a conglomerate scheme.

25 In support of such argument, authorities were referred to, in particular at

paragraph 4, and reliance was placed upon the findings of Gordon J in her

pooling decision (Letten (No 7)), in particular at paragraphs 5.3 to 5.15.

26 However, Mr Clelland’s submission fails to concentrate on the various

authorities cited, if I might say so, and instead bases the proffered conclusion

upon the actuality of how Mr Letten conducted the schemes, so as to utilise all

funds for all purposes, irrespective of their origin.

27 In considering the definition of a managed investment scheme set out in s9 of

the Act, one must look, I accept, at the substance of the enterprise and that a

scheme will include all parties necessary to the furtherance of the enterprise.

(See paragraph 2.11 of submission.)

28 As set out in Australian Softwood Forests Pty Ltd & Ors v Attorney-General

(NSW) (1981) 36 ALR 257, 262, the participation of individual parties is not

limited to one of the parts or elements of a scheme, or their profit, or

remuneration being derived from the particular activities in which they engage.


DPP (Cth) v Letten

It is also clear that there can be pooling of investors’ funds in a scheme.

Further, insofar as considering the concept in the definition of pooling, such

funds can be made up of numerous payments from participants and used for

the purposes they contemplate and there can be individual returns in

accordance with such contemplation.

29 However, what is important is a consideration of the intent of the parties.

Further consideration of the definition and, in particular, the phrase “common

enterprise” was provided by Mason J in Australian Softwood Forests, [133], as

to how one can, in the same scheme, have two separate operations

constituting an enterprise. He held that it would be enough to be a common

enterprise if “the two operations … contribute to the overall purpose which

unites them”.

30 In Australian Securities and Investments Commission v Takaran Pty Ltd

(2002) 170 FLR 388, Barrett J considered the concept of a “scheme” within

the definition, and said, at 393 [15]–[16]:

“The essence of a ‘scheme’ is a coherent and defined purpose, in the form of a ‘programme’ or ‘plan of action’, coupled with a series of steps or course of conduct to effectuate the purpose and pursue the programme or plan.”

[my underlining].

31 In considering Mr Clelland’s submission, and the authorities referred to, I find

that at no stage, based upon the materials before me, was there any:

(a) coherent or defined purpose whereby these 21 schemes were

connected;

(b) any evidence of a contemplated contribution by each of the 21

schemes to any overall purpose which would unite them;

(c) any evidence that before any contributions were made, that an

identified program or plan of action or scheme had been articulated,

much less a scheme whereby all the schemes were understood by the


DPP (Cth) v Letten

individual investors to be interrelated.

32 The only coherence, if that is the word, appears to have been in Mr Letten’s

head, in that he utilised all funds deposited in the 21 schemes for any purpose

he articulated, making income payments to all investors from a central bank,

thereby ensuring continued acceptance and compliance from such investors

as to his apparent financial abilities and capabilities.

33 Mr Clelland sought support for his submission from the tendered decision of

Gordon J (Letten (No 7)) as to the pooling of whatever assets remained, in the

sense that it was suggested that her Honour’s decision reflected the reality of

how the schemes were conducted.

34 The question that has to be answered is not how Mr Letten conducted the

schemes, but, taking account of all parties concerned and the course of

conduct undertaken, what type of schemes were they? Gordon J was sharply

critical of the way the schemes had been conducted, the funds commingled,

accounting undertaken which did not reconcile and was unreliable, with no

statutory accounts ever prepared or audited. The reason her Honour decided

upon the pooling decision was in light of such findings, and the consequential

prohibitive costs of tracing.

35 As her Honour noted (Letten (No 7) [302]), and what is obvious from a perusal

of the individual joint venture agreements, such agreements reflected that all

investor capital contributions were to be applied solely for the purposes of the

project and for no other project, investors were not financing any general

undertaking; rather, the capital was advanced “to the joint venture” and in

each scheme it was intended that such investments should be paid into a

bank account to be operated and maintained in accordance with the terms of

the joint venture agreement.

36 Her Honour went on, when considering the fiduciary duties involved in the

joint ventures, to say (Letten (No 7) [304]) that properly construed, and having


DPP (Cth) v Letten

regard to the relevant circumstances and the terms of the joint venture

agreements, an obligation was assumed for the benefit of all parties to it, with

a view to maximising the financial returns to all parties to such individual

scheme.

37 I stress, of course, that neither Mr Letten, nor LGHA were ever parties to any

of the schemes, albeit Mr Letten was often the sole director, or a joint director

with Mr Lane, of the proposed management company in each joint venture.

38 Her Honour then concluded, with which I totally agree, as follows:

“Here, the corporate defendants and the relevant manager were in breach of their fiduciary duty to investors when they promoted investments in schemes but did not keep the investments separate and instead commingled and combined the investors’ capital contributions to their own collateral purposes and did so without the knowledge or informed consent of joint venturers … .”

39 It should be said, of course, that despite what was stated in the joint venture

agreements, it would appear that the capital contributions of investors were

not paid directly to the manager, as so decreed, but, apparently, directly, as

instructed by Mr Letten it would seem, to LGH Administration Pty Ltd. Why

this was done by otherwise careful investors is difficult to understand. I have

perused the Victim Impact Statements and they are at one when they talk of

the trust held in Mr Letten. As ultimately submitted by Mr Clelland, such trust

emanated out of a long history between the investors and Mr Letten, being

that the majority were connected to the Amway concept of capital acquisition.

As I have said, they were successful in the past; had achieved capital

appreciation with schemes. No doubt it was this trust which was paramount in

investors consenting to forward funds to LGHA, which appear to be

inconsistent with the very agreements entered into.

40 The blame, for such failure of fiduciary duty, lies with Mr Letten, who, as

described by his employees, was the person responsible for all high-level

management determinations and control of all the companies.


DPP (Cth) v Letten

41 I reject the submission of the defendant. I find, beyond reasonable doubt, that

there were in fact 21 separate managed investment schemes which were

operated by Mr Letten in breach of the requirements of s601ED(1), which, of

course, is what Mr Letten has pleaded guilty to. Despite such finding, the

principle of totality will, of course, still have to be taken into account.

Was Mr Letten aware of the obligation to register each of the 21 managed investment schemes?

42 In dealing with this, it is important to remember what Sundberg and Dowsett

JJ described in Brookfield Multiplex v International Litigation Funding Partners

Pte Ltd (2009) 180 FCR 11 at [31] as a “fair summary” of the risks likely to be

encountered by investors, as identified by the Australian Law Commission

(“the Commission”) in its Report No 65, “Collective Investments: Other

People’s Money”. The Commission identified the risks, which any regulatory

system should guard against, being investment or market risk, institution risk

and compliance risk. It seems to me appropriately arguable that the

introduction of Chapter 5C of the Act was to such effect.

43 Further, in this consideration, the Court must take into account the period of

offending of Mr Letten’s crimes, being a period of effectively ten years. Prior

to and during all such time, he was a certified CPA accountant with a Tribeca

Training Certificate, which included competence in the area of managed

investment Schemes. (See Attachment C of the Prosecution’s submission on

sentence, Exhibit H).

44 Mr Letten had extensive experience in property management and, in fact, had

particular experience in managed investment schemes, of which he was a

director. Mr Letten was the managing director of a management trust known

as Yarra Valley General Management Ltd (“YVGM”) from 1998, and in 1999,

had signed for a further managed investment scheme known as the Sebel

Heritage Lodge Managed Investment Scheme, and a director’s declaration

that the compliance plan and the constitution complied with the Act. In


DPP (Cth) v Letten

addition, an ASIC dealer’s licence was given in September 1999 to YVGM, of

which Mr Letten was a director, to operate a single registered managed

investment scheme, being the Sebel Heritage Lodge. Subsequently, on

29 September 1999, a prospectus for the Sebel Heritage Lodge Managed

Investment Scheme was issued and under the heading “Responsible Entity”,

Mr Letten was identified as the chairman of both the responsible entity and its

compliance committee. Further, he was a director of a managed investment

scheme known as YVG Direct Property Fund No 1, which was registered on

7 February 2002. In this regard, I note the submissions set out in

paragraph 34 of the Prosecution submissions on sentence (Exhibit H) and I

have no hesitation in accepting such submissions.

45 I find beyond reasonable doubt that Mr Letten was well aware of his obligation

to register each of these managed investments schemes.

Did Mr Letten intend to operate each of the 21 managed investment schemes, without registration?

46 The relevance of this question comes about from Mr Clelland indicating that

though his client had pleaded guilty to the first 21 counts, such plea was on

the basis that it was submitted that Mr Letten was reckless as to such

requirement and therefore the crimes were not intentional. As this matter was

in dispute, it is necessary for the Court to make a finding.

47 The definition of intention is set out in s5.2 of the Commonwealth Criminal

Code 1995, and is as follows:

“A person has intention with respect to conduct if he or she means to engage in such conduct.”

48 Given the knowledge that Mr Letten had of the Act, his long experience in

property development and his actual experience of at least two managed

investment schemes, I have no doubt that the decision to operate each of the

21 schemes in an unregistered state was deliberate. I make such finding

based upon my conclusion, upon all of the facts, that Mr Letten intended to do


DPP (Cth) v Letten

so, because, he would otherwise have been constrained by the regulatory

safeguards which did not in any way suit his purposes in regard to the

invested funds. As such, I find beyond reasonable doubt that it was the intent

of Mr Letten, that the victims in this matter should not be given the regulatory

protections applicable to a registered managed investment scheme as

detailed in the Act, and explained in the statement of Ms Hanrahan

(Exhibit C).

Causation – Losses

49 For the purpose of the plea, there was no issue from the defence that the

investors in the 21 schemes suffered a loss assessed at $67 million.

50 The question for this Court is whether the criminal actions of Mr Letten in

regard to Charges 1 to 21, were the cause of such loss.

51 The defence argued that had there been no Global Financial Crisis in 2008-

2009, and if the assets of the 21 schemes had not been subject to

receivership, Mr Letten could have traded his way out of the dilemma.

52 I reject such argument. Mr Letten was, in reality, prior to both the Global

Financial Crisis and the receivership, on a downward spiralling economic frolic

whereby he had taken grave structural risks with each of the individual

managed investment schemes by way of commingling of assets, failed to

effect the regulatory safeguards, which would have applied if each of the

schemes had been registered.

53 I accept the submission that the fact of registration alone of any managed

investment scheme does not protect such a scheme from loss, nor does

registration offer financial protection or assurance of financial performance for

any investor; and, further, as demonstrated in the submissions, that even

registered managed investment schemes have delivered very large losses.

However, the purpose of the regulations are unrelated to profitability of a

managed investment scheme; they are to provide protection for investors, as


DPP (Cth) v Letten

determined by Parliament.

54 It was also submitted, and is true, that even though the schemes were

unregistered, obligations still applied in regard to each manager of each

scheme, pursuant to Chapter 7 of the Act, and individual directors were still

subject to the duties which applied by way of Chapter 2D of the Act.

55 It was put by the defence that the Director has not sought restitution in regard

to any of these 21 charges. I have not been advised why that is so, or

whether same was possible. However, I do not think that fact advances the

determination I must make, in this case, in any way.

56 There is no doubt in my mind that the actual cause of the loss was the

business structure initiated by Mr Letten. The description of Gordon J, to

which I have referred earlier [38] with which I agreed, was only possible by the

intentional failure of Mr Letten to register these schemes. The lack of

accounting, the commingling of assets and the failure of fiduciary duties would

not have been possible had the schemes been registered, as is required by

the Act. While I accept that these compliance structures are self-regulatory,

the imposed strictures of registration would not have allowed Mr Letten to act

in the way he did. I have no doubt that that is why he did not register each of

them.

57 The criminal test of causation is:

“…whether … a series of acts … are so connected with the event … that it … must be regarded as having a sufficiently substantial causal effect which subsisted up to the happening of the event, without being spent or without being in the eyes of the law sufficiently interrupted by some other act or event.”1

58 In this regard, I have also taken into account the law as expressed in R v

Storey [1998] 1 VR 359 and R v Olbrich (1999) 199 CLR 270.

59 Mr Letten did not register the schemes, because that allowed him to deal with

1 Hallett v R [1969] SASR 141 at 148-149


DPP (Cth) v Letten

the money of each of the investors/victims who contributed capital to the

individual schemes. Mr Letten could thereby conduct the schemes within the

Letten financial structure. I find beyond reasonable doubt, such financial

structure was the substantial causative effect of the losses, albeit that the

immediate catalyst for the occurrence of such losses was the Global Financial

Crisis, which were subsequently exacerbated by the receivership.

60 Insofar as the receiverships themselves are concerned, I accept the

Prosecution argument that it was the very structure set up by Mr Letten which

led to Gordon J determining the schemes were not in a state where they could

be registered.

61 I would therefore reject the submission of the defendant set out in paragraph

2, Exhibit 9B, and do not accept that such losses are a neutral fact insofar as

sentencing is concerned, as submitted in Exhibit 9C, paragraph 6.6. I am

satisfied, on the principles I have detailed, that such losses are an aggravating

factor in each of charges 1 to 21 of the criminality of Mr Letten.

62 As to the losses, it is important to understand that this Court, by this sentence,

cannot return lost funds to the investors. Being unregistered, there is no

insurance protection available for any derogation of duty by a director. Also,

victims must realise that, despite their personal trauma, such losses are but

one of the factors this Court must consider under s16A of the Crimes Act

1914, and this Court is necessarily limited by the prescribed maximum penalty

provided for by Parliament, which I have earlier detailed.

Dishonesty – Charges 23 to 27

63 Given the authority of SAJ v R (2012) 36 VR 435, on the facts as I see them,

irrespective of the test applied, I would find Mr Letten to have acted

dishonestly. However, as submitted by the Prosecution, I accept that

Mr Letten acted dishonestly in the terms of the definition set out in the Peters’

test.


DPP (Cth) v Letten

Intention – Charge 22

64 It is to be pointed out that Mr Letten is charged with aiding and abetting

LGH Holdings in this matter. Again, given Mr Letten’s experience, training

and the actual manner of operation of the managed investment schemes, I

reject the submission that to allow the company to issue securities in regard to

each of the 21 schemes, was not intentional. I am satisfied beyond

reasonable doubt that such was intentional.

65 Given the above findings, I come to consider the respective sentencing

submissions.

Prosecutor’s submissions

66 The Prosecutor submitted, and I accept, that there is no fraud alleged in

regard to Charges 1 to 22.

67 The Prosecutor submitted that, in regard to Charges 1 to 21, such regulatory

protection is designed to protect the investing public and, as such, general

deterrence is very important.

68 The Prosecutor submitted that, in regard to Charges 1 to 21 and Charge 22,

each is a serious example of such crime, given the scale and duration of

same.

69 In regard to Charges 23 to 27, the Prosecutor stressed the dishonesty, the

breach of trust involved and the amount of money in each charge.

70 While accepting good character as a matter that must be taken into account,

the Prosecutor submitted that good character is not as significant in white

collar crimes. It seems to me that the correct position is set out by T Forrest J

in R v Rau [2010] VSC 370, [32], where his Honour said:

“You have no prior convictions. It is often stated that in ‘white collar’ cases that fact has a lesser significance than in other types of cases. That is because it is this type of offenders’ good character that allows him or her to be the repository of the very trust that they have breached. Whilst it is of lesser weight than otherwise it would be, prior good character remains a relevant sentencing consideration. It informs


DPP (Cth) v Letten

aspects of personal deterrence, rehabilitation and the concept of adequate punishment.”

71 The Prosecution stressed the consequences in regard to Charges 1 to 21 and

adopted Mr Clelland’s phrase that such consequences, for the

916 participants in the schemes, were profound and enduring. I was referred

to the Victim Impact Statements in this regard and I have re-read those.

Without going to each of them individually, they indicate the substantial losses

effected in each case, they also demonstrate the degree of trust that was

reposited in Mr Letten personally; they illustrate the devastating impact

occasioned where savings and capital, acquired for retirement, family

assistance or education, have been lost.

72 Reading these Victim Impact Statements was quite heart-rendering and

dramatic. I am not quite sure why the Prosecution confined such to eleven

persons only. However, the accepted totality of the loss, and these eleven

particular examples, demonstrate the devastating impact of such.

73 In regard to Charges 23 to 27, it is acknowledged that all the monies have

been repaid by Mr Letten, albeit that I have signed a Restitution Order in such

amounts, as part of this plea.

Mr Letten’s mental state

74 The Defence tendered two reports of psychologist, Patrick Newton, the first

dated 23 April 2014 and the second 4 May 2014. Set out therein is the history

of depression suffered by Mr Letten, which led to the 1990 breakup of his first

marriage. It is noted that he remarried in 1993. Apparently he had an

exacerbation of such depression in 2004, which appears to be related to a

stress condition and thereafter, shifted to live in Christchurch, New Zealand.

The depression re-emerged in 2008, no doubt as a consequence of the

totality of the impact of these crimes.

75 Mr Letten appears to have been, based upon the statement of his wife and

other references set out in Exhibit 8, a person totally focussed on the business


DPP (Cth) v Letten

of the Letten empire. Mr Letten also had particular issues in regard to the

mental condition of his current young family. At page 8 of the first report of Mr

Newton of April 2014, it is noted that Mr Letten is not seen to suffer from any

psychosis or formal thought disorder, and his capacity for moral reasoning is

unimpaired; he was estimated to be of high-average intelligence. The

recurrent bouts of depression and mood disturbance were noted dating back

to the period I have indicated. At page 9 of the report, Mr Newton was of the

view that Mr Letten’s symptoms are likely to have had a significant effect upon

his mental clarity at the time of the offending conduct.

76 In the latter report of May 2014, such opinion is maintained. However, in

addition, at page 4, Mr Newton stated that Mr Letten set very high standards

for himself, recognised that he failed to live up to these standards and as

such, is subject to a harsh self-punitive focus of internal dialogue, which, in

Mr Newton’s opinion, has exacerbated the pre-existing depressive condition.

Mr Newton felt the remorse of Mr Letten was genuine, but that the depression

had now become all-encompassing, impacting upon his whole day, sleep and

ability to care for his family. It is noted, at page 10, that Mr Newton

considered Mr Letten to be emotionally vulnerable and would experience a

significant deterioration in mental state should he be imprisoned. It was Mr

Newton’s opinion that the distress associated with such imprisonment would

be of a degree that would be far more than for the normal prisoner.

77 In assessing such opinion, it is to be noted that Mr Letten’s brother, John,

gave evidence of his brother’s ongoing ability in the conduct of the family

company, Elastomers Australia. A number of character references spoke to

Mr Letten’s conduct of such company, indicating that whatever his depression,

Mr Letten has continued to be able to act efficiently and in a responsible

corporate manner.

78 The Crown expressed no issue with the opinion as to Mr Letten’s depression,

and the impact of a period of imprisonment upon Mr Letten. There is no


DPP (Cth) v Letten

submission from the defence that his mental condition should in any way

reduce the culpability involved in these crimes.

79 In conclusion, the Prosecution submitted that an immediate sentence of jail

was appropriate, given the aggravation of the crimes by way of breach of

trust, the length over which such crimes were committed, the sums involved

and the impact of losses. The Prosecution referred to R v Sellars, in the

sentencing remarks of Smith J of the South Australian District Court, 9 May

2008 (unreported, No DCCRM-09-383), where he said:

“The significance of your previous good character is eroded by the prolonged course of this fraudulent conduct. Indeed, it was your good character which enabled you to be in the position of trust that you so exploited.

General deterrence is a paramount sentencing consideration, particularly where, as was the case here, the offending involves a breach of trust. The commercial world rightly expects that professional executives such as yourself conform to exacting standards of honesty.”

80 I make the point that the breach here, in regard to Charges 1 to 22, does not

involve fraudulent conduct, but a breach of regulatory compliance.

Defence submission

81 Mr Clelland, in final submission as to sentence, stressed the personality of

Mr Letten and asked the Court to understand his obsessional commitment to

his job, and referred, in particular, to the statement of Mr Letten’s wife, to

which I have already referred, contained in Exhibit 8, tab 4, at paragraph 38

thereof, where she stated that his sense of duty to the investors was such that

it exceeded that given to the family. Mr Clelland submitted that Mr Letten was

the “heart and soul of the business”, with which I totally agree. Mr Clelland

submitted that the business was managed so as to ensure entitlements, which

I accept; however, such was done to the disregard of all other obligations so

that funds from the schemes were used freely and indiscriminately. The thirst

for entitlements, and the manner in which the business was conducted,

created a dangerous potential for all of the investors.


DPP (Cth) v Letten

82 Mr Clelland asked the Court to take into account the long-term history of many

of the investors, ninety per cent of whom he said were connected to Mr Letten

through the Amway organisation. They had developed trust in Mr Letten

through such connection, indeed this was the background to their investment

in the various schemes. I have no doubt of this and accept it totally.

83 Mr Clelland took the Court to the various schemes and the warnings therein

given to all of the investors and disclaimers clearly made. I have no doubt

that such applied. I have no doubt that investors who put their money into

these various schemes were well aware of the normal commercial risks. I am

sure the investors hoped, given their background of experience with

Mr Letten, that as had happened in the past, those risks would be averted.

However, the real danger in each of the schemes was not set out in the

disclaimers. The investors were not aware of the grave risk to their individual

investments from the manner in which such funds would be used, which

Mr Letten had orchestrated. The investors in each individual scheme were

kept totally in the dark as to the true manner of operation of Mr Letten’s

commingled schemes.

84 I accept that Mr Letten himself has lost $17 million of his own funds. This was

not disputed by the Prosecution; however, such is hardly ameliorating and

brings into sharp focus how risky the whole enterprise was. Even with the

injection of $17 million of his own funds and the fact that he has made no

proof of debt against any of the companies, such demonstrates to me the

grave risk presented by the way Mr Letten managed the schemes.

85 Mr Clelland relied upon Mr Letten’s experience, qualifications and standing in

the accounting community, and the references to such. I accept such

standing is now forever tarnished. In Exhibit 4, table 1, was a profile of

investors proving that of the 25 called at committal, 22 had previously had an

Amway connection. Unfortunately, the end result of all of this, was that such

history added to Mr Letten’s allure and to the unknown danger to the


DPP (Cth) v Letten

investors. I accept that each investor had a long history of repeated investing

with Mr Letten and were not persons who were “cold called”. Again, however,

this trust was the real danger; there was total trust in Mr Letten and,

unfortunately, he arrogantly failed to implement the statutory safeguards

which would have protected these longstanding investors.

86 I cannot remove from my mind the analogy to the gambler who keeps

gambling despite ongoing losses. Mr Letten was totally arrogant in regard to

his capacity and believed that the rosy past would continue forever; such

appears to be based on an opinion that capital values would always increase

and asset values would never decrease. Unfortunately, this proved to be

totally incorrect.

87 I accept the strong support for Mr Letten of each of the character witnesses, in

particular his wife, brother, Mr Ryder, Mr Woodgate, Mr Granter and Mr

Caputo.

88 Mr Clelland also gave the Court an analysis of previous decisions, insofar as

like offences are concerned (Exhibit 12) and took me through those, and the

Court was assisted in its task by such.

89 The Prosecution also tendered a number of sentences, similarly arranged

(Exhibit J).

90 As the Court of Appeal said in Hudson v R (2010) 30 VR 610, [27] to [29] and

in Hasan v R (2010) 31 VR 28, [52] to [56] such reference plays a part in

informing the instinctive synthesis of the sentencing process, but must, of

course, be balanced against the need to do justice in the particular case.

Necessarily, this sentence must be informed by the particular circumstances

of these crimes, their consequences as I have identified, together with

consideration of the antecedents and conditions of Mr Letten.

91 I accept the submission of Mr Clelland that there is no evidence of any


DPP (Cth) v Letten

utilisation by Mr Letten of the funds for his own private purpose or for any

improper purpose, unassociated with financing, the totality of his financial

empire. I accept the breach here is not, at least in regard to the first 22

offences, fraudulent but regulatory.

92 As to other sentencing factors, Mr Clelland stressed the cooperation, the early

plea, the fact that no proof of debt has been lodged by Mr Letten and that I

should accept, which I do, that Mr Letten’s remorse is genuine. I also note

that full reparation was made in regard to the last five charges, and that given

the analysis of the spreadsheet of LGHA, a sum of $300,000 of Mr Letten’s

own monies was contributed, after that company was moving into crisis.

93 I also accept that Mr Letten has no prior offences and a previous good

character, and by his plea, will lose his professional standing and

accreditation and is likely to be ordered not to be a director of any company

for at least five years, and thereby loses his career. I also accept that Mr

Letten has significant family issues, exacerbated by his own mental condition.

94 Mr Clelland conceded that the crimes are serious and that a jail sentence is

called for; however, he submitted that, pursuant to Commonwealth sentencing

provisions, such sentence can be effected, and an immediate recognisance

release be granted, in all the circumstances.

95 One aspect that is important here is that of social rehabilitation. Vincent JA

spoke of this in Director of Public Prosecutions v DJK [2003] VSCA 109,

where the crimes involved were quite different, but the principle equally

applicable:

“This notion of social rehabilitation is one that I do not believe has been accorded anything approaching significant recognition as an identifiable underlying concern of the criminal justice system. It seems to me that the process of social and personal recovery which we attempt to achieve in order to ameliorate the consequences of a crime can be impeded or facilitated by the response of the courts. The imposition of a sentence often constitutes both a practical and ritual completion of a protracted painful period. It signifies the recognition by society of the nature and significance of the wrong that has been done to affected members, the assertion of its values and the public attribution of responsibility for that


DPP (Cth) v Letten

wrongdoing to the perpetrator. If the balancing of values and considerations represented by the sentence which, of course, must include those factors which militate in favour of mitigation of penalty, is capable of being perceived by a reasonably objective member of the community as just, the process of recovery is more likely to be assisted. If not, there will almost certainly be created a sense of injustice in the community generally that damages the respect in which our criminal justice system is held and which may never be removed. Indeed, from the victim’s perspective, an apparent failure of the system to recognize the real significance of what has occurred in the life of that person as a consequence of the commission of the crime may well aggravate the situation. … .”

[My underlining].

96 As his Honour said in Director of Public Prosecutions v Toomey [2006] VSCA

90 at paragraph [22], discussing this concept:

“… The vindication of the victim in cases of this kind, in particular, is profoundly important if the criminal justice system is to perform its role properly.”

97 I have taken account of all of the matters referred to above, and which were

put to me by Counsel. I must, of course, take into account the matters set out

in s16A of the Crimes Act (Cth) 1914. I find, in particular, these offences are

of such a nature and seriousness that the sentencing principles of deterrence

and adequate punishment are of particular importance.

98 In considering the submissions put to me, I have determined, unfortunately for

you, Mr Letten, that I would be failing in my duty, after taking account of all the

relevant factors, if I passed a sentence upon you which did not include

immediate imprisonment. I therefore reject the submission of Mr Clelland in

this regard.

99 Would you please stand, Mr Letten.

100 On each of the first 21 charges, you will be sentenced to three (3) years’ jail.

101 I point out that in regard to each charge, the loss suffered by the victim as a

result of such criminal behaviour was an aggravating factor. I have been

unable, despite the limited assistance provided by Exhibit 11, to further

discriminate between each of the particular victims concerned in each charge,


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because I do not know the precise details of each investor’s loss, nor the

particular individual impact that such loss had, nor the individual resources of

each such investor.

102 If this was a State sentence, I would simply order that one month of the

sentence imposed on each of the Charges 2 to 21 be served cumulatively

upon each other and upon the three years imposed in regard to Charge 1 in

order to achieve an aggregate sentence for Charges 1 to 21 of four years and

eight months.

103 I will shortly detail the commencing date of each such sentence so as to

accord with the Commonwealth sentencing practice as detailed in s19(2) of

the Crimes Act (Cth) 1914.

104 As to Charge 22, I sentence you to two (2) years’ jail.

105 As to each of Charges 23 to 27, I sentence you to two (2) years’ jail on each

charge.

106 It is my intent that one (1) year of the sentence in regard to Charge 23 be

served cumulatively upon the aggregate sentence imposed in regard to

Charges 1 to 21, making a total aggregate sentence imposed upon you this

day of five (5) years and eight (8) months.

107 In determining an appropriate non-parole period, I consider that the

circumstances in this case justify the imposition of a period which is less than

would usually be imposed. I do so, taking into particular account your health,

age and previous good character, Mr Letten.

108 I order, pursuant to the provisions of s19AB of the Crimes Act (Cth) 1914, that

you serve a period of three (3) years before being eligible for parole.

109 Assuming section 6AAA of the Sentencing Act (Vic) 1991 applies, I declare

that had you not pleaded guilty, I would have sentenced you to an aggregate


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term of 7 years and 6 months with a non-parole period of 4 years.

110 As to the commencement of the sentences, the sentence imposed in regard

Charge 1 will commence today.

111 In regard to Charges 2 to 21 respectively, such sentences will commence one

month thereafter in each instance, so that the sentence on Charge 2 will

commence on the 14th day of September 2014 and respectively, leading up to

the sentence in regard to Charge 21, which will commence on the 14th day of

April 2016.

112 The sentence in regard to Charge 22 is to begin today.

113 The sentence in regard to Charges 23 to 27 are to begin on the 14th day of

April 2018.

114 For certainty, I indicate that the due date for parole is to be the 14th day of

August 2017.

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IN THE COUNTY COURT OF VICTORIA AT … COURT OF VICTORIA 250 William Street, Melbourne !Undefined...

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