Court reinforces hard line on corporate fraud: corporation’s deep pockets don’t detract from seriousness of offence

A former manager of a listed corporation recently learnt the hard way that our courts take white collar crime seriously regardless of the corporate victim’s size or financial position (Pereira v R [2018] NSWCCA 171).

Byran Pereira was the procurement officer and fleet manager of Coca-Cola Amatil Ltd. Using various methods, including receiving secret commissions and other benefits, he defrauded his employer of $3.2 million over 11 years.

Mr Pereira pleaded guilty to various offences under the Crimes Act 1900 (NSW). In sentencing him to an aggregate sentence of six years’ imprisonment, with a non-parole period of four years, Williams J of the District Court of NSW had regard to the following significant aspects of the offending which:

• led to the loss of a substantial amount of money of approximately $3.2 million;
• took place over 11 years from 2004 to 2015;
• was motivated by greed and committed for financial gain;
• involved premeditation and considerable planning, with a high degree of deception and sophistication over a long period of time; and
• was aggravated by the fact that Mr Pereira, as a senior executive in a large company, was in a position of trust.

What if the corporate victim is big enough to absorb the loss?

Mr Pereira appealed his sentence to the NSW Court of Criminal Appeal, where he argued that his offending —and Coca-Cola’s loss—were not substantial because the company had made hundreds of million dollars a year in profits during the 11 years he was committing his crimes.

Although Mr Pereira managed to avoid contending that his choice of a large corporate victim was a mitigating feature, he submitted that Coca-Cola’s capacity to absorb the loss was relevant to the assessment of the objective seriousness of the offence.

The Crown countered by saying that Mr Pereira was in effect arguing that the objective seriousness of an offence is mitigated because it could have been worse— and that would be wrong (both as a matter of legal principle, not to mention morally).

The NSW Court of Criminal Appeal agreed with the Crown, concluding that:

"Although the applicant denied that he was putting the matter as a mitigating feature, that is the effect of the argument. Had the victim here been a small company that perhaps went into liquidation as a result of the frauds, that may have been an aggravating matter. From an objective point of view, a fraud involving a little over $3 million is objectively serious and the fact that [Coca-Cola] was able to absorb the losses does not make the offending less serious."

What we can learn from this decision

The deliberate and sophisticated theft of a substantial sum of money by a trusted employee over a long period is a serious crime regardless of the size or financial health of the corporate victim, and the courts will sentence offenders accordingly.

The size or financial health of the corporate victim will, in our view, assume greater significance if the white collar criminal offence was a cause of a corporate victim’s financial hardship or collapse. In either case, the corporate victim can also consider making a claim for victim’s compensation against the perpetrator to recover its losses.

It is not uncommon for white collar criminals to try to justify their behaviour on the basis that it is not that serious in the context of the organisation’s size. This is why raising awareness among and educating employees, particularly in large organisations, that the courts do, in fact, take such offending very seriously can help to reduce the likelihood of corporate fraud. Employees are arguably more likely to think twice about offending when they know the seriousness of the consequences.

A useful addition to corporate fraud or anti- corruption policies, training programs, internal communications and the like, is a specific reference to the fact that the courts will not show leniency towards offenders because their employer possesses strong financial resources. It is also a good idea to include details of the maximum sentences for key fraud offences.

This article was first published in Inhouse Counsel, Volume 23 No 3&4, June 2019