Adam Cranston's Plutus Payroll grew exponentially through its fee-free services and rewards programs, using drug-addicted straw directors and phoenixed companies as a front for a $105 million tax fraud, a jury has heard.
Billing itself as "Australia's first zero-fee outsourced payroll service," Plutus offered "Plutus Points" which gave clients gift cards in exchange for referrals and remaining with the firm, crown prosecutor Paul McGuire SC said on Wednesday.
"In other words, Plutus paid workers to come and use its fee-free services ... You might think that that just sounds too good to be true," Mr McGuire told the jury.
This fee-free system was attractive as it allowed Plutus' clients to avoid yearly fees of around $15,000 per worker which were charged for legitimate payroll services.
From July 2014 to April 2016, Plutus brought in $72 million in gross employer wages to be processed through its payroll services. This increased to $336 million between January 2016 and April 2017.
As the criminal trial against Cranston and four other accused in the NSW Supreme Court continues, the Crown alleges Plutus and a number of second tier subcontracting firms were set up as a "front" to defraud $105 million in unpaid PAYG withholding tax and GST which should be been remitted to the Australian Taxation Office.
While Plutus claimed it did not charge fees because it was profitable through other revenue streams such as commissions from mortgages and car loans, or payroll financing services, the jury heard these offerings did not bring in profits anywhere near the $105 million allegedly defrauded from the tax office.
From July 2014 to July 2017, the firm used an increasingly complex structure of subcontractors, many of which were "phoenixed or liquidated" as the ATO closed its net around the scheme by freezing bank accounts and seizing funds, Mr McGuire said.
Individuals with substance abuse or addiction were also allegedly paid cash and signed on as "straw directors" of companies within the Plutus scheme.
The jury heard how Cranston used his father Michael Cranston, who was then deputy commissioner of the ATO, to "suss out" the extent of the tax office's investigation into the allegedly fraudulent scheme in 2017.
"It would seem Adam Cranston was using his father as a sounding board to obtain information," Mr McGuire said.
Accused with Adam Cranston are Lauren Cranston, Dev Menon, Jason Onley and Patrick Willmott. Menon is a Sydney-based solicitor who allegedly advised about the conspiracy.
Recorded conversations from late 2016 and early 2017 show the five accused talking about the risks of wire taps, how to get their stories straight to the police, and a former director Peter Larcombe, now deceased, who had Porsches in Dubai from his role in the scheme.
"There will be evidence about Porsches. Peter Larcombe's not the only person who got Porsches out of this," Mr McGuire said.
The five accused have all pleaded not guilty to one charge of conspiring together to form the Plutus Payroll scheme in order to defraud $105 million and one charge of money laundering these appropriated funds.
The jury also heard that two alleged Plutus co-conspirators who cannot be named previously pleaded guilty to the charges of conspiracy and money laundering and have been sentenced to jail.
The trial with Justice Anthony Payne continues.
