ATO fraud case: How did the investigation into the alleged $165m theft unfold?

By Sue Daniel and Riley Stuart.

Planes, sports cars, artwork and fine wines were among the boys’ toys and luxury goods that the Australian Federal Police allege were purchased as part of a major tax-fraud conspiracy.

Don’t forget the houses.

Operation Elbris, a police investigation into major fraud involving a $165-million theft from the Commonwealth, is looking at evidence from at least as far back as June 2016.

Australian Taxation Office (ATO) deputy tax commissioner Michael Cranston’s son, Adam Cranston, was arrested in Sydney yesterday as part of an Australian Federal Police (AFP) sting.

Michael Cranston, who police say may have been unaware he was entangled in the activities of others, has been issued with a court attendance notice.

The AFP has described the investigation as the “most significant” Australian white-collar criminal investigation in terms of the number of people and amount of cash involved.

Police will allege the group had a lavish lifestyle and diverted taxpayer funds to buy planes, sports cars, jewellery, property, artwork and fine wines.

As part of the operation, officers have seized:

• 25 motor vehicles
• $15 million in bank accounts
• 18 residential properties
• 12 motorbikes
• Two aircraft
• Firearms
• Jewellery
• Artwork
• Vintage wines
• $1 million in a safe deposit box

Acting AFP deputy operations commissioner Leanne Close said the ATO got involved in the investigation when alleged evidence of fraud mounted.

“So far investigations have taken us back to June 2016. So, the $165 million we have identified is from that point onwards,” she said.

“Because we [have seen] so much evidential material over the last two days, we will take time to examine that and see if that is where the conspiracy ends or if there is further charges or further money that has been defrauded.”

So how did the alleged fraud work?

Ms Close said the police will allege the conspirators were involved in running a legitimate payroll company and accepted money from clients to process payroll on their behalf.

That money was transferred to subcontracted companies — or tier-two companies — which then made the payroll payments.

And while that activity was legal, the charges related to what is alleged to have happened next.

The AFP alleged the tier-two companies were fronts, controlled by the conspirators, and they failed to honour their Pay-As-You-Go (PAYG) commitments to the ATO.

“Through our investigations we found that only part of the tax obligations were paid,” Ms Close said.

The alleged fraud was made up of many small incidents, so as not to set off red flags.

What happened next?

Yesterday, raids were carried out by police using more than 28 search warrants across New South Wales, arrests were made and evidence and assets seized.

Police continue to search for evidence today.

“Two aircraft [were seized]. Firearms, jewellery, artwork, vintage wines and also at least $1 million that we located in a safe deposit box,” Ms Close said.

“As a result of the activities, nine people were arrested and charged yesterday evening.”

Detectives alleged the members of the syndicate knew each other and socialised together.

What are the implications for the ATO?

More than 200 AFP officers worked closely with the ATO and acting commissioner of taxation, Andrew Mills, to investigate the complex structure established by the syndicate.

Mr Mills said the ATO was confident none of its systems had been compromised.

“The information that I have to date shows no compromise of the operation of our administration. Our systems, controls and procedures worked effectively,” he said.

“We have been able to successfully isolate and protect the investigation, working well with the AFP over many months to build a picture of what has been happening.”

Mr Mills said an internal Australian Public Service code of conduct investigation was also underway into a small number of other ATO employees who had been suspended without pay.

“Within the ATO, you [employees] have access to those matters only to which you actually are required for the purposes of your job,” he said.

“If you seek to obtain information which is outside that scope, you actually are in breach of the code of conduct.”

Michael Cranston will be charged with abusing his position as a public official relating to the fraud, although he is not believed to be a conspirator.

Adam Cranston, 30, was arrested at his flat in the affluent beach suburb of Bondi and has been charged with conspiracy to defraud the Commonwealth.

At a press conference in Sydney today, officials said Michael Cranston could have been unwittingly involved in his son’s alleged crimes.

This post originally appeared on ABC News.