back to article Payroll-for-contractors company named at centre of AU$165m tax scam scheme

When Australian payroll-for-contractors outfit Plutus Payroll stopped paying its customers, several pointed out that the company looked too good to be true – because it did not charge for its services. And now we know why: the biz has been named at the centre of an AU$165 million (US$122.5m, £94.5m) fraud against the …

  1. wsm

    As if...

    nobody would ever notice such a scheme? What were they thinking?

    1. TReko

      Re: As if...

      They had some inside men at the ATO, including Michael Cranston, a deputy commissioner.

      http://www.abc.net.au/news/2017-05-18/ato-deputy-commissioner-entangled-in-fraud-investigation/8536288

      1. eldakka Silver badge

        Re: As if...

        They had some inside men at the ATO, including Michael Cranston, a deputy commissioner.

        And as both this article and the one you've linked to both state, Michael Cranston is not suspected of involvement in the affair, therefore is not an inside man.

        The reason he has been stood down for investigation is basically for breaching security in that "loose lips sink ships" style, i.e. may have told his son more than he should have about how things work, the sort of stories that we all tell our families/close friends that maybe go a bit beyond what we should be telling them, but we all occasionally do it, because usually it never leaves that circle. But when it does, it usually comes back big.

      2. anothercynic Silver badge

        Re: As if...

        They had some inside men at the ATO, including Michael Cranston, a deputy commissioner.

        This is a *very* dangerous statement to make, TReko. Unless you have proof that confirms Cranston's involvement in the scam, I would be *very* careful to make potentially libellous statements on public fora like this one.

        1. johnsmithdude

          Re: As if...

          Eh, if he's a yank he has nothing at all to worry about. Libel and slander are next to impossible to prove and insulting/criticizing public officials is a national tradition.

    2. Anonymous Coward
      Anonymous Coward

      Re: As if...

      Greed, like lust, bypasses logic.

    3. Lee D Silver badge

      Re: As if...

      It's not "Is nobody going to notice this scam, ever?"

      It's "can we make our money and run before anyone notices?"

      Which, let's be honest, could easily have happened here.

      1. Anonymous Coward Silver badge
        Go

        Re: As if...

        It's not "Is nobody going to notice this scam, ever?"

        It's "can we make our money and run before anyone notices?"

        Which, let's be honest, could easily have happened here.

        But they got greedy and didn't know when to start running.

    4. katrinab Silver badge

      Re: As if...

      Read the comments in earlier articles. A lot of people were taken in.

    5. CrazyOldCatMan Silver badge

      Re: As if...

      nobody would ever notice such a scheme? What were they thinking?

      That they would make enough cash before anyone noticed and then leave for somewhere that doesn't have extradition treaties with Australia.

      Or, more likely, they were thinking that they were so clever that no-one would ever find out. Much like Prenda.

  2. Mark 85 Silver badge

    Not surprised...

    This seems to be what many commentards have said in past articles. I still find it amazing that companies can still pull off such stunts. I feel for those contractors having been through similar issues in the past but not that severe. And I'm happy that they've already seized property and made arrests. I hope the creditor wolves will not take everything and those employees can get paid.

    1. Anonymous Coward
      Anonymous Coward

      Re: Not surprised...

      When I suggested EXACTLY this scheme on a previous Reg article about this fiasco, I was shocked to receive downvotes from people dumb enough to think that a legitimate business could be run without charging clients - suggesting the insane idea that the interest off holding the money for a few days or a week or whatever between receiving it and paying it out could pay the cost of running such an operation.

      I guess innumeracy is alive and well at the Reg...

      1. anothercynic Silver badge

        Re: Not surprised...

        Doug, but... but... but... FACEBOOK. GOOGLE. UBER! ;-)

        Seriously though, that's why you never got a downvote from this end. I like logic and that is logical. You cannot run businesses for free (unless you have a rich sugar daddy like a venture fund who is happy to let you spend his money)!

        1. mathew42

          Re: Not surprised...

          > You cannot run businesses for free

          You can run a business on commissions. Plutus were including payments for health insurance, workers compensation, car leases, etc. It is not unreasonable to assume that with technology automating the process, costs could be kept low and kickbacks (aka rebates or commission) deliver a profit especially on the turnover.

          1. Anonymous Coward
            Anonymous Coward

            I wonder how long this scheme was running?

            The catch was probably when contractors started filing their taxes. Until then, there's no way for ATO to know exactly they were being shortchanged - Plutus could simply report they were paying less in wages which would explain the reduced tax payments.

            The catch comes when people file their taxes. What I'm curious about is this. Let's say I was a contractor using Plutus and I made $x over the course of a year, but Plutus paid taxes on my behalf based on a salary of $x/2. When they tax paperwork to the ATO (or IRS in my case) and to me, what number do they use $x or $x/2? If they use $x, the scam is found out about then, if they use $x/2 the ATO/IRS stays happy but if I file using that paperwork I'd be criminally liable for tax evasion.

            Other than the downside of jail time, it would be tempting to just file on the smaller income number and claim ignorance if caught - "hey I didn't look at it too closely, I just gave it all to my tax preparer and he assumed like I did that the W2 (or Aussie equivalent) I was sent was correct".

            If they've actually kept this up for multiple years then I wonder how the ATO never caught them. The IRS may be slow and lumbering at times, but this would be so easy to catch I can't believe it could work much longer than a year in the US. Even if they sent out fraudulent W2's, I have to assume some people would file their taxes based on their correct income numbers. Maybe that would avoid raising red flags about the company and keep the scheme in business for a few years until audits figured out where the source of the problem lay - but would also leave behind a lot of employees/customers who at minimum would owe a lot of back taxes and at worst could end up in jail.

            I'll bet some of the principals who benefited from this moved their assets overseas to prepare, and hopped on the first flight to a country without an Australian extradition treaty when the bank account was frozen. I'd be really surprised if they catch them all.

      2. Jason Bloomberg Silver badge

        Re: Not surprised...

        I was shocked to receive downvotes from people dumb enough to think that a legitimate business could be run without charging clients

        But would this business have worked if the scammers were handing over the money they should have to the ATO, were not perpetrating a scam?

        That there was a scam going on doesn't seem to me to be conclusive proof it could not have worked as a valid and legitimate business.

        1. Anonymous Coward
          Anonymous Coward

          Re: Not surprised...

          Run the numbers for how much you can collect on interest holding money for a couple days, and tell me how you are going to operate an entire company full of employees on that pittance.

    2. eldakka Silver badge

      Re: Not surprised...

      I still find it amazing that companies can still pull off such stunts.
      Well, as the article stated:
      raids in Sydney yesterday seized 25 motor vehicles, a dozen motorcycles, 18 residential properties, over 100 bank accounts holding over $15m, $1m of cash from a safe deposit box, firearms, jewellery, vintage wines and even a pair of aircraft.

      and 9 or more people have been arrested, I would suggest that they haven't pulled it off.

      1. Robert Carnegie Silver badge

        Re: Not surprised...

        They may have been caught but they had a bloody good time first. Except for the wine that they hadn't drunk yet.

        As the poet declares:

        There was a young fellow named Sidney,

        Who drank 'til he ruined his kidney;

        It shriveled and shrank

        While he sat there and drank,

        But he had a good time of it, didney?

        Change it to "a fellow FROM Sydney" and we are about there.

        http://www.montypython.net/scripts/austwine.php

        "its taste, and its lingering afterburn"

    3. LisaJK

      Re: Not surprised...

      Well they didn't pull this off... looks like they got caught!

      If they thought they would get away with this forever then they are stupid or blinded by greed. If they thought they'd make as much as they could then run, why didn't they run as soon as the bank accounts were frozen?

      Scams like this have occurred before and will occur again, it's human nature.

      If something seems to good to be true, it probably is, but some will believe it!

    4. anothercynic Silver badge

      Re: Not surprised...

      @Mark 85, it is not difficult. If you look at the scheme, the ATO *was* paid some money, enough to not raise suspicion for a while. But eventually transactions that don't look suspicious on their own may develop into a pattern that *is*. That's how people get caught in scams. They get complacent. They fall into a pattern. That's what raises red flags.

      Given the huge amounts of money the ATO (or the HMRC here) deals with on a daily basis, patterns will take a while to become evident... that it screws honest-to-God contractors absolutely sucks, and the directors should be taken to task and their assets seized (and sold off) until the debt (to ATO, the pension fund(s) and the contractors) is repaid. And, just for good measure, they should be banned for *life* from ever being company directors again!

  3. TReko
    Thumb Up

    Good reporting, el Reg

    This is the only article amid the myriad in today's press that actually explains what happened.

    1. eldakka Silver badge

      Re: Good reporting, el Reg

      Agreed.

      The other articles I read about this seem to imply that somehow they manged to get the money out of the ATO, i.e. transfer from ATO bank accounts etc, as opposed to it being tax money owed to the ATO that hasn't been paid to them as this article makes clear.

    2. Michael Hoffmann
      Thumb Up

      Re: Good reporting, el Reg

      Yeah, Fairfax media is showering itself with backpats for its "Exclusives" right now. Pchaw!

      As far as I'm concerned, Simon is the man of the hour, digging into this weeks before anybody else!

      Is there an Australian Pulitzer? ;)

  4. Winkypop Silver badge
    Flame

    Faaaaaark!

    Sharks in suits (allegedly)

    I mean, there's cheating on your income tax and then there's the big end of town.

  5. Truckle The Uncivil

    Slim odds the dad did not know. It would be hard to miss.

    1. david 12 Silver badge

      >seems odd<

      He's been done for discussing business with his son. That's because it is against the rules to discuss business with his son. The same rules affect lots of people in the tax office: their job requires them to not discuss business with people.

      It's not a particularly strict condition, but the people I know will only discuss business in general: they won't discuss /my/ business at all.

  6. kmac499
    Joke

    I have worked for some very good agents in the past, One even told the following about theatrical agents.

    Two impressarios were strolling though theatreland when they noticed a famous succesful actor on the other side of the street.

    "Isn't he one of yours old boy?"

    "Yes he is; and do you know the bastard takes 90% of what I earn"

  7. JLV Silver badge
    Facepalm

    8>/

    You gotta wonder about cleverness here. OK, you have a good scam going. Too brazen to be even noticed... short term.

    But you should know it will catch up to you someday. So, lay low, steal $5-10M, then get out and move to a nice sunny place chosen for its lack of extradition agreements with your homeland, decent healthcare and things to do - you'll be staying there for a long while.

    No, instead you stick around, amass huge amounts of high visibility bling that should catch the attention of any self-respecting tax authority. And just wait to be sent to a long vacation @ Club Fed.

    Duh!

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2020