ATO scam: Police phone taps reveal conversations between Michael Cranston and son Adam

TAX deputy commissioner Michael Cranston was recorded in police phone taps telling his son Adam they “have to think of a strategy” in the weeks leading up to his son’s arrest over a $165m tax fraud.

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TAX deputy commissioner Michael Cranston was recorded in a series of police phone taps telling his son Adam they “have to think of a strategy” in the weeks leading up to his son’s arrest over a $165m tax fraud.

In the calls Adam did not detail the ­extent of the ­alleged operation but Mr Cranston’s ­fatherly advice ­triggered the events that now threaten to destroy his career..

Adam Cranston leaves Sydney Police Centre in Surry Hills after being released on bail. Picture: Dylan Robinson

ATO deputy commissioner Michael Cranston was allegedly caught on phone taps giving advice to his son.

Australian Federal Police investigators taped the senior tax investigator in three phone calls on April 28 and May 2 in which he warned his son Adam, “You could be the subject of search warrants,” but added he was lucky the “coppers” were too busy to take any more ATO referrals

In the calls, the ­details of which were set out in court documents this week, Mr Cranston allegedly coached his son on how to deal with an ATO demand for ­unpaid company taxes and said he would ­arrange for the 30-year-old to meet with a tax official to ­discuss the issue.

The calls were made just over two weeks ­before Adam’s ­arrest and police have said there is so far no evidence to suggest Mr Cranston was aware of his son’s ­alleged operation beyond what he told him in the calls.

On Wednesday, Adam was charged with helping to mastermind Australia’s largest alleged tax scam, in which police claim he skimmed payroll tax money and used it to fund an extravagant lifestyle, which included luxury cars and waterfront homes.

ATO fraud: Key players

Mr Cranston’s 24-year-old daughter, Lauren, was also arrested when police conducted co-ordinated raids at almost 30 locations.

Ten people have been arrested so far and millions of dollars worth of property seized, ranging from racing cars to boats, planes, expensive wine and waterfront properties.

Police claim the syndicate members used Adam’s company, Plutus Payroll, to siphon millions of dollars in pay-as-you-go tax contributions from its corporate clients that were meant to be paid to the ATO.

The bugged phone calls form part of the chain of events that has left ­58-year-old Mr Cranston’s career in ­tatters after he was issued with a future court attendance notice for allegedly abusing his position as a public officer. Two of his subordinates were stood down for allegedly accessing ­information on his behalf.

Adam Cranston is alleged to be one of the masterminds behind the tax scam. Picture: Dylan Robinson

Police allege Mr Cranston passed on sensitive information about the progress of the ATO’s investigation into his son’s business.

The contents of the court documents were read to The Sunday ­Telegraph by a law enforcement ­official.

In one of the bugged calls, when Adam allegedly said his company had been assessed for $23 million in ­unpaid tax over just three months, Mr Cranston panicked about the possible media fallout given he was a senior ATO investigator.

“What I’m petrified about, Addy, is a massive conspiracy,” Mr Cranston allegedly told his son.

“I run the phoenix (investigations) in the organisation and ... oh, the media go off their head with that.”

ATO fraud: Key players

The first of the intercepted calls came at 7.01pm on April 28, two days after the ATO issued a “garnishee order” to Adam’s company Plutus, ­demanding it pay moneys owed.

Adam allegedly told his father the ATO had slapped Plutus with the order and had its bank ­account locked before explaining he planned to fight the order in court. Mr Cranston asked his son if it “related to the other matter” without elaborating.

In a second call three minutes later, Adam told his father there were 2000 people who would not be paid because of the garnishee order and complained the ATO was refusing to discuss the matter.

Mr Cranston told his son he would arrange for an ATO officer named Cameron to contact him.

He then expressed concern the ATO was investigating Adam for phoenix-style tax fraud, which refers to when a company is deliberately ­liquidated to avoid paying tax.

“You just make sure you haven’t got anything in anywhere.”

Adam disagreed with his father’s theory that the ATO had linked him to a tax fraud committed by his now deceased former business partner, Peter Larcombe, one of the ­architects of Adam’s ­alleged scheme.

Larcombe, a 38-year-old former King’s School student, killed himself in August 2016 by jumping off a building in the US after reportedly falling out with business associates in Dubai.

Mr Cranston then said “it would be nice to get rid of that thing that Peter was involved in”.

After saying he could find someone for Adam to talk to at the ATO, Mr Cranston said: “Mate, they’ve linked you to Peter for sure.”

ATO fraud: Key players

“They’re pretty good on this stuff, they’re reasonable. I don’t know if they have linked you or only stupid Peter but they just see the same entity involved. Even though you have done it this different way, that’s what they have done it for.”

As the call came to an end, Mr Cranston allegedly told his son that “they have to think of a strategy”.

His son replied that he and ­another man allegedly involved in the syndicate would come to see him and told him to not talk on the phone.

During a third intercepted call at 8.36pm on May 2, the two discussed the ATO order and the Plutus business model before addressing PAYG tax liabilities.

“We’re so good at connecting people, that’s what’s worrying me about it …” Mr Cranston said.

“You just make sure you haven’t got anything in anywhere — you could be subject to search warrants, or — I don’t want to scare you, but you could be.”

ATO fraud: Key players

The 58-year-old then allegedly told his son he was lucky the “coppers” were too busy to receive ­additional referrals from the ATO but warned he could not continue to fail to pay PAYG tax, as it would catch up with him.

Lauren and Michael Cranston will face Downing Centre Local Court on June 13. Adam Cranston will face Central Local Court on August 8.

‘BLACKMAIL SPARKED BY REVENGE’

ONE of the men accused of ­attempting to blackmail members of an alleged $165 million tax fraud syndicate told police he did it to get revenge for anti-Semitic comments.

Police allege Daniel ­Simona Hausman was one of three people who took part in an extortion ­attempt to demand that one of the operation’s alleged masterminds, Adam Cranston, pay $5 million or face being exposed in the media by veteran journalist Steve Barrett.

Hausman, 47, from Woollahra, was charged over the ­alleged plot with one count of ­demanding with menace.

According to court documents, when he was interviewed by police on May 17, Hausman told the officers one of the reasons he got involved with blackmail was to get back at Cranston for anti-Semitic comments.

He told police he had previously been in business with Cranston but their relationship broke down after the 30-year-old made anti-Semitic comments.

Hausman is accused of running the blackmail plot with 28-year-old Waterloo man Daniel Rostankovski who has also been charged with one count of ­demanding with menace.

Barrett has not been charged.

Rostankovski’s lawyer Paul McGirr told Central Local Court on Thursday the matter was likely to take a long time to play out.

According to court documents, Rostankovski and Barrett met Cranston and another man at the office of Clamenz Lawyers in the Sydney CBD on February 1.

Barrett allegedly said he was considering investigating the ­alleged tax fraud syndicate for a story, the documents said.

After Barrett left, Rostankovski allegedly demanded Cranston pay $5 million to prevent Barrett producing the story.

HOW THE ALLEGED SCAM WORKED:

■ Plutus Payroll Australia provided a payroll administration service for a large number of corporate companies.

■ The companies made regular payments to Plutus on the understanding those funds would be used to pay the wages and superannuation of employees and also to pay the ATO their required pay-as-you-go tax.

■ The syndicate allegedly recruited “straw directors” to act as directors of a series of “second tier” or “straw” companies.

■ Plutus allegedly transferred the payroll funds and a percentage of the PAYG tax to the second-tier companies.

■ However not all of the PAYG commitments were paid to the ATO.

■ Instead, police allege remaining funds were transferred to the syndicate members through false invoices and the bank accounts of front companies.

■ The straw companies would keep logs on the differences between what the ATO was paid and what the syndicate took.

■ The scheme allegedly raked in $165 million.