The Swindle: Adam Cranston mined his tax boss dad Michael for information on the ATO’s $105m investigation

An explosive police phone tap has revealed what Adam Cranston told his father Michael - a tax fraud investigator at the ATO - just weeks prior to his arrest for the biggest tax fraud scheme in Australian history. Listen to the call.

Michael Cranston was on the verge of a full blown panic attack and had to end the phone call that helped destroy his decorated career.

What his son had just confided in him would land him on the front page of every newspaper in Australia and led to him resigning as a Deputy Commissioner for the Australian Taxation Office – despite eventually being acquitted of all charges laid against him.

“No Addy, I’m really sick mate. I’m starting to get dizzy,” he said as he ended the call on May 2, 2017, which was secretly being recorded by the Australian Federal Police.

The call was played in evidence during the 2019 trial in the Sydney District Court where Michael was found not guilty by a jury of misusing his position as a senior public official to help his son Adam Cranston.

At the time of the call, the ATO were targeting Adam over $105 million in PAYG (pay as you go) and GST that should have been transferred to the tax office but was stolen through his company Plutus Payroll and a collection of shelf companies.

Adam Cranston has been found guilty of tax fraud. Picture: David Swift.

Michael Cranston was the former ATO deputy commissioner. Picture: AAP Image/Peter Rae

So Adam called his dad – who had dedicated 40 years of his life to become one of its leading tax fraud investigators – to deceptively mine him for information on how bad his situation was and how to combat it.

The contents of the call can be revealed after Adam and two others --lawyer Dev Menon and ex professional snowboarder Jay Onley -- were found guilty by a jury in the NSW Supreme Court on Tuesday of their respective roles in one of the biggest tax fraud schemes in Australian history.

The trio now face a maximum 25 years jail after being convicted of conspiring to cause a loss to the Commonwealth and dealing with the proceeds of crime. They will be sentenced at a later date.

Plutus payroll was a legitimate payroll company that Cranston bought in 2016 and had a lucrative client list that included government departments and other private companies.

It had no trouble attracting clients given that it charged no fee to its clients for the payroll service and counted government departments.

AUDIO: Listen to Adam Cranston’s conversation with his father in the interactive player below

The fraudsters shovelled the money to a collection of second tier companies run by straw directors – whose ranks included vulnerable people like drug addicts and public housing residents – to hide Cranston’s involvement.

The money was then funnelled back to the syndicate members using fake invoices, shelf companies and other business accounts.

Cranston used the millions to buy properties in Sydney’s south and the Hunter Valley plus multiple luxury cars while Onley shelled out for a property in Vaucluse, the trial was told.

Menon’s barrister told the jury his client did not have a financial motive to participate in the scheme but the court heard evidence that he used his law firm’s trust account to deal with the proceeds of the scheme and advised Cranston and Onley on how to cover up the conspiracy.

When police dismantled the operation in May 2017, it dominated national headlines for weeks.

The driving element was the shocking fact that Adam, the son of a high ranking tax official had helped fleece the ATO for such a huge amount of money.

‘ADDY, I’M PETRIFIED’

At the time of the call, Adam never considered that his actions would end his dad’s career at the ATO and result in him charged by police. It took Michael two years to clear his name.

Michael had been battling the flu for days and his son sent his mental state off a cliff by telling his father the ATO was pursuing his company, Plutus Payroll, for $45 million.

During the 30 minute call, Adam told his father he hadn’t committed any crime and that he had inherited a tax problem from a previous owner of a business he purchased.

Given his expertise, Michael could tell his son was in a lot of trouble. Worst case scenario, Adam was the head of a massive tax fraud syndicate.

He oscillated between two instinctive responses.

Michael Cranston leaving Darlinghurst Courthouse after his son Adam Cranston was found guilty. Picture: Jonathan Ng

On one hand he was a caring father instinctively acting to protect his offspring. On the other, he was a tax fraud expert trained to demolish people like his son.

He could not be both things in this situation. He tried to be, and it cost him his career.

Michael resigned from the ATO in 2017 after the Australian Federal Police charged him with misusing his position to help Adam.

In 2019, he was found not guilty by a jury after a bruising court case. He was cleared of committing any crime, but the damage to his career was already done.

During the call with Adam, Michael cycled through the potential news headlines in his mind.

“ … What I’m petrified about, Addy – is a massive (tax fraud) conspiracy,” Michael said. “That I run phoenix (investigations) in the organisation (the ATO). And you‘re involved in the … Oh the media go off their head with that.”

Michael was also piecing together the trouble he was in personally.

He had made discreet inquiries to get internal ATO information from his underlings. But Michael said in the call that he only did this before he realised how much trouble his son was in.

‘WAIT. HOW MUCH MONEY?’

Listening to Adam’s explanation on the call, Michael assumed his son’s company, Plutus, was being pursued by the ATO for far less than the actual amount.

The reality knocked him for six.

“So if you lose, what do you lose? Plutus is up for $4 million?,” Michael asked Adam.

The figure was wrong.

“No, they’re hitting us for 45,” Adam said.

Michael paused for a moment.

“$45 million?,” Michael said.

“Yep,” Adam replied. “They’re hitting us for $23 million GST … but … we’re getting rid of that. That’s a mistake. They’ve made an error there. So it’ll be $23 million they’re trying to hit Plutus for

Michael still couldn’t believe the size of the figure.

“$23 million? In that small period of one year?” Michael asked.

The day Adam Cranston was arrested for tax fraud in 2017. He now faces 25 years in jail.

Adam let out a small laugh. It was closer to three months.

“No,” Adam said. “ … in that small period since we took over paying directly, which was only in February.

Michael asked again: “How much tax?”

Adam repeated: “$23 million.”

Michael was in disbelief: “Jesus Adam. So … you’ve let the criminals in the last 12 months have $23 million …?”

Michael’s reference to criminals was in relation to Adam’s earlier explanation about how the millions in tax came to be unpaid.

Adam told his father that Plutus entered into an agreement where it would collect staff wages, PAYG tax and GST from a number of clients.

But instead of transferring the funds to the ATO, Adam told his father the money had been deposited into a law firm’s trust account because his subcontractors – who were supposed to pay the tax – were having banking issues.

Ford GT sports car which was in the garage on the day of Adam Cranston’s arrest.

But once the money was in the trust account, Adam told his father “they were gangsters” who “stood over us” for the money.

“What do you mean they stood over you?” Michael asked.

Adam gave half an explanation: “Oh mate, they made threats and all sorts of shit … I’ll talk to you about it in person.”

BLAME THE DEAD GUY

At the beginning of the call, Michael warned that the ATO would link Adam to dead Eastern Suburbs tax fraudster Peter Larcombe.

Larcombe, a former Kings student, was one of the architects of Adam’s tax fraud scheme.

The pair had been in business together before Larcombe fled overseas with $17 million that had been stolen from an enterprise he set up with Adam and others.

Larcombe killed himself by jumping off a Los Angeles building in 2016.

Peter Larcombe was one of the architects of the tax scheme. He would later die by suicide.

During the phone call, Michael warned the ATO would easily connect Adam to Larcombe.

“You’ve got to remember Adam. What you did in the past you got away with, right,” Michael said. “You get away with it when nobody knows about it, right. You think you get away with it, but you don’t.

“We’re (the ATO) so good at connecting people,” he said. “This is what’s worrying me about it … You just make sure you haven’t got anything in anywhere. You could be subject to search warrants. I don’t want to scare you. But you could be.”

DON’T THROW MONEY AT CARS

Michael also warned his son – who had a collection of sports cars at his disposal – that he had to be able to explain the origins of his money and assets.

“ … Don’t throw money at f – ken cars,” Michael said. “Because they’ll come in and add up all your f – ken cars and insurance and then they’ll hit you with the biggest f – ken tax bill. I’m telling you, you’ve just got to be real careful at the moment.

“They’ll see that you were connected with Peter Larcombe who was f – king around with the employer companies before, and he used dummy directors,” Michael said.

“It’s all connected. You’ve got to get ready even to think about maybe coming forward if something gets big and bad to say look, have a really good strong story with evidence. Write a chronology out now,” he said.

Some of the cars that Adam Cranston had at his disposal.

When Adam told his father “I’ve got no unexplained wealth, mate”, Michael responded: “You’ve got a lot of f – ken cars, mate.”

Adam claimed they were all on rental agreements and that he didn’t own them.

‘I RECKON YOU’RE IN THE TOP FIFTY’

Michael couldn’t help but be a protective dad.

He told Adam he would make discreet inquiries with a senior colleague at the ATO to see if Adam was on their list of top 50 tax phoenixing targets.

“I reckon you’re in the top 50,” Michael said. “Because … they have the top 50 phoenix groups and I reckon you’re one of them. I’ve just got a feeling you are.

“Look, I’m not 100 per cent sure,” Michael said. “I’m just going to be very sneaky with (the colleague) and get him to give me the list for other reasons in a month’s time.

Michael’s trial was told that he never accessed the information.

Despite his son’s claims, Michael knew Adam was in trouble.

Adam Cranston told his dad that he believed he had a solid case to beat the charges. Picture John Grainger

“Mate, what you’re doing is common phoenix stuff, mate. I’ve seen it all the time,” Michael said.

Adam claimed there was nothing on paper connecting him to tax fraud.

Michael told him that didn’t matter.

“And we’ll (the ATO) just say it’s a facade,” Michael said. “You’ve only got to join links and we’ll say here’s the link (to an established criminal) … It doesn’t matter (what you argue). You go back five years and you only need one link.

HOW WILL THIS LOOK IN THE MEDIA?

Michael was “petrified” about how he would be portrayed in the media if Adam’s tax issues were made public.

Adam told his father not to worry because there was no evidence that Michael had received money or assets from his son.

“Doesn’t matter mate,” Michael said. “That will make front pages. I’m petrified.”

Adam said his father could sue the media for defamation.

“ … You’ve never received any money from me,” Adam said. “It’s not like I’ve ever sent you money or you’re sitting there driving around in a Ferrari … Your financial position’s never changed.”

Adam Cranston behind the wheel of a Ferrari.

Michael now regretted making inquiries at the ATO.

“I shouldn’t have rang him at all,” Michael said. “I just asked him to ring. I shouldn’t have connected at all …

Adam was less than sympathetic.

“I did say to you, ‘Just be careful, mate’,” Adam said.

Michael encouraged his son to front up to the ATO.

“Mate, if the shit hits the fan and it’s personally involving you and you need to come clean and put things on the table. I could arrange somebody then. Because that’s desperate. You know what I mean.

“You could arrange someone?” Adam asked.

It never happened.

Both men were arrested less than two weeks later.