Former tax man Michael Cranston met son and business partner in office

Former deputy tax commissioner Michael Cranston held a private meeting in his Sydney office with his son Adam and his son’s business partner and lawyer Dev Menon, but says he did nothing wrong because they didn’t discuss specific tax matters only “hypotheticals” and “generics”.

Michael Cranston arrives at the Downing Centre Local Courts this week.Credit: Peter Rae

Mr Cranston was giving evidence for a second day in the District Court where he is on trial accused of acting on the wishes of his son, Adam Michael Cranston, when he contacted a subordinate to arrange an urgent meeting between tax office investigators and Plutus Payroll.

He is facing charges of obtaining information in his capacity at the ATO with the intention of dishonestly obtaining a benefit for his son; and with exercising his influence in his capacity as a deputy commissioner of taxation with the intention of dishonestly obtaining a benefit.

Mr Cranston told the court on Tuesday how he told tax office colleagues about the problems faced by his son and business partners because he was troubled by how tax officers may have applied the law.

He said he met his son and Mr Menon, a partner with Clemenz law firm, in his city office. Mr Cranston said it was a meeting he might hold with any law firm.

“Mr Menon wanted to talk about a particular structure he was thinking of putting in place. I said 'I can't really get involved in all the detail here, Dev, especially if you're using taxpayers' names',” Mr Cranston said.

Mr Menon proceeded to describe a business structure of a labour-hire firm without mentioning names.

“He also talked about how do I make sure the tax office is happy with this – this is something I'd be talking about to any taxpayer in meetings,” Mr Cranston said.

He was asked by his defence barrister David Staehli if he understood Mr Menon was talking about a structure that involved his son. “It could have been that, but he was talking hypotheticals and not putting names to it.”

On dealing with any conflict of interest, Mr Cranston was asked if he instead talked about it hypothetically.

Tax lawyer Dev Menon met with Michael Cranston in the tax deputy commissioner's office.

"In a generic sense, yes. That’s a practice that we had," he replied.

Mr Cranston was asked about a call he took from Mr Menon at home in April 2017, in which Mr Menon said he needed to speak with someone in the tax office urgently as a garnishee order was stopping employees from the labour-hire firm being paid.

Mr Cranston said Mr Menon told him: "Michael, I know your son is involved and you can’t talk about this but this is very urgent, people in the company [are] getting death threats from employees, and were threatening to go to the media. He needed to show the case officer that what they had done was legal – I didn’t know any of that – I said I would try and get somebody senior to ring him.”

Mr Cranston said he did nothing wrong and managed the conflict of interest by taking no part in discussions about the matter or decisions.

Tapped phone conversations between Adam Cranston and his father have been played in court.Credit: Daniel Munoz

Mr Cranston said he passed on the information to several colleagues because he was concerned about the possibility of how tax officers were treating the matter. He has denied acting dishonestly.

Mr Cranston, who earlier told the jury that "a bikie gang" connected to Adam's former business partner had threatened his son, told Adam the involvement of his former business partner Peter Larcombe may have raised red flags within the tax office.

"Bad people around Peter at the time" later threatened Adam and his associates when they sought to get the money back from Mr Larcombe.

Mr Cranston acknowledged that speaking to colleagues including Tony Poulakis could be misconstrued.

“I was letting my son know these things can be taken out of context – the fact is I’ve spoken with Dev and Tony and could be taken out of context and in future these things could be carefully managed.

“I was letting my son know I probably shouldn’t have done that – we should be careful because these things can be taken out of context …”

Mr Cranston maintained he had done nothing wrong.

He described how on his way to give a breakfast address to a room of 300 accountants, he was stopped getting out of a lift by two police officers.

"I don't think I’ve ever felt worse in my life. I was feeling very ill and very sick. I was extremely stressed and absolutely shocked," Mr Cranston said.

The trial continues.