Federal Court Imposes First Custodial Sentences in Landmark Cartel Lawsuit

CDPP v Vina Money Transfer Pty Ltd & Ors [2022] CIF 665

What do you want to know

  • The Federal Court of Australia fined money transfer company Vina Money Transfer $1 million and imposed custodial sentences on four people ranging from nine months to two years and six months in the first criminal cartel conviction case involving individuals in Australia.
  • Although each individual was released for good behavior (pursuant to recognizance orders), the Court carefully considered the prosecutor’s arguments that immediate jail terms should have been imposed on some of the offenders given the importance of general deterrence.
  • On September 8, 2022, charges were dropped against a fifth individual who had pleaded not guilty. If the jury trial against this individual had taken place, it would have been only the second contested trial against a criminal cartel in Australia, following the acquittal of Country Care and two individuals in June 2021.

On June 9, 2022, Judge Abraham of the Federal Court of Australia issued sentences in the criminal cartel case against Vina Money Transfer Pty Ltd (Vina’s Money) and four people. The Commonwealth Public Prosecution Department (CDPP) prosecuted the case following an investigation by the Australian Competition and Consumer Commission (ACCC) and the Australian Federal Police (AFP).

Background and impugned conduct

The cartel concerned the behavior of three companies that provided money transfer services between Australia and Vietnam: Vina Money, Hong Vina and Hai Ha. Each company had several branches in Victoria and NSW which, in some suburbs, were within 500 meters of each other.

The four individual offenders included directors and/or employees of Vina Money and Hong Vina. Hai Ha and its director were granted immunity from prosecution by the ACCC and the CDPP.

The three companies have entered into two contracts, arrangements or understandings (CAUs) containing cartel provisions:

  1. Exchange rate CAU: The three companies agreed to charge customers a common exchange rate of AUD to VND (Vietnamese Dong) from January 2012. Before this CAU was done, there was intense competition between the companies which affected their profits , and
  2. Discount on fees CAU: The three companies agreed to stop applying fee discounts in February 2012, then agreed to apply a common fee discount in March 2012, on remittances to Vietnam.

Vina Money pleaded guilty (and was found guilty) to giving effect to the CAU exchange rate in January 2012 and August 2016 and giving effect to the CAU fee rebate in February and March 2012. The four offenders each pleaded guilty (and have been found guilty of) being knowingly involved in some of the behavior charged. The extent of each individual’s involvement in the conduct varied, but was, in each case, considered by the Court to be “serious”.

Investigation and referral

The judgment says the investigation was triggered following telephone communications between two of the individuals which were intercepted by the Australian Criminal Intelligence Commission as part of an unrelated investigation. These communications revealed conversations and text messages between the three money transfer companies. These communications were forwarded to AFP and the ACCC in June 2014 who subsequently executed search warrants at each company’s business premises and each individual’s residential premises in 2016.

Decision on sentencing

The Court acknowledged that there were no comparative conviction cases to consider as this was the first time that individuals were to be convicted for cartel conduct. The Court accepted that the principles applicable to other white-collar crimes could also apply to cartel crimes given the similarities between the two types of offences.

The court ultimately fined Vina Money A$1 million and sentenced each individual to prison terms ranging from nine months to two years and six months. Each individual offender was released immediately for good behavior (known as an order of release by recognizance for Commonwealth offences).

Offenders did not recognize the seriousness of their offense

Although the Court accepted that the objective seriousness of the offense was appropriately characterized in the low to moderate range of offenses, the Court found that the conduct was “serious” in each case. The Court criticized various arguments that sought to downplay the seriousness of the offense and failed to recognize that the conduct was considered criminal. For example, some of the offenders had argued that customers were better off with the three local businesses working together rather than the big banks or international money transfer services and that the CAUs were not “designed to scam customers”. clients”.

There were also arguments that the offense was not as serious as that which had been the subject of the only previous criminal cartel convictions in Australia, which involved three major international shipping companies – given the relatively small size of the companies involved in this case. The Court rejected these claims on the grounds that the “nature of the harm” is the same in all cartel cases, given the effect of the conduct of the cartel on consumers and the market, and that deterrence is a primary consideration in sentencing. Despite the small size of the companies involved, between the relevant period during which the cartel operated, the three companies occupied around two-thirds of the market in terms of the number of money transfer transactions from Australia to Vietnam. , worth around 2.5 billion Australian dollars. .

Although there is little evidence regarding the financial status of each offender, the Court readily inferred that the offense in this case was committed for profit. Further, while the prosecution was unable to quantify the damage done to the market or identify individual victims in this case, the Court found that it was not necessary because the behavior of the cartel was inherently destructive to competition and consumer welfare.

Subjective personal factors and an early guilty plea are influential but not indicative of future cases: an ominous warning

Most important to the Court’s consideration in determining the appropriate sentence was the fact that each offender had pleaded guilty. The Court applied a 25% reduction to the sentences of Vina Money and three persons, and a 20% reduction to the fourth person (noting that the offender pleaded at a later stage in the proceedings than the other offenders).

Other personal factors considered important in mitigating sentences were:

  • the subjective situation of each offender (for example, their health, financial and family situation);
  • their respective prospects for rehabilitation;
  • the significant delay between indictment and conviction (nearly three years) caused by the Covid-19 pandemic and the complexity of the procedures; and
  • restrictions likely to be imposed in prison due to the Covid-19 pandemic, which may have made time spent in police custody more onerous than usual for offenders.

The prosecution argued that immediate imprisonment was the appropriate sentence for three of the offenders, but acknowledged that it would not be an appealable error if recognizance orders were granted.

The Court observed that, under ordinary circumstances, an immediate prison sentence might otherwise have been imposed on the offender who was most heavily involved in the conduct had the above mitigating factors not been present – in particular considering given the importance of general deterrence and exposure of cartel conduct. Ultimately, the Court found its decision to impose recognizance release orders to be “finely balanced.”

A look at the future of punishment

General deterrence will remain at the forefront of any criminal cartel conduct convictions in the future. It is clear that the CDPP is willing to push for immediate custodial sentences for perpetrators of individual cartels and the Court is willing to consider this sentence in the future.

While an early guilty plea will always weigh heavily in mitigation, the influence of other subjective factors on sentencing will be considered on a case-by-case basis. Clearly, as we transition to a more “normal” post-Covid-19 world, delays or confinement restrictions imposed by Covid-19 may not be factors available to mitigate punishment in the future.

Charges against the fifth individual dropped

On September 8, 2022, the CDPP withdrew criminal charges against a fifth person who had pleaded not guilty and was proceeding to a jury trial scheduled to begin September 21, 2022.

This follows the CDPP withdrawing all criminal cartel charges against Deutsche Bank, Citigroup, ANZ and six individuals between October 2021 and February 2022, and the withdrawal of all criminal cartel charges against CFMMEU and one individual in August 2021.

Although the CDPP is not required to provide reasons for withdrawing criminal charges, it is clear that the CDPP has encountered serious challenges in successfully prosecuting the cartel acts reported to it by the ACCC. The extent to which these challenges will influence CDPP’s appetite for pursuing future cartel cases remains to be seen.

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