"Involuntary inertia" spreading like foot in mouth

Bankrupt barristers and their tax ... Wayback Machine ... Barristers unpaid tax burden ... NSW Bar Association dithering and shifting the blame ... From Justinian's Archive March 6, 2001 

The latest member of the NSW Bar's bankruptcy club to make a front-page appearance is poor old John Cummins QC. 

He owes the taxman about $1 million and put himself into bankruptcy last December. 

Cummins had a simple tax avoidance plan. He never had a tax file number and so he never put in a tax return. 

Cummins is a life member and a former committee member of the Australian Jockey Club and a former councillor of the NSW Bar Association. 

The worst thing to emerge in newspaper reports was that the old buffer averaged an income of $200,000 a year in the 1990s. What an insult. 

He is a bit of a Bertie Wooster type and introduces himself in a jolly fashion: "JC, QC, AJC, at your service." 

Now he can greet people with: "JC, QC, AJC, Bankruptcee." 

His wife Mary does very well with her own party and events management business. She owns a warehouse at Alexandria, a property at Surry Hills in Sydney, a beach place in Queensland, plus, of course, the family home at Hunters Hill. 

She will sell one of two of her properties and bail John out, offering $500,000 to settle the debt with the ATO in the hope that this will save the old chap's most treasured possession - life membership of the AJC.

The story so far

The Sydney Morning Herald has done a splendid job with revelations that a number of the best fed and wined barristers at the NSW Bar 'n' Grill are double bankrupts, and in each case the Australian Taxation Office is the largest, or only, creditor. 

Tax Commissioner Carmody says:  

"It is difficult to escape the conclusion that some of these people use insolvency to avoid their tax obligations to the Australian community."  

The double bankrupts that have been named in print are: Stephen Archer with $3.1 million in unpaid taxes; Bill Davison with $1.9 million in unpaid taxes; Robert Somosi with $835,000 in tax debt and Robert Cameron with $480,000 outstanding to Mr Carmody. 

The ATO says that 25 of the 1,800 barristers at the NSW Bar are bankrupt as a result of income tax debts, and that about a third of those have been bankrupt twice. 

As Oscar Wilde put it, "once is a misfortune, twice is careless". 

Robert Cameron is facing his third lot of proceedings in bankruptcy in 11 years, which is very careless. 

If the figures are right then it means that there are at least another four more double bankrupts that have not yet been named by Granny Herald. 

According to Deputy Chief Tax Counsel, Michael Bersten, the ATO has discovered five QCs without tax file numbers and another 38 barristers in Sydney would soon be going bankrupt over debts to the taxman. Eight of them have had prior bankruptcies. 

About a quarter of NSW Bar owes the Tax Office a total of $50 million. 

What had been known around the Bar 'n' Grill for years comes as an awful fright to the public when plastered across the front page of a large metropolitan tissue. 

And the glaring pictures were pretty shattering. Archer looked utterly well fed; Somosi had the appearance of an alarmed bullfrog; Cameron's visage seemed desiccated; and poor Davison bore all the hallmarks of a stunned ferret caught in the headlights. 

Archer has been a bankrupt for 14 years. Under a separation agreement with Mrs Sarah Archer she has all the assets, up to $100,000 a year in cash, plus the upkeep of a late model Mercedes Benz. 

The fragrant Mrs Archer also has an interest in and runs The House of Cashmere which has outlets in the MLC Centre and at 12 O'Connell Street in Sydney. It boasts "the ultimate in personal softwear", and to have a cashmere garment is "its own reward" - and presumably Mrs Archer's as well. 

There are also "joint venture" cashmere studs in Inner Mongolia and Liaoning Province. 

The "unmatched wearing pleasure" of an item from The House of Cashmere doesn't come cheaply. It should be known, more simply, as The House of Cash. 

Mrs Archer told your correspondent that the reports in the Herald were "unfair". She was taking legal advice and that the full facts would emerge when she sued Granny. 

Husband Stephen has been convicted on 20 counts relating to failure to lodge tax returns. During both his bankruptcies the Herald claims he fell behind with his contributions to the Tax Office - but is now understood to be up-to-date. Even so, he won't come out of bankruptcy till 2005. 

Alec Shand, for one, will be frightfully distressed that Archer's financial affairs have hit the front pages in such an embarrassing way. Many also will remember the Archerettes, the sultry, pouting research assistants employed by the portly tax fudger to do his filing and assorted chores. Much merriment was the order of the day in chambers as the finest French bubbly kept everyone delirious. 

In 1996 Somosi was convicted and fined $70,000 for not filing a tax return for all the time he had been at the Bar - a period of 17 years. He too fell behind with payments to his creditors. 

Five years later the Bar Association is still "investigating" Somosi's fitness to remain on the roll. 

Parks and Gardens specialist Bill Davison pulls in more than $600,000 a year, while wife Vicki owns the house at Strathfield. He had a $50,000 splurge in Aspen and paid Amex bills totalling $65,000 in the three months before going bankrupt for a second time. He hasn't paid much income tax since the mid-1990s. 

Last year he spent $133,000 from his personal bank account. He is meant to pay $18,000 a month to his creditors, but is reported to be $54,000 in arrears. Davison has admitted that this is the result of him "choosing" to spend his earnings elsewhere. 

Last year his trustee in bankruptcy discovered a cache of over 1,000 bottles of wine, stored in the Strathfield garage, carelessly overlooked in his statement of affairs. The trustee grabbed it and got $45,000 at auction. 

Robert Cameron looks like a real wrinkled worry-wart, and little wonder when you consider he's been bankrupt for 10 years and it now looks like at least another three more years on top. 

Just don't quote me

Just look at the statements from those in the spotlight. 

Archer, the most blustering of them all, says it's a "serious libel" to associate him with anything the Tax Commissioner says about bankruptcy and avoidance. He added in a flourish to reporter Paul Barry, "publish and perish". 

Cameron claims that the publication of his details is as a result of a journalist's "grudge" against barristers. Davison pointed out to the paper that his Mercedes is a 1981 model, while Somosi says that he's been sick and his wife is also sick. 

But the really dotty stuff has been gushing out from officials of the Bar Association. 

President Ruth McColl started off saying, in relation to Somosi: "You can't assume we are doing nothing." 

Asked why the investigation had taken so long (it is now five years since his conviction), she added:  

"You can't assume that these things happen in two seconds. You don't understand the way we work." 

The day the story broke in the Herald (Monday, Feb 26), President McColl put out a statement saying that the whole beastly thing was the fault of the ATO. 

"Whilst (sic) the Australian Taxation Office is bound by its own statutory obligation of confidentiality, it is difficult to see why the commissioner could not make an appropriate complaint to the Association once the matter has been publicly examined in the courts. No disciplinary complaint has been made by the Commissioner against any individual commissioner." 

Two days later (Wednesday, Feb 28) she was forming a committee "with an urgent timetable" to investigate allegations make by The Sydney Morning Herald that some members of the Bar are using bankruptcy laws to evade their taxation liabilities". 

Still she was insisting that it was the Taxation Commissioner's fault for failing to bring these matters to the ever eager Bar Association's attention. 

Nice try, but a bit difficult to swallow, particularly as on the same day, and down the bottom of the same announcement, she revealed that the NSW Bar and the ABA have been considering requiring compulsory disclosure of bankruptcy by members. 

The executive director of the NSW Bar, Philip Selth, was also caught hopping about. When the Herald rang him to ask whether he was aware that John Cummins was a bankrupt, he said:  

"I'm aware he's one of my members, but no more than that. What am I supposed to be aware of?" 

The fact is that the Bar Association was never going to look anything but awful with this story, but its own behaviour on this question has been utterly deficient, even bankrupt. 

Precedents 

It's been going on for so long now. Many people at the bar have known about these tax generated bankruptcies for a hell of a long time. The Taxation Commissioner was talking about it last year. 

A frightful decision of the Legal Services Tribunal in the 1997 Harrison case helped set the tone. Thomas Edward Harrison had been convicted of 30 counts of failure to comply with 14 notices relating to non-lodgment of tax returns and for failing to obey three orders of the court. 

Even when the Legal Services Tribunal was hearing his case in May 1997, he had still not lodged his 1995 and 1996 returns, when his gross receipts for those years were $28,000 and $7,000 respectively. 

It was only after newspaper coverage of Harrison's 1995 conviction and sentence to 200 hours of community service that the trusty Bar Association initiated the proceedings in the tribunal to strike him off. 

David Officer QC and John Stowe QC, the bar types on the tribunal, found that Harrison was suffering from "involuntary inertia" in relation to his tax returns, as opposed to "an attempt to avoid his responsibilities". 

This did not amount to professional misconduct, or as the tribunal said with so much more finery:  

"... we are not satisfied that the barrister's conduct places him on that side of the line which indicates his unfitness to remain on the roll of legal practitioners." 

There was no appeal and the attitude persisted that one could not be hanged for a bit of "involuntary inertia" when it came to tax. 

Even judges were not immune from difficulty, which is not to suggest that they were facing bankruptcy or had never put in returns. In 1996 Justinian had the unhappy duty of reporting that Acting Justice (now Justice) Hamilton of the NSW Supreme Court had to call counsel into his chambers for a bit of a chat. 

He was hearing a case brought by the Taxation Commissioner against the Aegean solicitor and entrepreneur Con Karageorge. The kindly Ham had to admit to being in dispute with the commissioner himself over a couple of hundred thousand dollars, and was it all right to press on with the hearing? 

Of course, of course. No problem at all.