A former accountant who recommended the use of an SMSF for some clients has been sentenced to six years’ imprisonment after he was found to have defrauded investors of $815,000.
The sentence was given to Douglas Gordon Johnston following a two-week trial in the County Court of Victoria, which heard he, along with his wife, Maureen Gael Johnston, secured funds from investors but lied about how the money would be used.
The court heard that during the period from January 2010 to November 2013, investors deposited money into the bank account of Small Business Management Pty Ltd with the expectation they would receive returns on their investments, and in some cases SMSFs were established to manage the funds.
The funds were, however, withdrawn as cash by the Johnstons, used to repay the Johnstons’ credit card debts, transferred to another account in the name of Maureen Johnston, and used to pay new investor deposits in a Ponzi-style operation.
ASIC said most of the investors involved met the Johnstons through their association with the Collingwood Football Club, where the couple developed friendships before raising the idea of investing with them.
In sentencing Johnston, Judge Wendy Wilmoth said his actions were “entrenched in dishonesty” and “showed a callous disregard for the trust placed in you”.
Douglas and Maureen Johnston were charged together in late 2014 and on 20 December 2017 Mrs Johnston pleaded guilty in the County Court of Victoria and was sentenced to five years and six months’ imprisonment, while Mr Johnston was found guilty in the County Court of Victoria on 8 May 2019.
During her case, the court heard Mrs Johnston deceived people into investing money in property developments in the United States and Australia when the funds were actually spent gambling at Melbourne Crown Casino and paying personal credit card debts.
Her sentencing came after she pleaded guilty to three counts of obtaining a financial advantage by deception, totalling $1,027,000.
Judge Wilmoth said her actions were “intentionally dishonest and blatantly opportunistic” and without the early guilty plea, the sentence would have been seven years.
ASIC deputy chair Daniel Crennan said the Johnstons gained the trust of investors and then deliberately misled them for their own benefit.
“The sentences imposed on Maureen, and today on Douglas, demonstrate the types of outcomes ASIC, with the Commonwealth Director of Public Prosecutions, can achieve. This type of behaviour will not be tolerated by ASIC and will be pursued through the courts,’ Crennan said.
In 2002, Mr Johnston was also found guilty on 26 charges of intending to permanently deprive clients of more than $843,000 and was sentenced in the County Court of Victoria to four years and nine months’ jail.
At that time, the court heard he had obtained $843,416 from clients of Cranbourne Park Accounting Services, between September 1997 and May 1999, with the intention of permanently depriving them of their funds.
