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The Pallion Group has been involved in one of the most high-profile court cases involving the precious metals sector, battling with the Australian Taxation Office over GST payments. Pallion is comprised of multiple entities, including ABC Bullion, ABC Refinery, and Palloys.
The Pallion Group has been involved in one of the most high-profile court cases involving the precious metals sector, battling with the Australian Taxation Office over GST payments. Pallion is comprised of multiple entities, including ABC Bullion, ABC Refinery, and Palloys.

New money laundering laws: Loopholes, lawyers, liquidation and Pallion

When the first rumours emerged around 2013 about a legal dispute over ATO payments in the gold sector, most people assumed it was due to confusion about GST law. Few people would have predicted that the case would still be going through the courts more than a decade later, courtesy of Pallion Group.

Earlier this week, Jeweller documented proposed reforms to Australia’s anti-money laundering (AML) and counter-terrorism financing (CFT) regime. The changes are being advanced by the Attorney General’s Department and include a 16-page paper specifically addressing the jewellery industry.

If adopted, the changes will have a far reaching impact on how all sectors of the Australian jewellery will operate.

» See AML and CFT articles Part I and Part IIand which detail the number of people who have been jalied over gold GST fraud in the Australian jewellery indusrty.

One of the most high-profile court cases involving the precious metals sector and the Australian Taxation Office (ATO) has involved the Pallion Group and its managing director Andrew Cochineas. 

There are many other reasons why the details of this affair should be analysed, given that it, along with other cases of GST fraud in the gold sector which have resulted in jail sentences, may have contributed to new AML/CFT laws.

Pallion is the largest precious metals services group in Australia. It offers the jewellery industry bullion trading, refining and minting, casting and custom jewellery, findings, goldsmithing, and silversmithing.

ASIC records show six directors of Pallion Group Pty Ltd: Andrew and Phillip Cochineas, Philip Williams, Jane (Janie) Simpson, Francis Gregg, and Andrew Robinson.

The legal dispute is complex and has dragged through the courts for 10 years. It has included various appeals, with each side claiming ‘victory’ at different stages.

The case has generated more than 44,000 documents containing more than 50,000 pages and has even been reduced to debating the word ‘refining’.

Suffice to say that Jeweller will not attempt to comprehensively explain the legal complexities of the case; however, if a snapshot could provide insight into the root cause of the dispute, then it is this ABC News report.

In December 2016, the ATO named 670 large companies, stating they paid no corporate tax in the 2014-15 financial year.

The list included ABC Refinery (a Pallion-related company) and revealed that the company generated $644 million in income and paid no tax.

Special friendship - Cochineas and the Catanzariti brothers 
Federal Court documents show that EBS’s turnover increased by more than $600 million in two years. (Note 2012 year is an estimate based on five months.)
Federal Court documents show that EBS’s turnover increased by more than $600 million in two years. (Note 2012 year is an estimate based on five months.)

The stoush dates back to 2014 when the ATO attempted to collect GST payments from EBS & Associates.

How that came about and where the legal dispute is today makes for interesting reading. It involves a long list of people, companies, and their subsidiaries; too many to include here.

The intricate details begin in 2012 and involve several businesses run by Adrian Catanzariti — Italian Prestige Jewellery Pty Ltd, Premium Metal Service Pty Ltd, Antel Metals Pty Ltd, 4 Nines Pty Ltd, and A1 Metals Pty Ltd — together called IPJ Group.

IPJ is described as the ‘first client’ of EBS & Associates – a Pallion Group company.

The large value and frequency of gold transactions by IPJ Group were documented, as were the pricing of the gold, the coincidental timing of payments, and deliveries of precious metal followed by deliveries of scrap gold.

Court documents detail a “special friendship between the Cochineas brothers and the Catanzariti brothers.”

The documents also detail EBS’s extraordinary sales growth over three years and detail how its turnover “increased dramatically” — from $63 million during the last five months of the 2012 financial year to approximately $595 million the following year — an increase of around $465 million (based on an full year estimate of $130 million in 2012).

The company’s turnover increased by another $150 million in the ensuing 12 months, reaching approximately $746 million in the 2014 financial year.

This indicates an increase in turnover across two years of more than $600 million. See table above.

Andrew Cochineas
Andrew Cochineas
Phillip Cochineas
Phillip Cochineas
Paul Cochineas
Paul Cochineas

See you in court ... again!

The Commissioner of Taxation’s position was that these businesses entered or carried out a scheme with the sole or dominant purpose of EBS & Associates receiving a GST benefit from the scheme, namely the input tax credits for its acquisitions.

The Court documents go further, alleging that “Mr [Andrew] Cochineas and [director] Ms Simpson – but especially Mr Cochineas – were on notice (and in some cases had actual knowledge) of the fraudulent activities.

“Mr Cochineas did not take any steps before us to correct answers he had previously given in compulsory examinations that appeared to be incomplete or inaccurate and that were inconsistent with his affidavit evidence. Mr Cochineas is disingenuous in denying in his affidavit the existence of any suspicions about the fraudulent activities of the IPJ Group entities.”

"The case has generated more than 44,000 documents containing more than 50,000 pages and has even been reduced to debating the word ‘refining’."

Cochineas is CEO of Pallion Group and was described as an “astute businessman”.

Therefore, it was “highly unlikely [he] was unaware that the IPJ Group was somehow exploiting ‘GST loopholes’ in circumstances where the GST issues were a topic of special interest to Mr Cochineas and the applicant from, at the latest, early 2012.”

That said, it should be noted from the outset that Federal Court documents acknowledge that Andrew Cochineas and/or Pallion subsidiaries were not party to the complex fraud, including EBS & Associates, which was placed in liquidation and renamed ‘ACN 154 520 199’, and referred to as ACN154.

» Background reading: ATO chasing $208m in gold wind-up - ABC Refinery

However, the documents detail the Commissioner’s position; he “was not alleging that ACN 154 [EBS & Associates] was a party to the fraud being perpetrated by the Division 165 Supplying Entities, but he was alleging that ACN 154 was a willing and informed beneficiary of the scheme, because it received the benefit of input tax credits in connection with its acquisitions of this suspiciously rich and surging taxable supply of scrap gold.”

Further, “Mr Cochineas was ACN 154’s principal witness and provided two affidavits as well as oral evidence at the hearing. He was cross-examined at length during the Tribunal hearing.”

Victory and defeat for Pallion

The details above are from documents following an appeal to the Federal Court EBS & Associates in November 2020 to overturn the ATO’s previous successful litigation.

His appeal was subsequently accepted and was based on “a question of law from a decision of the Administrative Appeals Tribunal”.

That is, in December 2019, the ATO had an important victory when its $250 million assessment against EBS/ACN154 was upheld by the Administrative Appeals Tribunal (AAT).

Director Janie Simpson: "had actual knowledge of the fraudulent activities".
Director Janie Simpson: "had actual knowledge of the fraudulent activities".

At the time, Deputy Commissioner Will Day said, “The Tribunal found that these artificial arrangements dealing in gold were a tax-driven scheme. This decision clearly supports the ATO’s work in tackling schemes in the precious metals refining industry aimed at manipulating the GST treatment of gold.”

However, 12 months later, that decision was struck down when the Federal Court ruled in favour of Cochineas regarding procedural fairness pertaining to two emails tendered as evidence.

"In our view, the Tribunal’s reliance on the two emails in circumstances where Mr Cochineas was not a party to the emails, was not cross-examined on the documents and the documents were not the subject of any submissions by the parties, constituted a denial of procedural fairness,” the decision reads.

» Background reading: Huge victory for ATO in $250m assessment against EBS Refining

“While it is true that the documents were included in the Hearing Book without objection, in the circumstances, it could not have been reasonably expected that the Tribunal would rely on these documents to form an adverse view as to Mr Cochineas’s credit or to make adverse knowledge findings against ACN 154.”

The court ruled that the Tribunal denied ACN 154 procedural fairness and that the denial was material.

Justices Perram, Moshinsky and Thawley made the following orders to the effect that (a) the appeal be allowed, (b) the December 2019 decision of the Tribunal be set aside, and (c) the matter be remitted to the Tribunal (differently constituted) for determination according to law.

A cost order was awarded in favour of EBS/ACN 154.

With that said, if Cochineas believed the success of his appeal in 2020 would bring the matter to an end, he was mistaken.

In July last year, the ATO had another victory in the Federal Court, where it was granted the right to appoint Special Purpose Liquidators (SPL) for EBS & Associates, which, as mentioned, was placed in liquidation and renamed ‘ACN 154 520 199’, and referred to as ACN154.

Why? Well, according to Justice Goodman, the original liquidator appointed to EBS/ACN154 was conflicted, or at least appeared to be so.

What is an SPL, and who appointed the original liquidator in 2017?

How was he funded, and why did the ATO take the matter to the Federal Court?

That’s another story entirely, and it will be documented in the next instalment of this series, which examines proposed changes to Australia’s money laundering and anti-terrorist financing regime.

[Article Updated: 26 May 2024]

Detailed reading
» Part I - New money laundering laws: What do jewellers need to know?
» Part II - New money laundering laws: Millions at stake in the jewellery industry
» Part III - New money laundering laws: Loopholes, lawyers, liquidation and Pallion
» Part IVNew money laundering laws: Pallion Group, the ATO, and the voidable transaction
» Part V - Pallion Group: Timeline of missing detail, controversy and legal dispute

Federal Court Documents
» Commissioner of Taxation v EBS Refinery - November 2020
» Deputy Commissioner of Taxation v ABC Refinery - 31 July 2023
» Federal Court Order - Justice Goodman - 31 July 2023
 


» Editor's Note: Readers with information about alleged wrongdoing and/or financial crimes in the jewellery industry can either, formally or anonymously, contact Jeweller via the Contact Us form or write directly to our Tips email address.


 

Footnote: In the second instalment of this series, Jeweller informed readers that a subsequent story would address a court case involving Pallion Group and the Australian Taxation Office.

Two days before this story was published, Jeweller was contacted by a representative from Fowlstone Communications on 22 May, requesting a ‘right of reply’ to any editorial content relating to the Pallion Group.

The company's managing director, Geoff Fowlstone, describes himself as a leader in “the field of Crisis Communications and Reputation Management.”

The Fowlstone representative claimed to act on behalf of Pallion Group, although no evidence was provided to support this assertion. The email also sought a telephone call to discuss the matter further.

He was informed by Jeweller that if it were necessary to seek comment from Pallion directors, it would be done directly.

The representative replied the same day, reiterating the expectation of a ‘right of reply’ and instructing that any questions for Pallion Group should be directed to Fowlstone Communications.

Jeweller replied on 23 May, advising the representative that these demands would be ignored and that his company was not in a position to dictate terms to the media.

The same day, Pallion Group CEO Andrew Cochineas was contacted by Jeweller via email to raise this issue and asked if Fowlstone acted for Pallion Group.

Cochineas was also advised that any questions would be directly provided to him, not an external, third-party crisis management consultant.

At the time of publication, Mr Cochineas had not responded to the email.

 

More reading
Presentation at Sydney Fair to detail counter-terrorism and money laundering legal reform
Anti-money laundering agency pursues audit of Perth Mint
Two more gold dealers sentenced over stolen goods
Gold dealer linked to jewellery store robberies sentenced to jail
Jail likely for gold buyers linked to 2017 store robberies
Police drop more than 400 charges against gold dealer linked to jewellery store robberies
‘Record-breaking’ armed robbery at gold dealer; colourful history revealed
Gold dealer connected to jewellery robberies fronts court
Gold dealer linked to jewellery robberies ordered to pay $200,000
Melbourne jewellery robberies linked to gold GST fraud
Breakthrough in Melbourne jewellery robberies

 











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