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An investigator with the Australian Taxation Office has been found to have lied and tampered with evidence during a lengthy legal battle against a Queensland medical researcher who was accused of fraud.
The researcher was interviewed by the ATO, and was advised to answer questions and was told if she did not, she would be committing an offence. She therefore did not have a right to silence.
The ATO’s conduct was lambasted as “oppression” by Justice Paul Smith, who ordered for her fraud case to be stayed on Friday.
A Queensland judge found an ATO investigator lied and tampered with evidence in an alleged fraud case against a medical researcher. Credit: Luis Enrique Ascui
Smith handed down his judgment in the years-long case, involving the medical researcher, referred to as Julie Clarke in documents, after she requested a pseudonym.
Clarke had wished to develop a therapeutic using the chemical (R)-3-hydroxybutyric acid (also known as D-3-hydroxybutyric acid). It was intended to treat conditions such as cancer and obesity.
The case involved investor group The Brisbane Angels, who decided to invest $185,000 in 2016. Clarke had approached the group for funding relating to cancer trials. Brisbane Angels said they were not interested, but would consider it if it was a weight-loss drug. Two promising pilot studies were done and the $185,000 was invested.
The group later withdrew from the project after being informed it would be a “protracted and expensive process”.
There was a civil dispute between Clarke and the group, with the former wanting the return of the intellectual property, and the investors wanting their money.
An application was lodged with the ATO the following year, with Clarke claiming she had spent $11,380,900, on product development. The ATO considered the claim to be false, and believed she only spent $11,380.90. The ATO then proceeded to audit the case, and Clarke was interviewed.
Smith said the researcher was directed by the ATO to answer questions; otherwise she would be committing an offence, and as such she did not have a right to silence.
The court found that the substantial purpose of the interview was to question Clarke about the alleged fraud, which is a criminal offence.
Smith concluded that Clarke was unlawfully subjected to a hybrid audit and criminal interview, and she had been deprived of her forensic choices in the way in which she could defend herself at trial.
Court documents said both the ATO and Commonwealth Director of Public Prosecutions had improperly brought two prosecutions against Clarke, and as such the proceedings had become oppressive, and both included the use of an unlawful compulsory interview.
Court documents state ATO investigator Anthony Rains obtained documents from Brisbane Angels in 2018, and formed the view Clarke had defrauded them of the $185,000, believing it was spent on a personal loan and holidays.
The court found Rains referred the state fraud matter to the Queensland Police Service without any complaint by Brisbane Angels and failed to provide exculpatory material to police, including that Clarke was entitled to a consulting fee and other information that showed the money had been spent on legitimate expenses.
In his judgment, Smith said Rains engaged in multiple acts of misconduct, including that he deliberately altered the expenses sheet Clarke sent to Brisbane Angels, and provided misleading information to obtain search warrants, which subsequently misled several judicial officers.
The court found he also lied in a briefing note to the Queensland Bar, and failed to disclose emails between himself and Brisbane Angels before the state fraud trial in 2020.
Smith said: “I consider Mr Rains exceeded his authority by being heavily involved in the investigation of the state charge and it is doubtful there was ever a case to answer as alleged. I have found an abuse of process occurred here.”
Smith said Clarke was subjected to considerable stress and expense in having to defend the state charge whilst also defending the Commonwealth case.
He said Clarke must have been “absolutely fearful of being unjustly convicted on the state fraud charge which would carry a sentence of several years in jail and she must have felt no one was listening to her”.
He also said: “The court should not tolerate this type of conduct by this ATO investigator or the ATO more broadly, or any government authority for that matter.”
Smith said the justice system would be put at significant risk if courts could not rely on the integrity of government investigators and institutions.
Smith ordered for the prosecution against Clarke to be stayed.
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