Australia Tax Official Charged in Probe

CANBERRA, Australia (AP) -- A senior Australian tax bureaucrat and two of his children are among 10 people charged in connection with a sophisticated tax fraud that police say netted 165 million Australian dollars ($123 million) in less than a year.

Australian Taxation Office Deputy Commissioner Michael Cranston faces up to five years in prison if convicted of abusing his position as a public servant by passing information to his son, Australian Federal Police Deputy Commissioner Leanne Close said Thursday.

His son Adam Cranston, 30, is managing director of a Sydney-based financial services company that police say was at the center of the alleged scam involving payroll taxes. Police arrested him, his sister Lauren Cranston and seven others in raids Wednesday.

They were to be charged with crimes ranging from conspiracy to defraud the government to dealing in the proceeds of crime to demanding money with menaces.

The 58-year-old bureaucrat was not thought to be part of the alleged criminal syndicate, which Close said is accused of spending unpaid taxes on luxury homes, racing cars, airplanes, motorbikes, jewelry, art and vintage wine.

The group ran a legitimate payroll company contracted to pay staff on behalf of their employers. Police allege the scam came in when they introduced subcontractors to pay the salaries. Police allege the subcontractors were "a front" that only paid part of the taxes that the employees owed.

News Corp. reported that the suspects believed they had struck a sweet spot where each individual tax underpayment was too small to trigger a tax office response.

Police began investigating the scam in June last year. The tax office later became aware of the fraud through its internal systems and started working with the police, officials said.

Police served Michael Cranston with a notice on Wednesday, after his son's arrest, to appear in court on June 13.

"Michael was in shock when we spoke to him yesterday, as you would image, knowing what's happened to his son," Police Detective Superintendent Kirsty Schofield said.

Three other tax bureaucrats face disciplinary action for accessing information about an internal audit of the fraud, Acting Commissioner of Taxation Andrew Mills said. Tax officials are only allowed to access data relevant to their work.

"Australians must have a tax administration that they can trust and the people of the ATO must be of the utmost integrity and good judgment," Mills said.

Adam Cranston was among the first three defendants released on bail after appearing in a Sydney court on Thursday. He was charged with conspiracy to defraud the government, a charge that carries a maximum 10-year prison term.

He did not enter a plea and his AU$300,000 ($224,000) surety was provided by his wife and grandmother. His 24-year-old sister is due to appear in court on June 13 on the same charge plus a charge of dealing in the proceeds of crime. It was not immediately clear what sentence she might face.