Exceptional Circumstances: Mark Dreyfus, Richard Boyle, Gina Rinehart and Oracle Corporation

by Wally The Chartered Accountant | Oct 1, 2023 | Comment & Analysis, Latest Posts

Why is the rule of law applied in ways which reward a bad corporation, Oracle, with regulatory munificence, while a good citizen, Richard Boyle, acting for the integrity of the public service is dragged through legal hell? Wally The Chartered Accountant asks Attorney-General Mark Dreyfus.

Please compare the pair. Attorney General Mark Dreyfus KC: (1) Oracle Corporation a financial reporting cheat and a tax cheat showered with government-funded deals and contracts; and (2) Richard Boyle, a public servant whistleblower who acted against wrongdoing within the Australian Taxation Office. In vengeful return, Boyle is being threatened and emotionally destroyed by the prospect of a 161-year prison sentence. Yet Oracle sails off unscathed – indeed unnoticed, except for here.

Oracle … 68 separate offences

Mark Dreyfus KC, please digest this comparison. Once you have done so, please discontinue the prosecution of Richard Boyle on the grounds of exceptional circumstance. This was not your doing in the first place but a wicked prosecution which is now your legacy. The only possible reason for you to allow its continuance is that you wish to train public servants to look the other way and never speak to a journalist if they become aware of incompetence, illegality, or worse, in a government agency or department. It is a prosecution conceived by cowards in the name of cowardice.

Oracle Corporation

Oracle Corporation is a big fish. A United States multinational with a market capitalisation of approximately $468b; it provides network computing solutions, including computer systems, software, data storage and cloud infrastructure services.

According to the AusTender website, Oracle has been a busy little beaver with Australian government agencies and departments.

Since 2006, Oracle has been the beneficiary of 2,304 government-funded contracts, yielding a total value of $1.735b.

Of note is that Oracle has benefitted from 153 contracts with the Australian Securities and Investments Commission (ASIC) with a total value of $83.8m, and 66 contracts with the Australian Taxation Office (ATO) with a total value of $39m.

Mark Dreyfus KC, I hope these two agencies, ASIC and the ATO, have not let their contracts with Oracle, or their dependence on Oracle services, cloud their judgement over the regulation and enforcement of the law against Oracle itself.

ASIC (and time) is on Oracle’s side

Section 319 of the Corporations Act 2001 (Cth) (the Act) requires a large proprietary company to lodge its annual financial report with ASIC within four months of the end of each financial year.

Mark Dreyfus KC, allow me introduce you to four large proprietary companies of Oracle that are registered in Australia:

  • Oracle Consolidation Australia Pty Ltd (ACN 113 944 120)
  • Oracle Australia Holdings Pty Ltd (ACN 113 993 963)
  • Oracle Corporation Australia Pty Ltd (ACN 003 074 468)
  • Vantive Australia Pty Ltd (ACN 076 201 619)

These four companies have a financial year of May 31, which means they are required by law to lodge an annual financial report with ASIC no later than September 30 each year.

Mark Dreyfus KC, are you aware that in the seventeen years from 2006 to 2022, none of the above mentioned four Oracle companies have complied with Section 319 of the Act thereby racking up 68 separate offences against the Act? How did I become aware of these 68 offences? I used ASIC’s publicly available data and spent about one hour of my time looking at it.

Oracles’s 68 offences against section 319 of the Act are offences of strict liability, but they have been unregulated by ASIC, our corporate regulator which channels the Keystone Cops almost as an art form.

Perhaps ASIC has more important priorities than enforcing the law against U.S. multinationals, for example, applying for staff bonuses and making media releases? Perhaps ASIC was not aware of Oracle’s 68 offences?

ASIC should know about these offences because they are in plain sight in data managed by ASIC. How hard can it be to do a search on foreign-owned companies with $1 billion in consolidated revenue and then ask the question: are they lodging their financial reports as required by the law?

It seems ASIC doesn’t even bother looking if the big fish is a US multinational.

Oracle and EY: 42 breaches of the Corporations Act and counting

Gina Rinehart could be forgiven

In 2015, Hancock Prospecting Pty Ltd and two related entities were taken to court by ASIC and fined $130,000 for 13 offences against section 319 of the Act. The enforcement, which was commendable, followed investigations in these pages.

In a moment of pure sophistry however, an ASIC media release published on August 10, 2015, noted the fines against Hancock Prospecting and promised “ASIC will continue to take enforcement action against companies who fail to meet their financial reporting obligations”. There was no mention of exceptions as we can see with Oracle Corporation.

Gina Rinehart could be forgiven for wondering out loud, why did ASIC take my companies to court for failing to submit reports on time between 2008 and 2012 but it allows Oracle companies to commit the same offence from 2006 to 2022, or 17 years in a row, or 68 times, with impunity?

Rinehart’s company had to pay $10,000 per offence, or $130,000, but Oracle, apparently US corporate royalty, must rank above Perth royalty.

ASIC effectively allows Oracle to pay $0 for each of its 68 offences, thereby depriving the public purse of $680,000. Perhaps Gina needs to take her enterprise and herself to the United States like robust randy Rupert, and then the regulators in Australia may not try that hard, or at all, to enforce financial reporting laws on her companies?

Why has Oracle gone 17 years in a row ignoring section 319 of the Act and failing to lodge audited financial statements on time?  Is it a simple mistake, an oversight, or something its advisors, receptionists or cleaners forgot to do? Is it a mishap, something unimportant, something that is forgivable or merely a matter of staff training?

The real reason for delayed reports?

Oracle has engaged experienced firms for its financial reporting affairs, including Baker & McKenzie and Ernst & Young (EY). It is highly unlikely these advisors would not know about Section 319 of the Corporations Act and inform their client Oracle.

Alas, it seems Oracle has committed 68 offences against section 319 of Act because because they believe they can get away with it. But is there another, most sinister reason? Oracle’s untimely financial reports facilitate the management of its income tax affairs in Australia, ie. its income tax evasion.

tax rate of 0.4% on income

Late financial reports and delays in auditing usually allow taxpayers more time for more creativity, including back-dating transactions and agreements with related parties to minimise taxable profits.

When multinational like Oracle lodge untimely financial reports, this overturns a key protection in the Australian tax system. Their Australian tax base is protected by having large proprietary companies arrange their accounting records and have their financial reports audited within four months of the financial year end.

In each year, the audited financial reports precede the tax return. This means the tax return must reconcile to what has been disclosed in the lodged financial reports. Untimeliness opens the gate for financial reports to be subjected to tax-based manipulations months or even years after they were due to facilitate recording lower taxable profits and lower income tax or even no income tax.

Oracle practices tax-based manipulations on its financial reports is perhaps better described as accounting fraud for income tax purposes?

Oracle Consolidation Australia Pty Ltd has accumulated 8443 days of lateness and, on average, lodges its annual financial report 497 days after the legal deadline.

Oracle Australia Holdings Pty Ltd has accumulated 8560 days of lateness and, on average, lodges its annual financial report 504 days after the legal deadline. Oracle Australia Holdings Pty Ltd falsely claims that it is entitled to class order relief from financial reporting obligations for 2022. Such relief does not apply to subsidiaries of late lodging entities.

Oracle Corporation Australia Pty Ltd has accumulated 4745 days of lateness and, on average, lodges its annual financial report 279 days after the legal deadline.

Vantive Australia Pty Ltd, the entity currently responsible for Oracle’s tax affairs in Australia, has accumulated 42690 days of lateness – more than 13 years worth. Vantive has failed to lodge an annual financial report for the seven financial years from 2006 to 2012. In the remaining ten financial years 2013 to 2022, Vantive lodges its annual financial, on average, 692 days after the legal deadline.

The table below shows all the ugly details of Oracle’s financial reporting record.

Oracle late tax return lodgement

Oracle is a good friend of ASIC. Notwithstanding its ugly financial reporting record and 68 offences against section 319 of the Act, the regulator has signed onto 153 contracts with Oracle since 2008. The most recent contract with ASIC is for software maintenance and support and has a value of $3.4m.

Taxman on Oracle’s side

According to corporate tax entity information produced by ATO for the eight income years from 2014 to 2021, Vantive Australia (on behalf of the Oracle Corporation) has paid income tax of $43.6 million while Oracle has amassed total assessable income of $10.3 billion equivalent to a notional tax rate of 0.4% on income. Small business owners in Australia must wonder how they (Oracle) do it. How do you pay so little income tax on contracts with customers?

Why is Oracle allowed to shift taxable profits to low-tax jurisdictions? Isn’t it enough that Oracle receives $1.7b in Australia government contract work? Why do they have to skive out of paying a reasonable amount of income tax on their income from that work?

When is it ever enough for a US multinational evading taxes in Australia? Oracle Corporation has even tried to avoid paying withholding tax on the interest and dividends it uses to funnel Australian generated cash flows overseas.

In June 2022, the ATO issued an additional assessment of $233 million for interest on a withholding tax matter relating to 2014 to 2018. According to the financial report of Oracle Corporation Australia for May 2022, lodged in June 2023, Oracle has not paid the additional assessment of $233 million and discussions with the ATO are ongoing.

There seems to be quite of a difference between how the ATO treats a US multinational like Oracle and an Australian small business. Oracle can refuse to pay a tax assessment notice and enter discussions with the ATO that exceeds one year.

In contrast, an Australian small business receives a garnishee notice from the ATO. A US multinational gets a payment plan from the ATO. An Australian small business gets told by the ATO to pay up, or else.

Which brings us to the matter of Richard Boyle.

Richard Boyle – a modern day Australian hero

Richard Boyle is a small fish. Richard Boyle worked as a debt collection officer at the ATO, and he went into bat for Australian small business owners who are also small fish. Richard Boyle blew the whistle on the unethical debt recovery practices of the ATO that were aimed at Australian small businesses. Unlike Oracle, these taxpayers did not receive the benefit of year-long discussions with the ATO about their tax debts.

Richard Boyle acted in good faith against injustice and unethical behaviour at a government agency. Because of this, and only because of this, he must defend himself in protracted court proceedings. Meanwhile, Oracle Corporation has committed 68 offences against section 319 of the Corporations Act with impunity and is in year-long discussions with ATO about an unpaid $233 million debt.

Compare the pair Mark Dreyfus KC. This is an exceptional circumstance, and it requires your immediate action.

Please arrange to discontinue the unjust prosecution of Richard Boyle at your earliest convenience. Please also remind ASIC and the ATO of their obligations regarding the regulation of relevant Australian laws against Oracle Corporation.

Editor’s Note: MWM recommends Richard Boyle “do a Larry Ellison” from Oracle and enter a custom-built 79ft maxi in the Sydney to Hobart.

Mark Dreyfus, whistleblowers and the non-existent circumstances

Wally the Chartered Accountant (not his real name) is a veteran of the accounting profession who is concerned about dishonesty and falling professional standards. Wally's true identity is known to MWM.

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