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Federal Court of Australia - Full Court Decisions |
Last Updated: 17 February 2006
FEDERAL COURT OF AUSTRALIA
Hermanowski v United States of America [2006] FCAFC 8
EXTRADITION – Application of Treaty on Extradition between
Australia and the United States of America that came in force on 8 May 1976
as amended
by the Protocol done at Seoul on 4 September 1990 –
requirements of Article XI(3)(c) as to description of facts setting
forth
reasonable grounds for believing that an offence has been committed and the
person sought committed it
EVIDENCE – proof and application
of foreign law
WORDS AND PHRASES – ‘reasonable
grounds for believing’
Extradition Act 1988 (Cth),
ss 10(2), 11, 19, 21, 22(5)
Extradition (United States of America)
Regulations (1988)
Hermanowski v United States of
America [2005] NSWSC 145 affirmed in part
Cabal v United
Mexican States [2001] FCA 427 referred to
Commonwealth v Official
Trustee in Bankruptcy [2004] NSWSC 1155 cited
Croton v The Queen [1967] HCA 48;
(1967) 117 CLR 326 cited
Dallison v Caffery [1965] 1 QB
348 cited
East Grace Corporation v Xing (No 2) [2005] FCA 1266 cited
George v Rockett [1990] HCA 26; (1990) 170 CLR 104
cited
Griffiths v United States of America [2005] FCAFC 34; (2005) 214 ALR 665
referred to
Isakka v South Australian Asset Management Corp (non
registered entity) [2002] QCA 549 cited
Jacobi v United States of
America [1996] FCA 962 cited
Mitchell v John Heine &
Son Ltd (1938) 38 SR NSW 466 cited
Pasini v United Mexican
States [2002] HCA 3; (2002) 209 CLR 246 cited
Ruddock v Taylor [2005] HCA 48;
(2005) 221 ALR 32 cited
Todhunter v Attorney-General (Cth)
(1994) 52 FCR 228 referred to
Todhunter v United States of
America (1995) 57 FCR 70 applied
M Cherif Bassiouni,
International Extradition: United States Law and Practice, 4th edn,
Oceana Publications, Inc., Dobbs Ferry, New York, 2002,
Ch X
DA Ipp, ‘Must a prosecutor believe that the accused is
guilty? Or, was Sir Frederick Jordan being recalcitrant?’
(2005) 79
ALJ 233
PE Nygh and M Davies, Conflict of Laws in Australia,
7th edn, LexisNexis Butterworths, Australia, 2002
HERMANOWSKI v UNITED STATES OF AMERICA AND HER HONOUR JILLIAN
ORCHISTON, MAGISTRATE
NSD 642 OF 2005
GYLES, CONTI AND
GRAHAM JJ
17 FEBRUARY 2006
SYDNEY
ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES
|
BETWEEN:
|
CHARLES HERMANOWSKI
APPELLANT |
|
AND:
|
UNITED STATES OF AMERICA
FIRST RESPONDENT HER HONOUR JILLIAN ORCHISTON, MAGISTRATE SECOND RESPONDENT |
|
DATE OF ORDER:
|
|
|
WHERE MADE:
|
THE COURT ORDERS THAT:
1. The appeal be allowed in part.
2. The order of the Supreme Court made on 13 April 2005 that ‘The orders made on 7 May 2004 by Magistrate Orchiston are confirmed’ be set aside insofar as the orders of the Magistrate determined that the appellant was eligible for surrender in respect of the following extradition offences in the First and the Supplementary Requests for extradition of the appellant, Charles C Hermanowski, a/k/a ‘John Stobierski’: Counts 40–51 and 64 of the Second Superseding Indictment returned against the appellant on 11 April 2002 and Counts 52–63 and 65 of the Second Superseding Indictment returned against the Appellant on 11 April 2002.
3. Otherwise the appeal be dismissed and the orders made on 7 May 2004 by Magistrate Orchiston be otherwise confirmed.
Pursuant
to s 21(6)(g) of the Extradition Act 1988 (Cth) the Court states
that the appellant, Charles C Hermanowski a/k/a ‘John
Stobierski’ is eligible for surrender, within the meaning of s 19(2)
of the Extradition Act 1988 (Cth), in relation to the offences charged in
Counts 2–11 inclusive, 22, 23–34 inclusive, 68 and 69 and
72–85 inclusive
of the Second Superseding Indictment returned against the
appellant on 11 April 2002.
Note: Settlement and entry of
orders is dealt with in Order 36 of the Federal Court Rules.
ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES
|
CHARLES HERMANOWSKI
APPELLANT |
|
|
AND:
|
UNITED STATES OF AMERICA
FIRST RESPONDENT HER HONOUR JILLIAN ORCHISTON, MAGISTRATE SECOND RESPONDENT |
REASONS FOR JUDGMENT
THE COURT
1 This is an appeal from a judgment of Bell J of the Supreme Court of New South Wales of 13 April 2005 confirming orders made by Magistrate Orchiston on 7 May 2004 that the appellant was eligible for surrender pursuant to s 19 of the Extradition Act 1988 (Cth) (the Act) in relation to a number of extradition offences (Hermanowski v United States of America [2005] NSWSC 145). As will appear, the appeal is allowed in part.
LEGISLATIVE BACKGROUND
2 The Act commenced on 1 December 1988. One of the principal objects of the Act as set forth in s 3 was:
‘(a) to codify the law relating to the extradition of persons from Australia to extradition countries ... and, in particular, to provide for proceedings by which courts may determine whether a person is to be, or is eligible to be, extradited, without determining the guilt or innocence of the person of an offence’
3 By virtue of s 5 of the Act any country ‘that is declared by the regulations to be an extradition country’ is an extradition country for the purposes of the Act.
4 By Regulation 3 of the Extradition (United States of America) Regulations (1988), the United States of America was declared to be an extradition country under the Act.
5 Section 11 of the Act provided for the making of regulations which would modify the application of the provisions of the Act in relation to specified extradition countries. Relevantly it provided:
‘11(1) The regulations may:
(a) state that this Act applies in relation to a specified extradition country subject to such limitations, conditions, exceptions or qualifications as are necessary to give effect to a bilateral extradition treaty in relation to the country, being a treaty a copy of which is set out in the regulations; ...
...
(1C) For the purposes of subsections (1) and (1A), the limitations, conditions, exceptions or qualifications that are necessary to give effect to a treaty may be expressed in the form that this Act applies to the country concerned subject to that treaty.
...’
6 As from 21 December 1992 Regulation 4 of the Extradition (United States of America) Regulations provided:
‘4. The Act applies in relation to the United States of America subject to the Treaty on Extradition between Australia and the United States of America that came into force on 8 May 1976, as amended by the Protocol done at Seoul on 4 September 1990 (being, respectively, the treaty a copy of the text of which is set out in Schedule 1 and the protocol a copy of the text of which is set out in Schedule 2)’
7 Under the Treaty as amended by the Protocol provision was made for requests for extradition. Article XI of the Treaty, as replaced by Article 7 of the Protocol, relevantly provided:
‘(1) All requests for extradition shall be made through the diplomatic channel.
(2) The request for extradition shall be supported by:
(a) documents, statements, or other types of information which describe the identity and probable location of the person sought;
(b) a description of the conduct constituting the offence;
(c) a statement of the law describing the essential elements of the offence for which extradition is requested; and
(d) a statement of the law describing the punishment for the offence and the law relating to the limitation of legal proceedings.
(3) A request for the extradition of a person who is sought for prosecution ... shall also be supported by:
(a) a copy of the warrant or order of arrest issued in the requesting State for the arrest of the person for the offence;
(b) a copy of the charging document, if any; and
(c) a description of the facts, by way of affidavit, statement or declaration, setting forth reasonable grounds for believing that an offence has been committed and that the person sought committed it.
...’
[emphasis added]
8 Section 19(1) and (2) of the Act relevantly provided:
‘19(1) Where:
(a) a person is on remand under section 15;
(b) the Attorney-General has given a notice under subsection 16(1) in relation to the person;
(c) an application is made to a magistrate by or on behalf of the person or the extradition country concerned for proceedings to be conducted in relation to the person under this section; and
(d) the magistrate considers that the person and the extradition country have had reasonable time in which to prepare for the conduct of such proceedings;
the magistrate shall conduct proceedings to determine whether the person is eligible for surrender in relation to the extradition offence or extradition offences for which surrender of the person is sought by the extradition country.
19(2) ... the person is only eligible for surrender in relation to an extradition offence for which surrender of the person is sought by the extradition country if:
(a) the supporting documents in relation to the offence have been produced to the magistrate;
(b) where this Act applies in relation to the extradition country subject to any limitations, conditions, exceptions or qualifications that require the production to the magistrate of any other documents – those documents have been produced to the magistrate;
(c) the magistrate is satisfied that, if the conduct of the person constituting the offence in relation to the extradition country, or equivalent conduct, had taken place in the part of Australia where the proceedings are being conducted and at the time at which the extradition request in relation to the person was received, that conduct or that equivalent conduct would have constituted an extradition offence in relation to that part of Australia; and
(d) the person does not satisfy the magistrate that there are substantial grounds for believing that there is an extradition objection in relation to the offence.’
9 ‘Extradition objection’ is defined in s 7 of the Act. However, for present purposes it is not relevant.
10 By s 19(3) of the Act ‘supporting documents’ was defined to mean:
‘(a) if the offence is an offence of which the person is accused – a duly authenticated warrant issued by the extradition country for the arrest of the person for the offence, or a duly authenticated copy of such a warrant;
...
(c) in any case:
(i) a duly authenticated statement in writing setting out a description of, and the penalty applicable in respect of, the offence; and
(ii) a duly authenticated statement in writing setting out the conduct constituting the offence.’
11 Under s 10(2) of the Act a reference to ‘conduct constituting an offence’ is a reference to ‘the acts or omissions, or both, by virtue of which the offence has, or is alleged to have, been committed’.
PROCEEDINGS BELOW
12 Following the making of a request by the first respondent, the United States of America (United States), for the extradition of the appellant the second respondent conducted proceedings to determine whether the appellant was eligible for surrender in relation to numerous extradition offences for which surrender of the appellant was sought by the United States in accordance with s 19(1) of the Act.
13 On 7 May 2004 the second respondent delivered reasons for judgment occupying some 147 pages in support of her determination that the appellant was eligible for surrender to the United States of America in relation to certain but not all of the extradition offences in respect of which requests for extradition had been made.
14 The determinations made by the learned Magistrate were as follows:
‘For the reasons set out in this judgment, I am satisfied that the respondent Charles C Hermanowski, a/k/a ‘John Stobierski’, is eligible for surrender to the United States of America, pursuant to s19(1) of the Act, in regard to the following extradition offences in the First and the Supplementary Requests:
Counts 2–11: Presenting false and fraudulent claims upon the United States Department of Defense; in violation of Title 18, United States Code, Sections 287 and 2:
Count 22: Conspiracy to commit mail fraud; in violation of Title 18, United States Code, Section 371
Counts 23–34: Mail fraud; in violation of Title 18, United States Code, Sections 1341 and 2
Counts 40–51 and 64: Laundering the proceeds of mail fraud, with the intent to conceal and disguise the nature, location, source, ownership and control of the mail fraud proceeds; in violation of Title 18, United States Code, Section 1956(a)(1)(B)(i) and 2
Counts 52–63 and 65: Engaging in monetary transactions in excess of US $10,000 derived from the proceeds of mail fraud; in violation of Title 18, United States Code, Sections 1957 and 2
Counts 68 & 69: Tax evasion in violation of Title 26, United States Code, Sections 7201 and Title 18, United States Code, Section 2
Counts 72–85: Making, aiding and assisting in the preparation of false tax returns, in violation of Title 26, United States Code, Section 7206(2): para 25.
For the reasons set out in this judgment, I am not satisfied that the respondent Charles C Hermanowski, a/k/a ‘John Stobierski’, is eligible for surrender to the United States of America, pursuant to s19(1) of the Act, in regard to the following extradition offences in the First and the Supplementary Requests:
Count 1: Conspiracy to defraud the United States Department of Defense; in violation of Title 18, United States Code, Section 371
Counts 12–21: Making false and fraudulent statements in a manner within the jurisdiction of the United States Department of Defense, in violation of Sections 1001(a)(2) and 2
Count 39: Conspiracy to violate Title 18, United States Code, Section 1956(a)(1)(B)(i), by laundering the proceeds of mail fraud; in violation of Title 18, United States Code, Section 1956(h)
Count 67: Conspiracy to defraud the Internal Revenue Service of the United States Department of the Treasury, in violation of Title 18, United States Code, Section 371.’
15 On 7 May 2004 the second respondent recorded in writing the extradition offences in relation to which she had determined that the appellant was eligible for surrender and made a copy of that record available to the appellant and the Attorney-General in accordance with s 19(9)(c) of the Act. That determination was an administrative decision (per Gleeson CJ, Gaudron, McHugh and Gummow JJ in Pasini v United Mexican States (Pasini) [2002] HCA 3; (2002) 209 CLR 246 at [16]).
16 At the same time as she made her determination her Honour ordered that the appellant be committed to the Parklea Correctional Centre to await surrender under a surrender warrant or temporary surrender warrant or release pursuant to an order under s 22(5) of the Act (see s 19(9)(a) of the Act).
17 By a Summons filed 19 May 2004 the appellant applied to the Supreme Court of New South Wales for a review of the second respondent’s said order in accordance with s 21(1) of the Act. Thereafter, on 12 July 2004 the appellant filed an Amended Summons. By that Summons the appellant sought an order quashing the said order made by the second respondent in accordance with s 19(9) of the Act and an order directing the second respondent to order his release.
18 In such a proceeding the court was required to determine whether the administrative decision made by the Magistrate was right or wrong and, if wrong, what decision should have been made by her Honour, thereby determining the rights and liabilities of the parties to the review proceedings. At the very least, the court was required to determine whether or not the Magistrate’s administrative decision was erroneous in some respect that rendered the rights or liabilities of the appellant other than as set out in the decision (per Gleeson CJ, Gaudron, McHugh and Gummow JJ in Pasini at 255 [16] and [18]).
19 On 18 April 2005 the primary judge, Bell J of the Supreme Court of New South Wales, dismissed the appellant’s Amended Summons, and confirmed the order of the second respondent of 7 May 2004.
20 The primary judge included in her judgment on the review a statement to the effect that the appellant was eligible for surrender within the meaning of s 19(2) of the Act in relation to the extradition offences identified in paragraph 14 of Her Honour’s reasons for judgment of 13 April 2005, being the extradition offences in respect of which the second respondent determined that the appellant was eligible for surrender on 7 May 2004.
21 On 26 April 2005 the appellant appealed to this Court from the orders of the Supreme Court of New South Wales, in accordance with s 21(3) of the Act.
22 In relation to the appeal s 21(6) of the Act relevantly provides:
‘21(6) Where the person ...:
...
(b) appeals under subsection (3) against an order made on that review ...
...
the following provisions have effect:
(d) the court to which the ... appeal is made shall have regard only to the material that was before the magistrate;
...
(g) if the court to which the ... appeal is made determines that the person is eligible for surrender, within the meaning of subsection 19(2), in relation to an extradition offence or extradition offences – the court shall include in its judgment on the ... appeal a statement to that effect specifying the offence or offences.’
23 There was discussion of the nature of the appeal to this Court in the submissions on both sides, but, in the end, there was no issue raised that was critical to the disposition of this appeal.
FACTUAL BACKGROUND
24 The supporting material that was before the second respondent included an ‘Affidavit of Assistant United States Attorney Michael S Davis in Support of Request for Extradition’ sworn 12 March 2002 to which numerous documents were exhibited. That affidavit and the exhibits thereto became Exhibit 1 before the second respondent.
25 The material that was before the second respondent also included an ‘Affidavit of Assistant United States Attorney Michael S Davis in Support of Supplementary Request for Extradition’ sworn 6 June 2002 to which numerous other documents were exhibited. That affidavit and the exhibits thereto became Exhibit 2 before the second respondent.
26 Mr Davis’ first affidavit was 44 pages in length and contained 63 separate paragraphs. These included:
‘2. ... During my practice as an Assistant United States Attorney, I have become knowledgeable about the criminal laws and procedures of the United States.
3. As an Assistant U.S. Attorney for the District of Southern District of Florida, I am responsible for the preparation and prosecution of criminal cases. In the course of my duties I have become familiar with the charges and the evidence in the case of United States v Charles C. Hermanowski, a/k/a ‘John Stobierski,’ ...
4. An investigation by the United States Department of Defense, Office of Inspector General, Defense Criminal Investigative Service; the Internal Revenue Service, Criminal Investigations; and the United States Attorney’s Office has revealed that the subject of this extradition request, Charles C. Hermanowski, a/k/a ‘John Stobierski,’ has engaged in criminal conduct including the following: (1) conspiracy to defraud the United States Department of Defense; (2) presentation of false and fraudulent claims upon the United States Department of Defense; (3) making false and fraudulent statements in a matter within the jurisdiction of the United States Department of Defense; (4) conspiracy to commit mail fraud; (5) mail fraud; (6) conspiracy to launder the proceeds of mail fraud; (7) laundering the proceeds of mail fraud with the intent to conceal and disguise the nature, location, source, ownership and control of the mail fraud proceeds; (8) engaging in monetary transactions in excess of $10,000 derived from the proceeds mail fraud; and (9) obstruction of the due administration of justice.
5. In or about February 1998, the United States Attorney’s Office for the Southern District of Florida commenced an investigation of criminal conduct that included a scheme to defraud the United States Department of Defense associated with the submission of false settlement proposals that claimed millions of dollars of false and fraudulent costs. Evidence obtained in the initial stages of the investigation revealed that Hermanowski and others had likely complicity for this conduct. Evidence obtained as the investigation progressed revealed that Hermanowski and others likely had engaged in other criminal conduct, including the commission of a scheme to defraud various cable television networks of millions of dollars of revenue owed to them and a scheme to launder the proceeds of the fraud against the cable television networks. Evidence obtained as the investigation progressed further revealed that Hermanowski likely had obstructed justice by fleeing the Southern District of Florida.
I. THE INDICTMENT AND SUPERSEDING INDICTMENT
6. On or about June 26, 2001, a federal grand jury of the United States District Court for the Southern District of Florida returned a 65-count indictment against Hermanowski and Alice Pirchesky. The Clerk of the Court assigned to the indictment the case number of 01-0608-Cr-Ferguson/Snow. The indictment named Hermanowski in all 65 counts. The indictment charged Pirchesky in all of the counts except for Counts 35-38. The indictment charged Hermanowski with the following offenses:
a. Count 1 charged Hermanowski with conspiracy to defraud the United States Department of Defense; in violation of Title 18, United States Code, Section 371.
b. Counts 2-11 charged Hermanowski with presentation of false and fraudulent claims upon the United States Department of Defense; in violation of Title 18, United States Code, Sections 287 and 2.
c. Counts 12-21 charged Hermanowski with making false and fraudulent statements in a matter within the jurisdiction of the United States Department of Defense; in violation of Sections 1001(a)(2) and 2.
d. Count 22 charged Hermanowski with conspiracy to commit mail fraud; in violation of Title 18, United States Code, Section 371.
e. Counts 23-38 charged Hermanowski with mail fraud; in violation of Title 18, United States Code, Sections 1341 and 2.
f. Count 39 charged Hermanowski with conspiracy to violate Title 18, United States Code, Section 1956(a)(1)(B)(i), by laundering the proceeds of mail fraud; in violation of Title 18, United States Code, Section 1956(h).
g. Counts 40-51 and 64 charged Hermanowski with laundering the proceeds of mail fraud, with the intent to conceal and disguise the nature, location, source, ownership and control of the mail fraud proceeds; in violation of Title 18, United States Code, Sections 1956(a)(1)(B)(i) and 2.
h. Counts 52-63 and 65 charged Hermanowski with engaging in monetary transactions in excess of $10,000 derived from the proceeds mail fraud; in violation of Title 18, United States Code, Sections 1957 and 2.
Pursuant to Title 18, United States Code, Section 982(a), the indictment also sought forfeiture from Hermanowski of up to $8,280,382.08 in United States currency, and all interest and proceeds traceable thereto, on the grounds that such property was involved in or traceable to the criminal offenses alleged in the Counts 39 – 65 of the indictment. I have obtained from the Clerk of the Court true and accurate copies of the indictment described above and arrest warrant issued pursuant to the indictment. I have attached them to this affidavit as Exhibits 1 and 2.
7. On or about February 12, 2002, a federal grand jury of the United States District Court of Southern District of Florida returned an 66-count superseding indictment against Hermanowski and Pirchesky. The first 65 counts of the superseding indictment remained substantively unchanged from the initial indictment returned on June 26, 2001. Once again, Hermanowski remained charged in all of the first 65 counts, and Pirchesky remained charged in all of the first 65 counts, except for Counts 35-38. The superseding indictment added a new count, Count 66, which charged Hermanowski with obstruction of the due administration of justice; in violation of Title 18, United States Code, Section 1503. The superseding indictment also amended the forfeiture allegation under Title 18, United States Code, Section 982(a), such that the forfeiture allegation now seeks to forfeit from Hermanowski up to $16 million in United States currency, and all interest and proceeds traceable thereto, on the grounds that such property was involved in or traceable to the criminal offenses alleged in the Counts 39-65 of the superseding indictment. I have obtained from the Clerk of the Court true and accurate copies of the superseding indictment described above and arrest warrant issued pursuant to the superseding indictment. I have attached them to this affidavit as Exhibits 3 and 4.
...
III. OFFENSES AND ELEMENTS
11. Set forth in the following paragraphs is a description of the elements of each of the crimes with which Charles C. Hermanowski, a/k/a ‘John Stobierski,’ is charged in the indictment and superseding indictment. The basis outline of Hermanowski’s criminal conduct, as charged in Counts 1-65 of the initial indictment and superseding indictment, is described in the Affidavit of Special Agent Mary Dino of the Internal Revenue Service, Criminal Investigations, which is attached hereto as Exhibit 16. References are made therein to a variety of evidence including witness interviews and documentary evidence. The information set forth in Agent Dino’s affidavit sufficiently establishes Hermanowski’s commission of the offenses charged in Counts 1-65 of the indictment and the superseding indictment. The basis outline of Hermanowski’s criminal conduct, as charged in Count 66 of the superseding indictment, is described in the Affidavit of Special Agent Michael Parker of the United States Department of Defense, Office of Inspector General, Defense Criminal Investigative Service which is attached hereto as Exhibit 17. References are made therein to a variety of evidence, including witness interviews and documentary evidence. The information set forth in Agent Parker’s affidavit sufficiently establishes Hermanowski’s commission of the offenses charged in Count 66 of the superseding indictment.
12. Subparts A through I below address the elements of counts of the indictment and superseding indictment in the order in which the counts are charged of the indictment and superseding indictment.
...’
27 In the succeeding 48 paragraphs of Mr Davis’ first affidavit he set out the essential elements of the several offences set out in the original and/or the superseding indictment for which extradition was requested by the United States and also the punishment for such offences.
28 His first affidavit then continued:
‘IV. DESCRIPTION OF CHARLES C. HERMANOWSKI, a/k/a ‘JOHN STOBIERSKI’
61. Agent Parker’s affidavit provides the following description of Charles C. Hermanowski, a/k/a ‘John Stobierski.’ Hermanowski was born in Poland on February 24, 1934. Hermanowski is believed to be between 5’6" and 5’8". He is a citizen of the United States under the Hermanowski identity. In September 2000, he obtained Grenadian citizenship under the ‘Stobierski’ identity. Attached as Attachment 1 to Agent Parker’s affidavit is a copy of a photograph of Charles C Hermanowski, a/k/a ‘John Stobierski.’ Attached as Attachment 2 to Agent Parker’s affidavit is a copy of the fingerprint card of Charles C. Hermanowski, a/k/a ‘John Stobierski.’
62. As noted above, I have also have attached as Exhibits 16 and 17 the affidavits of Special Agents Mary Dino and Michael J. Parker, which further detail the evidence against Hermanowski. Each of these affidavits was validly executed under penalty of perjury under United States law. I have thoroughly reviewed these affidavits and attest that this evidence indicates that Charles C. Hermanowski, a/k/a ‘John Stobierski,’ is guilty of the offenses charged in the indictment and superseding indictment.
...’
29 The second affidavit of Mr Davis occupied 23 pages and contained 35 separate paragraphs. Section V of that affidavit included ‘CORRECTIONS TO OR CLARIFICATION OF CERTAIN MATTERS’ in his first affidavit.
30 Mr Davis’ second affidavit included the following:
‘5. This investigation [the investigations referred to in Mr Davis’ first affidavit which yielded the indictment returned on 26 June 2001 and the superseding indictment returned on 12 February 2002] also revealed that in addition to the criminal conduct set forth in those indictments Hermanowski also has committed various criminal tax offenses. On April 11, 2002, a federal grand jury returned a second superseding indictment in this matter. The second superseding indictment contains 85 counts. The first 66 counts charge the same offenses that were the subject of the initial and first superseding indictment. Counts 67-85 of the second superseding indictment charge criminal tax offenses that were not charged in the earlier indictments. With respect to these new charges, Charles C Hermanowski, a/k/a ‘John Stobierski,’ is charged in all but Counts 70 and 71. The new charges are discussed in more depth below.
6. This supplementary extradition request seeks to supplement the earlier extradition request to include the new charges against Hermanowski in the second superseding indictment. In this regard, I incorporate by reference into this affidavit my affidavit of March 12, 2002 (which was tendered to Australia under Diplomatic Note number 34 dated March 20, 2002), as well as the Exhibits and Attachments to that affidavit, which include the affidavits of March 12, 2002, of Special Agent Mary Dino and Special Agent Michael Parker.
I. THE NEW CHARGES IN THE SECOND SUPERSEDING INDICTMENT
7. The new charges against Hermanowski in the second superseding indictment are as follows:
a. Count 67 charges Hermanowski with conspiracy to defraud the Internal Revenue Service of the United States Department of Treasury: in violation of Title 18, United States Code, Section 371.
b. Count 68 and 69 charge Hermanowski with tax evasion, in violation of Title 26, United States Code, Sections 7201 and Title 18, United States Code, Section 2.
c. Counts 72-85 charged Hermanowski with making aiding and assisting in the preparation of false tax returns, in violation of Title 26, United States Code, Section 7206(2).
I have obtained from the Clerk of the Court true and accurate copies of the second superseding indictment described above and an arrest warrant issued pursuant to the second superseding indictment. I have attached them to this affidavit as Exhibits 1 and 2.
8. The provisions contravened by Hermanowski as described in Counts 67-69 and 72-85 (the charges added to the second superseding indictment) namely, Title 18, United States Code, Section 371; Title 26, United States Code, Section 7201 (to include aiding and abetting liability under Title 18, United States Code, Section 2); and Title 26, United States Code, Section 7206(2) – were duly enacted and in force as the law of the United States at the time of the offenses described in those counts of the second superseding indictment, and at the time the second superseding indictment was returned, and remain in full force and effect as of this date.
9. Under United States law, a superseding indictment (such as the second superseding indictment in this case) does not extinguish, void, or nullify earlier indictments in the same matter. Rather, an initial indictment and all subsequent superseding indictments all remain in effect unless dismissed by Court order, and multiple indictments can be pending against a defendant at the same time. All three indictments returned in this matter against Charles C. Hermanowski, a/k/a ‘John Stobierski,’ continue to remain in full force and effect. Accordingly, the addition of the new charges against Charles C. Hermanowski, a/k/a ‘John Stobierski,’ in the second superseding indictment does not extinguish, void, or nullify the charges in the initial and superseding indictments. For these same reasons, an arrest warrant issued pursuant to a superseding indictment does not extinguish, void, or nullify an arrest warrant issued pursuant to an earlier indictment issued in the same matter. Accordingly, the arrest warrant attached as Exhibit 2 to this affidavit that was issued against Charles C. Hermanowski, a/k/a ‘John Stobierski,’ for the charges contained in the second superseding indictment does not extinguish, void, or nullify the arrest warrant dated February 12, 2002, and which was attached as Exhibit 4 to my affidavit of March 12, 2002 (tendered to Australia under Diplomatic Note number 34 dated March 20, 2002), or the arrest warrant dated June 26, 2001, and which was attached as Exhibit 2 to my affidavit of March 12, 2002 (tendered to Australia under Diplomatic Note number 34 dated March 20, 2002).
...’
31 In 16 paragraphs under the heading ‘III. OFFENSES AND ELEMENTS’ Mr Davis set forth the essential elements of the several offences for which extradition was sought as charged in counts 67–69 and 72–85 of the Second Superseding Indictment and the punishment for such offences.
32 Before proceeding to deal with the individual offences Mr Davis said:
‘12. Set forth in the following paragraphs is a description of the elements of each of the crimes with which Charles C. Hermanowski, a/k/a ‘John Stobierski,’ is charged in Counts 67-69 and 72-85 of the second superseding indictment. The basic outline of Hermanowski’s criminal conduct, as charged in Counts 67-69 and 72-85 of the second superseding indictment, is described in the Affidavit of Special Agent Mary Dino of the Internal Revenue Service, Criminal Investigation, which is attached hereto as Exhibit 11. References are made therein to a variety of evidence, including witness interviews and documentary evidence. The information set forth in Agent Dino’s affidavit sufficiently establishes Hermanowski’s commission of the offenses charged in Counts 67-69 and 72-85 of the second superseding indictment. (Agent Dino also executed an affidavit on March 12, 2002, in support of the initial extradition request, which was tendered to Australia under cover of Diplomatic Note number 34 dated March 20, 2002. Agent Dino’s affidavit was attached as Exhibit 16 to my affidavit of March 12, 2002, which likewise was tendered to Australia under cover of Diplomatic Note number 34 dated March 20, 2002. ...)’
33 Towards the end of his affidavit Mr Davis said:
‘31. As noted above, I have also ... attached Agent Dino’s affidavit as Exhibit 11 to this affidavit ... I have thoroughly reviewed her affidavit and attest that this evidence indicates that Charles C. Hermanowski, a/k/a ‘John Stobierski’, is guilty of the offenses charged in the Counts 67-69 and 72-85 of the second superseding indictment.’
34 The exhibits to Mr Davis’ first affidavit were as follows:
Exhibit 1 – Indictment against the appellant and Alice Pirchesky returned 26 June 2001
Exhibit 2 – Warrant for Arrest of the appellant dated 26 June 2001
Exhibit 3 – Superseding Indictment against the appellant and Alice Pirchesky returned 12 February 2002
Exhibit 4 – Warrant for Arrest of the appellant dated 12 February 2002
Exhibit 5 – Extract from the 2001 edition of the US Federal Criminal Code and Rules and Title 18
Exhibit 6 – 18 USC paragraph 287
Exhibit 7 – 18 USC paragraph 371
Exhibit 8 – 18 USC paragraph 1001
Exhibit 9 – 18 USC paragraph 1341
Exhibit 10 – 18 USC paragraph 1956
Exhibit 11 – 18 USC paragraph 1957
Exhibit 12 – 18 USC paragraph 1961(1)
Exhibit 13 – 18 USC paragraph 1503
Exhibit 14 – 18 USC paragraph 2
Exhibit 15 – 18 USC paragraph 3282
Exhibit 16 – Affidavit of Special Agent Mary Dino in Support of Request for Extradition of Charles C Hermanowski, a/k/a ‘John Stobierski’ sworn 12 March 2002
Exhibit 17 – Affidavit of Special Agent Michael J Parker in Support of Request for Extradition of Charles C Hermanowski a/k/a ‘John Stobierski’ sworn 12 March 2002 together with attachments thereto
[emphasis added]
35 The exhibits to the second affidavit of Mr Davis were as follows:
Exhibit 1 – Second Superseding Indictment against the appellant and Alice Pirchesky returned 11 April 2002
Exhibit 2 – Warrant for Arrest of the appellant certified 5 June 2002
Exhibit 3 – Extract from the 2002 edition of the US Federal Criminal Code and Rules and Title 18
Exhibit 4 – 18 USC paragraph 371
Exhibit 5 – Title page for Title 26 (Internal Revenue Code) sections 7201–7440 of the United States Code Annotated
Exhibit 6 – 26 USC paragraph 7201
Exhibit 7 – 26 USC paragraph 7206 (2)
Exhibit 8 – 18 USC paragraph 2
Exhibit 9 – Title page for Title 26 (Internal Revenue Code) sections 6401–7200 United States Code Annotated
Exhibit 10 – 26 USC paragraph 6531
Exhibit 11 – Affidavit of Special Agent Mary Dino in Support of Request for Extradition of Charles C Hermanowski, a/k/a ‘John Stobierski’ sworn 7 June 2002
[emphasis added]
36 The two affidavits of Special Agent Mary Dino constituted the substance of the relevant factual material relied upon to satisfy the requirements of the Act and the Treaty.
GROUNDS OF APPEAL
37 The grounds of appeal to this Court from the judgment of the Supreme Court of New South Wales which are pressed are as follows:
‘1) Her Honour erred in finding that the description of the facts relied upon by the first respondent (the USA) pursuant to s19(2)(b) of the Act, read with s11(1)(a), 11(1B) and 11(1C) of the Act, and clause 4 of the Extradition (United States of America) Regulations 1988, was capable of satisfying the criteria in Article XI(3)(c) of the extradition treaty between Australia and the USA dated 14 May 1975 as amended by the protocol dated 4 September 1990 (the Treaty).
Particulars
i) Article XI(3)(c) of the Treaty required that the request for extradition be supported by:
‘a description of the facts, by way of affidavit, statement or declaration, setting forth reasonable grounds to believe that an offence has been committed and that the person sought committed it.’
ii) The description of the facts relied upon by the USA comprised affidavits of an investigator, Agent Dino, which advanced assertions and hearsay material to support the allegations of criminal conduct by the appellant.
iii) In this case, which involved numerous fraud allegations arising from complex commercial transactions and relationships, and difficult issues of knowledge and intent, the assertions and hearsay material in the description of the facts were not capable of satisfying the criteria in Article XI(3)(c) of the Treaty.
2) Further, and in the alternative to ground one, her Honour erred in failing to find that the second respondent was wrong in concluding that the criteria in Article XI(3)(c) of the Treaty were satisfied in relation to counts 2 to 11 of the second superseding indictment.
Particulars
...
[Paragraphs (i) – (iii) are no longer pressed]
iv) Further, the second respondent’s finding that there were reasonable grounds to believe that the appellant had knowledge of the submission of the TSPs [Termination Settlement Proposals] was based upon assumptions which were not available from the description of facts:
a) The second respondent found that the TSPs dealt with reimbursement for a "key aspect" of the appellant’s business, namely, costs incurred in relation to various Defense bases. The description of the facts stated that the appellant’s cable television companies provided service to both private homes and military personnel residing on military bases but did not provide any basis to conclude what proportion of the companies’ business was derived from work associated with military bases.
b) The second respondent relied upon a belief that the appellant had been involved in the creation of false invoices and the misuse of corresponding cheque payments. The connection drawn by the second respondent between this conduct and knowledge of the preparation and submission of the TSPs was not supported by the description of the facts.
3) ...
[Ground 3 is no longer pressed]
4) Further, and in the alternative to ground one, her Honour erred in failing to find that the second respondent was wrong in concluding that the criteria in Article XI(3)(c) of the Treaty were satisfied in relation to counts 40 to 65 of the second superseding indictment.
Particulars
i) The second respondent erred in finding that the contentions advanced by the appellant, in relation to the absence of material showing the level of available legitimate funds in the bank accounts operated by the appellant’s companies, depended upon the application of USA law.
ii) In the absence of any such material in relation to the relevant bank accounts, to show that the allegedly laundered funds were, in fact, derived from the proceeds of the alleged mail fraud, the second respondent erred in finding that the criteria in Article XI(3)(c) of the Treaty were satisfied.’
First Ground of Appeal
38 The primary judge dealt with the case advanced in Ground of Appeal 1 as follows:
‘16 The principal way in which the plaintiff put his case on the review was a contention, which was not advanced by senior counsel appearing before the Magistrate on his behalf and not raised by his amended points of claim. It is that the requirement of Article XI(3)(c) - that there be a affidavit, statement or declaration containing a description of the facts setting forth reasonable grounds for believing that an offence has been committed and that the person the subject of the application committed it - is not satisfied by a description of facts that give rise to reasonable grounds for the belief by a process of inferential reasoning. The mandate that the description of the facts "set forth" reasonable grounds for the belief is said to require that the affidavit, statement or declaration articulate the grounds for the belief as distinct from giving an account of facts from which the conclusion, that there exist reasonable grounds for the belief, may be drawn.
17 The requirements of Article XI(3)(c), as amended by the Protocol, were considered by Spender J in Todhunter v Attorney-General of the Commonwealth of Australia (1993) 52 FCR 228 at 251-252:
"Before a person can be extradited, what is required is a description of facts which provide reasonable grounds for believing that an extradition offence has been committed. That is directed at a particular offence. Where extradition is sought in respect of a number offences, there has to be in the material, a description of facts that provide reasonable grounds for believing that each of such offences has been committed and that, in this case, Mr Todhunter, committed it. Further, in my opinion, the requirement that there be "reasonable grounds to believe" that an offence has been committed requires reasonable grounds to believe that each element of that offence has been committed."
18 The Full Court approved the primary judge’s construction of Article XI(3)(c) (Todhunter v United States of America (1995) 57 FCR 70 at 93-94). To my mind, Todhunter provides no support for the construction for which the plaintiff contends.
19 In Jacobi v United States of America [1996] 962 FCA, Kiefel J was concerned with an issue as to whether the factual material provided by the requesting country was sufficient to satisfy the requirements of Article XI(3)(c). Her Honour observed (at 8):
"A belief may then be held without addressing all of the questions which might arise when reading a narrative of events. It may be compared with an approach which requires the resolution of those matters to reach the requisite level of satisfaction to either a civil or criminal standard of proof. Nevertheless that does not mean that a narrative of events provided, as the description of facts required by the Article, must be taken at its highest or that questions which, as a matter of commonsense, arise with respect to the story put forward are to be shut out from consideration. It may be that a statement of the facts is in its detail so general and unspecific, so confusing or apparently unreliable, that it could not be said to be arrived at by a basis in reason. Although lacking the requirement of proof one must be able to reason towards the belief. So whilst there may remain some element of surmise or conjecture, if the deficiencies in the factual outline are too great, the test will not be satisfied."
I do not read her Honour’s remarks as providing support for the construction of the Article for which the plaintiff contends.
20 The plaintiff submits that the point now taken was not put in Todhunter or Jacobi. In the plaintiff’s submission, it is necessary that the Article be read strictly in accordance with its terms. My attention was directed to the meaning of the verb "to set forth" given in Black’s Law Dictionary (United States of America: Thomson West, 8th edition, 2004), which is: to set out; to recite, explain, narrate or incorporate (facts or circumstances). The Shorter Oxford English Dictionary (Oxford: Oxford University Press, 5th edition, 2002), defines the term, relevantly, as: to give an account of especially in order, distinctly, or in detail; expound; relate; narrate; state; describe.
21 Some emphasis was placed by senior counsel on the plaintiff’s behalf on the circumstance that it is the United States that determines the material that is placed before the Magistrate in support of the request and that the person the subject of the request has no opportunity to test the material. While this consideration may explain why it was thought necessary to require that a request for extradition be supported by a description of facts that provides reasonable grounds for believing both that an offence has been committed and that the person whose extradition is sought committed it, I do not see it as a consideration that favours the construction for which the plaintiff contends.
22 In the written submissions filed on the plaintiff’s behalf it is noted that the question of whether the affidavit, statement or declaration sets forth reasonable grounds for the belief is a question for the magistrate’s determination. An assertion of reasonable grounds for belief held by a prosecutor or an investigator cannot suffice. Accepting this is so, I do not see why any policy consideration would favour a construction that demands that the affidavit, statement or declaration articulate the steps in the process of inferential reasoning, as distinct from giving a description of primary facts from which the conclusion that reasonable grounds for the belief is either drawn or not as the case may be.
23 A construction of the Treaty emphasising substance over form and rejecting an overly technical approach has found favour in the Federal Court: Harris v Attorney-General (Cth) (1994) 52 FCR at 401-402 and the Full Court in Todhunter (at 86, [132], [133] and [134])). It seems to me that a description of facts may be said to set forth reasonable grounds for the belief that an offence has been committed, and that the person the subject of the request committed it, by the narration of primary facts that give rise to that conclusion. The construction of the Article for which the plaintiff contends would make its requirements difficult to satisfy in a circumstantial case, no matter how compelling the inference (of reasonable grounds for belief) to be drawn from the description of the facts might be. The Article requires a description of facts setting forth reasonable grounds for the belief. It does not require a description of the facts and the inferences that are said to arise from them setting forth reasonable grounds for the belief. I am not persuaded that this ground of challenge to the approach adopted by the Magistrate (or this Court upon the review) has merit.
24 In paragraph [5] of the FAPOC, [Further Amended Points of Claim] the plaintiff contends that the Magistrate erred in finding that the material produced by the United States was capable of satisfying the criteria in Article XI(3)(c) for the reasons set out in the written submissions that were before her (RB 382-389 paragraphs [4] – [24]).
25 As the United States sets out in an annexure to written submissions filed on its behalf, a number of the plaintiff’s written submissions referred to globally in this ground were accepted by the Magistrate. The submission that she rejected was that developed in the plaintiff’s written submissions at RB 387, [19]. It was:
"in a case such as this, with numerous fraud allegations arising from complex commercial transactions and relationships, and difficult issues of knowledge and intent, Article XI(3)(c) requires the USA to provide affidavits, statements or declarations from the central witnesses setting out the evidence that they would be expected to give at trial supported, as appropriate, by relevant documentation and exhibits."
26 The terms of Article XI(3)(c) do not support the contention that the United States was required to provide affidavits, statements or declarations from the central witnesses setting out the evidence that they would be expected to give at trial. The submission finds no support in Todhunter or Jacobi. It was not a ground of challenge that was pressed at the hearing of the review. I am not persuaded that it has merit.
27 The complaint that was developed on the hearing of the review was that it is necessary that the affidavit, statement or declaration containing the description of the facts identify the source of the factual assertions made in it. The mere recital by an investigator that something is the fact without providing the basis for the assertion was submitted to fall short of providing reasonable grounds for belief.
28 In George v Rockett [1990] HCA 26; (1990) 170 CLR 104 the High Court held:
‘When a statute prescribes that there must be "reasonable grounds" for a state of mind – including suspicion and belief – it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.
...
The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of mind may, depending on the circumstances, leave something to surmise or conjecture" (at 112 and 116).
29 The description of the facts contained in the affidavit, statement or declaration for the purposes of Article XI (3)(c) need not be of facts that are admissible in evidence. As the plaintiff acknowledged, the description may include hearsay assertions (RB 388, [22]). The question of whether the description of facts sets forth reasonable grounds for the requisite belief may involve consideration of whether a source is identified for a particular assertion. I am not persuaded that as a general proposition it is necessary for the source of the facts asserted to be identified in the affidavit, statement or declaration in order to satisfy the requirements of the Article: Todhunter (Spender J) at 251 and Jacobi at 7.’
39 The argument for the appellant on appeal largely turned upon this ground of appeal which was elaborated upon in various ways during argument. Mr TA Game SC, senior counsel for the appellant, submitted that reasonable grounds for belief required more than a statement of the alleged conduct giving rise to the extradition offences, something more than ‘bare assertions’. He submitted that in order to perform an independent assessment of the material, which he submitted was required for the purposes of determining eligibility for surrender, there needed to be a sound basis for a magistrate in the position of the second respondent to be satisfied that:
(i) there is an alleged offence;
(ii) there are reasonable grounds for believing that the allegations can be proven; and
(iii) therefore, there are reasonable grounds for believing, in accordance with Article XI(3)(c), that the offence has been committed.
Putting it another way, he submitted that there had to be an assignment of significance to the facts the subject of the description.
40 It was submitted that the affidavits of Special Agent Mary Dino, upon which the United States relied, did not state or disclose the United States’ case. He contended that what Special Agent Dino asserted to be the facts did not take the matter any further. His submission was that it was no more than ‘a very glorified description of the conduct’.
41 It was submitted for the appellant that in a case such as this, with numerous fraud allegations arising from complex commercial transactions and relationships, and difficult issues of knowledge and intent, Article XI(3)(c) required the United States to provide affidavits, statements or declarations from the central witnesses setting out the evidence that they would be expected to give at trial supported, as appropriate, by relevant documentation and exhibits. Alternatively, it was submitted that where the United States elects to rely entirely upon hearsay material collected in an affidavit from one investigator, the source and quality of that hearsay must be explained in some detail. Moreover, there must be a basis for understanding how the hearsay material would be available to the United States in proving the alleged offences. For example, the United States should, at least, identify the key witnesses and provide a summary of the evidence which is expected to be given by each of them to prove the elements of the alleged offences.
42 The appellant’s case was that the United States elected to rely upon largely unsourced hearsay material and assertions of alleged conduct as set out in the affidavits of Special Agent Dino. In the absence of, at least, a meaningful summary of the evidence which was available from each of the central witnesses, there was, the appellant submitted, no sound basis to independently assess the source and probative value of the hearsay and assertions which comprised Special Agent Dino’s affidavits.
43 The appellant submitted that the second respondent erred in:
(i) stating that ‘a description of the facts’ did not necessarily require the United States to reveal the ‘exact manner’ in which it was intended to prove the allegations;
(ii) being satisfied that there were reasonable grounds to believe in the existence of unnamed witnesses because in the affidavits of Special Agent Dino and Assistant United States Attorney Davis various ‘principal witnesses’, including two external auditors, employees of the appellant’s companies and an employee of a purported subcontractor of the companies, were mentioned;
(iii) not accepting that Article XI(3)(c) of the Treaty required the production of affidavits from the principal witnesses; and
(iv) finding that the affidavits of Special Agent Dino described, in summary form, the factual material that may be given by these ‘principal witnesses’.
44 Mr Game SC submitted that Article XI(3)(c) could not be satisfied by someone as remote from the facts as Special Agent Dino who did not identify the United States’ intended witnesses and actually describe what they would say. The appellant contended that the limited references to these ‘principal witnesses’ in the affidavits of Special Agent Dino failed to provide a sufficient basis to independently assess the source and quality of the hearsay material attributed to those witnesses by Special Agent Dino. Furthermore, the material provided by the United States failed to provide any indication as to whether or not these ‘principal witnesses’, or any other witnesses, would be available to give evidence.
45 Considerable emphasis was placed upon the approach of Spender J in Todhunter v Attorney-General (Cth) (Todhunter primary) (1994) 52 FCR 228 and Kiefel J in Jacobi v United States of America [1996] FCA 962. It was submitted that reasonable belief requires more than reasonable suspicion. It was also submitted that showing grounds for such belief requires more than a statement of the alleged criminal conduct. Article XI(3)(c) goes beyond Article XI(2)(b). Reference was made to the decision of the Full Court in Todhunter v United States of America (Todhunter appeal) (1995) 57 FCR 70 at 90B.
46 Counsel for the United States submitted that the appellant’s arguments were an attempt to put various glosses on the clear words of Article XI(3)(c) of the Treaty which were not supported by the express words of the Article, the purpose or intent of the Act or the authorities. The Article requires a description of facts not a description of a process of reasoning, or inferences said to arise on the evidence by which the facts are to be established. Hearsay may be relied upon – there is no restriction to legally admissible evidence. It was submitted that the facts described here establish more than grounds for suspicion. The arguments for the appellant failed to accommodate the fact that the standard had been changed from a prima facie case test. Counsel for the United States relied upon a chart which cross-referenced the relevant material with the elements of the extradition offences.
47 In considering the competing submissions, it will be necessary to deal with some general issues. It is to be noted first that the case has been conducted before this Court on the footing that the interplay between s 11 and s 19 of the Act and between s 19 of the Act and the Extradition (United States of America) Regulations 1988 (as amended) is settled by the decision in Todhunter appeal. We need not reproduce all of the analysis in that judgment. The most critical finding was that compliance with Article XI(3)(c) of the Treaty is an issue at the stage of proceedings before the magistrate by reason of s 19(2)(b), ie, that production of those documents to the magistrate ‘is required’. That finding is controversial. It required implication into the language of the Treaty. It also has an important, and somewhat anomalous, result when coupled with the further finding that Article XI(3)(c) is to be read as if the words are ‘an offence has been committed against the law of the requesting State’ – namely, that an Australian magistrate must determine effectively whether charges have been properly laid according to United States law. The consequence is that the Treaty provides for an additional barrier in s 19 proceedings that makes obtaining a determination of eligibility of surrender to the United States more difficult than extradition to many other countries where there is no such barrier, yet the United States has one of the most highly developed systems of criminal justice in the world. Comparison with, eg, the extradition regulations relating to the United Mexican States, the Republic of Indonesia and the Republic of the Philippines respectively makes the point. The same result would presumably apply to extradition to Australia.
48 Be that as it may, this case must be decided according to the decision in Todhunter appeal. On that basis, the document required by Article XI(3)(c) is clearly directed to establishing, in the case of a person who has been charged, that the charge was properly laid. Whatever difficulties there may be in construing that Article, it bears similarity to some of the elements of reasonable and probable cause for prosecution according to Australian law (see the authorities collected in DA Ipp, ‘Must a prosecutor believe that the accused is guilty? Or, was Sir Frederick Jordan being recalcitrant?’ (2005) 79 ALJ 233) and ‘probable cause’ in United States law (M Cherif Bassiouni, International Extradition: United States Law and Practice, 4th edn, Oceana Publications, Inc., Dobbs Ferry, New York, 2002, Ch X, p 826). It also has some similarity to the statutory requirements for the issue of search warrants and like instruments (eg, George v Rockett [1990] HCA 26; (1990) 170 CLR 104). There is also an overlap between the provisions of s 19(2)(c) and s 19(3)(c) of the Act, and there is a body of authority as to those provisions. An examination of those analogous situations may illuminate the present issue of construction.
49 Before examining those sources, some aspects of Article XI(3)(c) can be noted. One is that, to an extent, it is elliptical. A description of the facts as such would not normally be regarded as ‘setting forth’ (or ‘giving an account of’ or ‘expounding’) reasonable grounds for belief. Another aspect is that the provision requires a degree of formality in the description of the facts by way of affidavit, statement or declaration. Further, it is also established that ‘an offence’ is to be read as ‘the offence charged’ and that the requisite reasonable belief should extend to each charge and each element of each charge (Todhunter primary at 252, affirmed in Todhunter appeal at 89–90). In Todhunter primary, Spender J held that the description of the facts could be by way of hearsay, although at 251 he added:
‘The nature of the hearsay, whether it is attributable or non-attributable, the quality of the source, and other factors may all bear on the question of whether the description, be it hearsay or otherwise, is such as to found "reasonable grounds for believing" as the Article requires.’
There was no dissent from this in
Todhunter appeal.
50 A number of propositions were recently stated by the Full Court in Griffiths v United States of America [2005] FCAFC 34; (2005) 214 ALR 665 at [50]–[55] in relation to a statement of conduct for the purposes of s 19(3)(c)(ii) and s 19(2)(c) which are useful for present purposes provided that the differences in context are borne in mind:
‘(i) As already noted, it is well accepted that the statement "setting out the conduct constituting the offence" for s 19(3)(c)(ii) purposes may consist of a number of documents: Dutton v O’Shane at [105]. For this reason it is permissible to have resort to all of the "supporting documents" to ascertain what that conduct is.
(ii) Section 19(3)(c)(ii) requires a statement of the "acts or omissions, or both, by virtue of which the offence has, or is alleged to have, been committed": s 10(2). A bare description or definition of the offence will not suffice: De Bruyn v South Africa [1999] FCA 1344; (1999) 96 FCR 290 at [8] ff; McDade v United Kingdom at [16]. As was said by Gleeson CJ and McHugh and Heydon JJ in the s 42 (speciality) case of Truong v R (2004) 205 ALR 72; [2004] HCA 10 at [29]:
"The acts or omissions, that is, the conduct, by virtue of which an offence has been, or is alleged to have been, committed, lie at a level of abstraction between a formal statement of the elements of the offence, on the one hand, and an account of the evidence relied on to prove the relevant conduct, on the other."
(iii) The statement must speak with sufficient specificity, clarity and coherence to serve its purpose: cf Linhart v Elms (1988) 81 ALR 557 at 583. Hence, as Kenny J said in McDade at [17]:
"Having regard to the purposes of a s 19(3)(c)(ii) statement, a document will not meet the requirements of that provision if it is so vague and general or so disorganised that the relevant acts and omissions cannot be reasonably identified. Whether a statement relied on in satisfaction of that provision is to be accepted as a statement setting out the conduct constituting the relevant extradition offence or offences is essentially a matter of practical judgment and assessment, not for over-zealousness in discerning deficiencies: Zoeller at 294 and Wiest [23 FCR] at 519."
(iv) The s 19(3)(c)(ii) statement serves a dual purpose. First, the facts relevant to the extradition offence are proved by that statement. second, because the magistrate making the eligibility determination is confined to the material adduced in the supporting document, the statement must be such as to permit the magistrate to be satisfied that the conduct said to constitute the offence would constitute an extradition offence had it taken place in that part of Australia where the proceedings are being conducted: Zoeller v Federal Republic of Germany (1989) 23 FCR 282 at 299-300; 91 ALR 341 at 356–8; De Bruyn v South Africa at [7].
(v) It is not the magistrate’s function under s 19 to determine what are the minimum facts necessary to constitute the foreign offence. As was said in Zoeller at 300:
"That there has been a foreign crime committed is for the purpose of the proceedings before the magistrate proved by the warrant duly authenticated. What the facts relevant to that crime are is proved by the duly authenticated statement under s 19(3)(c)(ii). That the offence is an extraditable offence is proved by the s 19(3)(c)(i) document. All the magistrate is required to do is, by reference to Australian law, to determine whether the conduct referred to in the s 19(3)(c)(ii) statement is an offence under the law of a State or Territory of Australia or Commonwealth law."
(vi) A consequence of the dual purpose of the s 19(3)(c)(ii) statement is that the level of information and detail the requesting country provides about the conduct constituting the extradition offence may be sufficient to satisfy s 19(3)(c) but be inadequate for s 19(2) purposes.’
51 The statutory provision in question in George v Rockett was s 679 of the Criminal Code (Qld), which is in similar terms to the previous s 10 of the Crimes Act 1914 (Cth) and s 711 of the Criminal Code (WA). The relevant part of the provision was as follows:
‘If it appears to a justice, on complaint made on oath, that there are reasonable grounds for suspecting that there is in any house, vessel, vehicle, aircraft, or place –
(a) Anything with respect to which any offence which is such that the offender may be arrested with or without warrant has been, or is suspected, on reasonable grounds, to have been, committed; or
(b) Anything whether animate or inanimate and whether living or dead as to which there are reasonable grounds for believing that it will of itself or by or on scientific examination, afford evidence as to the commission of any offence; or
(c) Anything as to which there are reasonable grounds for believing that it is intended to be used for the purpose of committing any such offence;
he may issue his warrant directing a police officer or police officers named therein or all police officers to enter, by force if necessary, and to search such house, vessel, vehicle, aircraft, or place, and to seize any such thing if found, and to take it before a justice to be dealt with according to law.
Any such warrant is to be executed by day unless the justice, by the warrant, specially authorises it to be executed by night, in which case it may be so executed.
Where it appears on the complaint that an offence involving the safety of an aircraft has been is being or may be committed on board or in relation to the aircraft the justice may direct in his warrant that any person on board the aircraft or any person who is about to board the aircraft may be searched.’
[emphasis added]
52 Consideration of that judgment of the full High Court indicates that the existence of reasonable grounds in the present case is to be judged objectively (at 112). There is discussion of the difference between ‘reasonable grounds for suspicion’ and ‘reasonable grounds for belief’ (at 115–117). Having described suspicion as a positive feeling of actual apprehension, the judgment continues, as quoted by the primary judge in this case, at 116:
‘The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.’
(See also Cabal v United Mexican States [2001] FCA 427 at [133]–[138] as to ‘substantial grounds for believing’ and the cases relevant to ‘reasonable cause to believe’ in O 15A r 6 of the Federal Court Rules collected by French J in East Grace Corporation v Xing (No 2) [2005] FCA 1266 and compare the discussion of ‘reasonable suspicion’ in Ruddock v Taylor [2005] HCA 48; (2005) 221 ALR 32.)
53 Leaving aside the debate in connection with malicious prosecution as to whether the prosecutor must believe that the accused is probably guilty of the offence, the following propositions from the judgment of Jordan CJ in Mitchell v John Heine & Son Ltd (1938) 38 SR NSW 466 at 469 are instructive:
‘In order that one person may have reasonable and probable cause for prosecuting another for an offence, it is necessary that the following conditions should exist:
(1) The prosecutor must believe that the accused is probably guilty of the offence.
(2) This belief must be founded upon information in the possession of the prosecutor pointing to such guilt, not upon mere imagination or surmise.
(3) The information, whether it consists of things observed by the prosecutor himself, or things told to him by others, must be believed by him to be true.
(4) This belief must be based upon reasonable grounds.
(5) The information possessed by the prosecutor and reasonably believed by him to be true, must be such as would justify a man of ordinary prudence and caution in believing that the accused is probably guilty.’
54 The test was put by Diplock LJ in Dallison v Caffery [1965] 1 QB 348 (at 370) as follows:
‘Where a felony has been committed, a person, whether or not he is a police officer, acts reasonably in making an arrest without a warrant if the facts which he himself knows or of which he has been credibly informed at the time of the arrest make it probable that the person arrested committed the felony. This is what constitutes in law reasonable and probable cause for arrest.’
55 One must, in addressing the question of eligibility for surrender to the United States of America remember that the requirement of Article XI(3)(c) is that the request for extradition be supported by a description of the facts setting forth reasonable grounds for believing that an offence has been committed and that the person whose extradition is sought, committed it. The word ‘believing’ begs the question – belief by whom? Each of the appellant and the United States has submitted that the expression should be construed as ‘reasonable grounds for the magistrate, ie, the second respondent, believing’. That is to be understood as calling for the requisite belief to be that of a reasonable person in the position of the magistrate, ie the question should be viewed objectively and not subjectively.
56 The critical aspect of the matter calling for consideration is the meaning of the expression ‘a description of the facts ... setting forth reasonable grounds for believing ...’.
57 As we see it, the expression ‘by way of affidavit, statement or declaration’ does not bear upon this issue. It is intended to define the method whereby the description of the facts setting forth reasonable grounds for believing that an offence has been committed and that the person whose extradition is sought committed it, may be provided. It simply indicates the vehicles that may be employed. The punctuation (commas which precede and follow the expression) indicates a measure of intended discontinuity. As an aside, we would also observe that the alternatives of affidavit, statement and declaration indicate that the requirement imposed by Article XI(3)(c) may be met with some, but not strict, solemnity. In this regard it should be noted that the Explanatory Statement (Extradition (United States of America) Regulations (Amendment) 1992 No 394, Explanatory Statement) issued by the authority of the Attorney-General in respect of the Protocol whereby Article XI in its present form was adopted, stated that one of the principal effects of the Protocol was to modify ‘the evidentiary standard so as to simplify the documentation required to accompany an extradition request’ (emphasis added).
58 Article XI(2)(b) requires that a request for extradition be supported, in respect of each alleged offence, by a description of the conduct constituting the offence. In that context Article XI(3)(c) requires that such a request also be supported by a description of the facts setting forth reasonable grounds for believing that an offence has been committed and that the person whose extradition has been sought committed it. Plainly, Article XI(3)(c) requires something different from that required by Article XI(2)(b). In our opinion, the key to the difference lies in the nature of the ‘facts’ to be described. The ‘facts’ referred to in Article XI(3)(c) are not necessarily restricted to the ‘facts’ constituting the alleged criminal conduct, but may include facts from which the reasonableness of the relevant belief can be established. Those facts may include the state of the investigations conducted to that time. This reflects the circumstance that a reasonable belief that an offence has been committed and that the person sought committed it might be based upon material falling well short of that required to be tendered to prove a prima facie case (as had formerly been required by the Treaty). When a wider view of the relevant facts is taken, the apparent ellipsis in the provision disappears. The ‘facts’, as so understood, would (and should) set forth facts disclosing the reasonable grounds for belief.
59 In our opinion ‘a description of the facts’ requires no more than a verbal portrait of the facts. The sufficiency of that portrait will be determined by questioning whether it sets forth reasonable grounds for believing that an offence has been committed and that the person whose extradition has been sought committed it. In this regard, we consider that ‘setting forth’ should be treated as equivalent to ‘that would, if correct, provide’.
60 A clear distinction is to be drawn between a description of the facts that would, if correct, establish a prima facie case, provide reasonable grounds for believing or reasonable grounds for suspecting that an offence has been committed. Remembering that eligibility for surrender is to be determined without determining the guilt or innocence of the person whose extradition is sought, we do not accept the appellant’s submission that the description of the facts must descend to the detail of how the facts will be proven.
61 Article XI(3)(c) will be satisfied if the description of the facts provides reasonable grounds for the requisite belief, in this case an inclination of the mind towards the proposition that the relevant offences have been committed and that the appellant committed them. This would be sufficient even if the description of the facts falls short of proof.
62 We are of the opinion that Article XI(3)(c) does not mandate either that there must be an explanation of the facts sufficient to demonstrate reasonable grounds for believing that an offence has been committed and that the person whose extradition has been sought committed it, that the intended witnesses for the prosecution be identified, that their respective availability to give evidence be confirmed and that their respective likely evidence be specified, or that there must be disclosure of material from which an assessment may be made of the quality of the evidence to be called to prove the facts described. Such material may, but need not necessarily, be provided.
63 That understanding of Article XI(3)(c) is consistent with that of Bell J (see particularly [29]). When so understood, the appellant’s root and branch attack upon the affidavits of Special Agent Dino is not established. Those affidavits set forth facts relevant to direct implication of the appellant in criminal conduct and facts relevant to the state of investigation from all of which reasonable grounds for the relevant beliefs might follow. The fact that the equivalent of a prosecution brief may not be presented (even by hearsay) is not sufficient to sustain a broad brush conclusion of inadequacy in the description of the facts. In those circumstances, Ground of Appeal 1 fails and it is necessary to consider the remaining particular grounds of appeal.
Ground 2
64 Ground 2 relates to Counts 2–11 in the Second Superseding Indictment. In short compass the situation was that the Hermanowski group of companies were owned and controlled by the appellant and his wife. The group operated from a small central office in Miami, Florida. Companies within the group provided cable television services to, inter alia, various US military bases in the United States and in Japan. For the purpose of providing those services it was necessary for the relevant Hermanowski companies to incur expenditure on infrastructure such as cabling.
65 Well prior to 10 June 1997 false invoices were brought into existence in respect of certain fictitious infrastructure expenditure on such bases. The appellant was involved in the creation of such false invoices. Thereafter, payments were ostensibly made by the ‘debtor’ Hermanowski companies to the ‘providers’ of the fictitious infrastructure, CCU Inc. and Mausina Development Corporation, the former being a Hermanowski company and the latter a non-existent company. The appellant endorsed those cheques for payment into a personal bank account controlled by him.
66 Thereafter, when the United States Department of Defense commenced to close certain of its bases in the United States, it made provision for compensation to be offered to companies servicing such bases that may have incurred what, by virtue of the closures, became wasted expenditure. The relevant procedure was for the service providers to submit Termination Settlement Proposals (TSPs) recording, inter alia, the extent of the infrastructure expenditure thrown away by the closure of the bases.
67 On 10 June 1997 some ten TSPs were lodged with the United States Department of Defense by five of the Hermanowski companies seeking recovery of, inter alia, purported expenditure on fictitious infrastructure work the subject of the sham invoices.
68 The appellant’s case is that there was nothing alleged in the description of the facts provided by the United States sufficient to provide reasonable grounds for believing that the appellant had committed the offences which were alleged to have been committed in respect of the submission of the overstated TSPs, either as a principal or as an accessory.
69 In her published reasons the second respondent, after referring to certain matters in paragraphs 14, 15, 20, 21 and 23 of Special Agent Dino’s first affidavit said:
‘They point to an integrated operation, and some consistency of conduct on the part of the respondent [referring to the appellant] in his playing some role in both the creation and discrete storage of the invoices, his knowledge of their entry into the company’s records, and his use of them thereafter through generating, endorsing and depositing cheques made out to CCU Inc. and Mausina into his personal bank account. On these bases, I consider that there are reasonable grounds for believing that the respondent was involved in the creation of the relevant invoices [referring to sham invoices in relation to fictitious infrastructure work said to have been carried out on bases that were closed]’
70 Later in her published reasons the second respondent dealt with the involvement of the appellant in the submission of the false TSPs in the following terms:
‘The first ground of aiding and abetting liability
First element
In regard to the first element that the respondent knowingly presented to an agency of the United States a false and fraudulent claim against the United States, as charged in the superseding indictment, I accept the submission by Mr Game that:
• there is no suggestion that the respondent was involved in the preparation of the TSPs by Pirchesky,
• it is not asserted that the respondent directed Hensley to sign the TSPs, and that
• no direct involvement by the respondent in the actual delivery of the TSPs to the Department of Defense on behalf of the Hermanowski companies on or about 10 June 1997 is alleged.
I accept that the description of the facts does not assert that the respondent personally submitted the TSPs. However, I do not consider that these matters are determinative of the point. The first ground of liability under aiding and abetting requires only that the relevant act, namely the presentation of the false claims to the Department of Defense, was wilfully directed or authorized by the respondent.
In considering this issue, the Court has already found under Count 1, Status of the CCU Inc and Mausina invoices and Status of the TSPs, that the description of the facts sets forth reasonable grounds to believe that the TSPs sought reimbursement for false CCU Inc and Mausina invoices of some $US8 million, that the respondent was directly and knowingly involved in creating false CCU Inc and Mausina invoices, and that he was aware of the entry of those invoices into the books and accounts of the Hermanowski companies. I also particularly take into account the following further facts, as described:
• that Hermanowski was the owner and therefore the ultimate beneficiary of the Hermanowski companies, and worked in the one location in Miami with Pirchesky (who was involved in preparing and drafting the TSPs seeking reimbursement for the false invoices: paragraph 13) and Hensley, (who signed the TSPs: paragraph 16), (paragraph 7).
• that the TSPs were not in the nature of minor administrative matters. They dealt with reimbursement for a key aspect of the respondent’s business, namely the costs incurred by the Hermanowski companies in having sub-contractors install the necessary cable and wiring in various Defence bases (paragraphs 6, 10, 11, 12).
Given these circumstances, the Court must consider the likelihood of the respondent remaining unaware of, and not having any involvement in, the preparation and submission of the TSP claims to the Department of Defense, notwithstanding that they involved claims of some $US8 million from purported CCU Inc and Mausina invoices, and which impinged directly on the activities and financial state of the Hermanowski companies.
The Court must also consider the likelihood of Pirchesky and Hensley acting unilaterally and on their own initiative in instrumenting these claims, given the Court’s belief that it was the respondent who was involved in the generation of the underpinning false invoices, and the misuse of the corresponding cheque payments.
Having considered these matters, I am satisfied that there are reasonable grounds for believing that the respondent was aware of, and involved in, the preparation and submission of the TSPs that made the false claims, through his authorising Pirchesky and Hensley to prepare and submit the claims to the Department of Defense.
Accordingly, I am satisfied on the first element of aiding and abetting, that the description of the facts sets forth reasonable grounds to believe that the respondent wilfully directed or authorised the presentation to the Department of Defense of TSPs which he knew contained false information concerning the purported invoices.
Second element
In relation to the second element that the respondent acted wilfully and with knowledge of the false and fraudulent nature of the claim, I consider that, for the same reasons as set out in Count 1, Status of the CCU Inc and Mausina invoices and Status of the TSPs and under the first element in Counts 2-11, the description of the facts provides reasonable grounds for believing that this second element is satisfied.’
71 The primary judge dealt with Counts 2–11 in the Second Superseding Indictment in paragraphs 31–56 of her reasons for judgment. The critical findings by the learned Magistrate are summarised at paragraphs 41–44 (inclusive) of those reasons. The matter raised by Ground of Appeal 2 as particularised by (iv)(a) was dealt with by her Honour in paragraph 56. Her Honour said:
‘56 ... I am inclined to consider that it was open to the Magistrate to reason that the submission of the TSPs claiming reimbursement in an amount of US$8 million was not in the nature of a minor administrative matter. Similary I consider that her Honour’s finding that the submission of the TSPs dealt with reimbursement for "a key aspect of the respondent’s business" to have been open on the description of the facts contained in the Dino affidavit. If I am wrong in these respects, I would still be of the view that the description of the facts that I have referred to at paragraphs [41] and [44] (sic) above satisfies the requirement of Article XI(3)(c), in that it sets forth reasonable grounds for believing both that the offences in counts 2-11 were committed and that it was the plaintiff who committed them.’
72 The appellant’s submission was to the effect that the description of the facts did not enable it to be determined whether, in the scheme of things, the amount sought to be recovered under the TSPs for fictitious work, the subject of the sham invoices, was sufficiently significant for it to be likely that the appellant would have been involved, in an accessorial sense, in the submission of the TSPs to the United States Department of Defense. This is an appeal from the judgment of the Supreme Court, not from that of the learned Magistrate. No error is disclosed in the manner that this issue was dealt with by Bell J. Systematic false claims for reimbursement of many millions of US dollars are not routine matters.
73 The substance of the issue is raised by Ground of Appeal 2 as particularised by (iv)(b) and was dealt with by Bell J particularly at:
‘48 ... I am, in any event, of the opinion that the description of the facts contained in the first Dino affidavit with respect to the elements of the offences charged in counts 2–11 (that I have summarised it [41]–[44] above) satisfies the requirements of Article XI(3)(c).
...
52 The Magistrate found that the description of facts set forth reasonable grounds for belief that the plaintiff committed the offences in counts 2–11 in that the presentation of the false TSPs to the Department of Defense had been wilfully directed or authorised by him within the meaning of Title 18, USC, s 2. I consider that the Magistrate was correct in coming to this conclusion.
...
54 ... I consider that it was open to the Magistrate to conclude having regard to the facts set out at paragraphs [41] to [44] above that the description of the facts set forth reasonable grounds to believe that the plaintiff [referring to the appellant] wilfully directed or authorised the submission of the false TSPs.’
and the concluding portion of [56] set out above.
74 The appellant’s submission in this Court was that his involvement in the preparation of the false invoices did not provide a sufficient basis for implicating him in the submission on 10 June 1997 of the TSPs which sought recovery of monies representing fictitious work, the subject of such invoices. It is common ground there were no facts establishing any direct involvement in making of the false claims by the appellant. Mr Game SC submitted that the magistrate reached a ‘must have known’ conclusion which could not constitute reasonable grounds for believing that an offence had been committed by the appellant in respect of the submission of the TSPs.
75 The appellant again faces the difficulty that Bell J independently agreed with the conclusion of the second respondent and there is no appealable error disclosed in that decision. This is a good example of the practical difference between the former Treaty test and the present Treaty test. We are inclined to accept that the facts summarised at [41]–[44] of Bell J’s judgment would not establish a prima facie case against the appellant on these counts. There are simply too many alternative hypotheses consistent with innocence. A ‘must have known’ approach would not suffice for the purposes of the criminal law. However, the facts clearly establish reasonable grounds for believing that the offences had been committed. In our opinion, it was open to Bell J to conclude that the facts also establish reasonable grounds for believing that the offences had been directed or authorised by the appellant. We would also so conclude. Without recounting all of the relevant facts, it is most significant that the appellant was effectively the principal of the corporate bodies, and there is no suggestion that any of the employees who were directly involved in submission of the TSPs would profit personally from the fraud. The conduct alleged was systematic and significant.
76 Even though the description of the facts may have left some matters to inference, we are satisfied that it provided reasonable grounds for believing that offences as charged in Counts 2–11 of the Second Superseding Indictment had been committed and that the appellant committed them in the sense found below. We respectfully agree with the conclusions of the primary judge in this regard.
77 For the foregoing reasons, Ground of Appeal 2 fails.
Ground 4
78 A brief summary of the matrix of facts alleged in which ground 4 falls to be considered is an underreporting, using the U.S. mail, by the Hermanowski cable television companies of customer numbers to cable television networks supplying product to Hermanowski cable television companies. Such under-reporting, initiated by the appellant, was of the order of 23 per cent. The fees charged by such suppliers to the Hermanowski television companies were calculated by reference to average customer numbers per month. By under-reporting the numbers, the suppliers ended up being underpaid by 23 per cent. However, in their own books, the Hermanowski cable television companies recognised the full extent of their liabilities to their suppliers as if the customer numbers had been correctly reported. In due course the appellant instructed that cheques be drawn in favour of the suppliers for the amount of the deficiencies in the payments to them, ie the balance on their account. However, these cheques were never forwarded to the cable television networks which had supplied the programs. Rather, the appellant took the cheques and falsely endorsed them in the names of the payee companies so that they could then be paid into his own bank account. Having banked them, he then initiated a series of loans, in different amounts, of the monies he had so received back to the Hermanowski cable television companies.
79 Counts 40–65 in the Second Superseding Indictment fall into two distinct groups:
(1) Counts 40–51 and 64 charge the appellant with laundering the proceeds of mail fraud with intent to conceal and disguise the nature, location, source, ownership and control of the mail fraud proceeds contrary to Title 18, United States Code, s 1956(a)(1)(B)(i) and s 2.
(2) Counts 52–63 and 65 charge the appellant with engaging in monetary transactions in criminally derived property in excess of USD10,000 derived from mail fraud contrary to Title 18, United States Code, s 1957 and s 2.
The same set of transactions is raised in each group of offences. They concern 13 cheques drawn between 4 November 1996 and 10 November 1997.
80 For relevant purposes, the mail fraud referred to is that charged in Counts 23 to 34 of the Second Superseding Indictment. The gist of the alleged mail fraud was the sending through the mail of false subscriber fee remittance reports and cheques drawn accordingly.
81 Special Agent Dino’s first supporting affidavit included the following:
‘34. From mid-1992 through mid-1995, Hermanowski allowed the proceeds of the fraud to accrue on the companies’ books and records as funds owed to the cable television networks but not yet paid. Starting in mid-1995, Hermanowski started to siphon the proceeds in the following manner. Hermanowski would have company employees write cheques from different Hermanowski cable television companies payable to the networks. These cheques represented funds that had been fraudulently withheld from the networks through the mail fraud scheme. Analysis of the records of the Hermanowski cable television companies indicate that the amounts reflected by these cheques would be entered into the companies accounts associated with funds payable to the networks, meaning that the cheques were meant to correspond with fraud proceeds that had accumulated over the course of years. However, Hermanowski would not present the cheques to the purported payees – i.e., the networks. Rather, Hermanowski would then take the cheques, falsely endorse them in the name of the network/payees, and then deposit them into his account at Community Bank in the Miami area. Between 1995 and 1998, Hermanowski siphoned the entire $8 million in fraud proceeds in this manner.
...
39. In furtherance of the scheme to launder the fraud proceeds directed by Hermanowski, Pirchesky also made false entries into the books and records of the Hermanowski cable television companies to make it appear if the $8 million in cheques to the networks through which the fraud proceeds were laundered from the companies into Hermanowski’s Community Bank account were being used for a legitimate purpose. Pirchesky would enter the amounts of the cheques into the company journal accounts that tracked the amounts due to the networks, making it appear that the cheques deposited into Hermanowski’s account were being used to pay the networks, rather than Hermanowski. Pirchesky also maintained a spreadsheet that attempted to track the amount that each programmer was defrauded so that the cheques used to siphon the proceeds would be written in an amount in proportion to amounts each network was defrauded.’
82 The second respondent disregarded certain parts of paragraph 34 of Special Agent Dino’s affidavit but said in respect of it:
‘I consider that the Court can have reasonable grounds for believing that funds from customers were retained on the Hermanowski books and records for the 3 year period 1992 to 1995 as funds owing to the Networks; that from 1995 until 1998, employees of the Hermanowski companies made out cheques payable to the Networks which corresponded to these amounts owed and which were signed by Hensley (see paragraph 35 below); that the respondent endorsed these cheques in the name of the network payees; and that he deposited them into his own bank account at the Community Bank.
I also consider on the basis of this same factual material that the Court can have reasonable grounds for believing that the respondent must have been aware, in particular, when endorsing the cheques and then depositing them into his personal bank account that they were made payable to various Networks. I further consider that the Court can have reasonable grounds for believing that the respondent must have been aware of the earlier accumulation of funds due to the Networks prior to the generation of the corresponding cheques.’
83 In relation to paragraph 39 of Special Agent Dino’s affidavit the second respondent disregarded certain parts thereof. However, her Honour said in relation to the paragraph:
‘... I consider that based on:
• the analysis undertaken of the books, records, journal accounts, and spreadsheets of the Hermanowski companies (paragraphs 3, 25 and 39)
• the analysis of the related cheques and their movement into the respondent’s own Bank account at the Community Bank (paragraph 25); and
• the handwriting comparison exercise referred to by Dino in paragraph 25 above,
the Court can have reasonable grounds for believing that Pirchesky kept a spreadsheet setting out the amounts owed to the Networks which, in fact, made it appear that the cheques deposited into Hermanowski’s account were being used to pay the Networks, rather than Hermanowski, and that she made corresponding entries into the journal accounts of the Hermanowski companies for cheques purportedly paid to the Networks in the same amounts, totalling to $US8 million.
...’
84 The primary judge dealt with the appellant’s submission in respect of Counts 40–65 in paragraphs [69]–[85] of her Honour’s reasons for judgment. Inter alia, her Honour said:
‘70. Counts 40–51 and 64 charge the plaintiff with laundering the proceeds of mail fraud with intent to conceal and disguise the nature, location, source, ownership and control of the mail fraud proceeds, contrary to Title 18, USC, s 1956(a)(1)(B)(i) and (ii) [sic]. The elements of these offences are set out in the first Davis affidavit (at RB 35-36, [46]-[48]). In order for the plaintiff to be convicted of the offences it is necessary for the United States to establish the following four elements:
‘First: That the Defendant knowingly conducted, attempted to conduct, or caused to be conducted a "financial transaction" as hereafter defined;
Second: That the Defendant knew that the funds or property involved in the financial transaction represented the proceeds of some form of unlawful activity;
Third: That the funds or property involved in the financial transaction did in fact represent the proceeds of mail fraud; and
Fourth: That the Defendant engaged in the financial transaction knowing that the transaction was designed in whole or in part to conceal or disguise the nature, location, source, ownership or the control of the mail fraud proceeds.’
...
82. The facts set out in the first Dino affidavit included the following: the plaintiff instructed Hensley and Pirchesky that the Americable companies were going to pay the networks for only seventy-seven percent of the correct subscriber figures and withhold the remaining amount owed (paragraph [29]). In the three years prior to mid-1995 the amount by which the networks had been underpaid was recorded on the companies’ books as funds owed to the networks (paragraph [34]). Commencing in mid-1995 the plaintiff had company employees write cheques from the Hermanowski companies made payable to the networks representing the funds that had been withheld from them (paragraph [34]). The books of the Hermanowski companies were written up so as to represent that the Networks had been paid (paragraphs [34] and [39]). The cheques constituting the ‘financial transaction’ for the purpose of these offences (that are itemised in paragraph [37] of the first Dino affidavit) were drawn in sums that were recorded in the Hermanowski companies’ books of account as owing to the networks. The figures represented in each instance the underpayment the subject of the false subscriber reports. It seems to me that the description of these facts discloses reasonable grounds to believe that the funds involved in the financial transaction represented the proceeds of mail fraud.
...
85 Counts 52–63 and 65 are also mail fraud counts and involve the same set of transactions as counts 40-51 and 64. The plaintiff relies on the same challenge with respect to them, namely the absence of material to provide reasonable grounds for belief that the property was derived from mail fraud. I am satisfied that the description of facts set forth reasonable grounds for the requisite belief with respect to these counts.’
85 It was submitted for the appellant that the description of the facts ‘did not provide any basis to assess whether or not the cheques [purporting to be drawn in favour of the cable television network companies] were drawn from legitimately earned funds’. The appellant argued that there could not be reasonable grounds for believing that the money laundering offences had been committed unless the description of the facts provided reasonable grounds for believing that the cheques represented the proceeds of the mail fraud against the cable television networks (in relation to Counts 40–51 and 64) or were derived from such mail fraud (in relation to Counts 52–63 and 65). Mr Game SC submitted ‘the one uncontestable proposition is that the mail fraud must have been committed and that these [payments] are proceeds of the mail fraud or represent the proceeds of the mail fraud’ otherwise there could be no offences made out. Mr Game urged that it could never be known, apart from taking Special Agent Dino’s word for it, that there was any connection between under-reporting and payments to the appellant’s company and that a tracing exercise could be performed. He further submitted that the description of the facts in this respect was simply assertion.
86 In particular, it was submitted that no information was provided in relation to the amount of cash available in the bank accounts from which the cheques were drawn. Nor was any insight given into the source of those funds, even though it was apparent from other information within Special Agent Dino’s affidavit that the appellant’s companies comprised a significant commercial enterprise which was capable of generating substantial amounts of legitimately earned funds. In outline:
(1) From mid 1992 to mid 1995 the withholdings from the cable networks were allowed to gradually accrue on the appellant’s companies’ books and records as a debt owed to the cable networks but not yet paid.
(2) It was not until between 1995 to 1998 that the cheques made payable to the cable networks were drawn.
(3) It is inherent in the materials submitted by the United States that during these periods the appellant’s companies were earning legitimate funds through a network of cable television networks in a variety of locations.
(4) Therefore, the withheld payments to cable networks were gradually merged with legitimately earned funds over the six year period from 1992 to 1998.
(5) There was no material to show that the legitimately earned funds in the appellant’s companies’ bank accounts were insufficient to cover the amount of the cheques made payable to the cable networks.
87 It was submitted for the United States that there were reasonable grounds for believing that the funds involved in the financial transactions represented the proceeds of mail fraud because:
(1) Starting somewhere in the early 1990’s, the appellant instructed Hensley and Pirchesky that the Americable companies (companies owned and controlled by Hermanowski) were going to pay the networks for only 77 per cent of the correct subscriber figures and withhold the remaining amount owed;
(2) In the three years prior to mid 1995, the amount by which the networks had been underpaid was recorded on the companies’ books as funds owed to the networks;
(3) Commencing in mid 1995, the appellant had company employees write cheques from the Hermanowski companies made payable to the networks representing the funds that had been withheld from them;
(4) The books of the Hermanowski companies were written up so as to represent that the Networks had been paid;
(5) The cheques constituting the ‘financial transaction’ for the purposes of these offences were drawn in sums that were recorded in the Hermanowski companies’ books of account as owing to the networks;
(6) The figures represented in each instance the underpayment the subject of the false subscriber fee remittance reports; and
(7) The appellant would not present the cheques to the purported payees (the underpaid networks) but took the cheques, endorsed them in the name of the network payee and deposited them into his own account at Community Bank in Miami.
88 The question which arises in relation to these counts is whether there are reasonable grounds for believing that offences have been committed. It is clear from the evidence of Mr Davis that a necessary integer of the prosecution case is to establish that the funds or property involved in the financial transactions did, in fact, represent the proceeds of mail fraud (in one case) and that the property was actually derived from mail fraud activity (in the other). It is also clear that the amounts in question were each drawn by cheque from the bank account of the relevant company. Furthermore, as pointed out on behalf of the appellant, the companies in question were carrying on legitimate business activities over the years that the alleged mail frauds were perpetrated. There is no suggestion in the facts described that the bank accounts were other than mixed funds of the company concerned regardless of source – there is no reference to any segregation such as might take place with trust funds.
89 So far as Australian law is concerned, it is difficult enough when dealing with appropriation and tracing of amounts paid to a mixed fund, even in a civil context, to identify particular funds as proceeds of a particular transaction (for some recent discussion see Isakka v South Australian Asset Management Corp (non registered entity) [2002] QCA 549 at [17]–[19]; Commonwealth v Official Trustee in Bankruptcy [2004] NSWSC 1155 at [8]–[23]). Furthermore, there are particular difficulties in accommodating the dealings by a corporation with its bank with the criminal law. As pointed out by Barwick CJ in Croton v The Queen [1967] HCA 48; (1967) 117 CLR 326 (at 330):
‘... though in a popular sense it may be said that a depositor with a bank has "money in the bank", in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases: see generally Nussbaum, Money in the Law: s.8, p.103. Neither the balance standing to the credit of the joint account in this case, nor any part of it, as it constituted no more than a chose in action in contradistinction to a chose in possession, was susceptible of larceny, though it might be the subject of misappropriation: see also on this point the judgment of Lord Goddard in Reg. v. Davenport ([1954] 1 W.L.R. 569; [1954] 1 All E.R. 602) with which I respectfully agree.’
90 Mr Davis gave the following evidence:
’49.C. The Funds Represented the Proceeds of Mail Fraud:
1. Counts 40–51: The funds involved in the transactions conducted by Hermanowski in Counts 40–51 represented the proceeds of mail fraud. As Agent Dino explained in Section III, paragraph 34, of her affidavit, the cheques at issue represented funds that had been fraudulently withheld from the networks through the mail fraud scheme directed by Hermanowski. Analysis of the records of the Hermanowski cable television companies indicate that the amounts reflected by these cheques would be entered into the accounts associated with funds payable to the networks, meaning that the cheques were meant to correspond with fraud proceeds that had accumulated over the course of years.
2. Count 64: The funds involved in the transaction conducted by Hermanowski in Count 64 represented the proceeds of mail fraud. As Agent Dino explained in paragraph 41 of her affidavit, the cheque identified in Count 64 was one of the cheques used to launder the fraud proceeds from Hermanowski’s account back into the Hermanowski cable television companies.
...
54.D. The Funds Represented the Proceeds of Mail Fraud:
1. Counts 52–63: The funds involved in the transactions conducted by Hermanowski in Counts 52–63 represented the proceeds of mail fraud. As Agent Dino explained in Section III, paragraph 34, of her affidavit, the cheques at issue represented funds that had been fraudulently withheld from the networks through the mail fraud scheme directed by Hermanowski. Analysis of the records of the Hermanowski cable television companies indicate that the amounts reflected by these cheques would be entered into the Hermanowski cable television companies accounts associated with funds payable to the networks, meaning that the cheques were meant to correspond with fraud proceeds that had accumulated over the course of years.
2. Count 65: The funds involved in the transaction conducted by Hermanowski in Count 65 represented the proceeds of mail fraud. As Agent Dino explained in paragraph 41 of her affidavit, the cheque identified in Count 65 was one of the cheques used to launder the fraud proceeds from Hermanowski’s account back into the Hermanowski cable television companies.’
That evidence was not expressly relied upon by Bell J.
91 The findings of the learned Magistrate and Bell J, and the submissions on behalf of the United States, appear to proceed upon the basis that, if the cheques in question can be matched with the amounts shown in the books of the relevant company as owing to the account of the supplier, then the requirements of the sections are satisfied – the funds the subject of the cheques may be taken to be proceeds of the mail fraud or as property derived from the mail fraud, as the case may be. It is submitted for the appellant that this is so only in a loose sense and confuses internal bookkeeping entries, on the one hand, with real transactions, on the other.
92 Under Australian law, all that can be said about any particular cheque which is honoured by a bank is that the bank has paid an amount to the presenter of the cheque at the direction of the drawer. The source of the monies is the arrangement between the drawer and the bank.
93 If the drawer of the subject cheques was in credit with the bank at the time, there could be no assumption that the particular amount paid in each case to honour the cheque was, or was derived from, the proceeds of a mail fraud as compared with other sources of income. The same reasoning would plainly apply in the case of a payment of a cheque by the bank when the drawer was in debit. The funds in that case are provided by way of loan to the drawer. Absent some trust arrangement honoured by the bank in relation to particular accounts, there would be no connection between the internal entries of the drawer of the cheque on the one hand and the source of the monies on the other. Furthermore, it would be unusual to describe an unpresented cheque as proceeds of anything.
94 The evidence of Mr Davis does not elucidate how those issues are dealt with in relation to the relevant United States law. No reference is made to any relevant extended statutory definitions and there is no reference to case law. The law to be applied in Florida is foreign law. The content of foreign law is a question of fact. In the absence of evidence it is assumed to be the same as domestic law. However, the application of the proved (or assumed) foreign law to the facts of the case is, where relevant, a matter for the domestic court (PE Nygh and M Davies, Conflict of Laws in Australia, 7th edn, LexisNexis Butterworths, Australia, 2002 at [17.1]–[17.3] and [17.8]). The limitation upon the adducing of evidence provided by s 19(5) of the Act does not apply to the adducing of evidence as to foreign law. The evidence of Mr Davis, set out above, does not relate to the content of foreign law as such, but, rather, to its application to the facts and is expressed without elucidation by reasons based upon the applicable law – whether substantive or procedural. This is not a proper basis upon which to decide an issue that is not a matter for expert evidence, but is rather a question for the Australian courts.
95 There was apparently a ruling by the learned Magistrate that the appellant could not rely upon a decision of the United States Federal Court of Appeal for the Fifth Circuit (US v Loe, 248 F.3d 449) the tender of which was rejected. After noting the rejection in her reasons for judgment, the learned Magistrate continued:
‘Accordingly, I consider that Mr Game’s submission that unless it is shown that the account contained insufficient "clean funds" to cover a withdrawal, it cannot be established that the withdrawal was derived from unlawful activities, being dependent upon the application of relevant US law, does not arise for determination.’
The attempt to rely on US v Loe was not repeated before Bell J. No particular submission was directed to Ground of Appeal 4 as particularised by paragraph (i).
96 It is possible that, under the law applicable in Florida, the entries in the books of the companies concerned can be regarded as appropriating or segregating the proceeds of the mail fraud so as to provide the link between the proceeds of the mail fraud and the relevant offences. However, that has not been established, either as a matter of foreign law or by reference to domestic law deemed to be foreign law. Absent such a conclusion, there are no reasonable grounds for believing that a relevant offence has been committed as no facts are described that establish an essential element of the offences. There is no answer to Ground of Appeal 4 which accordingly must be upheld.
CONCLUSION
97 The appeal is upheld in part. The orders of the Supreme Court confirming the orders made on 7 May 2004 by Magistrate Orchiston and declaring that the appellant is eligible for surrender on the extradition offences identified at paragraph [14] of the reasons of the Supreme Court, are set aside in so far as such orders determine that the appellant Charles Hermanowski is eligible for surrender to the United States of America on the extradition offences being Counts 40–51 and 64 and Counts 52–63 and 65 of the Second Superseding Indictment being Exhibit 1 to the affidavit of Michael S Davis subscribed and sworn 6 June 2002. In lieu thereof, such of the orders of the said Magistrate as determined that the appellant was eligible for surrender as aforesaid are set aside but the orders are otherwise confirmed. Pursuant to s 21(6)(g) of the Act this Court states that the appellant is eligible for surrender, within the meaning of s 19(2), in relation to the following offences – namely, the offences set forth in the following counts of the Second Superseding Indictment:
Counts 2–11 (inclusive)
Count 22
Counts 23–34
(inclusive)
Counts 68 and 69
Counts 72–85 (inclusive).
The appeal
is otherwise dismissed.
98 Each side has had a substantial measure of success. There should be no order as to the costs of the appeal to this Court. There is no occasion to disturb the order for costs made in the Supreme Court. The appellant sought to quash all of the orders of the Magistrate and failed in that endeavour. There is no challenge to that order for costs as such.
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I certify that the preceding ninety-eight (98) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Court.
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Associate:
Dated: 17 February 2006
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Counsel for the Appellant:
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TA Game SC, D Jordan
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Solicitor for the Appellant:
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Kessels Goddard + Ajuria
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Counsel for the First Respondent:
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MM Gordon SC, PE McDonald
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Solicitor for the First Respondent:
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Commonwealth Director of Public Prosecutions
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Solicitor for the Second Respondent:
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IV Knight, Crown Solicitor
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Date of Hearing:
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23–24 August 2005
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Date of Judgment:
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17 February 2006
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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2006/8.html