In late 2005, Andrew Binetter, the then chief executive of Australian juice business Nudie, described to officers working at Israel Discount Bank (IDB) how the family venture had taken off.
Binetter, who was a co-founder and appointed CEO of Nudie in 2005, told the bank: "We are getting a lot of good financial press in the Australian business media."
"We have even been in discussion with a Richard Branson company with a view to acquiring it," according to an affidavit produced by Binetter during a subsequent tax appeal against the ATO.Â
He went on to explain how private equity business CHAMP had invested in Nudie, taking its valuation at the time to $29 million. Sure, the fire at Nudie's factory in May 2004 had hurt, Binetter said, "but we are rebounding from this setback".
Nudie, which today is one of Australia's fastest-growing juice companies, had temporarily outsourced manufacturing to various premises around Australia and was looking to set up its own premises again at Pagewood in Sydney's east.
Binetter said a loan was also needed so they could buy equipment for Nudie and a separate Tamarama juice business.
"My father wants to set up a new company to borrow monies from your bank so that it can on-lend to Ligon 158, so that Ligon can rebuild the Pagewood premises so that Nudie can get back into its premises," he said.
"Also we want to borrow money so that Ligon 158 and Ligon 237 [others] can increase their investments in the Nudie Group business. Currently, we own about 27.5 per cent of Nudie, but my father wants to take control of Nudie because, as you can see, it is a growing business."​
Nudie was last year taken over by Philippines-based food company Monde Nissin Corporation for about $80 million. But what started as a sweet success story for the Binetter family has, for it at least, turned sour.
On Friday afternoon, the Federal Court ruled the Binetter family's dealings with IDB and another Israeli bank, Bank Hapoalim, were a scam created solely for the purpose of evading income tax.
Files destroyed: 'disgraceful'
The Binetters - ​including Andrew, his brother Michael, and some other family members involved in Binetter entities - deliberately set out to conceal the truth and mislead the Australian Taxation Office, and will now have to pay back $125 million.
It is another big win that has come from the ATO's now-defunct Project Wickenby investigation into offshore tax evasion - following last week's High Court victory against a series of companies associated with high-flying Sydney accountant Vanda Gould.
Michael Binetter went so far as to try to arrange the destruction of documents which might have disclosed the existence of the offshore deposits.
Justice Jacqueline Gleeson
The court also found that in Friday's case there were breaches of duty by the directors of the company because they left it exposed to hefty tax bills when ATO investigators discovered millions of dollars of undeclared money stashed in offshore accounts in Israel and Switzerland.
Justice Jacqueline Gleeson said by "causing the applicants to make payments from that income to the Israeli banks, or by causing the corporate respondents to make such payments on behalf of the applicants, the relevant directors depleted the applicants of funds that could otherwise have been used to pay their tax liabilities".
Furthermore, Nudie's Michael Binetter was involved in the family paying Israeli lawyer Amiram Gicelter to arrange the Âdestruction of documents about the family's accounts at Tel Aviv-based Bank Hapoalim.
"Michael Binetter took steps to procure the destruction of Bank Hapoalim's files," Justice Gleeson said.
"In my view, this disgraceful episode demonstrates that Michael Binetter was participating, in a dishonest way, in the management of BCI's [Binetter family's funding vehicle for Nudie Juice] tax dispute which, by then was the principal business of BCI.  In doing so, he was acting as a de facto director of BCI."
Justice Gleeson said Michael and Andrew Binetter went to "extraordinary lengths to cause the applicants to contest the revised assessments while failing to disclose the existence of the deposits" that "change[d] the whole picture".
"Michael Binetter [then a practising lawyer] went so far as to try to arrange the destruction of documents which might have disclosed the existence of the offshore deposits and the terms upon which those deposits secured the advances to the applicants," Justice Gleeson said.
Back-to-back loans under watch
The scam was done via what's known as "back-to-back loans", which under the then tax commissioner Michael Carmody had become a key focus of the ATO's crackdown on offshore tax evasion by the wealthy.
It allowed the Binetters to give the appearance of borrowing money from Israeli banks but the drawdowns were backed by matching deposits in secret accounts. These offshore deposits, Justice Gleeson said, "were used as security for advances of funds by the Israeli banks to the various applicants".
It gave the Binetter entities the benefit of drawing on offshore funds and at the same time concealing the use of those funds from the ATO. Then the Australian finance company and the Binetter entities could claim deductible expenses in Australia and thereby evade tax.
The ATO's audit of the family's businesses began in 2006, but due to fraud and evasion, resulted in the ATO issuing fresh tax bills dating back as far as 1992.
After several years disputing the revised assessments, the business went into liquidation. The lawsuit against the Binetter family was brought by liquidators John Sheahan and Ian Lock of Sheahan Lock, which had been backed to pursue the case by the ATO.
Apart from finding Michael and Andrew Binetter breached their duties to the companies, Justice Gleeson also found breaches by the two brothers who founded the Binetter family business, now deceased Erwin Binetter and Emil Binetter.
Justice Gleeson dismissed the claims against Erwin's widow Margaret and Emil's son Gary.
It is not clear whether the Binetters will now appeal.
Separately, the liquidators to the Binetter businesses launched legal action against an Israeli bank over their alleged role in the back-to-back schemes. The banks are accused of deliberately assisting the family in hiding at least $67 million. The ATO is the largest creditor.
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