The Australian Federal Police believes former senior Macquarie banker Michael Carapiet knowingly backdated declarations to the tax office over millions of dollars in share options that would have substantially reduced his income tax.
And the simple fact that investigators could see that his handwriting left indentations on documents beneath what he was signing indicated he had signed forms from different years one after the other.
The matter has come to light after the sentencing of Mr Carapiet's tax agent Artin Etmekdjian to a seven-month suspended jail sentence for fraud, to be served as an intensive correction order, after pleading guilty to dishonestly influencing a public official at the tax office over the false declarations.
Mr Etmekdjian, who is appealing the sentence, is a former mayor of Ryde who had refused to resign as a Liberal councillor following his conviction. Council formally disqualified him from holding office on Thursday.
The case centres on Mr Carapiet, Macquarie's former head of investment banking who retired in 2011 after a celebrated 22-year career at the bank, and a series of share options valued at around $2 million he was granted as part of the bank's employee share plan in the 2002, 2006 and 2007 financial years.
Employee share schemes provide for discounts and benefits to workers so long as the employee makes an election on an s139E form from the tax office to include the discount in assessable income for the year they were granted.
As a high-flying investment banker, Mr Carapiet was one of Macquarie's biggest earners, pocketing $15.8 million in 2006 and $22.9 million in 2007.
In response to questions from the tax office in 2009 Mr Etmekdjian said Mr Carapiet "is quite adamant that the s139E elections were made in accordance with the relevant legislation".
But in an agreed statement of facts tendered as part of Mr Etmekdjian's sentencing last Thursday, documents reveal that Mr Etmekdjian emailed Mr Carapiet's personal assistant at Macquarie in 2009 requesting he sign forms and date them variously from 2002, 2006 and 2007.
The tax office alleged that in those emails Mr Etmekdjian "requested Carapiet to backdate these forms and they were not signed as per the dates ... but rather some time later.
"The purpose of these forms being backdated and passed off as genuine to the ATO was in order to substantially reduce Carapiet's aggregated tax income liability," it said.
The court also heard evidence that a forensic examination by the Australian Federal Police last year led it to believe Mr Carapiet signed the forms one after the other, as the indentation of Mr Carapiet's signature and handwritten date from the earlier forms were discovered on the later forms.
"The examiner concluded that there were indentations originating from the signature and the handwritten date on the 2002 s139E form were also detected on the 2006 and 2007 s139E election forms," documents tendered in court show. "Meaning that the 2002 document was on top of the 2006 and 2007 election forms when the signature and handwritten date was produced."
"Further that indentations originating from the signature and handwritten date on the 2006 election form was detected on the 2007 election form. Meaning that the 2006 election form was on top of the 2007 election form when the signature and handwritten date were produced."
In submitting the forms to the tax office in 2009, Mr Etmekdjian claimed that Mr Carapiet had made the election in the year the options were awarded "however the amount in question had been inadvertently omitted from the income tax return".
Mr Carapiet has not been charged over the matter. It is unclear from the court material whether the tax office is pursuing Mr Carapiet. Mr Carapiet has been approached for comment. The ATO declined to comment on whether the matter was ongoing.
As the matter began to escalate, Mr Carapiet appointed big end of town lawyers Clayton Utz to review all material provided to the tax office.
Mr Etmekdjian said he "thought he was doing the right thing by asking Carapiet to sign new declarations in 2009 as that would redress deficiencies in his [Etmekdjian's] earlier actions".
Mr Etmekdjian admitted to the tax office "that due to his inexperience in dealing with employer granted options many of the elections are not in order". Mr Carapiet, a fellow Armenian Australian, was Mr Etmekdjian's only client with share options.