Commonwealth Director of Public Prosecutions (CDPP)

Business behaving badly: white collar crime in the 21st century

Date of Publication: 
10 October 2008

Author: Christopher Craigie SC Date: 10/10/2008 Venue: 11th International Criminal Law Congress

This conference happens to coincide with a period of considerable anxiety as to the security and stability of international economies. It is particularly timely then to be speaking about the future in the prosecution of a group of offenders who engage in crimes that inflict considerable economic damage and loss on both individuals and communities worldwide. The term “white collar crime” had origins and its legitimate uses in a particular historical and social context. As many here may know, its origin is in the work of the American Sociologist Edwin Sutherland who launched the term in a 1939 speech to the American Sociological Society. In later writings Sutherland defined white collar crime as those, “committed by a person of respectability and high social status in the course of his occupation.”1 One suspects that when Sutherland coined the phrase it was a convenient way of bringing to the notice of middle and upper-middle class professionals the shocking truth that not all crimes were committed by some typically depraved member of the so called criminal classes. Although it contained this disquieting implication, it is likely that the truth in Sutherland’s terminology fell on somewhat more receptive ears than he would have found at the century’s beginning. In that earlier time of the great entrepreneurial blossoming of America there was, it is fair to say, more than a little conduct that we would now regard as unconscionable that was part and parcel of the buccaneering spirit behind many of America’s great industrial successes. Such boundaries that existed then were still quite generously set in the anti-trust laws of the late 19th century. It was campaigning against the uglier but then legal manifestations of earlier 20th century capitalism, including appalling employment conditions that had caused Sutherland and his colleagues to be known as the “muckrakers”.2 Even by 1939 the public concept of crime within Sutherland’s classification, as distinct from those matters such as larceny or fraudulent arson that had always been palpably criminal, was still quite limited. One doubts, even after seven years of the New Deal that Sutherland’s 1939 speech would have persuaded a broader American audience to contemplate anything approaching today’s extensive regulatory structures. Contemporary regulatory structures increasingly include both civil and criminal sanctions for both patently dishonest business conduct and that which in former times would merely have been regarded as sharp practice. The more stringent regulatory responses are accepted in much of the developed and developing world as conducive, if not essential, to the functioning of an orderly national and global economy. In 1939 there was no such acceptance and the notion of regulation itself was still somewhat revolutionary. The least controversial but still novel message in Sutherland’s 1939 speech was simply that “nice people just like us” can become moral, if not legislated and convicted, criminals through their business activities. Sutherland’s terminology had found a receptive time for delivery in terms that appealed and resonated with a measure of caution that had entered into America’s hitherto unqualified enthusiasm for untrammelled free enterprise. In the early 21st century I suggest we can be far more robust in adopting a language that defends and nurtures the free market system whilst saving it from its own excesses. The continued currency of the term “white collar crime” is now unhelpful in this task. Any lingering implication that there is a more benign variety of crime, arising from genteel origins of some corporate perpetrators can surely now be dismissed. Language of this kind is an impediment to retaining community confidence that we have clear-eyed legislative, regulatory, prosecutorial and judicial responses to what are in essence very serious and harmful crimes committed by people in positions of trust and advantage. It is an aggravating fact in a contemporary setting when such crimes are committed by people in the course of occupying very high positions of authority in business. These positions invariably arm them with criminal tools of trade that are the power and information to access and despoil both the material assets and the reputation based value of the corporate entity that they have been retained to serve. Such persons are commonly (sometimes astonishingly) well rewarded to keep and protect the very trust that they have breached. More frequently now in the era of the national and multi-national corporations the nature of the trust that has been breached entails damaging consequences well beyond the unjust enrichment of the offender. Most of us will be aware from some recent outstanding examples that an offender sufficiently well placed in a financial institution, a prudential entity or the stock market can, through greed, malice or indifference, inflict damage massively beyond the immediate losses in ill gotten gain to that offender. In this connection one only needs to think of the devastation caused by recent international offenders in notable banking and stock trading frauds and indeed in our own insurance industry. In a prominent local instance, the HIH matter, the damage done touched whole sections of society, has shaken the insurance industry and made victims of thousands of prudent private investors. Another relatively new aspect of corporate offending has seen the most extreme instances of corporate offending in advanced economies, where loss and damage have been wrought by individuals on a scale that would have seemed inconceivable even a short time ago. One recalls the 1995 case of Barings Bank, the oldest merchant bank in the United Kingdom, a two hundred year old institution that was effectively destroyed by the activities of one rogue trader inflicting a 725 million pound loss. The losses in that instance were dwarfed in January this year by the infliction of a seven billion US dollar loss on a major French bank Societe Generale, again by a rogue trader. These phenomena may be extreme examples but they do inform any assessment of how the potential consequences of high level offending are to be measured when the maximum penalties in penal statutes were usually those enacted in a different far less exposed and less interdependent global economic climate. Increasingly national economies, Australia’s in particular, rely for their viability and strength on their “brand” reputation of probity and integrity in their commercial institutions and quality of regulation and enforcement. Because of this and the sensitivity of some markets it is possible that a single grave instance of corporate criminality can have potential to be as devastating in economic term as the physical destruction of significant physical infrastructure. Offending, or patterns of offending in the domestic economy may be less in immediate impact than the devastating examples I have just referred to. If not responded to effectively, they can nonetheless have an accumulating and remorseless effect in eroding the moral capital that is inherent in the kind of brand reputation that trading nations such as Australia enjoy. Meeting harm done with a response in a sentence that appropriately reflects that harm in a proportionate sentence is a well established principle of sentencing law. At a primary level of corporate offending the nature of modern business requires a proper appreciation of the enhanced capacity for lasting harm and economic hardship to more victims. This makes a case for occasionally reviewing where in the criminal calendar we place grave corporate offending with potentially wide fields of actual or potential damage across the community and even across national borders. I suggest that appropriate consideration of the scales of harm that can now be done in some areas supports a process of regular review of the maximum penalties. The statutory maximums are, of course the signals which the community through Parliament traditionally uses as a starting point that conveys its view of the inherent criminality in an offence. A more contemporary assessment of the harm done by grave corporate offending may also diminish the weight still given to favourable subjective features in the background of a corporate offender. Although authority does suggest that such matters should be of less weight in corporate crime they have sometimes been taken into account by sentencing judges in relation to the increased susceptibility of an educated person to punishment, enhanced by factors of personal humiliation loss of social status or loss of opportunity to enhance a career curtailed by the fact of conviction. A well supported precedent for this kind of review and periodic reordering of the weight given to competing sentencing factors is already present in some other community harming offences. In some instances there has been a steady process of shifting emphasis, whereby actual or potential harm to the community significantly outweighs formerly potent mitigating factors, such as prior good character. An obvious and, for a corporate offender, distasteful reference should be made to the very stern treatment of first offender international drug couriers. In such offenders a crime free past is usually assessed as a factor that is neutral at best. It is also one that actually enhances both the offender’s capacity and attractiveness to offender principals because the prospects of being undetected in offending are enhanced by using a person less likely to attract attention. Uncomfortable though some may find any comparison of such offending with corporate crime, it suggests that there are sound examples where harm done outweighs features consideration of prior good character. One part of Sutherland’s notion that does remain relevant is that deterrence, always a tendentious notion when applied the bulk of persons who commit “ordinary” crime, may be a sharper weapon when directed towards a person of intellect, education and status, all of which can swiftly be put at nothing by the potent threat of a prison sentence.

Current and future challenges for the Commonwealth DPP.

It is probably beyond the remit of this paper to delve too deeply into the history of the legislative provisions that provide the black letter law for corporate regulation. However, the background sets out some of the Constitutional challenges we have faced in prosecuting these offences and in that respect is instructive in itself: In 1981 the Commonwealth and the States established a cooperative scheme for companies and securities regulation. The structure of the scheme involved the Commonwealth enacting legislation that had effect in the Australian Capital Territory and which was applied by each of the States (with varying degrees of minor amendment) as State law. In addition, a national coordinating body was established – the National Companies and Securities Commission. This scheme came to be regarded as significantly unfunded and less than effectual. During the late 1980’s when a number of significant corporate collapses occurred steps were taken to reform the system. In 1989 the Commonwealth enacted new corporations legislation designed to bring corporate regulation onto a national footing. The Corporations Act 1989 and the Australian Securities Commission Act 1989 found a constitution basis in the Commonwealth’s Constitutional power to make laws in respect of corporation, as contained in s51(xx) of the Constitution. Key aspects of the legislation were challenged by the States on Constitutional grounds before it was enacted. In NSW v Commonwealth (1990)169 CLR 482 the High Court held that the provisions of the Corporations Act 1989 enabling the incorporation of trading and financial companies were beyond power and invalid. Negotiations followed between the Commonwealth and the States to establish a successor cooperative system of corporate regulation that commenced operation on 1 January 1990. This scheme proved to be a breakthrough and involved the Commonwealth enacting the Corporations Law, with effect as a law for the Australian Capital Territory. The States and the Northern Territory also applied the Corporations Law as a law for each of their jurisdictions. In addition, the States and Northern Territory applied Commonwealth adjectival law dealing generally with the administration and enforcement of the legislation. So for example, the Commonwealth Crimes Act 1914 was applied as a law of the States and Northern Territory to offences against the Corporations Law. Unlike the former cooperative scheme, responsibility for the administration and enforcement of the Corporations Law rested solely with the Australian Securities Commission (later the Australian Securities and Investments Commission or ASIC). Prosecution responsibility rested with the Commonwealth Director of Public Prosecutions (CDPP). The new scheme was undoubtedly complex. Under its provisions the State enacted offences which were to be treated for the purposes of State law as Commonwealth offences and applied all relevant Commonwealth Acts to those offences for their effective operation. The legislation bestowed the power to prosecute on the CDPP and equivalent Commonwealth legislation sought to accept that function for the CDPP. Two significant decisions of the High Court revealed significant deficiencies in this scheme. In Re Wakim (1999) 198 CLR 511 the High Court held that State jurisdiction generally but including jurisdiction in relation to matters arising under the Corporations Law of the States, could not be referred on the Federal Court. This had the effect of rendering much of the jurisdiction bestowed on the Federal Court under the legislation invalid. In R v Hughes (2000) 74 ALJR 802 the High Court cast into doubt the CDPP’s power to prosecute offences arising under the Corporations Law, in effect holding that in each particular prosecution the CDPP must be able to point to a valid head of Constitutional power to be able to prosecute the matter. Of course pointing to a valid head of power on the facts of a matter was somewhat problematic in a number of areas where offences had been created. Kirby J in Hughes described the national scheme in the following terms: Courts, including this Court, regularly speak in terms of the “intention” of the legislature when interpreting particular legislation. This polite but unacceptable fiction has never been shown in starker relief than in the present case. So complex is the interlocking legislation, with fiction plied upon fiction, that it must be doubted whether any of those presenting and enacting it were truly aware of precisely what they were doing. The fundamental confusion created uncertainty in an area of law vital to the nation’s welfare and wealth creation. It lead to a political solution whereby the States agreed to refer to the Commonwealth power to enact the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 and amendments to those Acts relating to the formation of corporations, corporate regulation and the regulation of financial services and products. Out of what has been a troubled and complex past we now at least have the firm Constitutional basis for the regulation of corporations and financial products that is essential for proper regulation and the platform for future development and growth. Having said that to describe the current legislation as complex is a vast understatement. Few statutes (taxation legislation aside) come close to it for size and complexity. Those who practise in the corporate law area will be aware of the constant changes in the legislation over the last 15 years or so and the effort and patience required to master this area of the law. Between 1990 and the middle of 2001 the Corporations Law was amended by no fewer than 30 separate Acts. Some of those amending Acts were in the nature of housekeeping or only made minor amendments. Others such as the Financial Services Reform Act 2001 made substantive amendments to the law and are comparable in size to whole Acts themselves. During this period criminal offences have been added, amended and deleted. Breaches of directors’ duties and other previously criminal offences have been de-criminalized (or is that civilised), and a new regime for civil penalties (a hybrid of criminal and civil actions) has been introduced. The one constant in this process has been to increase the number of pages in the legislation. Constant and sustained study is required to retain an understanding of the area.

New crimes, new opportunities and new responses.

During the last 10 years or so the opportunity for corporate crime has increased exponentially. The growth in superannuation schemes and contributions, the increasing variety of financial products and instruments and the ability to communicate anywhere in the world almost instantaneously has lead to increases in productivity and wealth. Unfortunately, it has also led to a corresponding increase in the ability of corporate fraudsters to dupe the unwitting. Some of the devices and frauds used are of a quality that would attract and deceive the most cautious among us. The recent scandal involving fake Olympic Games tickets is a notable example. Regrettably, there is sometimes a degree of enhanced and avoidable vulnerability in people who simply do not pay sufficient attention to protection of their own financial wellbeing. This is the case in many of the unregistered financial schemes that are referred to the CDPP. In these cases money has been raised for an ostensibly respectable purpose only to be diverted to the promoter’s pockets or to fund an extravagant lifestyle. However the defendant may be so convincing so as to persuade investors that if they cooperate with ASIC or the prosecution there will be simply no opportunity to recover the moneys. Accompanying this will be the promise that the “ship is still coming in next week” and it is only unexpected delays that are holding up the pay day. Inevitably the ship never comes in. While a strong enforcement approach is an essential response to these incidents, education of consumers must be an important part of the solution. The old dictum promoted by ASIC that “if it sounds too good to be true, it is too good to be true”, undoubtedly remains reliable advice for would be victims. There are, of course, many areas of the law where the educated and technically capable criminal can commit effective fraud. In many areas of finance and wealth creation a degree of trust in the corporate entity is absolutely essential. Even the slightest whiff of corporate scandal will lead to a run on the institution. The fraudulent corporate offender may well calculate that even if caught there will be a strong motivation on the part of his employers to cover up the malfeasance. Where such fraud is discovered the investigation may be long and the subsequent proceedings even longer. This year my Office completed the prosecution of Simon Hannes for the offence of insider trading. Hannes was convicted and sentenced in 1999 for one offence under s1002G (2) of the Corporations Act of insider trading and two structuring offences under s31(1) of the Financial Transactions Reports Act. However these convictions were set aside by the NSW Court of Criminal Appeal in October 2000 and a retrial was ordered. The retrial in the Supreme Court of NSW concluded on 11 September 2002 when Hannes was again convicted of the offences. The effect of Hannes’ re-sentencing on 13 December 2002 was that he was ordered to serve a further period of imprisonment of 4 months 9 days in addition to the period of 15 months 22 days that he had already served. The charge under the Corporations Act related to the purchase of a large number of call options in TNT at a time when Macquarie Corporate Finance Ltd, a company of which Hannes was an executive director, was acting for TNT in relation to a proposed takeover by a Dutch company. It was alleged that Hannes had purchased the TNT call options in a false name before the takeover negotiations became public knowledge. The charges under the Financial Transactions Reports Act related to action which Hannes allegedly took to conceal his purchase of the call options. In November 2006 the NSW Court of Criminal Appeal dismissed an appeal against the convictions. In June 2008 the High Court of Australia dismissed an application for special leave to appeal the convictions. In all, this single case has extended over 10 years and its cost may be measured in the millions of dollars.

Competition, Market Manipulation (just two areas of emphasis).

Recently ASIC has indicated a reinvigorated focus on market offences such as market manipulation and insider trading. In order to respond to these threats to the vital national concern of a fair and efficient operation of the market, ASIC has established a dedicated team to investigate and refer matters to the CDPP. As indicated in the Hannes case, these prosecutions can be very complex and resource intensive. In addition ASIC will be targeting newer areas such as rating agencies, activist hedge funds and listed investment vehicles. This is in response to a perceived need for greater scrutiny of unlisted financial instruments and unrated products. With continuing turmoil on the world markets and the collapse of major financial houses every effort must be made to properly inform investors of the risks involved. While it is not the function of Government to eliminate risk it can properly be seen that full and informed disclosure is fundamental to investment decisions. The complexity of the laws under which we prosecute should not be underestimated. The insider trading laws have been variously described as overly complex, too legalistic too unclear and too illogical.3 Perhaps it is best to illustrate this point by example. The provisions dealing with insider trading spread over 12 pages of legislation. The prohibition extends beyond shares traded on the stock exchange. The prohibition now extends to financial products, which as defined extends to securities, derivatives, managed investment products, superannuation products and any financial products that are able to be traded on a financial market. The definition sections are not complete. Thus R v Firns (2001) 38 ACSR 223 the Court of Criminal Appeal dealt with the question whether a judgment handed down in open court in Papua New Guinea was “readily observable matter”. The Court, by a majority, held that the concept of readily observable matter for the purpose of Australian insider trading laws was not limited to matters that were readily observable in Australia. Mention should also be made of the proposed legislation for a criminalised cartel offence, currently being considered by Government. The genesis for this initiative arose in late 2001 with comments by the then ACCC Chairman Professor Fels concerning the need for criminal penalties in respect of hard-core cartel activity. On 9 May 2002 the Treasurer appointed a Committee comprising a former High Court Justice the Honourable Sir Daryl Dawson AC KBE CB, Mr Curt Rendall and Ms Jillian Segal to review the provisions of the Trade Practices Act 1974. The Dawson Committee as it became known handed down its report on 31 January 2003. The report contained a recommendation that, notwithstanding the difficulties in arriving at a workable definition of hard core cartel activity, there should be criminal sanctions for such behaviour. The Committee noted that there were a number of problems that needed to be solved before the introduction of criminal sanctions including the definition of the conduct and the need for a leniency policy that was both clear and certain. In this respect the experience from overseas jurisdictions is that the existence of a clear and certain leniency policy is a potent weapon in unearthing and exposing cartel behaviour. The Committee also noted that while certainty of detection is a better deterrent than severity of punishment, a leniency policy that provides automatic immunity for the first cartel participant who discloses the activity is a powerful destabilising tool in relation to cartel activity. A working party was subsequently set up to examine these and other issues and a report was submitted to Government. In early 2005the then Government released its position on the issue setting out the parameters of such an offence. This initiative then lapsed for some time and this year draft legislation was released by the Government creating a cartel offence. While work continues on this initiative it is fair to say that following the enactment of the offence, it is likely that cartel prosecutions will be some of the largest and most complicated offences that the CDPP will be called upon to prosecute. The stakes will be high for all involved. The CDPP has and will continue to work closely with the ACCC in pursuing this initiative.

Responses, conventional and less traditional.

Let me briefly describe how the CDPP responds to the challenges of prosecuting corporate crime. Each of the larger Regional Offices (NSW, WA, Qld and Vic) has a specialised Commercial Prosecutions Branch which is responsible for prosecuting breaches of the Corporations Act 2001, the Australian Securities and Investments Act 2001 and relevant State offences. The Branches also have a responsibility to conduct large fraud matters where there is a corporate element, and offences against the Trade Practices Act 1974 and the Bankruptcy Act 1966. In the smaller Offices (Tas, SA, NT and ACT) the CDPP has dedicated prosecutors who specialise in Commercial prosecutions. CDPP has established structures with a view to standardising as far as practicable our Commercial prosecution practice. While the conduct of the cases is regionally based there is a Deputy Director for Commercial prosecutions responsible for coordination and liaison with ASIC. CDPP engages with ASIC and ACCC at the regional office level, Head Office level and Head of Agency level. The Office does have a relatively small number of excellent in-house counsel. This capacity is balanced by our capacity to tap into a number of other skilled counsel, including Senior Counsel, in private practice. When counsel is briefed it is the practice, whenever possible, to brief early and to obtain advice on preliminary matters of procedure and approach. The CDPP currently has approximately 61 personnel working in the Commercial prosecutions area. Of those 43 are lawyers and 18 are support staff. Head Office provides an oversight role in relation to the practice and becomes involved in advising in the larger more important investigations and guiding ensuing prosecutions that may arise. An analysis of the offences we most commonly prosecute provides some insight into the areas of corporate malfeasance. At the top of the list are breaches of director’s duties under s184(1) and (2) of the Corporations Act 2001. These are offences of dishonesty either in the context of a director failing to exercise his or her powers or discharge his or her duties in the best interests of the corporation or a director or employee using his or her position dishonestly. In addition, the CDPP often prosecutes State Crimes Act offences of obtaining a financial advantage by deception or make a false statement with intent to obtain a financial advantage (e.g. under s178BA and s178BB of the Crimes Act 1900 (NSW)). In this respect corporate criminal conduct may be addressed by Commonwealth or State offences or a combination of both. I note in passing that there are very cooperative relationships with State DPPs, reflecting the complementary arrangements whereby consent provisions support the prosecution of State offences by the CDPP. Notwithstanding these arrangements the combining of Commonwealth and State offences can be quite problematic as Commonwealth offences now are governed by the Commonwealth Criminal Code. This legislation inter alia codifies the basis of Commonwealth criminal liability. It employs terminology, which while conceptually similar is different to the terminology in State law. A number of issues can arise when State offences are prosecuted in conjunction with Commonwealth offences that arises out of the same course of conduct. Not the least of these is the challenge in explaining to the jury variations in the matters it will need to be satisfied of in order to establish criminal liability for Commonwealth and State offences. In addition, the breach of directors’ duties offences carries a maximum penalty of 5 years or 2,000 penalty units or both. A penalty unit is $110. It is to be noted that certain State offences may carry much higher maximum penalties which may provide a far more satisfactory sentencing outcome for a court. (For example sections 81 and 82 of the Victorian Crimes Act 1958 carry maximum penalties of 10 years.) This will be especially so where there is a single offence that has had a catastrophic effect on the corporation, its shareholders or creditors. In instances of complex commercial fraud cases, it is vital that at an early stage considerable effort is employed in determining how a prosecution is to be most cogently and effectively presented. This process may begin in discussions with investigators at a relatively early stage in the investigation. If the nature of the allegations is known there will be merit in considering how those allegations might be proved and the type of evidence required. A prime example is the Bond investigation, initially conducted by John Sulan QC and covering over 29 separate areas of potential criminality. Some of the areas under consideration involved issues arising from complex expert evidence and overseas evidence. Some of these issues were likely to present significant difficulties in proving the offence to the criminal standard. In consultation with the CDPP the ASC (as it then was) decided to investigate 3 separate areas of criminality. Important in that decision was how the allegations might be proved once investigated. Our most major commercial prosecutions invariably involve a large body of available evidence and are document intensive. The evidence may provide a choice of available charges. In complex fraud it is vital to try to limit the case to realistic outcomes and to plan how best to present the prosecution case in the simplest possible way. Planning should extend to the selection of case officers and succession planning. A balance must be sought in the selection of those charges that will adequately reflect the nature and extent of the criminal conduct disclosed and which, if the defendant is convicted, will provide an appropriate basis for sentence. It is also important not to overload the indictment. An overloaded indictment is another source of complexity and possible distraction that can and should be avoided. At trial a complex prosecution case entails a greater task in meeting the considerable obligations of proper disclosure, including that of unused material that may be regarded as relevant to the defence. These obligations are regarded as inseparable from the task of ethical prosecution under our system. They are taken very seriously and enforced by a documented Disclosure Statement.

Coercive powers.

A number of Commonwealth agencies have the ability to compel persons (including the likely suspect) to answer questions and produce documents in relation to a matter under investigation. The parameters of these powers must be carefully ascertained from the legislation bestowing the power. The use of coercive powers as an investigative tool is a very powerful weapon in the fight against corporate crime. The use of these coercive powers does have limits. Importantly, there may be limits on the use that can be made of such material where it incriminates the person answering the question or providing the documents. Often the use of the coercive power might be met with the amnesiac response of I don’t recall. Further the fact that a person is required to answer questions is not indicative of the willingness of that person to provide a witness statement when called upon to do so by the investigator. A careful value judgement must be made by the investigator in relation to the use of coercive powers to further an investigation. Often an attractive and ultimately more productive investigative technique may be the old fashioned statement taking in relation to those persons who are not considered to persons of interest in the investigation.

Mutual Assistance.

Transnational Crime is becoming increasingly organised, prevalent and diverse in nature. Many of the offences we prosecute are increasingly globalised and involve criminal conduct in more than one national jurisdiction. This involves the CDPP seeking the cooperation of other jurisdictions to assist in obtaining and presenting evidence for use in Australian courts. By the same token, other countries increasingly seek Australian assistance in the collection of evidence for offences being prosecuted abroad. These instances of cooperation reflect acceptance by prosecuting agencies that international crime requires an international response and the increasing acceptance of a wider international obligation to combat crime. Mutual Assistance (MA) is the formal process by which countries obtain and provide assistance to each other to investigate and prosecute criminal matters and to recover the proceeds of crime. MA is not the only channel used for international cooperation in criminal cases. There is often direct contact between police and other investigative agencies and contact through Interpol and other international agencies. As a general rule, direct contact between police and other investigative agencies is a more efficient way to progress an investigation than making an MA request. However, there are circumstances where an MA request will be necessary and in particular where the foreign evidence is required to be admitted into evidence in a court in Australia.

Proceeds of Crime Act (POCA)

The Proceeds of Crime Act 2002 is an effective tool to deprive wrongdoers of the proceeds of their illegal activity. The CDPP has carriage of litigation under this Act and may take confiscation action either in conjunction with the prosecution process (conviction-based action) or independently from that process (civil action). The scope for proceeds of crime action in relation to cases of corporate wrongdoing is narrower than in relation to some other types of offences. That is because in many such cases there are identifiable victims of crime, such as the company itself or its shareholders, whose interests might be prejudiced by the taking of action under the Proceeds of Crime Act 2002. Under the Act confiscated property is paid to the Commonwealth and is not available for the victims of the particular crime. There are, however, certain types of corporate wrongdoing which do not involve victims, or where victims are particularly difficult to identify. These include offences such as insider trading, market manipulation, and corrupt receipt of bribes or other benefits by corporate officials. DPP has taken proceeds of crime action in a number of cases of this type. In such cases confiscation action can be a highly effective method for depriving offenders of the fruits of their offences and achieving deterrence. A good example is the West Australian matter of Alan Dawson, in which the DPP obtained an order requiring Dawson to pay a pecuniary penalty of $3.7 million. This was the amount of unlawful benefits which Dawson’s private company had obtained through improper dealings in options in a public company of which Dawson was also the managing director.

The inherent challenge of coherent responses in a federal system.

Commercial prosecutions have an inherent level of intellectual challenge. The subject matter is fluid and sometimes irreducibly complex. The law has necessarily reacted to this. The Corporations Act now runs to 2420 pages, up from 1835 in 2001, with forty one amendments inserted in that time. S80 of the Constitution mandates that the trial on indictment of an offence against Commonwealth law must be before a jury. Case law has confirmed that in this context a jury trial requires a unanimous verdict normally from a jury of twelve citizens. This can create challenges for the prosecution of large complex cases under our present system. By and large the jury system has, and continues to, serve us well but the demands the system may place on individual jury members who may be required to effectively suspend their careers and normal daytime activities for periods of 6 months or more should not be underestimated. A jury panel of only twelve is unacceptably vulnerable to misadventures in any long trial. Fortunately, each of the States and Territories has moved to meet this, albeit with a range of inconsistent provisions for enlarged panels or reserve jurors in certain trials.4 Commercial prosecutions are a field where the ideal process requires a good deal of pre-trial identification and refinement of issues. Because of their nature the trial of complex, document intensive cases can take substantial periods of time. Recently one tax fraud trial lasted for 12 months. As prosecutors we are acutely aware that we need to focus our cases, seeking to rely on only that evidence which is required for the purposes of the case, seek to explore ways of summarising or charting the evidence thereby making it digestible and where possible agreeing with the defence on expedited ways of introducing the evidence. This approach was recently demonstrated in a large non commercial case conducted in the Supreme Court in Victoria where the Crown was able to come to agreement with the defence as to much of the material that was to be admitted. While the trial still ran in excess of 6 months, without this agreement the trial would have run for in excess of 12 months. The costs involved in running “mega trials” are staggering. In the case I have just referred to those costs were estimated at around $60,000 per day. Where defendants are legally aided this cost is borne by the Community. There needs to be a concerted effort now to address this issue rather than wait for a solution that may be imposed that requires radical change to the way we operate. In this respect the development of Uniform Criminal Procedure rules would be a welcome advancement. Effective trial conduct of this kind does require a considered but quite surgical approach to evidence by all counsel and a readiness to assess the practicalities of the trial as a whole. Ideally, the efficient hearing of such large cases also requires a robust judicial approach to case management and a commitment by the defence to an approach of contesting only that evidence that is in truly in issue. A simple fact is that many Commonwealth trials are inherently complex in ways that could not have been contemplated when jury trial was mandated for Commonwealth offences was mandated as a feature of our 1901 Australian Constitution. There is, given the range of subject matters and the nature of investigative capacities, often a great deal of potential evidence in a contemporary trial which will be disclosed to the defence in accord with a rigorous adherence to the law and the CDPP disclosure statement. This commonly embraces a great deal more material than the Crown would rely upon and includes unused material of potential value to the defence. The latter is a category wherein prosecutors are prudent to err on the side of generosity. The interplay between these factors and the constitutional requirement that Commonwealth indictable matters be tried by a jury raises a challenging issue for the times: The continued viability of the jury trial as a process in which the public may retain confidence must assume the assertion of professionalism by both prosecutors and defence counsel. This entails lawyers on both sides engaging in timely and critical examination of potential evidence and identifying the real issues for the jury, ensuring that only those issues are litigated. Both parties are required to implement this approach, unless one concedes that a “win at all costs” mode of defence can be reconciled with a duty to the Court. The approach of constructive issue identification is consistent with Bar Rules5 and in keeping with both the traditions of fearless and effective defence. My concern here is not that people might be acquitted but rather that trials should not degenerate into lotteries of confusion and exhaustion. A functioning jury system is quite distinct from one that can be driven to collapse under the weight of cases rendered incomprehensible, where all possible material including that of marginal relevance is regarded as evidence that the prosecution is required to call without any contribution to issue clarity.

Assessing the costs behind the statistics.

It is difficult to find current estimates of the cost of corporate crime in Australia. Any figures must of their nature be imprecise as, no doubt, this cost will include the lost opportunity cost of investors who are discouraged from investing in the Australian market due to a perceived lack of confidence caused by corporate crime. Further, while companies will from time to time collapse and those collapses may involve suspected aspects of fraud it is often difficult to attribute the entire cost of the collapse to corporate crime. There is also a human cost that is very hard to estimate. How can one calculate in monetary terms the loss caused to a self funded retiree who loses his nest egg as a result of corporate misfeasance? Indeed those who have lost as a result of corporate collapses may suffer psychological harm that requires medical treatment. The degree to which the community at large can or should attempt to ameliorate such suffering, given its possible scale and the implications for resources is a matter for political determination and not to be discussed here.

Multi agency and other cooperation.

There is a strongly entrenched tradition of cooperation through the flexible and complementary arrangements between all the State and Commonwealth prosecuting entities. The level of cooperation between all Australian Directors of Prosecutions is a particular example of the federal ideal as a functioning reality. As previously mentioned there are sound arrangements of cross delegation between the CDPP and other prosecutors. In addition, all Australian Directors meet at convenient intervals several times each year to consult on matters of common interest. When appropriate these meetings have been extended to include our New Zealand counterparts and most recently a meeting of Australian Directors was immediately followed by a Forum of Australian Chief Prosecutors with our colleagues from sixteen Pacific island nations.6 In a more local context, the frequently used phrase “whole of Government” is particularly relevant to the CDPP’s operations. In April 2004, Management Assistance Committee of the Public Service Commission released Connecting Government. This report defined ‘whole of government’ in the Australian Public Service as: . . . denot[ing] public service agencies working across portfolio boundaries to achieve a shared goal and an integrated government response to particular issues. Approaches can be formal and informal. They can focus on policy development, program management and service delivery. An immediate question arises as to how the CDPP’s central tenet of independence sits with whole of government, particularly when cooperating with some forty referring agencies that have their own statutory frameworks and perhaps differently defined notions of independence in their relationship with Executive Government? One way the CDPP responds is by being a close advisor to where a Taskforce has been established, but not an operational participant in stages of intelligence and investigation. I have found that a significant factor is also to be found in a Commonwealth culture that understands and respects the great value that other agencies obtain from an independent CDPP. Thus, the Office keeps both close but independent in a way that benefits the joint effort with our expertise but does not compromise our independence and the objectivity of our advice. The independence of the CDPP is a formidable strength for the Office, it is also one valued by Governments of all persuasions. This has been actively supported by successive Attorneys General and the Office has been notably free of political interference. Independence is retained, not simply as a self-sustaining ideal, but because of its pragmatic value to our system of government under the rule of law. It is an independence that comes with a balancing degree of accountability that is appropriate to a parliamentary democracy. The most visible aspect of accountability is in the requirement to report annually to the Attorney General, who takes ministerial responsibility for what the Office does, and in the attendance of the Director at Senate Estimates hearings twice each year. Countering the phenomenon of serious corporate crime starts with an informed community and an engaged business sector that promotes ethical business practice. This, in turn, is reflected in a community that is better educated to protect its reasonable expectations of business and a business community that meets those expectations and is a partner in processes that produce good and effective laws.

Conclusion.

As a nation that ranks a mere 52nd in population but is one of the world’s leading fifteen or so trading nations Australia’s brand integrity is essential. As with many successful economies of moderate size, we maintain this with an emphasis on quality of products, services, and people rather than the scale of business done. We would like to believe, that even in instances where we do business on a massive scale it is faith in the integrity of the Australian party that seals the bargain and leads to more such bargains. For this country brand integrity is the hallmark of much of what we do in the world, from our farmers to our sportsmen and women as with our private enterprises both within and beyond our boundaries. We are a country with a commitment to straight dealing in openly competitive markets and this is the keystone of a regulatory climate that sees business, government and those charged with administering business laws in partnership. We carry this spirit to like-minded partners in the Asia Pacific Region and beyond, as is typified by frequent contacts between my Office and kindred international organisations. The principal value that we believe we can bring to these relationships is a continuing commitment to vigorous and effective prosecution of corporate offenders in order to maintain the sound quality in the integrity of the national brand that we seek to share. An essential element in maintaining the credibility of this approach is that we are consistent in our domestic legal system’s response to the instances of aberrant and criminal business conduct. I trust that this presentation is a helpful outline of how my Office undertakes this task as the national prosecuting entity.

Endnotes

1 E. H. Sutherland (1949): 9 White Collar Crime, New York, Holt Rinehardt & Winston.
2 Hazel Croall (1992) p7 White Collar Crime, Open University Press.
3 Insider Trading – The need for Conceptual Clarity (1996) 14 Company and Security Law Journal 151, Michael Whincop, at 232.
4 In Western Australia, up to 5 extra jurors, in NSW, South Australia, Queensland, Victoria and Northern Territory up to 3 and 2 in Tasmania.
5 Rule 42 states that: A barrister must seek to ensure that work which the barrister is briefed to do in relation to a case is done so as to:
  1. confine the case to identified issues which are genuinely in dispute;
  2. have the case ready to be heard as soon as practicable;
  3. present the identified issues in dispute clearly and succinctly;
  4. limit evidence, including cross?examination, to that which is reasonably necessary to advance and protect the client’s interests which are at stake in the case; and
  5. occupy as short a time in court as is reasonably necessary to advance and protect the client’s interests which are at stake in the case.
6 Sydney June 24 and 25 2008, jointly hosted by the CDPP and Nick Cowdery QC the New South Wales DPP.