Friday 21 October 2016

Elaine Byrne: Society and State must take white-collar crime seriously

The system may indeed be guilty but cultural attitudes to white-collar crime need to change also.

Elaine Byrne

Published 04/05/2014 | 02:30

Judge Martin Nolan placed the blame for failings in Anglo firmly in the State's corner
Judge Martin Nolan placed the blame for failings in Anglo firmly in the State's corner

'An attack on democracy," was how the then Taoiseach, John Bruton, described the murder of Veronica Guerin. Her death and that of Detective Garda Jerry McCabe in 1996 galvanised the nation.

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Powerful criminal networks posed a direct threat to Irish democracy. The response by the State was swift and unequivocal and cut across party political lines.

The pink metal signage of John Gilligan's Equestrian Centre still hangs on the wall of the Criminal Assets Bureau (CAB) to serve as a daily reminder of why one of the most innovative criminal investigative organisations in the world was established.

Compare that response to the State's response to white-collar crime. Judge Martin Nolan placed the blame for failings in Anglo Irish Bank squarely in the State's corner.

The illegal share-buying scheme at Anglo was not the fault of the two men who carried out the fraud. Instead, it was the Financial Regulator who led Anglo directors, Pat Whelan and Willie McAteer, "into error and illegality". In other words, the judge decided that the system, not any individual, was guilty.

Whelan and McAteer will not spend any time in jail, despite a six-year investigation and a 48-day trial which found both men guilty. If the State is to blame for the white-collar criminality which led to the €30bn Anglo collapse, what has the State done about white-collar crime?

The Governor of the Central Bank, Patrick Honohan, has robustly defended recent reforms which have created an interventionist Financial Regulator. Since 2008 financial institutions have been liable for more fines than ever before. In 2007, just €5,000 in settlement agreements was reached. The figure for 2012 was €8.5m. Enforcement by the Regulator is more stringent now with the introduction of Prism, an expensive risk-based framework for the supervision of regulated firms.

However, these positive reforms at the Central Bank are not a substitute for failings by the Government on white-collar crime. That's the verdict of the knight in shining white armour. In his last few months as Financial Regulator, Matthew Elderfield, had nothing to lose by telling it as he saw it. Elderfield damningly testified to various Oireachtas Committees that Ireland's white-collar crime laws were simply "not fit for purpose".

Indeed, Whelan and McAteer were convicted on a minor technical breach of the 1963 Companies Act. The Anglo trial was the first time in the 50-year history of that Act that a conviction was returned on section 60!

Elderfield called on the Law Reform Commission to conduct a review of Ireland's white-collar crime framework.

Perhaps the perfect candidate is the soon-to-be-retired head of the Commercial Court, Mr Justice Peter Kelly. The Banking Inquiry will examine why things happened in the past. We need a white-collar crime audit to stop criminality happening in the future.

Elderfield wrote to the Public Accounts Committee (PAC) last year slating the State for failing to extend powers to his office within the Central Bank (Supervision and Enforcement) Bill.

His concerns were repeated in a 2013 PAC report on "bank stabilisation". The PAC report found that just 60 officials from three State bodies – the Office of the Director of Corporate Enforcement (ODCE), the gardai and the Central Bank – are investigating those who were central to the banking crisis.

How many officials are tasked with investigating drug crime? Why are white-collar criminals treated differently to drug dealers? The six-year delay in bringing the Anglo case to trial suggests that something is just not right.

Ian Drennan, the head of the ODCE, described the Anglo investigation as "resource intensive" in his 2012 annual report. That's polite civil service code for "the State has not given us enough resources to do our job properly".

"As a consequence", Drennan said, the ODCE had "limited latitude" to address the other work it is tasked to do, such as "the examination of complaints received from members of the public, auditors' and professional bodies' statutory reports and to proactively seek to address other areas of potential risk".

The ODCE went on to say that stakeholders "must recognise and acknowledge that we cannot do everything". By dedicating limited resources to the Anglo investigation, the ODCE could not fulfil its work in other areas.

The ODCE's budget was cut by 12 per cent between 2010 and 2013, at a time when it was conducting the biggest and most complex case of its kind in Irish history.

The Criminal Assets Bureau (CAB) has the same problem. In its annual report, it noted that because a solicitor has not yet been replaced, a backlog of work "has contributed to a reduction of the number of new cases which could be brought in the course of the year".

This crisis-driven approach to white-collar crime puts one fire out while allowing another to start. If the State took white-collar crime seriously, it would not allow this situation to develop where ODCE and CAB are critically constrained in their ability to fulfil their mandate.

In its submission to the Department of Justice in 2010, the ODCE noted that a disparate set of agencies have responsibility under one legislative code only. This means that Revenue has responsibility for offences committed under revenue legislation, ODCE looks after breaches of the company acts, the Competition Authority takes care of wrongdoings within the competition acts and so on.

But white-collar criminals do not conduct illegal activity within the confines of one piece of legislation! So multiple agencies may need to be involved, but information sharing is not always possible because of confidentiality requirements. Ireland does not have a police-led multi-agency taskforce with a singular focus on white-collar crime.

Part of my work as a consultant with the European Commission on corruption was to liaise with officers within the various oversight agencies. They are deeply committed individuals dedicated to upholding the rule of law. They are as frustrated as the general public about the inability of the State to prevent, detect, investigate and prosecute white-collar crime.

The system is to blame, according to Judge Martin Nolan. The State is responsible for this system. A belated Banking Inquiry will not solve the attack on Irish democracy caused by white-collar criminals. An audit established to review legislation, resources and structures will.

More important than that is a change in our cultural attitudes toward white-collar criminality. That is what will galvanise a nation once more.

Dr Elaine Byrne is the author of 'Political Corruption in Ireland 1922-2010: A Crooked Harp'.

Sunday Independent

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