Recent high-profile prosecutions against former Anglo Irish Bank officers have resulted in acquittals, damaged public confidence in the state’s ability to enforce the law, and engulfed the Office of the Director of Corporate Enforcement in allegations of ineffectiveness and incompetence.
For those who may not have been following the decade-long saga, or have forgotten what it’s all about by now, the bank collapsed spectacularly during the crash of 2008. A cascade of accusations, investigations and prosecutions followed, dealing with how the bank’s officers’ business practices contributed to its implosion and the resulting massive cost to the taxpayer.
Among these was the longest criminal trial in the history of the Irish state, the recent prosecution of former Anglo Irish chairman Seán Fitzpatrick, which ended in May 2017, with another spectacular collapse.
Judge Aylmer directed that Seán Fitzpatrick be acquitted, and criticised the ODCE for failing to conduct impartial investigations, coaching witnesses, and destroying evidence which may have been exculpatory.
In that case, denying Fitzpatrick his constitutional right to a fair trial was an extremely serious failing, and the ODCE must learn from its mistakes in order to restore public confidence in corporate enforcement. However, many of the recent criticisms of the office for handling the Anglo investigations have been either mistaken or misguided.
Prior to the creation of the ODCE in 2001, Ireland had a culture of non-compliance with company law. The Working Group on Company Law Compliance and Enforcement concluded that the majority of companies in Ireland were not observing even the most basic of requirements, like filing annual accounts with the Companies Registration Office. For example, just 13 percent of companies filed their accounts on time in 1997.
Moreover, even though the Companies Acts contained 280 separate and distinct criminal offences, only a handful of the of these had ever been prosecuted. Only one offence, the failure to file annual accounts, was prosecuted with any regularity.
Since its establishment, however, the ODCE has had an extraordinary impact on the landscape of corporate enforcement in Ireland. First and foremost, the ODCE encourages compliance with the law through educating company officers about their obligations.
Though this aspect of the ODCE’s activities is often overlooked, this represents a change that would have been unthinkable only two decades ago, when apathetic legal and political institutions largely paid lip service to the regulation of the corporate sphere, when company law existed only on paper, when people were unaware of their obligations, and when complicated legal provisions were not explained to corporate actors.
The ODCE also actively investigates and enforces company law, engaging with liquidators, for example, in order to protect the public from company directors that operate to defraud investors. Civil sanctions, like restriction and disqualification orders, which constrain and ban officers from managing companies, have proven particularly valuable.
At the end of 2002, there were just 54 people on the register of restricted persons, but this had risen to 961 by the end of 2016. Just 10 company directors were named on the register of disqualified persons in 2004, but 3,664 persons were on the register by the end of 2016.
The ODCE has had more mixed results with criminal prosecutions. In its early years, it prosecuted many new offences that had never been prosecuted before. These cases were not, however, unqualified successes.
Many of them were prosecuted in the District Court, where fines were low and offenders didn’t go to jail. It is unlikely that these cases had any meaningful impact in terms of deterring others from committing similar crimes.
Prosecutions on indictment, before a judge and jury and with potentially more severe penalties, were rare, and custodial sentences were exceptional. The first effective custodial sentence during the lifetime of the ODCE was not handed down until 2011, a decade after its establishment, for the offence of furnishing false information to the Registrar of Companies.
In the past, commentators (this author included) criticised the ODCE for failing to refer more cases to the DPP for prosecution on indictment, for failing to pull the trigger on the “big gun”, in sufficiently serious cases.
In recent years, however, the ODCE has significantly reoriented its enforcement strategies. It now favours prosecutions on indictment in criminal courts, with real teeth.
Some former Anglo executives, like William McAteer and Patrick Whelan, for example, have been convicted of breaching the Companies Acts, while others, like Sean Fitzpatrick, have been acquitted. Among those convicted, some have received years of jail time, while others have received community service.
The results are clearly mixed, but are not overwhelmingly disappointing. In addition, some criticisms of the ODCE have also been misguided.
It is important to note that the ODCE is only concerned with breaches of the Companies Acts, rather than the laws that apply to companies more generally, like tax laws. Some white-collar crime cases, which were not breaches of the Companies Acts, are therefore not attributable to the ODCE.
Moreover, though the ODCE refers cases for prosecution on indictment, it is the DPP, not the ODCE, that prosecutes these indictable company-law offences, like those cases against the former Anglo executives, because she has the exclusive jurisdiction to prosecute all indictable crime in Ireland.
Moreover, the ODCE runs on a shoestring budget so taking complex and expensive cases against well-resourced defendants, who vigorously resist proceedings, is extremely difficult. By way of illustration, the private suit between Fyffes and DCC for insider dealing ran for months in the Superior Courts and the plaintiff’s legal fees alone were reportedly settled for approximately €3.4 million in 2007. This was more than the €3.355 million it cost to run the ODCE in 2006.
In addition, the office has been chronically understaffed, particular with regard to accounting professionals and in-house digital forensic staff. In 2007, the DCE asked for an additional 20 staff, but only received four. By the end of that year, it had a total of 40 full-time staff. According to the most recent report for 2016, the ODCE is composed of 37.5 whole-time-equivalent staff, making it less staffed than it was a decade ago.
Meanwhile, the public is angry because there has been very little accountability for those whose irresponsible actions caused the financial crash. The ODCE, however, was never going to be able to address this. There is no such offence contrary to Irish company law.
Curiously, however, the Central Bank of Ireland, though lambasted after the crash, has escaped continuing opprobrium by stepping back from enforcement matters, even though it is arguably the one body most appropriately poised to address the mismanagement of banks.
Nevertheless, politicians have recently pledged to abolish the ODCE and establish a new agency, with more powers, to tackle white-collar crime. However, the ODCE already has very significant powers as its disposal.
The creation of a new agency will be a welcome development only if the state provides the funding necessary to support its mission. There is little point in politicians conveniently championing their own “tough on crime” credentials if they under-resource the agency.