An Taoiseach, Leo Varadkar, has pledged to beef up the Office of the Director of Corporate Enforcement to form an “Irish FBI”.
It is a great sound bite, but Ireland has a long history of strong political rhetoric on white collar crime, and creating tough laws, but without following through on adequately resourcing enforcement.
In 1962, prior to a major overhaul of company law, the Minister for Industry and Commerce, Jack Lynch, recognised “there would, of course, be little point in imposing obligations on companies and their officers unless suitable provisions were made for the prosecution of offenders … [T]o the extent which our resources permit, steps will be taken to ensure that the requirements of the law are complied with, and that offenders are punished”.
In fact, one of the main bodies which was responsible for corporate enforcement at that time, the Garda Fraud Squad, was egregiously under-resourced. An analysis of the Irish Times archives show that in 1971, the nationwide force consisted of just 17 officers. It remained chronically under-staffed and under-funded for decades, with fewer than 30 officers on the squad by 1990.
In 1991, Minister for Justice Ray Burke acknowledged that the squad did not retain any full-time accountancy or legal staff to help it analyse and interpret company accounts and papers, making it difficult to see how it could address sophisticated and complex forms of financial crime.
It remained so under-resourced that by 1995, the squad did not have enough money to buy a fax machine. This was the same body that was responsible for addressing sophisticated computer fraud.
Resourcing is still a major issue. In 2007, the ODCE asked for an additional 20 staff but only received four, increasing its complement from 36 to 40 full-time staff. Taoiseach Bertie Ahern seemed indignant that the request was even made.
He said at the time: “It is not that Mr Appleby’s [the former Director of Corporate Enforcement] work is not considered important. … He has 36 [staff] so it seems extraordinary that he could want another 20; one would not receive such an increase in any Department. He will have to wait his turn …”.
Matters did not improve for the ODCE. In fact, they got worse. The downtown in the economy after the financial crash brought high levels of insolvency, requiring further oversight from the ODCE, and significant expenditures were incurred on the complex investigation of corporate wrongdoing in the Irish banking sector.
In its annual report from 2011, for example, the office acknowledged that the substantial resources required to conduct the Anglo investigation placed it under considerable strain. Presumably conscious of the mantra that those in the public service should “do more with less”, it stated “every effort continues to be made to limit ODCE spending and liabilities”.
The current plan to overhaul the ODCE stems from the collapse of the recent FitzPatrick trial in which the ODCE was found to have conducted a biased investigation, coached witnesses, and destroyed evidence.
Minister for Jobs, Enterprise and Innovation Mary Mitchell O’Connor announced that she had ordered the Director of Corporate Enforcement to report to her on these issues. She seemed to pre-judge the detail of the report, however, by insisting that any problems arising in the trial could not be the fault of a lack of government funding.
She said: “We must know exactly what happened and exactly what failed, we must be open to any and all new measures and solutions to fix this and I do not accept that this is entirely an issue of funding and resources.”
Nevertheless, it would appear that failings arose, at least in part, because the ODCE was not sufficiently equipped to run many parallel complex investigations contemporaneously and that its thinly stretched solicitor took the lead on preparing the cases when a member of the Gardaí would normally take on this role. As such, the problems related, to some extent, to expertise and resources.
Published in November last year, the current policy review outlining the reform of the ODCE doesn’t appear to address the issue of resources. The review mainly discusses how effective Irish laws already are, arguing that “Ireland’s regulatory and enforcement regime is very active”.
As to restructuring the ODCE, these discussions have already been overtaken by existing internal actions and reorganisations performed by the ODCE itself. The ODCE has already reorganised its internal structures, recruited forensic accountants and a digital forensics specialist, and revised its internal procedures so that the Gardaí now take the lead on all criminal investigations.
The key issue is whether the ODCE will finally be given the resources to effectively perform its functions. Unfortunately, there is no reason to believe that additional resources are really being poured into corporate enforcement.
According to the ODCE’s most recent report from 2016, the office has 37.5 whole-time equivalent staff, making it less staffed than it was a decade ago.
By contrast, the annual report of the Criminal Assets Bureau for 2016 demonstrated that it had an approved staffing complement of more than 70 personnel. To be clear, the point is not that CAB has too many staff, it is that the ODCE has too few.
In the absence of a full audit, it is difficult to say how many more staff it needs. However, let’s say its 2016 pay budget of approximately €2 million was doubled to hire twice as many staff.
The extra resources required to do this would still be less than half what Varadkar’s spin unit would have cost this year and would constitute just a drop in the bucket of the €871 million annual budget of the Department of Business, Enterprise and Innovation.
If the state is serious about corporate enforcement, it needs to put its hand in its pocket and pay for it. Rhetoric is easy but resources reflect real commitment.