Agenda-Setting Report on White-Collar Crime Welcome, but Not Without Flaws

The Law Reform Commission recently released its mammoth “Report on Regulatory Powers and Corporate Offences”.

In general, the report is a thoughtful and comprehensive review of corporate enforcement in the state, and it is likely to set the agenda for years to come. It is not, however, without its issues.

Following on from the government’s proposals to reconstitute the Office of the Director of Corporate Enforcement (ODCE) as a new agency, the Law Reform Commission proposes the establishment of a new independent Corporate Crime Agency with its own statutory mandate to investigate corporate offences.

The commission links this proposal to the collapse of the trial of Seán FitzPatrick, following a finding that the ODCE had conducted a biased investigation, coached witnesses, and shredded evidence that may have exonerated him.

In addition to recommending that the new Corporate Crime Agency be better-resourced, the commission suggests that it should also resemble the Criminal Assets Bureau (CAB) and be multidisciplinary in orientation.

This means that in addition to being staffed by lawyers, accountants and gardaí, as the ODCE already is, it would also be staffed by revenue and social welfare officers, who could draw upon their powers to assess tax and investigate benefits fraud.

That structure may, however, makes more sense for CAB than for an agency tackling corporate and white-collar crime. CAB uses its revenue powers to tax wealth generated from organised and gangland criminals, in circumstances where those targeted cannot show that they earned that wealth through legitimate means.

It also uses its social-welfare powers to address welfare fraud on the part of organised criminals, who often do not have formal gainful employment and who claim social welfare as a means of explaining (at least partially) their incomes.

It is less clear that these structures and powers are needed to address corporate and white-collar crimes, like those addressed in the Anglo trials, where the perpetrators were not drawing social welfare and where there were, for the most part, no indications that Anglo was a vehicle for the evasion of tax (though there was a very particular, peripheral case involving the evasion of DIRT which was widespread when brought to light in the 1990s).

In these circumstances, attempting to address white-collar crime using a CAB-style agency seems a bit like putting a square peg in a round hole.

Moreover, though the ODCE is exclusively charged with the responsibility of investigating and enforcing company law, the new agency that will replace it will not primarily address breaches of this branch of law.

Instead, it seems to have a much broader remit to investigate any cases that might be referred to it by the Central Bank, the Competition and Consumer Protection Commission, and any other relevant financial and economic regulatory body.

On the one hand, using a single Corporate Crime Agency to address many forms of corporate wrongdoing could be seen as an advantage, because wrongdoing in companies may not only involve breaches of the Companies Acts, including, for example, failing to file annual accounts or continuing to trade while hopelessly insolvent, but instead may involve breaches of many statutes across a range of regulatory regimes.

As such, it may make sense to have a joined-up, unified approach to dealing with these issues, led by a single agency.

However, given Ireland’s long history of apathy and neglect with regard to enforcing the Companies Acts, this proposal may be a step backwards because it dilutes the mandate of the ODCE, so that investigating breaches of company law merely becomes one of many competing priorities in a new agency with many responsibilities.

After all, just two decades ago, in 1998, the McDowell Report concluded that Ireland was characterised by a culture of non-compliance with company law, and non-enforcement of it.

Enforcing company law, it noted, was important to protect the public from commercial fraud; to protect traders, suppliers and investors; to protect legitimate businesses from other market players who engage in illegality; and to protect Ireland’s reputation as an attractive place in which to do business.

Accordingly, the importance of enforcing the Companies Acts cannot be overstated.

Finally, the commission recommends establishing a Prosecution Unit within the Office of the DPP to address corporate and white-collar criminality. Placing this unit within the DPP itself is meant to ensure that “the most efficient processes are in place to prepare a prosecution on indictment in accordance with the relevant principles and rules applicable to a trial on indictment”.

The DPP has noted, however, that a Special Financial Unit already operates within her office and has done so in some form since 2011. The key issue, she notes, is whether the funding will be put in place to adequately resource the greater workflow that may come from the operations of the Corporate Crime Agency.

Gathering these threads together, the commission has proposed a new Corporate Crime Agency, staffed in part by revenue and social welfare officers in accordance with a gangland “crime control” model, to address wrongdoing by persons who are not drawing welfare, in circumstances where there have been no suggestions that the Revenue Commissioners are unable to address tax-defaulting white-collar criminals, who are generally non-violent and middle-class.

This agency, which is less focused on sectorally specific wrongdoing, will work with a “new” prosecution unit that has already existed in some form for the guts of a decade.

Nevertheless, the conversation initiated on this topic by the Law Reform Commission is valuable. It is clearly welcome that reforming the institutions of corporate enforcement appears to be back on the political and legislative agenda for the first time since the ODCE was established in 2001.

It is less clear that this proposal, unless more fully worked out, is the panacea Ireland needs right now.