Corporate crime wave: Australia's epidemic of corporate criminality

“As crimes pile up they become invisible”

Bertolt Brecht

“Corporate crime poses a significant threat to the welfare of the community. Given the pervasive presence of corporations in a wide range of activities in our society, and the impact of their actions on a much wider group of people than are affected by individual action, the potential for both economic and physical harm caused by a corporation is great.”

Law Reform Commission of New South Wales

In two recent submissions, I argue that Australia is in the wake of a global and national epidemic of corporate and business malfeasance, lawlessness and criminality, and has become a haven for corporate and white collar crime.

Crimes committed by those at the top of the corporate (and political) hierarchy are routinely ignored or brushed under the carpet and Australia governments and the various regulatory authorities have failed to take action against increasingly egregious and escalating levels of unlawful and criminal conduct by corporations and business.

One submission was to an Australian Senate Inquiry into Penalties for White Collar Crime (which has since lapsed because of the government's dissolution of both houses.) My submission is available here as Submission No 18 under the banner of the Nemesis Project which I coordinate.

The second submission was to the Federal Attorney's General's public consultation on Deferred Prosecution Agreements for corporate and business crime (submission is not yet publicly available but will be here).

In the submission to the Senate Inquiry into Penalties for White Collar Crime, I argue that:

• Over recent decades legal and regulatory systems have been dismantled or loosened to remove constraints against corporate and investor profit-making and profit-taking.
• Corporate and white-collar crime is traceable to a gross failure of the law. Legal constraints have been cast aside or not applied to their fullest. Corporations and business groups have worked to limit the effectiveness of efforts to stamp out corporate crime. They make it more difficult to prosecute crimes.
• Corporations and business have actively subverted the law, as well as government regulation and ethical standards, in order to maximize their profits and ensure that resources flow to them. There has been a pervasive legal and political failure to control unlawful conduct by corporations and business.
• For decades, the regulatory authorities have failed to investigate and take action against corporate and white collar crimes.  Governments, corporate regulators and law enforcement authorities and politicians have been unwilling to take serious action against corporate criminals who knowingly swindle and harm ordinary Australians.
• The dominant response to corporate and business offending has been regulation rooted in co-operation. These strategies work predominantly to the advantage of powerful corporate and business interests.

These views were supported by numerous other submissions to the Senate Inquiry, as well as a recent report by the Australia Institute.

A submission to the Senate Inquiry by the the Economic Consultancy LF Economics provides a damming indictment of corporate criminality and control fraud within the FIRE sector (finance, insurance and real estate).

They contend that systemic criminal activity exists in the FIRE sector, with the full knowledge of all the regulatory authorities and State and Federal governments, and  places consumers at grave risk of having their finances and livelihoods destroyed.

LF Economics calls for much greater enforcement and prosecution of corporate and financial criminality:

Australians have been betrayed by the regulatory agencies’ neglect and continual siding with lenders and corporate management, despite their full knowledge of the catastrophic pain endured by many who have lost their homes, assets and life savings. ….. A strict focus on rules, regulations, standards, codes and penalties will have a negligible effect on control frauds because these crimes are simply ignored in reality. Two decades of fruitless inquiries and tweaking of innumerable rules and regulations has merely contributed to the losses endured by typical ‘mum and dad’ investors, now into many tens (perhaps hundreds) of billions of dollars. The nation already has an abundance of appropriate laws and regulations to contain and dismantle these control frauds, yet regulators are averse to enforcement, rendering these powers null and void.

The Australia Institute report Corporate Malfeasance in Australia shows that corporate malfeasance is endemic and widespread in Australia. Its findings include:

• Budget cuts enacted by the current government have compromised the ability to investigate corporate wrongdoing.
• There are hundreds of cases against corporations and business being pursued by Australian regulators each year, however progress is seriously impaired by the lack of staffing and resources.
•  There are fewer regulators ‘patrolling the corporate beat’ in Australia with government agencies responsible for monitoring corporate wrongdoing and malfeasance having their staffing cut between 14-16% since the 2013-14 Budget.

Despite this corporate crime wave, the Abbott/Turnbull Government is considering introducing a Deferred Prosecution Agreements (DPA) Scheme to give corporations accused of wrongdoing and criminality the opportunity to defer prosecution in exchange for a monetary payment and compliance with a range of conditions. DPAs involve a shift from prosecution to compliance.

A DPA is a contractual agreement between government and a corporate entity that allows government to impose sanctions and set up and monitor institutional changes, in exchange for an agreement that government forego further investigation and corporate criminal indictment.

Governments and regulatory authorities (particularly in the USA and UK) have relied primarily on deferred prosecution agreements, however corporations and business continue to engage in unlawful and criminal conduct. Indeed, the criminality has intensified and become more brazen.

In the US, despite an epidemic of criminality, the authorities have been unwilling to charge and prosecute corporate criminals and one consequence of the adoption of DPA’s, is that Federal prosecutions of corporate and white collar crime is at a 20 year low.

In my submission, I argue that Deferred Prosecution Agreements are no solution to the epidemic of serious corporate malfeasance and criminality that has made Australia a haven for corporate crime.

There is no evidence that DPAs deter corporate and white collar crime and they may, in fact, encourage crime by reducing the threats of prosecution and incarceration. As the number of DPAs rise, the number of prosecutions decline.

My submission opposed the adoption of a DPA scheme in Australia.