Penalties for White Collar Crime: Senate Report of March 2017

Inquiries by Parliamentary committees can be a waste of everyone’s time. The Senate’s Inquiry into criminal, civil and administrative penalties for white collar crimes is a good example.

It began in November 2015 and ended in March 2017 (after pausing for 5 months because of the  election). It received 139 submissions, 2 lots of “additional information”, and had a public hearing at which 23 witnesses appeared. It’s report, which carries the grandiose title “Lifting the fear and suppressing the greed” (23 March 2017), runs to 108 pages. The committee said:

“A clear message to the committee from inquiry participants was that white-
collar crime and misconduct can cause serious harms, both at the individual level and
in the community as a whole.”

But despite this statement and the enormous amount of work that went into making submissions, conducting the inquiry and writing the report, media coverage has been almost non-existent. Perhaps news editors thought the subject matter was fairly dry, and/or that the report’s  recommendations were not particularly noteworthy or inspiring or controversial.  Such a conclusion would be understandable. To which I would add, that the report is unlikely to have much of an impact on how we deal with white collar crime.

THE COMMITTEE’S RECOMMENDATIONS
Recommendation 1	That the government consider reforms to provide greater clarity regarding the evidentiary standards and rules of procedure that apply in civil penalty proceedings involving white-collar offences.	paragraph 3.52
Recommendation 2	That the Australian Securities and Investments Commission (ASIC) consider ways in which the accessibility and usability of the banned and disqualified register might be enhanced, in order to create greater transparency regarding banning and disqualification orders.	paragraph 5.24
Recommendation 3	That the government consider making infringement notices available to the ASIC to respond to breaches of the financial services and managed investments provisions of the Corporations Act.	paragraph 5.34
Recommendation 4	That the government amend the Corporations Act 2001 to increase the current level of civil penalties, both for individuals and bodies corporate, and that in doing so it should have regard to non-criminal penalty settings for similar offences in other jurisdictions.	paragraph 6.55
Recommendation 5	That the government provide for civil penalties in respect of white-collar offences to be set as a multiple of the benefit gained or loss avoided.	paragraph 6.56
Recommendation 6	That the government introduce disgorgement powers for the ASIC in relation to non-criminal matters.	paragraph 6.57

The committee’s full report is available for viewing and download at the committee’s Parliament of Australia website.

Incidentally, insolvency practitioners will be disappointed that there are so few references in the report to insolvency and liquidation, although potentially recommendation 4 could have an impact in corporate insolvency.

The next part of this blog post contains extracts which reveal “The Committee’s Views”  and the “Table of Contents of Report”.

 

THE COMMITTEE’S VIEWS
Chapter 2: Overview of the current penalty framework	Providing an overall assessment of the adequacy and consistency of current penalties for white-collar crime and misconduct is not straightforward. Just as the types of wrongdoing that might be considered white-collar crime and misconduct are extremely varied, so too are the penalties available in relation to that wrongdoing. However, the committee agrees that, broadly speaking, there appear to be serious inadequacies and inconsistencies in the current penalty framework. These inadequacies and inconsistencies are drawn out in subsequent chapters, as are steps that might be taken to address them. (2.47)
Chapter 3: The investigation and prosecution of white-collar crime and corporate and financial misconduct	The committee notes that some inquiry participants, including the Australian Shareholders’ Association, are concerned that ASIC was too quick to pursue civil proceedings rather than criminal prosecutions. The committee is, however, satisfied that ASIC and other enforcement agencies have sufficient flexibility to pursue both criminal and non-criminal actions, and is not convinced that civil proceedings constitute a ‘weak’ or ‘second-best’ alternative to criminal prosecution. On the contrary, the committee agrees with the point made by the AFP that the availability of administrative and civil penalties are as important as criminal penalties in combating white-collar wrongdoing, and of particular importance where criminal liability cannot be proven. (3.48 )
	The committee also notes concerns about the difficulty of proving white- collar offences, including in civil penalty proceedings. The committee is inclined to agree with the view that just because particular crimes or civil offences are difficult to prove, this does not mean evidentiary standards should be lowered. However, the committee notes that in some civil proceedings commenced by ASIC and other regulatory authorities there is a lack of clarity as to the standard of proof that must be satisfied—or, more specifically, the meaning and application of the ‘balance of probabilities’ standard—and the rules of procedure that apply. In this regard, the committee notes that some inquiry participants have recommended reform to clarify the evidentiary standards and procedures that apply in civil penalty proceedings. (3.49)
	Evidence received in this inquiry underlines the need to reform Australia’s corporate whistleblowing framework, and also points to the potential value of the introduction of a DPA scheme in tackling serious corporate crime and misconduct. The committee notes and welcomes the fact that both matters are being pursued in other forums. (3.50)
	The committee notes the AFP’s concerns regarding the inadequate provision for criminal liability in the Criminal Code for ‘ringleaders’ in serious and organised crime syndicates, including syndicates engaged in serious financial crime. While this matter was not considered at any length in this inquiry, the committee would encourage the government to engage with the AFP in considering steps to strengthen these provisions for criminal liability in such cases. (3.51)
Chapter 4: Sentencing, deterrence and custodial sentences	The committee acknowledges the concerns of some inquiry participants, and in particular of victims of white-collar crime and their advocates, that maximum prison terms for white-collar offences should be increased. However, the committee is satisfied that the maximum prison terms available in Australia are comparable to those available in similar foreign jurisdictions. While the committee does not preclude the possibility that maximum terms of imprisonment for certain offences should be increased, broadly speaking the committee considers current maximum terms of imprisonment for white-collar crime to be appropriate. (4.64)
	The committee considers that custodial sentences have an important role to play in deterring and punishing white-collar crime. Indeed, the committee is inclined to agree with the suggestion that arguably nothing deters a white-collar criminal more than the realistic prospect of imprisonment.(4.65)
	The committee would have strong reservations in relation to any steps to introduce mandatory sentencing in relation to white-collar offences. While deterring, detecting and prosecuting white-collar crime and misconduct is often very challenging, this in itself would not justify steps that would remove the discretion of the courts in sentencing. Mandatory sentencing might also reduce the prospects of guilty pleas or cooperation in white-collar crime cases. (4.66)
Chapter 5: Banning orders and infringement notices	The committee notes the issues raised by CCLSR in relation to the banned and disqualified register maintained by ASIC. While the committee did not consider the matter at any length in the inquiry, it considers that there would be merit in further considering enhancing the access to and usability of the register. This would likely help improve transparency regarding the use of disqualification and banning orders in Australia, and also better enable consumers and other interested parties to access information about people and organisations that have engaged in misconduct serious enough to warrant a banning or disqualification order. (5.23)
	While noting the Law Council of Australia’s views regarding infringement notices, the committee agrees with ASIC that infringement notices provide a valuable enforcement tool for responding to less serious instances of corporate and financial misconduct. (5.32)
	The committee agrees with ASIC that there may be value in making infringement notices available for breaches of the financial services and managed investments provisions of the Corporations Act. (5.33)
Chapter 6: Monetary penalties and disgorgement	The committee considers there is overwhelming evidence and support for increasing the current levels of civil penalties for white-collar offences in the Corporations Act. The committee is reluctant to specify a particular penalty amount, and notes that the ASIC Enforcement Taskforce may be better placed to comment on this matter. Nonetheless, the committee suggests that the government should have regard to the level of non-criminal penalties in other jurisdictions for similar offences, and in this connection notes that the fivefold increase (or greater) suggested by some witnesses would not be inconsistent with penalty settings in foreign jurisdictions. (6.52)
	The committee notes the importance of multiples of benefit penalties in ensuring that white-collar offenders are not able to profit from their crimes and misconduct. In this respect, the committee considers there is a need to introduce multiple of benefit penalties in relation to non-criminal offences. (6.53)
	The committee agrees that the lack of disgorgement powers in non-criminal matters represents a significant gap in ASIC’s enforcement toolkit. Noting that this is a matter that the ASIC Enforcement Taskforce is likely to address, the committee nonetheless considers that the government should move to address this gap and introduce disgorgement powers in relation to non-criminal matters. (6.54)

 

TABLE OF CONTENTS OF REPORT
		Page
Membership of Committee		iii
List of recommendations		vii
Chapter 1: Introduction and Overview		1
	Submissions and public hearings	1
	Defining ‘white-collar crime’ and ‘corporate and financial misconduct’	2
	Is Australia a ‘paradise’ for white-collar crime?	4
	Impacts of white-collar crime and corporate and financial misconduct	6
	Recent inquiries and reports regarding the penalties issue	7
	Structure of this report	12
Chapter 2: Overview of the current penalty framework		15
	Categories of penalties for white-collar crime and financial misconduct	15
	Responsibilities for enforcement and the application of penalties	16
	Views on the adequacy and consistency of the current penalty framework	22
	Committee view	27
Chapter 3: The investigation and prosecution of white-collar crime and corporate and financial misconduct		29
	Evidentiary standards and white-collar offences	29
	Deterrence dependent on prospects of detection and prosecution	35
	Encouraging corporate cooperation and compliance	37
	Committee view	44
Chapter 4: Sentencing, deterrence and custodial sentences		45
	Purposes of penalties and sentencing	45
	Custodial sentences for white-collar offences	49
	Mandatory sentencing	60
	Committee view	62
Chapter 5: Banning orders and infringement notices		65
	Importance of banning and disqualification orders	65
	Committee view	69
	Infringement notices	70
	Committee view	72
Chapter 6: Monetary penalties and disgorgement		73
	Adequacy of current maximum monetary penalties	73
	Limitations of monetary penalties in cases involving bankruptcy	79
	Disgorgement powers	79
	Committee view	84
Additional comments from the Australian Greens		87
Appendix 1: Submissions received		91
Appendix 2:  Additional information, tabled documents  and answers to questions on notice received		97
Appendix 3: Public hearings and witnesses/td>		99