White collar crime – ░░░ INSOLVENCY INTERFACE

Combatting illegal phoenixing – consultation paper – 28 September 2017

Corporate Insolvency, Insolvent Trading, Offences, Phoenix company activity, Regulation, White collar crime Comments Off

Sep 282017

Consultation

The Treasury has today (28 September 2017) released a consultation paper on reforms to address illegal phoenix activity. The closing date for submissions by interested parties is 27 October 2017.

The paper is available for download from the Treasury website.

Below is the foreword to the paper, by the Hon Kelly O’Dwyer MP, Minister for Revenue and Financial Services:

Phoenixing involves the stripping and transfer of assets from one company to another to avoid paying liabilities. It hurts all Australians, including employees, creditors, competing businesses and taxpayers, and has been a problem for successive governments over many decades.

Phoenixing has a significant financial impact – in 2012, the Fair Work Ombudsman and PwC estimated the cost of phoenixing to the Australian economy to be as high as $3.2 billion annually. It also undermines business’ and the public’s confidence in the corporate and insolvency sectors and the broader economy.

Companies fail for many different reasons, and it can be difficult to distinguish between those who are engaging in illegal phoenix activity and those who are simply involved in a failed company. We are committed to helping honest and diligent entrepreneurs who drive Australia’s productivity, but we won’t tolerate those who misuse the corporate form, to defeat creditors and rip off all Australians. Continue reading »

Package of reforms to address illegal phoenixing

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Sep 132017

Phoenix

Media release, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, 12 September 2017:

The Turnbull Government is taking action to crack down on illegal phoenixing activity that costs the economy up to $3.2 billion per year to ensure those involved face tougher penalties, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, announced today.

Phoenixing – the stripping and transfer of assets from one company to another by individuals or entities to avoid paying liabilities – has been a problem for successive governments over many decades. It hurts all Australians, including employees, creditors, competing businesses and taxpayers.

The Government’s comprehensive package of reforms will include the introduction of a Director Identification Number (DIN) and a range of other measures to both deter and penalise phoenix activity.

The DIN will identify directors with a unique number, but it will be much more than just a number. The DIN will interface with other government agencies and databases to allow regulators to map the relationships between individuals and entities and individuals and other people.

In addition to the DIN, the Government will consult on implementing a range of other measures to deter and disrupt the core behaviours of phoenix operators, including non-directors such as facilitators and advisers. These include: Continue reading »

Penalties for White Collar Crime: Senate Report of March 2017

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May 292017

crime-cloud

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”.

Final report on university research into fraudulent phoenix companies

ASIC, Corporate Insolvency, Insolvency Law, Phoenix company activity, Regulation, White collar crime Comments Off

Feb 252017

Melb Uni
Researchers at Melbourne University have issued their third and final report on investigations into insolvency fraud committed through the use of phoenix companies.

The 162 page report, issued on 24 February 2017, is titled Phoenix Activity: Recommendations On Detection, Disruption And Enforcement.

In the Executive Summary the authors state:

Harmful phoenix activity, left unchecked, has the capacity to undermine Australia’s revenue base and the competitive ‘level playing field’. It is wrong that legitimate business operators, paying taxes, wages and other debts, might be driven out of business by those engaging in harmful phoenix activity. Minimising business distrust caused by harmful phoenix activity can lower the cost of finance and make it more widely available. If less tax revenue is fraudulently avoided, the economy and society as a whole benefit. If fewer employee entitlements are lost as a result of harmful phoenix activity, there is likely to be less reliance on the Fair Entitlements Guarantee, freeing up government resources for other purposes.

What was described in earlier reports as “fraudulent phoenix activity” is described in the final report as “harmful phoenix activity”.

CLICK HERE to read and/or download a copy of the report.

The authors are Professor Helen Anderson, Professor Ian Ramsay, Professor Michelle Welsh and research fellow Mr Jasper Hedges.

Their Phoenix Project (“Phoenix Activity: Regulating Fraudulent Use of the Corporate Form”) “seeks to enhance Australia’s economic stability by determining the best methods of addressing fraudulent use of the corporate form without unduly inhibiting its proper use”. The project was launched in 3 years ago.

Analysis and highlights of the report will be posted here in due course.

Missing Submission On Penalties For White Collar Crime

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Jan 192017

Boo Hoo

In March 2016 I lodged a submission with the Senate Standing Economics References Committee which is inquiring into penalties for white collar crime in Australia. However, for reasons which remain a mystery (probably just an administrative stuff-up), my submission did not make it to the committee, and so is not published on the Inquiry’s website with the other 139 submissions appearing there (at 19 Jan 2017).

The 139 submissions are listed (and publicly available) on two web pages:

134 submitted during the 44th Parliament

5 submitted during the current (45th) Parliament

Although my submission didn’t contain any astonishing revelations or brilliant insights, a considerable amount of thought and work went into creating it, and the facts and ideas it contains are probably worth considering. Therefore, I’ve decided to publish most of the submission here, just for the record.(The Senate Committee is due to report by 28 February 2017.)

OFFENCES IN CORPORATE INSOLVENCY

The committee is looking at penalties for white-collar crime in general. The focus of my submission was the field of corporate insolvency and the penalties for white collar crimes committed by directors of insolvent companies. Continue reading »

Heard the expression moral bankruptcy? Now there’s penal bankruptcy in Bankruptcy Law

Case Reports, court decisions, Criminal convictions, Insolvency Law, law reports, Personal Bankruptcy, White collar crime Comments Off

May 212015

Slap with feather … (updated 4 December 2015)

Case 3

Australian Financial Security Authority – Media release: (NSW) Hull – Bankrupt pleads guilty to three offences under the Bankruptcy Act

Wed 02 December 2015

A man was sentenced for disposing of property within 12 months prior to becoming a bankrupt with intent to defraud his creditors and having made a false declaration on his Statement of Affairs. Mr Denis John Hull was sentenced in the Downing Centre Local Court on 24 November 2015 following a guilty plea being entered to having disposed of property within 12 months prior to becoming a bankrupt with intent to defraud his creditors and to having made a false declaration on his Statement of Affairs.

On 31 March 2012 Mr Hull received a total of $21,175.44 from the sale of two parcels of shares authorised for sale on 26 March 2012. On 10 April 2012 he became bankrupt via Debtor’s Petition, by which time he had disposed of monies totalling $16,000 received from the sale of shares. In his Statement of Affairs completed on 5 April 2014, Mr Hull failed to disclose the sale of the two parcels of shares, and failed to disclose the existence of the bank account into which the share proceeds were subsequently deposited.

During the proceedings Magistrate Milledge remarked that the offending was “quite deceitful and very worrying”. She later stated that the offending was “despicable, mean and criminal”, but acknowledged that it was clear that Mr Hull accepted that as demonstrated in his letter to the court. In passing sentence, Magistrate Milledge gave consideration to Mr Hull’s age at the date of the offending; the fact that he had previously managed to lead a trouble free life; and that his recent efforts to repay the monies showed remorse; and remarked that it was her view that whilst there was serious criminality she saw it as something that was done at a critical place in life and understood that this was why Mr Hull had done what he had done, noting that this did not excuse the offending.

Mr Hull was sentenced and was ordered to enter into a 2 year good behaviour bond in the amount of $200 with nil conviction to be recorded pursuant to Section 19B(1)(d) Crimes Act 1914. Magistrate Milledge noted that no restitution order would be made as this was being taken care of.

The matter was prosecuted by the Office of the Commonwealth Director of Public Prosecutions.;

Amazing … (updated 11 August 2015)

Case 2

Australian Financial Security Authority – Media release: (TAS) Smith – Discharged bankrupt faces court and imprisonment for failing to disclose financial details and withdrawing cash of $72,600

Thu 06 August 2015

A dairy farmer formerly of King Island, Dominic Luke Smith was prosecuted in the Launceston Court of Petty Sessions on 24 July 2015 for removing $72,600 from his bank accounts in 2012, prior to and just after the date of bankruptcy.

Mr Smith also failed to keep appropriate books and records relating to his business transactions for five years prior to his bankruptcy and failed to disclose information as required by the trustee. Mr Smith was not able to account for how he spent a $100,000 loan and failed to produce bank account statements and cheque butts when requested by his bankruptcy trustee. Mr Smith pleaded guilty to 15 offences under the Bankruptcy Act and was sentenced to a total effective sentence of 4 months’ imprisonment, released on a $1,000 two-year good behaviour bond. The matter was prosecuted by the Office of the Commonwealth Director of Public Prosecutions.

Case 1

Australian Financial Security Authority – Media release NSW (McElwaine) – Nine-month bond for offence against the Bankruptcy Act

Thu 14 May 2015

A NSW woman has pleaded guilty to gambling away more than $137,000 from the sale of her property rather than paying creditors before declaring bankruptcy with debts of $438,000. Dee Why resident Bridgett McElwaine was sentenced in the Downing Centre Local Court on 12 May 2015 after pleading guilty to an offence against the Bankruptcy Act. Ms McElwaine filed for voluntary bankruptcy in October 2012 with debts of $438,000 mostly from the use of 22 credit cards. Before her bankruptcy, Ms McElwaine had received proceeds of more than $137,000 after selling her property in Frenchs Forest, NSW. She withdrew more than $96,000 in the 12 months before her bankruptcy and told the court she ‘blew the lot’ on gambling instead of making the money available to her creditors. In sentencing Magistrate Goodwin noted a jail term was available for Ms McElwaine’s serious offence and that a clear message needed to be sent to the community about the unacceptable nature of that behaviour. Ms McElwaine was convicted and placed on a nine-month good behaviour bond, recognisance of $500 and to accept Community Corrections Service supervision. The case was prosecuted by the Office of the Commonwealth Director of Public Prosecutions.Media release NSW (McElwaine) – Nine-month bond for offence against the Bankruptcy Act

Parliamentary Committee recommends ASIC be permitted to access data

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Mar 042015

Recommendation 20 of the advisory report by the Australian Parliamentary Joint Committee on Intelligence and Security (tabled 27 February 2015) is that the Australian Securities and Investments Commission (ASIC) be listed as a criminal law-enforcement agencies under proposed section 110A of the Telecommunications (Interception and Access) Act 1979, thereby permitting it to continue to access telecommunications data.

ASIC had fought strongly for this change during the Committee’s inquiry – see, for example, my post “Not happy, Malcolm! ASIC argues for access to telecommunications data.”

During a Committee hearing Mr Greg Tanzer, the Commissioner of ASIC, highlighted the need for reliable access to telecommunications data to combat the increasing global threat of insider trading:

It is not like terrorism, and I do not make a case that it is exactly the same as terrorism. That would be churlish and, frankly, stupid. But insider trading is an especially pernicious activity. If insider trading is permitted to continue, retail investors and institutional investors will lose confidence in the Australian market. Australia is a net importer of capital—a very major net importer of capital—and if foreign investors in particular, let alone Australian investors, lose confidence in our market, we lose this whole engine and multiplier effect that we have through our capital markets for efficient capital raising. … I am not equating this to a terrorist act, but I am equating this somewhat to other crimes which cause physical harm to people. It is very difficult for a person who has lost their life savings to recover, particularly if your are at that part of your life… where you do not have a lot of time to recover a deadweight loss. (Page 35 of Report.)

In its comments the Committee said:

6.42 The Committee recognises the importance of carefully circumscribing the agencies which are designated as ‘criminal law enforcement agencies’ to ensure that only agencies involved in investigating serious contraventions of the law and subject to appropriate safeguards may seek warrants to access stored communications.
6.43 On the evidence provided, the Committee considers that ASIC is an appropriate agency to be a ‘criminal law enforcement agency’. In particular, the Committee notes that ASIC’s functions include investigating serious offences; that access to stored communications is, and will continue to be, of assistance in its investigations of serious offences; and that ASIC is subject to appropriate accountability requirements and safeguards including the Australian Privacy Principles.

Not happy, Malcolm! ASIC argues for access to telecommunications data

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Feb 022015

In a move that seems to be based on the curious notion that corporate, white-collar crime is not real crime, the federal government has proposed to reduce the right of the Australian Securities and Investments Commission (ASIC) to access telecommunications metadata.

But ASIC is fighting back, with straight talking, in detailed submissions to the Senate inquiry into the Bill. [Full name of inquiry: Senate Legal and Constitutional Affairs Committee – An inquiry into the comprehensive revision of the Telecommunications (Interception and Access) Act 1979.]

Background

In introducing the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014 (TIA Bill) to parliament in October 2014 the Minister for Communications, Mr Malcolm Turnbull, said:

“The bill contains a package of reforms to prevent the further degradation of the investigative capabilities of Australia’s law enforcement and national security agencies.”

After explaining how crucial this was, he said:

“This bill does not provide agencies with new powers to access communications data; the bill simply ensures that data will continue to be available to agencies as a part of legitimate investigations, subject to the same, strict limits that currently apply. In fact, the bill will strictly limit, and indeed reduce, the range of enforcement agencies permitted to access telecommunications metadata without a warrant. The bill will allow what we might call ‘traditional’ law enforcement agencies, such as the police, Customs, crime commissions and anticorruption bodies, to access this information. The bill will also grant the Attorney-General the power to declare, via legislative instrument subject to parliamentary oversight, additional agencies….” (Underlining mine.)

[Source: Second reading speech- Hansard- 20 October 2014 – page 12561-3]

The Australian Securities and Investments Commission (ASIC) is one of the agencies whose right to metadata has been reduced.

ASIC fights back

The following is an extract from the submission in January 2015 by the ASIC to the Senate Inquiry.

ASIC Submission paragraphs 7 to 22.

(Images added)

[Source: The full ASIC submission, which is available here.]

Law enforcement

ASIC as a major criminal law enforcement agency

ASIC is, among other things, a major criminal law enforcement agency. The types of white collar crime investigated and prosecuted by ASIC are both notoriously difficult to prove and capable of causing immense harm to Australia’s financial system. This harm includes damage to the integrity of Australia’s financial markets, and devastation to individual victims who risk losing their houses and life savings.

This significant risk is expected to increase into the future given the ever-growing pool of superannuation investments and large number of Australians expecting to retire from active work in the next 20 years.

ASIC’s express criminal law enforcement functions and obligations extend to the investigation and prosecution of “prescribed offences” and “serious offences”, as defined in sections 5(1) and 5D of the TIA Act. For example:

ASIC is responsible for the investigation and prosecution of criminal offences in a range of Commonwealth statutes, [1] including the following “serious offences” in Part 7.10 of Corporations Act 2001 (Cth) (Corporations Act) that are punishable by imprisonment for up to 10 years:

(i) insider trading (s 1043A);

(ii) market manipulation (ss 1041A to 1041D); and

(iii) financial services fraud (ss 1041E to 1041G), such as fraudulent investment schemes (including Ponzi schemes), cold calling ‘boiler room’ investment frauds and superannuation fraud; and

ASIC is also empowered to, and regularly does, investigate and prosecute other criminal offences (Commonwealth, State or Territory) where the conduct involves corporations, managed investment schemes or certain types of financial fraud, [2] including the following “serious offences”:

(i) general fraud offences under State legislation punishable by a maximum term of imprisonment of 7 years or more. [3]

ASIC is the only agency with specific statutory responsibility for investigating and prosecuting criminal offences in the Corporations Act. ASIC is also the only agency with a standing statutory entitlement to commence prosecutions for offences in the Corporations Act. [4]

ASIC regularly exercises these criminal law enforcement functions and obligations. For example, between 1 July 2009 to 30 June 2014:

ASIC, in collaboration with the Commonwealth Director of Public Prosecutions (CDPP), secured criminal convictions against 129 persons for indictable offences, including “prescribed offences” and “serious offences” as defined in ss 5(1) and 5D of the TIA Act, and achieved sentences of imprisonment against 68 persons; [5] and

ASIC, through the conduct of its own prosecutions, secured criminal convictions against 2,404 other persons for less serious summary offences, an average of 481 persons convicted a year.

On 24 June 2013 the Parliamentary Joint Committee on Intelligence and Security (PJCIS) handed down its report entitled Report of the Inquiry into Potential Reforms of Australia’s National Security Legislation. In its report the PJCIS did not recommend removing or reducing ASIC’s existing powers under the TIA Act to access telecommunications data or stored communications. Rather, the PJC wrote the following (at pp.25-26):

2.54 The Committee is satisfied that access to telecommunications data for serious crime and threats to security is justified. Access for agencies not enforcing the criminal law or investigating security threats should be subject to further review.

Recommendation 5

The Committee recommends that the Attorney-General’s Department review the threshold for access to telecommunications data. This review should focus on reducing the number of agencies able to access telecommunications data by using gravity of conduct which may be investigated utilising telecommunications data as the threshold on which access is allowed.

This conclusion and recommendation does not justify the proposed removal of ASIC’s existing powers to access telecommunications data given that ASIC is responsible for enforcing the criminal law, including investigating and prosecuting “serious offences” as defined in the TIA Act.

Neither the Explanatory Memorandum nor the second reading speech relating to the TIA Bill elaborates on the criteria that were adopted in determining which agencies should be included within the definition of “criminal law-enforcement agency”, but in the second reading speech the Minister for Communications stated:

[T]he bill will strictly limit, and indeed reduce, the range of enforcement agencies permitted to access telecommunications metadata without a warrant.

The bill will allow what we might call ‘traditional’ law enforcement agencies, such as the police, Customs, crime commissions and anticorruption bodies, to access this information.

In light of ASIC’s explicit, extensive and longstanding [6] criminal law enforcement functions, there does not appear to be logical reason for its exclusion from the primary definition in the Bill of a “criminal law -enforcement agency”. In particular, ASIC is not aware of any specific submission or suggestion to the effect that it has either misused its existing powers under the TIA or should have them removed.

ASIC’s existing powers under the TIA Act

ASIC is currently an “enforcement agency”, as defined in s 5(1) of the TIA Act. [7] Consequently:

authorised ASIC officers are able to receive telecommunications data if it is reasonably necessary for enforcement of the criminal law or a law imposing a pecuniary penalty; and

ASIC has the ability to seek a warrant from an independent judicial officer authorising ASIC to access stored communications for the purpose of investigating a “serious contravention”, as defined in s 5E of the TIA Act.

Any subsequent use of telecommunications data or stored communications obtained by ASIC is strictly restricted by a number of legislative and procedural safeguards, in addition to oversight regimes. These are outlined later in the submission.

An important consideration in any assessment of the necessity of ASIC having the ability to access telecommunications data and stored communications is the fact that many of the offences it investigates and prosecutes, including all of the offences in Part 7.10 of the Corporations Act, are actually constituted by communications or otherwise generally require proof of communications for a successful conviction. For example:

the insider trading offence in s 1043A(1) ordinarily requires proof that inside information was communicated to the accused;

the insider trading offence in s 1043A(2) specifically criminalises the “communication” of inside information;

the market manipulation offences in ss 1041A to 1041C ordinarily require proof of communications, such as placing orders for the offending trades by telephone or over the internet, and the identity of the persons who made them;

the market manipulation offence in s 1041D specifically criminalises the “circulation or dissemination” of offending “statements or information”;

the offence in s 1041E (false or misleading statements) specifically criminalises the “making” or “dissemination” of offending statements or information;

the offence in s 1041F (inducing persons to deal) criminalises the “making” or “publishing” of offending statements or information; and

the offence in s 1041G criminalises engaging in “dishonest conduct” in the course of carrying on a financial service business, which commonly involves communications of false or misleading information.

The central importance of telecommunications evidence and the need for ASIC to obtain such evidence in relation to investigations of these market-related offences was specifically recognised by the then Minister for Financial Services, Superannuation and Corporate Law when introducing reforms to the TIA Act in 2010. [8]

One particular type of serious criminal activity investigated by ASIC that involves communications is “cold calling” investment frauds, which can be prosecuted as a serious fraud offence against State Acts or as a financial services fraud offence against the Corporations Act. These frauds involve individuals being unexpectedly called and subjected to intense pressure into buying investments on the premise of high returns (sometimes as high as 300 per cent in just 15 days), but the returns are often completely fictitious and the investments a sham or worthless.

An example of cold calling frauds involved ASIC’s investigation between September 2009 and April 2013 of 17 cases of investment fraud causing over $8 million in losses to Australian investors. In these investigations, ASIC used telecommunications data as a crucial form of intelligence. The Australian Crime Commission estimated that between January 2007 and April 2012 more than 2,600 Australians lost over $113 million to investment frauds, but it is believed there is a high level of underreporting and the extent is far greater. [9]

Investigations and prosecutions for Corporations Act offences are notoriously difficult, resource-intensive and time-consuming. Effective performance of ASIC’s law enforcement functions can only be achieved if we have adequate powers to obtain information and evidence about suspected contraventions of the laws we administer. Given the increasing role of telecommunications in the delivery of financial services in Australia, including carrying out trades on Australia’s markets, ASIC anticipates that its need to obtain telecommunications data and stored communications will correspondingly increase over time.

Footnotes:

[1] See, eg, ss 1(2)(g), 13 & 49(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); s 1315 of the Corporations Act; and ss 247 and 274 of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act). While all criminal prosecutions arising out of ASIC investigations are commenced by ASIC and are based on briefs of evidence prepared by ASIC, prosecutions for indictable offences are generally continued by the Commonwealth Director of Public Prosecutions (CDPP).

[2] See, eg, s 13(1)(b) of the ASIC Act. Prosecutions for State or Territory offences are commenced by ASIC or its officers in accordance with the law in each jurisdiction governing the commencement of prosecutions.

[3] ASIC is also responsible for the investigation and civil prosecution of contraventions of a range of federal laws imposing substantial pecuniary penalties. Examples of civil penalty cases successfully brought by ASIC include: ASIC v GE Capital Finance Australia [2014] FCA 701 (penalties totalling $1.5 million); ASIC v Newcrest Mining Ltd [2014] FCA 698 (penalties totalling $1.2 million); Idylic Solutions Pty Ltd, Re; ASIC v Hobbs (2013) 93 ACSR 421 (penalties totalling $670,000); ASIC v Macdonald (No 12) (2009) 259 ALR 116 (James Hardie case) (penalties totalling $670,000); ASIC v Vines (2006) 58 ACSR 298 (penalties totalling $640,000); ASIC v Vizard (2005) 54 ACSR 394 (penalties totalling $390,000); ASIC v Loiterton (2004) 50 ACSR 693 (penalties totalling $805,000); ASIC v Adler [2002] NSWSC 483 (HIH case) (penalties totalling $900,000).

[4] Pursuant to s 1315 of the Corporations Act and s 49(2) of the ASIC Act.

[5] Some examples of recent criminal cases successfully pursued by ASIC include: R v Johnson [2014] VSC 175 (imprisonment for 6 years and 6 months, with a non-parole period of 3 years and 6 months); R v Veitch, NSW District Ct, 26 June 2014 (imprisonment for 6 years and 2 months, with a non-parole period of 4 years); R v Maile, QLD District Ct, 20 June 2014 (imprisonment for 4 years and 3 months, with a non-parole period of 16 months); R v Williams, QLD District Ct, 20 June 2014 (HIH investigation) (imprisonment for 4 years and 3 months, with a non-parole period of 16 months); R v Kur, WA District Ct, 21 February 2013 (imprisonment for 4 years, with a non-parole period of 2 years); R v Evans, NSW District Ct, 7 May 2013 (imprisonment for 5 years, with a non-parole period of 3 years and 9 months); R v Weerappah, VIC County Ct, 6 August 2013 (imprisonment for 4 years, with a non-parole period of 2 years); Banovec v R [2012] NSWCCA 137 (imprisonment for 7 years, with a non-parole period of 4 years and 9 months); R v Hoy [2011] VSC 95 (imprisonment for 13 years and 9 months, with a non-parole period of 9 years); Koch v R [2011] VSCA 435 (imprisonment for 13 years and 2 months, with a non-parole period of 10 years, reduced on appeal to imprisonment for 9 years and 10 months, with a non-parole period of 7 years and 6 months); R v Finnigan, NSW District Ct, 18 December 2011 (imprisonment for 10 years, with a non-parole period of 6 years); R v Dale, QLD District Ct, 25 November 2011 (imprisonment for 7 years and 6 months, with a non-parole period of 3 years and 2 months. The sentence was upheld on appeal: R v Dale [2012] QCA 303); R v Jovicic, QLD District Ct, 1 September 2011 (imprisonment for 7 years, with a non-parole period of 2 years and 4 months); R v Kennedy, QLD District Ct, 8 November 2011 (imprisonment for 6 years, with a non-parole period of 2 years); R v De Silva [2011] NSWSC 243 (imprisonment for 2 years and 6 months, with a non-parole period of 18 months); R v Bangaru, NSW District Ct, 17 December 2010 (imprisonment for 8 years and 6 months, with a non-parole period of 6 years and 4 months); R v Hartman [2010] NSWSC 1422 (imprisonment for 4 years and 6 months, with a non-parole period of 3 years).

[6] ASIC (and its immediate predecessor, the Australian Securities Commission) has been exercising important criminal law enforcement functions since 1991 and before this there was a very long tradition, spanning 150 years, of comparable specialist authorities undertaking criminal investigations and prosecutions in relation to corporate crime in Australia: see, eg, sections LVII to LX of the Companies Statute 1864 (Vic).

[7] ASIC falls within paragraph (n)(i) of the definition of “enforcement agency” in s 5(1) of the TIA Act because ASIC’s functions include, among other things, “administering a law imposing a pecuniary penalty”

[8 ]Minister for Financial Services, Superannuation and Corporate Law, Speech, 2 March 2010, available at:

http://ministers.treasury.gov.au/listdocs.aspx?doctype=1&PageID=005&min=ceba. Also see Minister for Financial Services, Superannuation and Corporate Law, Media Release, 28 January 2010, available at: http://ministers.treasury.gov.au/listdocs.aspx?doctype=0&PageID=003&min=ceba.

[9] Australian Crime Commission, Serious and organised investment frauds¸ https://www.crimecommission.gov.au/publications/intelligence-products/crime-profile-fact-sheets/serious-andorganised-investment-frauds.

ASIC calls for greater penalties and stands up for its staff

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Feb 192014

In today’s opening statement to the Senate inquiry into the performance of the Australian Securities and Investments Commission (ASIC), the Chairman of ASIC, Mr Greg Metcalf, has called for greater penalties for breaches of corporate law and has strongly defended ASIC staff.

Greg Metcalf, ASIC Chairman

On Penalties

“On the topic of penalties, I would like to say a little more.

There is an expectation among the public that we will take strong action against wrongdoers – and doing this will send a message that shapes future behaviour. However, one of the barriers we face to achieving this is the inadequacy of penalties.

We have outlined some of these inadequacies in our main submission. They include the fact that:

some comparable criminal offences currently attract inconsistent penalties

civil penalties:

are currently set too low

are not available for a sufficiently wide range of misconduct

lastly, we require a more graduated set of penalties to provide an effective enforcement response in a wider range of cases.

We consider that this includes the greater availability of infringement notice powers.

It is frustrating – both for us and the public – when the penalty available to respond to misconduct is much less than the profit someone made in the process. If this is so, then rational players in the market will routinely take that risk. If the thinking of law-breakers is a tussle between fear versus greed, then we need penalties that amplify the fear and smother the greed.

We need penalties that create a fear that overcomes any desire to take risks and break the law.”;

On ASIC staff

“Chairman, one disappointing thing about some of the submissions was the inflammatory tone of criticisms made – particularly about ASIC staff.

ASIC has exceptional employees. They are men and women who work at ASIC for good reason. This is because they believe in the public interest. They are skilled and committed to their work. Considering the difficult job they do, they should receive appropriate respect.

Our people have diverse backgrounds – they have experience in law, accounting and financial services. Many have invaluable industry or consumer advocacy experience. This means they understand how markets work and the issues facing investors, consumers and the wider industry.

ASIC employees also undertake ongoing internal training and have access to industry secondment programs, which further develop their skills.

All of these things make our people highly sought after by the private sector and internationally by other regulators.”

SOURCE: These are extracts from an ASIC document dated 19 February published on the ASIC website. The subtitle is “Speaking notes from Greg Metcalf, Chairman, ASIC”. To see CLICK HERE.

Ariff case prompts calls for Royal Commission into white collar crime

ASIC, Australian Senate 2009-2010, Insolvency practices, Offences, Official Inquiries, Prosecution of Liquidators, Regulation, White collar crime Comments Off

Sep 292011

The Senator who instigated the Senate Economics References committee inquiry into the role of administrators and liquidators has called for a Royal Commission into white collar crime.

Senator John Williams, the Nationals Senator for New South Wales, has congratulated the Armidale Dumaresq Council for supporting his call. Senator Williams said yesterday (28/9/2011) that Armidale Dumaresq Council has first-hand knowledge of the damage that can be done to community assets through unscrupulous practices of some in the insolvency industry. The YCW Leagues Club in Armidale was the victim of the administration of Newcastle liquidator Stuart Ariff who this week was found guilty on 19 criminal charges relating to a separate matter.

Senator Williams said the Council’s submission to the 2009 Senate inquiry was damning of the Australian Securities and Investments Commission (ASIC) for a lack of action. Since then, Armidale Dumaresq Council Deputy Mayor Jim Maher has been keen to see reform in the insolvency industry, and successfully moved two motions.

On 21 September 2011 Senator Williams called for a Royal Commission into white collar crime in Australia, and handed a file of statutory declarations alleging wrongdoing to the Australian Federal Police and the NSW Fraud Squad.

“Unfortunately there is no confidence in the industry regulators like ASIC anymore. Mr. Ariff is a case in point. I hope the Federal government acts on white collar crime because it is destroying peoples’ lives. To do nothing would be a green light for the illegal activities to continue”, Senator Williams said.

SOURCE: MEDIA RELEASE BY SENATOR JOHN WILLIAMS, 28 September 2011. Click here for Senator William’s Website.

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