Law failing to get hot under white collar

WHAT do you have to do to get arrested in this town? Last week, Judge Peter Kelly voiced a sentiment that resonates with a large chunk of the populace. He is not pleased with the progress of investigations into white-collar crime.

“An apparent failure to investigate thoroughly — yet efficiently and expeditiously — possible criminal wrongdoing in the commercial/corporate sector does nothing to instil confidence in the criminal justice system as applicable to that sector,” he said.

A similar sentiment was once expressed in song by Bob Dylan. “Steal a little and they throw you in jail, steal a lot and they make you a king.”

Dylan was referring to American mores and that country’s criminal justice system, but, compared to what goes on here, the Yanks come down on “crims” in pin-stripe suits like a tonne of bricks.

Money talks louder in the USA than in most places, but even there justice sometimes takes its course. Regularly, white-collar crime is investigated and charges brought. The evidence is placed before a judge and jury, which decides on guilt or innocence.

Last week in New York, a hedge-fund manager, Raj Rajaratnam, was found guilty of insider trading. The jury came to its decision after deliberating for eight days.

The billionaire faces up to 19 years in jail. He was freed on bail, pending sentencing, but must wear an electronic tag.

We do things differently here. Rarely does alleged white-collar crime get as far as a criminal court. The civil law is used by wealthy people to sort out their differences, but even when apparent criminality is uncovered in that forum it never translates into charges.

Two cases illustrate the point. On July 27, 2007, the Supreme Court ruled, in a civil case, that industrialist Jim Flavin had engaged in insider trading. Seven years previously, when Flavin was a member of the board of fruit importer, Fyffes, shares in the company were sold on his behalf. The company which he headed up, DCC, made a profit of €80 millio. The shares were sold prior to an announcement by Fyffes that had a negative impact on their price. Flavin had that information when the sale was made.

Judge Niall Fennelly said it was a fairly straightforward matter. “It is a fraud on the market,” he said. “The insider who exploits his access to the special knowledge he enjoys for the purposes of the company, in his capacity as executive or director of a company, commits a crime.”

There is no suggestion in this column that Flavin was guilty of insider trading. That would have been for a jury to decide, had he ever been charged, which he wasn’t. Comments by a Supreme Court judge don’t amount to a conviction.

The judge was opining that a fraud to the value of €80m had been committed. In some jurisdictions, this would alert the cops, who would initiate a criminal investigation. Here, the Office of the Director of Corporate Enforcement (ODCE) appointed a barrister to look into the matter. Over a year later, the barrister delivered his report, which effectively said it was all a big misunderstanding and Flavin was a grand man.

As a substitute for a criminal investigation, the process that Flavin was subjected to would find great favour in some quarters.

Take the teenager from the wrong side of the tracks who is strongly suspected of stealing a car.

Instead of being arrested and questioned by trained gardaí, the teenager could be sent a letter instructing him to make an appointment for a chat with a nice barrister who appreciates good manners. That would certainly put the fear of God into some hardchaws.

A higher standard of proof is required in a criminal court. However, the whole affair speaks volumes about a system that rarely sees men with good tailors before a criminal court.

Another case in a similar vein involves disgraced solicitor Thomas Byrne. In October, 2007, it emerged that he had been less than rigorous in his duties as an officer of the court. The Law Society withdrew his licence to practice. Judge Kelly forwarded papers to the Garda Fraud Squad in relation to Byrne’s activities. Nothing came of that. Byrne got entangled in a legal action with a former associate, which ended up in the High Court.

On April 13, Judge Frank Clarke issued a ruling on the Byrne case. He didn’t mince his words. He said Byrne had been involved in “a lawyer’s version of a Ponzi scheme”. (A ponzi scheme is better known as a pyramid scheme.)

“It is of some relevance to note that Mr Byrne made full and frank admission in the witness box as to the practices in which he was engaged and his acceptance that those practices were unlawful under many headings,” Clarke ruled.

“I do have to comment that, in light of these admissions, it is very surprising indeed that no further action against Mr Byrne seems, as yet, to have been taken.”

Three-and-a-half years after the fraud squad were alerted from a High Court bench about Byrne, nothing has been done.

There are some obvious reasons why the current situation prevails. There is a lack of resources and expertise in the Garda, and other bodies like the ODCE. Political priorities have long laid elsewhere. When the bubble was flying, the big law-and-order issue was the number of gardaí in the force. There was no emphasis on how equipped the force was to tackle white-collar crime. During the same period, the ODCE was understaffed, and told by the Taoiseach they would have to get in line if looking for more resources.

Like resources, legislation in this area has been a low priority down through the years.

Business funds politics and the big noises in both sectors frequently rub shoulders. Tightening up laws and regulations can, at the most innocent level, be inconvenient to business. One of the problems in prosecuting anything to do with the banking collapse is that, in many cases, the state, through the regulator, was aware of what was going on and failed to act.

The constitution doesn’t help matters. Designed to ensure that the citizen is fortified against the might of the state, the practical result in relation to white-collar crime is that it is more difficult to build a sustainable case to take into court. A reluctance by the DPP to put complex matters before a jury may also have its origins in the provisions of the constitution.

Many of these obstacles could be overcome if the political will existed to do something about it. Despite all that has transpired, there is still a question mark over how far any government is willing to go.

On Friday, Justice Minister Alan Shatter published a bill designed to strengthen the law. It’s a start, but that’s all. There’s a long way to go before white-collar crime gets the attention it deserves.

As Kelly inferred, how can the public continue to have faith in a criminal justice system that prosecutes theft of one kind, and not another?