The Serious Fraud Office’s decision not to lay criminal charges over the collapse of Hanover Finance shows how tough it is to prosecute white collar crime under the present law, former SFO [Serious Fraud Office] boss Adam Feeley says.
The decision not to charge Hanover owners Eric Watson and Mark Hotchin would not have been taken lightly and showed there was room for debate about the effectiveness of the Crimes Act , he said.
“In my time there I always had grave concerns about the morality of what happened at Hanover and moving from the moral to the legal level there were real issues which needed to be tested.”
Feeley, who was SFO chief executive when the Hanover investigation began in September 2010 and resigned last July to take up the role of Queenstown District Council chief executive, said he had to take some responsibility for the length of the process.
“But during my time there we stuck at it because I simply wasn’t satisfied it was something we could walk away from,” he said.
“So long as I was there I always took the view there was a prospect of charges being laid. But at the end of the day that prospect has to be backed up by the evidential sufficiency and obviously [acting SFO chief] Simon [McArley] didn’t feel that was there and I respect Simon’s decision.
“I know the team worked incredibly hard on it and all the resources that could be put into it were put into it, so I don’t think if a different set of people looked at it with any different timeframe they would have done any differently.
“I have no doubt it was a first-rate investigation but equally I know there will be a lot of frustrated people and I can understand that.”
This morning the SFO said there were serious question about several aspects of Hanover’s activities in the run-up to its collapse in July 2008. At the time, Hanover and its sister companies owed 13,000 investors $554 million.
However, McArley said the evidence available did not reach the required threshold to prove anyone had committed a criminal offence.
“Recent decisions relating to other failed finance companies have highlighted how difficult it is to satisfy this standard,” he said.
Feeley said that regardless of the Hanover case the law should be reviewed to ensure it could deal with white collar crime.
“Bluntly I don’t think the Crimes Act deals with the reality of the modern day corporate world,” he said.
“We have dishonesty offences which contemplate dishonesty in a very individual setting … corporate fraud is a far more complex process, not just in terms of the transaction but in terms of the collective mind in which that operates.
“We have had decisions where the court has said getting some legal advice, which frankly was contrived legal advice, meant that directors could honestly rely on it. I have no doubt for a second that they believed that advice was independent or objective.
“Again I’m not speaking with reference to Hanover, but I think potentially some of the outcomes in the finance cases could have been different under different laws.
“Whether those laws are all right or not is going to be the subject of a lot of public debate. When you look at the morality of what happened with some of the finance companies, I think the average common-sense person would say if that transaction isn’t unlawful, then that is just plain wrong.” Feeley said there were two potential areas of reform, “one is how the mental element of the offence is framed; probably the other is evidence collection.”
Experience from the United States suggested there were only two ways to get enough evidence to prosecute – one was to have a whistleblower and the other was to intercept communications.
“I know undoubtedly the latter will potentially scare the hell out of a lot of people, but, you know, people think the SFO act is a powerful act because you lose the right to silence,” Feeley said.
“Well frankly I think that’s naive to think it’s powerful in that regard, because people simply say in answer to all questions ‘sorry I would like to answer that but I forget’.
“There begins the end of it.”
Source: Fairfax NZ News
Hard to prosecute white collar crime – Feeley. By Tim Hunter. 30 April 2013.
Eric Watson not surprised SFO closing case. By Hamish McNicol. 30 April 2013
Hotchin under mouting pressure over house. By Rebecca Stevenson. 30 April 2013