100% Conviction Rate for 2002


Fraud Squad in the Firing Line

The criminal trial today is a kind of show-jumping contest in which the rider for the prosecution must clear every obstacle to succeed.

- Robert Mark

by James Gardiner

The Serious Fraud Office is prosecuting more cases than ever and last year achieved a "100%", but not everyone is convinced the elite policing unit is doing what is needed to curb white-collar crime.  Since the controversial decisions not to prosecute in the so-called "Winebox" tax fraud case, the SFO has maintained a relatively low profile, perhaps intentionally.  Yet it is starting to find its way back into the headlines through the volume of its work.  Last year it had 40 active prosecution cases - twice the number usually undertaken - and for the first time conducted prosecutions outside New Zealand.  But at least one lawyer, a former SFO prosecutor, feels the cases tend to be straightforward and directed against small-time crooks rather than major corporate fraudsters.

From the outset the SFO was controversial.

In 1989 the Police objected strenuously to Treasury plans to set up a separate body to investigate and prosecute "serious" fraud.  The then Police Commissioner, John Jamieson, said the definition of serious fraud - involving sums of $500,000 or more - was even then far too low.  Jamieson suggested a threshold of $3 million would be more in touch with commercial reality.  Jamieson was also opposed to police losing the sole constitutional right to investigate and prosecute offenders.

But the tide of public opinion was running the other way.  The fallout from the 1987 stockmarket crash was widespread and the collapse of shareholder wealth around the world seemed to be accompanied by a rash of cases involving bent lawyers, crooked accountants and failed business tycoons.  As some headlines had it, a "Gang of 20" (or was it 40?) roamed the land while the heads of companies who previously promised us untold riches if only we would entrust them with our savings, were finding ways to hide what money they had left and flee the land.  Corporate names like Rada, Goldcorp and RSL were in the headlines for all the wrong reasons.

The Serious Fraud Office was born in 1990 with an act of Parliament bearing its name giving it the constitutional right to investigate and prosecute serious or complex fraud.  The $500,000 threshold was set and has not been changed.  A dozen years on, in its latest annual report, SFO director David Bradshaw paints a rosy picture of the performance of his office and its 35 staff.  Bradshaw alone has discretion over which of the 100-odd complaints received each year are investigated and prosecuted.  He lists the criteria as:

bulletFraud involving more than $500,000.
bulletFraud perpetrated by complex means.
bulletFraud which is, or is likely to be, of major public interest or concern.

The report lists 17 prosecutions completed in the year to June 30.  All the defendants were convicted and most received jail terms, ranging up to (in three cases) five years.

Auckland lawyer Jeremy Bioletti worked as a prosecutor at SFO between 1991 and 1995.  Now he sometimes finds himself on the other side of the courtroom defending clients charged with serious fraud.  "I feel that some of the prosecutions are fairly easy," Bioletti says.  "If someone's used a false invoice to get finance and they've done it repeatedly, that's serious, but is it complex?  It's a question of relativity when you've got a specialist government agency that's set up for serious or complex fraud.  A lot of their stuff in anyone's book would be serious because of the dollar amounts involved.  But if you look at it ... what people are doing a lot is probably not much more sophisticated than sending in a form with false information on it."  Bioletti finds it odd that so few corporates seem to be under scrutiny despite huge losses and spectacular collapses in recent years.  "I'm not saying that you're going to get Enron here, because you're not, but the theme could possibly be the same, as opposed to some gang of crooks who are going round fleecing money off little old ladies.  There's two alternatives.  One is it isn't happening or, two, it is happening and no one's really trying to tap into it."

Another former SFO prosecutor, Dan Gardiner, who worked under both Bradshaw and his more colourful predecessor, the policeman-turned-lawyer Chas Sturt, believes "quite strongly" in the SFO and the effectiveness of the systems it employs to investigate and prosecute.  Gardiner says it is a "fair point" that most of the people charged were mainly in the lone wolf conman category rather than high-ranking business leaders, but he feels most corporate losses are due to incompetence rather than criminality.  The SFO has to have reasonable grounds to mount an investigation - either a complaint or some other information - before it exercises its powers to seize documents and inspect records.  Gardiner believes the public is well-served by the combination of the Securities Commission, which investigates breaches of company law, the Commerce Commission, which enforces the Fair Trading Act, and the SFO.

An area of concern was the degree to which devolution of responsibility to lower levels in the public service had increased the potential for fraud and corruption in departments dealing with immigration, tax and welfare.  There is a perception in the legal community that the SFO prosecutes "dead bodies - people who are dead in the water", Gardiner says.

Bradshaw does not accept his office prosecutes only cases where it is certain of success.  "Nothing could be further from the truth," he says.  The high percentage of guilty pleas when charges were laid was instead a reflection of the "thoroughness and professionalism of our investigations".

Bioletti is also unconvinced about the value to New Zealand taxpayers of the SFO investigations and prosecutions in Vanuatu and the Cook Islands, at the request of their governments.  Bradshaw described those cases as positive developments in the international battle against fraud and corruption - smaller countries being prepared to call on larger neighbours to assist with law enforcement.

Attorney-General Margaret Wilson, the minister responsible for the SFO, says she is happy with its performance.  A "wide range of complex cases" it had successfully prosecuted in recent years would not have gone ahead without its expertise, Wilson says.  These included corporate, investment and mortgage frauds, theft by trusted advisers such as solicitors, accountants and tax advisers, gaming fraud and official corruption.  "The SFO's ability to get on and do its work in a quiet but effective way is a measure of its success."

Former Prime Minister Sir Geoffrey Palmer, who as Attorney-General was instrumental in setting up the SFO, says he, too, believes it has succeeded and is working as intended.  Palmer describes Bradshaw as a "model public servant - careful and determined" and says the SFO's work has been of a high standard.  Palmer acted as a consultant to fishing industry interests involved in the scampi corruption allegations, which are to be the subject of a Parliamentary inquiry.  He said in November that documents he had seen warranted further scrutiny, although he had not concluded whether they represented offending or incompetence.  By then the SFO, or, more precisely, Bradshaw himself had already decided the material was insufficient basis for a fraud investigation and that further evidence was unlikely to be uncovered.

The most high-profile previous occasion where the office decided not to pursue a case was the "Winebox" tax fraud inquiry - a decision that has been repeatedly criticised, questioned and subjected to legal review.  Arch-critic NZ First leader Winston Peters, whose allegations against the SFO and the IRD helped to spark the Winebox inquiry, says he has seen nothing since then to convince him the office has improved.  He said it was "not competent" to consider the scampi allegations of corruption involving high-level government officials in a multimillion dollar fishery.

Whether that case comes back to haunt the SFO remains to be seen.

Source: nzherald.co.nz 4 January 2003

My opinion of the Serious Fraud Office is quite high right now.  (Ask me again at the end of June 2003.)  My biggest complaint is that they can move glacially slowly in some instances.  But I suppose that could mean they're fighting small skirmishes and being very thorough...

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