Watchdog group ‘too poor to prosecute’

Press, 5 March 1987, Page 30

Watchdog group ‘too poor to prosecute’

By

FRANCIS DANIEL

of Reuters through NZPA Sydney

Australia’s top corporate watchdog agency is too poor to prosecute multi-million dollar business swindlers with international links.

The disclosure, made during an international seminar of corporate crime investigators, legal experts and police agencies, has raised fears that big-time criminals might find Australia a safe haven.

Officials of the National Companies and Securities Commission (N.C.S.C.) said an investigation into an sAustl3 million fraud had to be shelved because of lack of funds.

They said the swindle involved fraudulent share dealings by a businessman who used a network of companies in six countries to siphon money from an Australian enterprise.

The Australian company, alerted to the fraud, took steps to protect its shareholders, they said. But the culprit could not be brought to court without gathering evidence outside Australia, a costly exercise which the N.C.S.C. could not afford. The officials said the case was only one of many, some involving probably tens of millions of dollars, which the N.C.S.C. could not afford to investigate.

“There is not much we can do about it. There is a lot more crime than there are resources,” the executive director of N.C.S.C., Ray Schoer, told the seminar, which was attended by officials from Malaysia, Singapore and New- Zealand as well as Australia.

Any investigation across international boundaries could cost more than a million dollars and N.C.S.C.’s budget did not allow that kind of spending, according to the officials.

The N.C.S.C., established in 1979, works on an annual budget of sAusts.3 million. It has a staff of , 82 which the officials said was grossly inadequate to fight corpo-

rate criminals with vast resources.

The N.C.S.C. chief, Henry Bosch, said “internationalisation” of the Australian financial markets and technological advances in market operations had made commercial crime much more complex and difficult to expose.

The full extent of business crimes in Australia is not known but figures available showed that computer fraud in the. financial sector alone had increased four-fold, running into millions of dollars.

Customs and income tax evasion cost the Government more than $4 billion last year, according to an official report. The N.C.S.C. has yet to win a successful prosecution for insider trading — illegal share trading using information not publicly disclosed. The officials said N.C.S.C.’s limited resources did not allow it to pursue insider trading with the same vigour of corporate watchdog agencies in the United States, Britain and other industrial countries. “There are differences between Wall Street and our financial communities but it is likely that fortunes are being made by insider trading here as well,” said the “Australian” newspaper.

Bosch said N.C.S.C.’s problems in fighting insider trading were compounded because of the narrow definition of the crime under Australian law, and inadequate penalties. Unlike the United States, only directors and executives of companies can be charged with insider trading in Australia. “Our law also requires proof that information in the insiders’ hands has to be sufficient' to be able to move the market. That is very difficult,” Bosch says.

The N.C.S.C. is seeking the views of the business community on toughening legislation, including penalties, against insider trading before making submissions to a Minister-

ial council next month.

The Deputy Prime Minister and Attorney-Gen-eral, Lionel Bowen, has rejected N.C.S.C. claims that it lacks funds to run effectively. The N.C.S.C., under an established co-operative scheme, could draw on the resources of Corporate Affairs Commissions in the various Australian states, he told Parliament. Under Australia’s federal system, the commissions act as N.C.S.C. agents in the states but attempts to give it overriding powers have broken down in federalstate rivalry.

“The scheme is cooperative in name rather than reality. The basic concept — a pooling of legislative powers by the Commonwealth (Federal Government) and the states — breaks down because the states are not prepared to support the scheme fully,” one newspaper commentator said.

Opposition political parties have attacked the Labour Government for what they describe as inaction in fighting growing white collar crime. “A criminal syndicate, floated on the Australian Stock Exchange, would be a brilliant success. Investors would know they were on to a sure thing,” says the Opposition legal affairs spokesman, John Spender.