Bill has corporate fraud in sights

Press, 14 September 1988, Page 10

Bill has corporate fraud in sights

By

BRENDON BURNS,

political reporter Legislation to. combat corporate fraud was introduced in Parliament yesterday by the Minister of Justice, Mr Palmer, who earlier said the Government was able to cope with the problem. Mr Palmer’s bill, to update the Companies Special Investigations Act, 1958, was said by the Opposition to be a late attempt by Mr Palmer to acknowledge the extent of corporate fraud. Introducing the legislation, Mr Palmer said it arose from an urgent review of the law he had called for from the Justice Department. The review followed up the airing of claims of corporate fraud and “recent company failures.” Mr. Palmer did not name any companies, but’ it was clear he was referring to the collapse of R.S.L., Landbase Securities, Ltd, and Burbery Finance, Ltd. Existing law meant that a company’s position had to have deteriorated to the point where the only option was to

“kill” or “bury” it, he said. The bill enabled the Registrar of Companies to take earlier action where a company was judged to be trading “fraudulently” or “recklessly.” It allowed the prevention of further deterioration of a company’s financial affairs.

Where a company’s position was very serious, incoming investments could be “frozen.” This is seen as answering the situation which arose in the R.S.L. collapse where it was still taking deposits days before it went into liquidation. The bill also gives greater powers to demand the assistance of companies in providing details of financial standing. Refusal to answer the questions of investigating staff is to be an offence. Mr Palmer said the legislation did not protect investors in financial institutions.

“Investors must take responsibility for, their investment decisions.”

However, the bill provided enhanced powers to

contain much earlier the damage of a financial collapse. Penalties for offences against the act, when passed, include imprisonment for up to a year and a fine not exceeding $lO,OOO for an individual and $25,000 for a corporation. “I asked for that urgent review because the corporate fraud debate has focused attention on the limitations of the law in this area,” Mr Palmer said.

The Leader of the Opposition, Mr .Bolger, said the bill was the biggest Uturn he could recall. He quoted Mr Palmer, reported in “The Press” of June 1, saying the Government’s resources to deal with corporate fraud were not inadequate. The few conmen involved posed little risk to the public, provided people were careful about their investment decisions, Mr Palmer had' said. The 20,000 investors, most of them elderly, in R.S.L., Landbase and Burbery Finance would see the bill as representing a very sick joke, said Mr Bolger. Introduction of the legislation admitted the inadequacy of existing legislation, as highlighted by Opposition and news media debate. Any attempt to /deal with the problem was welcome, even if it was belated. ; However, Mr Bolger said it was a soft substitute for the Commission of Inquiry intd corporate fraud which he had been calling for in recent months.