Ireland’s White-Collar Crime Problem

First published in the Sunday Business Post 11 September 2016

Ireland’s attitude to immoral conduct by the middle classes is to pretend it does not exist

What do we want? An inquiry! When do we want it? Now! This is the default response by Irish public life to allegations of unethical behaviour.

Other jurisdictions have a different response. It is a radical, revolutionary, avant-garde concept. Readers may have to sit down for this. Are you ready to be scandalised? In many places around the world, such as Brazil, Northern Ireland and America, police authorities investigate allegations of impropriety.

We will come back to this profound notion shortly.

Ireland’s attitude to immoral conduct by the middle classes is to pretend it does not exist by refusing to officially acknowledge it.

What other reason explains why the Central Statistics Office does not have a separate category that singularly identifies corruption, white collar or corporate crime? Official statistics on white collar crime do not exist in Ireland. The closest equivalent is ‘fraud, deception and related offences’. This catch-all category includes welfare fraud and new categories established under the Criminal Justice Act 2011 such as fraudulent trading and insider dealing.

 

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The absence of precise data on corruption, white collar and corporate crime has an impact on policy making. Politicians allocate scarce resources on need. The resources needed to investigate welfare fraud and insider trading are different. By lumping welfare fraud in with complex white collar crime offences, the state is officially acknowledging it does not understand the distinction between the two.

Here’s an example. In April of this year, an Irishman was convicted of benefit fraud following a prosecution brought by the Department of Social Protection. He was living in Lanzarote between July 2008 and May 2011 and continued to claim €30,000 in disability allowances.

In June, former Anglo Irish Bank executives John Bowe and Willie McAteer and the former chief executive of Irish Life and Permanent, Denis Casey, were convicted. The three former bank executives were found guilty of a €7.2 billion scheme to mislead the public about the true health of Anglo.

Mulvany’s welfare fraud was €30,000. The fraud committed by Bowe, McAteer and Casey was €7.2 billion. Both crimes are categorised by the CSO as the same.

The resources, time and specialist expertise utilised by the state to secure these two sets of separate convictions are vastly different.

The Anglo/Irish Life convictions were a testament to the Garda Bureau of Fraud Investigation (GBFI) and the Office of the Director of Corporate Enforcement (ODCE). But some may question whether the unprecedented financial costs and extraordinary resource-intensive investigation were worth the effort in the longest-running criminal trial in the history of the state.

The decision by GBFI and the ODCE to focus scarce resources on the Anglo/Irish Life trial had consequences for these organisations in their day-to-day activities.

For instance, the 2015 Garda Inspectorate Report noted that the GBFI is struggling to manage the volume of suspicious financial transaction reports forwarded to it as part of money laundering and terrorist financing legislation. The report also found that GBFI is investigating serious fraud without always having the necessary skills and resources to conduct a thorough investigation.

A 2014 review of existing resources at the ODCE identified an insufficiency of in-house accountancy expertise and the need for an in-house IT forensics capability and the limiting effect of those deficiencies on the ODCE’s capacity to effectively discharge its mandate.

In the absence of resources, political support, additional powers and structured cooperation from other agencies, what incentive is there for GBFI and ODCE to undertake difficult, complex and ground-breaking white collar crime investigations? In Ireland, a relatively uncomplicated welfare fraud case is given the same status as an arduous white collar crime case in the crime statistics.

The European Commission will publish its second corruption report on Ireland later this year. What has changed since its first report was published in 2014? As a governance consultant for the commission, I have assisted with the preparation of the reports. My sense is that many of the dedicated public servants within the oversight agencies have grown more frustrated.

This column has previously outlined how Irish authorities have failed to use the Eurojust tools at its disposal, particularly joint investigation teams (JIT) with other European jurisdictions.

Instead of creating a central registry of Irish bank accounts and a coordinated method of managing confiscated assets, CAB has had to smile politely at new powers which focus on low-level criminals, not the ringleaders.

In cases where an instance of corporate crime has been committed in Ireland and in other jurisdictions, it appears that decisions are made to let other jurisdictions take the lead. Irish authorities have become spectators.

Here’s one example from the past. When the Gallagher Group collapsed in the early 1980s, a six-year Garda investigation into alleged breaches by merchant banking of the Companies Acts, Larceny Acts and Central Banks Acts took place. The DPP decided not to prosecute.

When these offences were alleged to have been committed in the Republic, the Gallagher Group was also engaged in strikingly similar offences in the North. The response by the authorities there? A two-year investigation, which prompted Patrick Gallagher, chair of the group, to plead guilty to five offences. He was sentenced to two years imprisonment, despite the payment of significant compensation.

That’s what an accountability deficit looks like. What is it about the Irish mindset that automatically demands an inquiry instead of actual consequences?

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