New entity means white-collar criminals can now breathe easy

White collar crime has never been a priority for any New Zealand Government but last week’s announcement of the scrapping of the Serious Fraud Office reveals just how unimportant it has become.

On the face of it the Government is simply merging the SFO into a new entity called the Organised Crime Agency (OCA) within the police. Minister of Police Annette King says organised crime has moved on and New Zealand has to move on to keep ahead of it. She says a specialised agency is the only way to beat increasingly sophisticated criminal rings.

However, when the focus of the new agency is revealed it is clear that concerns about white-collar fraud have been sidelined. We are told the target of the new agency will be organised crime such as drugs, money laundering, cyber-crime, paedophile rings and identity theft.

Major fraud (cases involving more than $500,000) doesn’t rate a mention.

What’s more, the additional powers held by the SFO will not be transferred to the new agency. Because of the complex and hidden nature of white-collar crime the SFO was given additional clout to conduct investigations. For example, it has the authority to force those being scrutinised to hand over documents and co-operate with an investigation.

Powers such as these will be lost in the new agency. Annette King says it will not need them and the police have not asked for them. This is unsurprising given the main tasks the police see for the new agency – investigating major fraud is not one of them. It’s an interesting contrast to the additional powers heaped on the police to deal with gang activity and all manner of “street-level” crime. How is it that the police need all these extra powers to deal with the Mongrel Mob selling drugs but less powers to tackle multimillion-dollar fraud?

Media reporting has a lot to do with it. Aside from the high profile cases such as insider trading allegations against Michael Fay and David Richwhite (who paid the Securities Commission $20 million in an out of court settlement to avoid prosecution on insider trading allegations relating to Tranz Rail shares), fraud cases generally get little coverage. A solo mum charged with fraud because she has a live-in boyfriend she hasn’t declared is likely to get as much publicity as a multimillion-dollar fraudster.

We can all agree on the importance of effectively tackling the criminal groups behind drugs and paedophilia, etc, but just because these crimes are given more media attention than major fraud is not a reason to ignore our biggest thieves.

New Zealand First’s Ron Mark says hopefully that lack of skills and time has been a barrier to police investigation of commercial fraud and the resources of the new agency would help to boost its capacity. However, there is nothing to suggest this will occur. Large fraud cases will be less likely to be investigated, while the major resource will be focused towards issues of police priority.

It’s worth remembering that the SFO was set up in 1990 after the sharemarket crash of 1987 revealed a huge amount of white-collar crime, fraud and grubby dealings among New Zealand’s corporate elite. As well as huge amounts of money lost, investor confidence in the sharemarket plummeted. Restoring that confidence for investors was a driver in the SFO being established and at that time it had wide support across the community.

Perhaps the policy to scrap the SFO means Government and business feel that investor confidence has been restored sufficiently to allow the Government to once more ignore our biggest ripoffs – until the next crash, anyway.

This decision is handing our leading white-collar criminals a freedom-from-prosecution card so they won’t even need a get-out-of-jail-free card.

The Government has the resources to seriously hold business criminals to account but not the willpower. It doesn’t do a Government any good to pressure business too hard when political survival depends on being able to gain the large corporate donations which enable a party to campaign in modern, expensive, media-driven election campaigns.

It’s better to be seen to be tough on street crime than on the grey-suited thieves who steal millions with a ballpoint pen and go free while those who steal hundreds with a knife are jailed.

The pen might be mightier than the sword but is nowhere near as sexy.

The Government highlighted again last week that there is more than a grain of truth in the old saying that jails are where the big criminals put all the little criminals.