Corporate and White-Collar Crime in Ireland review: weapons of choice are ‘spreadsheets and meetings’

Corporate and white-collar crime in Ireland

Author: Joe McGrath

ISBN-13: 978-0-7190-9066-0

Publisher: Manchester University Press

Guideline Price: £70

Butter is to blame. This pale yellow corruption of churned milk slips through our hands at any attempt to grasp it. A 1962 Supreme Court case on the smuggling of butter was responsible for how white-collar crime was defined in Ireland. The seminal case of Melling v Ó Mathghamhna laid down a set of criteria to be considered when deciding whether or not a particular offence is minor or non-minor.

Joe McGrath argues that the intellectual failing of Irish jurisprudence can be traced to this butter case. A blunt distinction between civil and criminal law was drawn. Corporate misbehaviour was marginalised from the definition of criminal law. The Irish courts narrowly interpreted the severity of the punishment, the moral guilt of the accused, the state of law and public opinion in deference to respectable corporate elites.

Using broad strokes of analysis, McGrath’s fundamental assumption is that Ireland’s traditional economic dependence on its agricultural sector relegated corporate wrongdoing to the realm of incidental curiosity. As an agrarian state with relatively low levels of business activity, Irish policy choices on white-collar crime enforcement were minimalist. The UCD law academic insists that this failure to develop a jurisprudence incorporating regulatory wrongdoing into the architecture of the criminal law was “premised on a political and social inertia surrounding corporate life”.

His thesis finds support in the 1958 Report of the Company Law Reform Committee. The Cox Report received relatively little attention at the time, despite being the first substantial review of company law in the history of the State. In a devastating critique of Irish corporate life, it noted that Irish society regarded offences in the Companies Acts as merely “trivial or technical” rather than criminal.

Noncompliance culture

Fast-forward 40 years. Michael McDowell’s 1998 review

Company Law Compliance and Enforcement

found that corporate wrongdoing was perceived as less harmful than conventional crimes. Ireland was “characterised by a culture of non-compliance” and most of the hundreds of summary offences provided for in the Companies Acts “have never been the subject of prosecutions.”

Fast-forward another 12 years. The 2010 Honohan and the Regling and Watson reports on the collapse of the Irish banking system mirrored the Cox and McDowell findings of widespread noncompliance, a deferential approach by regulators. and a chronic reluctance to prosecute corporate wrongdoers.

There is no record of anyone receiving a custodial sentence for breaching the Companies Acts prior to the 1990s. Why? McGrath considers how the criminal law principles of subjective culpability, due process and proportionality in sentencing had a significant impact on the way in which white-collar crimes were prosecuted.

Corporate deviancy did not command the same level of condemnation in sentencing because it was considered less harmful. Unlike homicide and rape, corporate wrongdoing is rarely violent. As McGrath explains, “the tools of industry are spreadsheets and meetings, not guns and knives”.

The book depressingly details how corporate offenders benefited from well-recognised mitigating facts, such as the absence of previous convictions and the ability to pay compensation to victims of their wrongdoing. The rules on sentencing were “systemically biased and resulted in lighter penalties for white-collar criminals”.

There is much to commend in McGrath’s devastating book, which is primarily aimed at a legal academic audience. Important legal cases are maddeningly given swift description that disadvantages the general reader. His analysis of the Garda Fraud Squad sharply highlights how ineffectual it was. Even Ray Burke, then the minister for justice, lamented (in public, at least) the Fraud Squad’s inability to conduct an effective investigation.

Weak powers, chronic under-resourcing and outdated laws hamstrung its operations. A complement of 17 officers in 1971 increased to just 30 by 1990. No full-time accountancy or legal staff were employed to analyse company accounts. We learn all this from 39 references from one newspaper archive rather than primary source interviews with former gardaí or departmental files in the National Archives.

The results of an inept Fraud Squad were inevitable. In 1984, the directors of Aluminium Fabricators were not prosecuted despite keeping double books to divert company funds into their own private Isle of Man bank accounts. Nor were the directors of Contract Packaging prosecuted in 1992 after they defrauded Revenue and siphoned off £383,000 of company money for their personal use. And so on.

Tighter legislation Yet all was not lost, apparently. Europeanisation, globalisation, the commercialisation of Irish society and the domestic scandals of the 1990s changed perceptions. Tighter legislation was introduced, butter like. The purpose of the new laws was to protect businesses from fraudulent activities of their employees and rival businesses rather than the wider public.

A sense of animated festivity almost breaks through McGrath’s technical language as he describes the first prison sentence ever imposed for an offence under the Companies Acts in the history of the State. A successful prosecution of fraudulent trading was secured in 1996 following the case of the DPP v Mark A Synnott. Alas, on the eve of the boom this was more of “a false dawn than the beginning of a new era”.

The Office of the Director of Corporate Enforcement secured 66 convictions in 2004; this had declined to eight in 2010. Civil sanctions rather than incarcerations were the preferred remedy. Most cases were processed in the District Court, where punishments were often small fines.

McGrath’s last chapter is infuriating. The 2008 financial crisis “changed the landscape of enforcement”, butter like. The judiciary, he argues, sought to reconfigure sentencing rules that placed greater emphasis on the particular harm caused by the offence and less emphasis on the background of the offender. He cites the 2009, 2012 and 2013 incarcerations of Patrick Duffy, Paul Murray and the highly publicised trial of garlic importer Paul Begley as evidence of this new focus on corporate wrongdoing.

The recent convictions of two former directors at Anglo for breaches of the Companies Acts also herald a different approach. Specialist regulatory agencies now have significant powers of investigation and prosecution.

Butter, however, is made of a texture that is slippery to hold. McGrath concludes that a two-tier legal system was created post-2008. Corporate deviants continue to be treated far more deferentially than conventional criminals because they are usually only prosecuted after non-legal enforcement techniques and civil sanctions have failed, if at all. Regulators emphasise civil orders such as restriction, disqualification or administration fines. Criminal law still remains the sanction of last resort.

The last line of this timely, thoughtful book amounts to a call for action. “If public shaming of corporate and white collar criminals does not occur then ‘crime in the suites’ continues to be of a different character to ‘crime in the streets’.”

Elaine Byrne is a governance consultant with the European Commission. Her book Political Corruption in Ireland 1922-2010: A Crooked Harp? was published by Manchester University Press in 2012