Corporate Ireland learning to comply with law

In the 10 months to this October the ODCE made use of 10 search warrants, received 13 High Court orders and made six arrests, writes Colm Keena

Some years ago Mr Michael McDowell told a gathering of accountants that the days when people suspected of company law offences directed inquiries to their lawyers were over. In future, accountants were told, misbehaving company directors would find gardaí in their offices and themselves being brought down to the local station to answer questions. The State would no longer turn a blind eye to corporate corruption and white collar crime.

It sounded impressive.

Mr McDowell, now the Minister for Justice, Equality and Law Reform, addressed the accountants' dinner as a barrister who had chaired the Company Law Compliance and Enforcement Working Group, set up by the Tánaiste, Ms Harney, as a result of business scandals that arose in the late 1990s. The group recommended setting up the Office of the Director of Corporate Enforcement (ODCE) and 2003 was the first year the agency was up and running.

So has the relationship between State and corporate Ireland been transformed in 2003 insofar as compliance with the law is concerned?

There has certainly been no rash of new scandals arising out of the agency's work. Nor have their been squeals of complaint from professional and representative bodies that would no doubt get upset if the ODCE used strong-arm tactics to clean up corporate Ireland. Change is more gradual, with new rules and regulations creating a net that those involved believe will drive up general compliance standards and increase the likelihood of detecting wrongdoers.

In the 10 months to this October the ODCE made use of 10 search warrants, received 13 High Court orders allowing for the examination of companies' books and/or directors' bank records, and made six arrests. Three people were detained in Garda stations for questioning, and two luxury cars were seized.

Such activity constitutes a sea-change in how the State relates to the corporate world. But such figures do not indicate the level of white collar crime and corporate corruption in the Republic. A Dublin Garda station would be more active on a busy day.

In late 2002-early 2003 the final pieces were put in place for much of the network of obligations and processes whereby the ODCE, headed by Mr Paul Appleby, hopes to monitor corporate compliance world. The processes aim to use accountants and others as the agency's eyes and ears.

Auditors reviewing company accounts must report instances of suspected breaches of company law to Mr Appleby's office. Liquidators must also file reports to his office and advise him on whether he should absolve them of their obligation to seek the restriction on the directors from acting as directors in the future.

Auditor reports jumped from 400 in 2002 to more than 1,400 in 2003. Liquidator reports jumped from 300 in 2002 to about 500 in 2003.

The agency also receives information about possible breaches of company law through public complaints. It received 300 such complaints in 2003 as against 200 in 2002. Auditor reports prompted Mr Appleby to issue a document covering the law on financial transactions between directors and their companies, particularly regarding the restrictions on the size of loans directors could sanction for themselves.

Liquidator reports will lead to a raft of people appearing before the Examiner's Court, with most likely to be restricted on the extent to which they can operate as directors in future. Restrictions are likely to emerge from the other end of the court process early in 2004 and the names of those restricted will be available from the Companies Registration Office.

About 100 directors were restricted during 2003 and this should rise significantly in 2004.

Liquidator reports have been producing material for Mr Appleby's office which could in time lead to the issuing of criminal charges for significant offences, though no such charges have yet been laid. About 40 convictions were secured during 2003, almost all for minor offences such as failing to keep proper books of account. Among the high profile firms the agency is believed to have dealt with were two from the Dunnes Stores group.

The Dunnes Stores inquiry is a long-running saga going back to the 1997 McCracken Report. A decision to appoint an officer to Dunnes Stores Ireland Company and Dunnes Stores (Ilac) Ltd was made by the Tánaiste in July 1998 but the work was held up by a series of High Court and Supreme Court appeals.

Following the exhaustion of this process in June, the ODCE official appointed authorised officer to the companies, Mr Cyril Houlihan, is understood to have begun work. Unlike the position that pertained when the Department of Enterprise, Trade and Employment appointed such officers, the ODCE does not comment on whether an authorised officer has been appointed. One such appointment is known to be in the process of completion, though the firm to which the officer is being appointed has not been stated.

As well as enforcing the law Mr Appleby's office encourages compliance by issuing documents explaining the obligations on companies and directors, and making presentations to professionals, business figures and civil servants. Next year, the Companies (Auditing and Accounting) Bill 2003 should be signed into law. As well as establishing the Irish Auditing and Accounting Supervisory Authority, it is likely to oblige directors' to sign year end statements stating their firms have been compliant during the period.

This will not have an immediate direct effect on Mr Appleby's office though in future it may limit the responses available to directors subjected to an ODCE inquiry into suspected breaches of company law.