Prosecution of alleged financial crimes is imperative


LEGAL OPINION:REGULATORS RAIDED the offices of the Anglo Irish Bank in February 2009. Three years on, the investigation continues. This is not the first time that the State has launched a lengthy investigation into white-collar crime. The investigation into Merchant Banking’s failure to comply with financial regulations in the 1980s lasted for six years before it was determined that the case could not be prosecuted.

However, politicians are now more likely to favour prosecuting and punishing white-collar criminals. They have accused bankers of “economic treason” that did more damage to the State than the IRA. But has rhetoric really changed to resolve? Will the Anglo investigation be different?

Ireland’s social, political and economic context is significantly different now to that of the 20th century. Post-independence, politicians romanticised frugalism and isolationism. Protectionism was an assertion of sovereignty to prevent the English from seizing control of our economy.

For most of the 20th century Ireland was an agrarian state with low levels of corporate activity. The major concern in Irish society was for greater employment, not corporate wrongdoing. Increased corporate activity provided much needed jobs and there was little recognition of the potentially negative effects of inadequate corporate regulation.

Ireland reversed its economic policies, attracting foreign-owned, export-orientated industries to stimulate jobs and prosperity. It abandoned protectionism, lowered corporate tax, championed facilitative corporate and financial regulations, and marketed itself as a place to do business.

Between 1956 and 2005, the number of private companies in Ireland rose from 7,388 to 138,215. The number of public companies rose from 372 to 1,103. In 2008, Ireland became the eighth largest global banking sector. It went from being a State where the banks were “pulling down the shutters” to one where they established their headquarters.

However, as more workers became white collar, there were more opportunities for white-collar crime. Increased corporate activity was a dangerous phenomenon in a State with lax regulations, widespread corporate non-compliance with the law, and little cultural recognition of the harms that companies could cause to society.

Consequently, the turn of the 20th century in Ireland was a time of considerable corporate scandal. Significant wrongdoing was revealed in Greencore and Goodmans, shaking confidence in Ireland’s most prominent companies. The subsequent NIB and DIRT inquiries revealed that the banks had defrauded the public and the State, and suggested that financial wrongdoing was frequent and systemic. Various tribunals of inquiry also revealed how businessmen had funded the personal lifestyles of senior politicians in return for contracts and favours. And so Irish society learned that the invisible hand could also be a greased palm.

Massive international frauds also emerged in Enron and Parmalat and these were linked to subsidiaries in Dublin’s IFSC. The New York Times dubbed Ireland “the wild west of European finance”. The tipping point came in 2008 when corporate irresponsibility in Irish banking exposed Ireland and Europe to an unprecedented level of economic harm.

At this point, politicians and the public showed a more determined resolve to address corporate wrongdoing. New legislation was recently passed to facilitate white-collar crime prosecutions. Corporate and financial regulators were allocated more resources and staff despite reductions elsewhere in the public service. The Director of Corporate Enforcement has recently secured a special agreement to postpone his retirement in order to complete the investigation into Anglo. The social, political and economic climate is such that the prosecution of alleged financial crimes at Anglo is imperative. But mere scapegoating for political purposes will undermine the integrity of the law. White- collar criminals must be consistently and proportionately punished, not occasionally sacrificed. Justice must be seen and believed.

Dr Joe McGrath is a law lecturer at NUI Galway and has a PhD in corporate and financial crime