Corporate rorts, the law and the rich
By John van der Velden
When John Elliott was acquitted of fraud charges in August 1996, he announced to the football crowd at Optus Oval that he had "stuck it right up the NCA" [National Crime Authority], I think expecting Carlton players and supporters to applaud, if not emulate, his success.
The remark must have struck most of the crowd as a little strange. After all, Elliott is not your archetypal little Aussie battler fighting off a mortgagee in possession. One could be forgiven for wondering who was sticking what up whom.
In evidence to the October '97 inquiry of the Federal Joint Parliamentary Committee on the National Crime Authority, former NCA investigator Garry Livermore responded to Elliott's public jibe by saying that Elliott had stuck it "right up the system, he stuck it up you, Mr Chairman, and every law-abiding member of the Australian community".
Elliott's running battle with the NCA has thrown an all too infrequent spotlight on corporate criminality and the justice system.
The case is not particularly unique, coming on the heels of a series of high profile corporate crime cases from the late 1980s. Elliott, three other former Elders IXL executives and two bankers were acquitted of fraud charges involving some $66 million. Despite some recent publicly conspicuous convictions of others, this remains the rule rather than the exception. It would normally barely rate further mention.
What is noteworthy is the transparency of the prosecution and defence process, including a vigorous and very public post-case bloodletting. It serves as an instructive reminder for an agency in the policing and justice system that momentarily forgot its place.
Less fortunate was former fellow Elders executive, Ken Jarrett, chief witness for the prosecution. He had previously already served six months' jail after pleading guilty to participating in a dodgy foreign-exchange transaction.
New Zealand businessman Allan Hawkins allegedly received a "good will" payment disguised as a foreign exchange loss. Hawkins had been reportedly helpful in Elliott's defence against a BHP takeover bid, but NCA plans for his extradition to give testimony never eventuated. Hawkins did over two years' jail in New Zealand for corporate fraud.
According to Livermore's inquiry evidence, "... Mr Elliott effectively outlasted and out-resourced the NCA and the DPP ...
"It was clear to anyone who turned up to the court that it was like David against Goliath ... there were just teams of lawyers and advisers on the defence side and it just didn't look like a fair fight at all ... The local dog catcher had more power than the NCA."
After legal challenges contesting whether NCA charges could be laid, when the case eventually made it to trial, Justice Vincent ruled in the preliminary stages that NCA evidence had been illegally obtained.
As a result, Livermore said, "Not one of some 130 witnesses ever gave evidence before a jury in this matter. It's a disgrace and a blight on the system."
Livermore went on to say that the NCA had additional evidence on several related matters concerning secret payments and illegal profit involving over $150 million, but that lack of resources made prosecution unlikely. Moreover, Justice Vincent had been a known critic of the NCA for a number of years and thus should not have heard the case because of possible bias.
Elliott, his co-defendants and Justice Vincent immediately denied Livermore's various allegations.
Rejecting suggestions of lack of impartiality, Vincent stood by his finding that the NCA's investigation had exceeded its brief. This view was echoed by Jeff Kennett in his spirited defence of Elliott in state parliament.
However, the Victorian Court of Appeal in September '97 found that the termination of the trial was based on errors in legal reasoning which had rejected key NCA evidence. Livermore regards this as vindication of the NCA case, even though, having been found not guilty, Elliott and Co cannot be retried.
Elliott's response to Livermore was: "The man's off his tree obviously, otherwise he wouldn't have criticised the judge ... I find Mr Livermore's outburst exactly the reason why I am saying the NCA has to be abandoned ... He is the sort of person who typifies this organisation. That's what the NCA do, they harass people as they harassed me."
In charge and at large
Elliott is justifiably annoyed at being singled out by the NCA. After all, he is a very successful and high placed member of the master class, being not only a major corporate player but also a past federal president of the Liberal Party.
Irrespective of the formal legality or illegality of business activities, class wealth, power and social position are predicated on expropriating the unpaid, surplus labour of the working class. Workers are compelled to subject themselves to this exploitation because Elliott and his class privately own and control the means of production of material wealth.
From certain class points of view, and legal systems, this would be regarded as thievery and extortion. In Australia, however, it is legally sanctioned core business, unlike the occasions when those being robbed in this manner take it back using less refined methods.
The legal system incorporates a series of inter-class and in-house rules to define and adjudicate what constitutes a valid swindle for the master class. Within the rules is business and outside the rules are things like fraud.
Obviously, murky grey areas abound. This makes your relative position in the class very important.
The more unfettered your business activities, in relation to your own and other classes, the more you can maximise your financial gain. The more money, connections and power you have, the better you are able to help define the rules and their application, through hiring lawyers and influencing the "public opinion" of judges and politicians.
In turn, this allows for the further expansion of wealth. Success is about continually expanding the boundaries of your core business, maximising your opportunities and minimising sanctions, corporately and personally.
The converse also applies, as will be illustrated below. The cyclical vagaries of the capital accumulation process can leave one terribly exposed to in-house rules.
Bankruptcy, for example, is not a good idea if the more entrepreneurial grey zone predominantly frames your business activities.
Wounded investors start remembering rules overlooked when the corporate team was going well. Referees never like scrappy play which interrupts the flow of the game, and flagrant violations can incite outrage from the crowd. Moreover, the cost of tribunal hearings can become prohibitive if you are no longer financially well placed.
Some are better at sticking it up the system than others. While recipients like Livermore and the NCA might rank Elliott high in his class, he was fully acquitted, so he didn't do anything wrong. For a better indication of the corporate codes guiding business activity, it's necessary to review other examples.
The more you make, the more you can take
Corporate executives make quite a bit. Top earners receive several million dollars in annual salary and bonuses. Share options are commonplace and can quadruple this amount. Even second tier executives in larger companies get well in excess of half a million dollars.
Everyone manages to keep most of it, if the Tax Office is any guide. According to Commissioner Michael Carmody, an investigation of 100 wealthy people found a tax minimisation web of 2500 entities. In just 800 trusts, they earned $50 million in untaxed income. Trusts are growing at a rate of 50,000 a year.
They take quite a bit too. Recent estimates suggest that nearly two-thirds of the financial loss caused by crime comes from fraud and related activities — about $14 billion annually. A large slice of this action is the preserve of the master class.
For example, former Coles Myer chief Brian Quinn took "pilfering on the job" to new levels by defrauding the company of $4.5 million for home renovations from 1982 to 1988.
Rejecting subsequent criticism about the leniency of the minimum two and a half year sentence, Justice Vincent (again!) said his decision had been tempered "with a measure of compassion" for the "substantial ridicule and humiliation" Quinn had experienced. The bigger you are, the softer you fall.
Alan Bond is bigger, took more and has had a comparable landing. Before he crashed, Bond controlled hundreds of companies. For his part in a $1 billion fraud of Bell Resources shareholders, he was sentenced to four years' jail, extended to seven years on appeal.
Bond had personal debts of over $800 million when he was declared bankrupt in 1992. He wore his creditors down after three years of legal battles and was discharged when he settled by paying them one cent on the dollar. Ongoing investigations suggest millions of dollars are still unaccounted for and that Bond has a seemingly inexhaustible supply of paid legal help, gifts and benefactors.
There have been softer landings in relation to jail time. However, there was public disquiet when Bond was identified having coffee with his jailer in a Perth cafe during a day trip. Some people's "time" is harder than others'.
Christopher Skase has managed somewhat better. When his Qintex group collapsed with debts in excess of $1.5 billion, Skase bolted to his mansion on a Spanish island. Extradition attempts failed and have now been abandoned.
The higher you climb the more hidden the crime
Corporate sector criminality is pursued in relation to a system of in-house rules that grant large shareholders, executives and corporations an advantaged position relative to subordinate classes.
Offshore tax havens, corporate bribery, trusts and the like are set up in an extremely complex manner, requiring considerable expertise, experience and resolve to track down the relevant facts. This tends to deter even genuine police and prosecutor interest and scrutiny. In any case, political policing priorities and budget allocations are focused on subordinate classes.
Corporations and individuals have massive political and economic resources at their disposal with which to defend their interests. They can hire the top legal teams and play out the courtroom process through "corporatising" and "lawyerising" defences.
Bond and Skase have taken this a step further by medicalising court delays and stalemates. Skase's lung condition appeared to improve markedly after a Spanish court ruled he was unfit for extradition to Australia. Bond was reportedly involved in negotiations for a multimillion dollar property deal on the Gold Coast while in the middle of a court delay to allow treatment for depression.
You only do time if you don't have a dime
Bankruptcy doesn't mean that you personally are really broke, or that you are necessarily bound for jail, but it does leave you exposed to a range of motivated people and regulatory agencies.
Elliott didn't do anything wrong, because he was acquitted. Another very obvious difference from the preceding cases is that his business interests are going strong. Most of the high profile corporate convictions of the 1980s and 1990s followed spectacular collapses — such as Rothwells Bank, featuring Laurie Connell, Tricontinental with Ian Johns and Hooker Corporation with George Herscu.
Among the murky boundaries between business and criminality in the master class, this is about as clear a measure of what is and is not legal as you can get. It doesn't pay to let down your class mates.
Owners and managers of capital seek to secure maximum gain in relation to subordinate classes and each other. Boundary issues regarding formal legality are inevitably encountered. However, transgressions are less a matter of personal failing than a normal and essential component of business success, and are rarely contained by the regulatory bodies of the state.
Being the class in charge grants, among other things, the capacity to corporatise, lawyerise and medicalise defences against prosecution. Accordingly, even officially proved criminality is accompanied by minimum pain.
Whether "paying the fine" or "doing the time", chances are, if you haven't managed to completely stick it up the system the first time around, you'll have another opportunity to do "business" again.
Not that there's anything wrong with that.