Story: Property crime
Page 4 – White-collar crime
Invisible for decades
The term ‘white-collar crime’ was coined in 1949 in the United States to refer to crimes committed by people in positions of power and high social status in the course of their jobs. Also referred to as ‘commercial crime’, its scope is extensive, including embezzling funds from employers or clients, theft of stock, padded expense accounts, tax evasion, insider trading and misrepresentative advertising.
For most of the 20th century commercial crime or white-collar crime had a low public profile. The first white-collar investigation took place in 1934 and the next in 1958. This did not mean that there was little fraudulent behaviour in New Zealand companies, but rather that it was not reported or detected. The police had little capability or even understanding of business practices and it was not until 1985 that a Corporate Fraud Unit (initially of three staff) was created within the Department of Justice’s Auckland office.
The puzzle
Investigating corporate crimes is an exacting task, as the first head of the Serious Fraud Office, Charles Sturt, recalled when he investigated the collapse of Equiticorp in the early 1990s: ‘It was rather like completing a 100,000-piece jigsaw puzzle from a million pieces. The dilemma was to work out which 900,000 pieces did not form part of the final picture. This is all the more difficult in an investigation where no crime has been established before you start.’1
Establishment of the Serious Fraud Office
Following the 1987 sharemarket crash there were many suspicions of corporate crime. In response the government set up the Serious Fraud Office in 1990. Staffed by investigators with backgrounds in law, accountancy and senior police work, its investigative powers are considerable. If the office suspects that a serious fraud may have been committed they can require any person to produce documents or to reveal where they are. Lawyers, accountants and other professionals cannot refuse on the basis of client confidentiality, and unlike interviewees in other investigations, there is no right to remain silent. The Minister of Police is responsible for the Serious Fraud Office but the government has no influence over its investigations.
The establishment of the office with its very wide-ranging powers and staff of specialists, lifted the lid on white-collar crime. One of its first investigations resulted in Allan Hawkins, executive chairman of Equiticorp, being sentenced in 1992 to six years imprisonment for stealing $88 million. Many more prosecutions of company directors, lawyers, politicians, bureaucrats and accountants occurred over the 1990s and in the early 2000s.
Some professions have taken their own action against white-collar crime. The Law Society has a fidelity fund, established in 1984. This gives clients of dishonest lawyers some level of compensation – although the maximum payout to an individual is $100,000.
Organised and Financial Crime Agency of New Zealand
In July 2008 the Organised and Financial Crime Agency of New Zealand was established within the police force to help fight organised crime, which was increasingly using international financial networks to launder money. Originally this agency was meant to absorb the Serious Fraud Office, but an incoming National government decided to maintain the Serious Fraud Office as a separate entity. In 2010 the Serious Fraud Office had fewer than 30 operational staff and dealt with over 100 cases a year. It only took on cases of serious or complex fraud. As perpetrators are often highly intelligent and use complex company structures and transactions to try to cover their tracks, investigations can take years. Standard fraud cases are dealt with by fraud squads within the police.
