KEY POINTS:
Shonky New Zealand directors will be given a get out of jail free card if the Government goes ahead with plans to disband the Serious Fraud Office.
The Government's short-sighted decision to roll the SFO into a new organised crime agency under the NZ Police comes as another
wave of company collapses threatens investor confidence.
Investors should expect the SFO to be the independent agency that will at least take a poke into the affairs of companies like the failed Bridgecorp and explore whether any of the money-go-rounds and inter-company loans which appear to have propped up this particular transtasman finance group had a fraudulent aspect.
Instead, the Government is pondering the extent of transitional (political) damage that might occur if it prompts a sectoral shakeup by forcing the finance companies to adopt best practice. And the fraud investigators that should be probing some of these companies will instead be turned into organised crime sleuths - that's if they stay around.
Why New Zealanders would place any faith in the police to get to the bottom of complex fraud when they couldn't be bothered chasing up slam dunks like the electoral fraud at the 2005 election is a key question that neither they nor their political masters will be likely to answer.
New Zealand should be strengthening the SFO and its independence - not pushing it out of existence.
Police Minister Annette King is right to say transnational organised crime is now a major threat to New Zealand and the Pacific region. Much of the crime explosion in the Pacific is Asian-related, although the Police Minister is too PC to point that out.
The OCA, which will cover the gamut of criminal activity, including cyber crime, identity theft and identity fraud, money laundering, extortion, blackmail, fraud and drug manufacturing, distribution and trafficking, is long overdue. It will also cover paedophilia networks and politically motivated criminal activity.
But the need for an organised crime agency, doesn't mean the SFO should be scuppered.
Our SFO was modelled on the UK Serious Fraud Office. Britain has retained the fraud agency, which is actively engaged in probing white-collar crime, which certainly hasn't disappeared in that country simply because crime, like any other business, has been globalised. But it also has a Serious Organised Crime Agency (Soca) which addresses many of the functions that NZs new crime agency will cover.
This is an important distinction which seems to have eluded Attorney-General Michael Cullen, who has ministerial responsibility for the SFO and should be expected to champion it.
Cullen maintains the nature and scale of fraud offending has changed since the SFO was set up in 1990 after the sharemarket crash uncovered substantial white-collar crime activity.
In a statement, he said modern fraud offending, enabled through globalisation, computer, internet and identity access, is so complex that the demarcation between fraud and other forms of organised criminal activity is no longer a clear one.
Former Attorney-General Sir Geoffrey Palmer - who set up the SFO - also wants the SFO to go. His belief is that the police now have forensic accounting capability, and that the nature of complex and serious fraud has changed.
Sir Geoffrey's entitled to his opinion, but he's on shaky ground to argue the SFO's current powers should not be transferred across with the fraud investigators to the new organised crime agency.
The problem is that Sir Geoffrey, who chairs the Law Commission and has advised the Government on the issue, is not being challenged on his views. The SFO, which has the ammunition to counter the politicians, is no longer allowed to publicly take issue with the plan.
Take a current example.
The Securities Commission is expected to investigate Bridgecorp's prospectuses.
But the SFO is the only agency on the block - apart from the company's receivers - that can readily probe what happened to the cash after investors deposited their savings.
Right now the SFO can force directors to provide information and override their right to silence even if the information provided could incriminate them.
But the SFO also uses its powerful tools to force information out of lawyers and accountants, thus preventing suspected fraudsters from sheltering behind client confidentiality.
Sir Geoffrey told the Herald "I don't myself believe [the powers] are necessary and I would hate to see it generally available."
The Law Commission wants investigators to get court orders before demanding documents which would give the unscrupulous time to shred them.
SFO director David Bradshaw, who has clearly been fighting in the trenches to try to protect the agency, reinforces the SFO's 90 per cent success rate for prosecutions, convictions it has achieved against more than 300 fraudsters to the betterment of those who have lost their savings to such predators.
Bradshaw resigned after his second five-year term as director expired in July. He could not have foreseen that he would be the last independent SFO boss.
Instead of bowing out on a high, he's still trying to ensure that the ability to investigate and prosecute serious fraud in New Zealand is not lessened when he finally leaves his job in November.
Bradshaw is now a lame duck but will no doubt continue to fight on till he goes.
