Hurdles in solving corporate frauds

Anti-corruption authorities have faced intense scrutiny over their handling of high-profile bribery cases, writes Georgia Wilkins.

As the fallout from claims of corruption continues, the two bodies in charge of enforcing bribery laws, the Australian Federal Police and the Australian Securities and Investments Commission, have been accused of acting too slowly, and sometimes not at all, in handling cases.

A year after the Organisation for Economic Co-operation and Development delivered a stinging criticism of the authorities' failure in securing just one prosecution in 13 years, they are now being accused of inaction over corruption claims at Leighton Holdings and the Reserve Bank's note printing subsidiaries. But the woman in charge of the AFP's white-collar crime division says some of those claims are unfair.

Speaking to BusinessDay weeks after fresh allegations at the construction firm and Reserve Bank subsidiaries, the manager of the AFP's fraud and anti-corruption unit, Linda Champion, has sought to defend the division's conduct and capacity to catch corporate criminals.

While she would not comment directly on any individual cases, Champion says critics have overlooked the constraints of investigating and charging rich and powerful people.

"These are complex matters so we cannot just pull in alleged suspects before we have our facts in place," she says.

"Especially when you're talking about large corporations, the suspects are very smart people and incredibly litigious, so we look at that from the outset."

Fairfax Media recently revealed that Leighton's top executives and directors allegedly oversaw plans to pay multimillion-dollar kickbacks to contractors in Iraq, Indonesia and Malaysia and covered up warnings of internal fraud.

The AFP is investigating payments associated with the Leighton Iraq venture, but have been criticised for taking too long.

Leighton has said it is co-operating with the police investigation and that its directors have acted with due diligence.

Champion says the AFP has taken significant steps to strengthen its ability to prosecute corporate criminals but it is difficult to speed up investigations.

"I can't really say, for such large and complex matters, how to expedite them ... all countries grapple with similar challenges."

Champion was transferred from the AFP's special references investigations team to set up the fraud and anti-corruption unit in February.

She came to the division after working on complex fraud cases at the AFP's Townsville crime branch.

She says she was drawn to the work after seeing the ripple effect of corruption on communities, particularly disadvantaged ones.

"That strikes a chord and makes it a bit more humanised for me. It's a driving reason behind where I'm going with this new foreign bribery push."

But nine months after the division was set up, questions are being raised about its ability to deal with complex corporate crimes that can span multiple jurisdictions.

Last month, the AFP and ASIC revealed they had dropped an investigation into Jack Flader, the mastermind behind Australia's biggest superannuation fraud, after investigators failed to find sufficient evidence he had broken the law.

This was despite the assistance of the Securities & Futures Commission of Hong Kong, where he is based .

The abandonment of the probe ends any possibility of charges being laid against Flader, despite a court finding he was the "ultimate controller" of Trio Capital, which cost investors $176 million.

In the case of Leighton, the AFP has been accused of failing to interview some of the key players alleged to be involved.

Champion says its work is hampered by the challenge of obtaining evidence from overseas.

"Large-scale investigations can span several countries. There are very lengthy processes for us to obtain evidence.

"Proving jurisdiction in itself can be complicated when you're looking at subsidiary companies overseas," she says.

"We want to get all our information and facts in place before we speak to key witnesses or suspects."

She says even when the international component of an investigation is successful, legal hurdles remain in Australia.

"We have to go through and ensure our evidence meets the Australian legislation evidentiary standards.

"It's more than likely that the evidence is held overseas, as well as the witnesses and the suspects," she says.

Critics of the AFP's role in corporate matters say that aside from its failure to prosecute cases, it is also failing to uphold basic levels of transparency and accountability.

They say of greatest concern is the abandonment of cases without the public's knowledge, leaving few people with a clear understanding of how the organisation operated.

"It's the public's money, so the public has an interest in knowing that everything that needs to be investigated is investigated," says Juliette Overland, senior lecturer at the University of Sydney.

Dr Kath Hall, associate professor at the Australian National University's law school, says both the AFP and ASIC need to address how they disclose information to the public while adhering to their confidentiality rules.

"We need good reasons for when the AFP fails to take action, and how things are proceeding," she says.

Greens deputy leader Adam Bandt has called for the Abbott government to conduct an inquiry to determine whether Australia needs a specialist agency to fight white-collar crime.

He says the inquiry should also examine the relationship between ASIC and the federal police - which has been tarnished by poor co-operation and buck-passing.

ASIC chairman Greg Medcraft has defended his agency's role in the Leighton investigations, saying last month that it was up to the AFP to make a criminal investigation before it looked into civil claims.

Champion says the AFP has made a number of efforts to improve its record of enforcement since the OECD review, including setting up a new framework for foreign co-operation through a new anti-corruption taskforce. It has also introduced a panel of experts to oversee its decision-making.

Australia is required to report back to the OECD in October next year on its progress in implementing the body's recommendations.

The agency criticised Australia's low enforcement of foreign bribery offences and urged the AFP to take sufficient steps to ensure that foreign bribery allegations were not prematurely closed.

It also recommended it be more proactive in gathering information from diverse sources at the pre-investigative stage.

The head of the OECD's anti-corruption division, Patrick Moulette, says it has not formally reviewed Australia's efforts to tackle bribery since the report last year and remains "seriously concerned" about its lack of convictions.

"We also remain hopeful that we will see progress when Australia reports back to the working group."

At the time of the last review, only one case had led to prosecutions out of 28 referrals in 13 years.