Things To Think About
First: if you’ve been thinking about whistleblower protections in Australia, and my comment last fortnight that there’s no formal support from Australian regulators for a US-style whistleblower reward or qui tam system, you might appreciate this review of the SEC’s reward program.
Second: who should investigate and prosecute corporate corruption offences, a police force or a regulator? In the US, the Foreign Corrupt Practices Act is administered by DOJ’s criminal division, which is empowered to enter, among other things, deferred prosecution agreements (“DPAs”) (subject to court approval). Here in Australia, the Australian Federal Police Fraud and Anti-Corruption unit investigates and prosecutes s70.2 Criminal Code Act 1995 foreign bribery. But, as the Sydney Morning Herald noted last year, “Commander Champion said the AFP could not offer companies immunity, but their co-operation would be taken into account by prosecutors and the court.” That’s cold comfort, particularly following Barbaro, and is in stark contrast to the formal policies many regulators have on dealing more leniently with self-disclosing offenders (see, eg, the ACCC’s immunity policy for cartel conduct).
Why am I raising this topic this fortnight? Because Melbourne company Redflex Holdings Group has a fully-owned, US-based subsidiary, Redflex Traffic Systems Inc (“Redflex”) which “installs cameras that automatically record and ticket drivers who run red lights“. That subsidiary paid bribes to a Chicago city official over the course of 10 years. Redflex has just entered a deferred prosecution agreement with the US DOJ, which pointed out in its media release that Redflex only secured a DPA because of its extensive cooperation – including cooperation in the DOJ’s investigation and prosecution of its CEO, Karen Finley, who was tried and convicted for bribery, and is currently serving a thirty month sentence. That’s not an outcome that could be reached in Australia. Recall, however, that our A-G is considering the possibility of introducing DPAs to Australia. But also consider that Australian regulators, in contrast to police forces, use a range of enforcement tools, most non-criminal, to respond to misconduct; DPAs are not the only possible means of providing flexibility in enforcement.
Notable Litigation Actions
Well well: corporate guilty pleas in the USA for the VW cheat device and Takata airbag scandals this fortnight. White collar charges were also filed in both matters – the Yates memo is certainly having an impact.
The US Attorney-General announced “VW is charged with and has agreed to plead guilty to participating in a conspiracy to defraud the United States and VW’s U.S. customers, and to violate the Clean Air Act, by lying and misleading the EPA and U.S. customers“: a $2.8 billion dollar criminal fine has been agreed. Press conference footage here. (As noted in the release, six VW execs and employees were also charged; Oliver Schmidt was arrested during his recent trip to Miami.) (See also: the EPA’s notice of violation to Fiat Chrysler.)
As for Takata, the DOJ announced, “Tokyo-based Takata Corporation, one of the world’s largest suppliers of automotive safety-related equipment, agreed to plead guilty to wire fraud and pay a total of $1 billion in criminal penalties stemming from the company’s fraudulent conduct in relation to sales of defective airbag inflators. An indictment was also unsealed charging three Takata executives with wire fraud and conspiracy in relation to the same conduct.”
These are significant cases because the companies have pleaded guilty: contrast this with the deferred prosecution agreements entered by GW over its faulty ignition switch (2015), and Toyota over its ‘sticky accelerators’(2014).
Also in the US, the rather remarkable white collar prosecution of Barry Cadden has commenced before a jury. He is charged with murder, over the deaths of patients who contracted meningitis after they received contaminated drugs produced by his company. There are other charges, and co-accuseds. The company was wound up following the meningitis outbreak.
Back home, the ACCC’s Valve (Steam) litigation has wrapped up, with the Federal Court (Edelman J) ordering a $3M civil pecuniary penalty. (To recap: Valve is a US-based company operating an online game distribution network known as Steam; it has more than 2 million Australian subscriber accounts: those consumers buy or download digital games.) Valve contravened ss 18(1) and 29(1)(m) of the Australian Consumer Law when it told Australian consumers they were not entitled to refunds under any circumstances.) Just as with the nurofen litigation, there were so many contraventions that the maximum penalty was virtually incalculable, so consideration was given to ‘courses of conduct’, but as with the Full Court decision in the Nurofen case, little assistance was gained from that concept – in stark contrast with criminal law. The case also includes dicta on causation v contribution in the context of calculating profits from misconduct.
And an interesting prosecution in the NSW Land and Environment Court: AGL Energy Ltd has pleaded guilty to ten charges of failing to disclose political donations.
Law & Policy Updates
In the US, it seems inevitable that the EPA’s approach to enforcement will change substantially under the leadership of Trump-appointment Scott Pruitt.
29-30 January 2017: Financial Institutions, Regulation and Corporate Governance Conference (Melbourne)
8 February 2017: ASIC RegTech Roundtable (video conference)
17 February 2017: NELA Climate Change and Environmental Legislation Conference (Murdoch, WA)
28 February- 1 March 2017: Informa Responsible Lending and Borrowing Summit (Sydney)
20-21 March 2017: ASIC Annual Forum (Sydney)
27-28 July 2017: ACCC & AER Regulatory Conference (Brisbane)
Inquiry into the enforcement and administration arrangements underpinning the Australian Consumer Law (submissions close 23 January 2017) Productivity Commission
Inquiry into the social issues relating to land-based driverless vehicles in Australia (submissions close 6 February 2016) Senate Standing Committee on Industry, Innovation, Science and Resources
Inquiry into whistleblower protections in the corporate, public and not-for-profit sectors (submissions close 10 February 2017) Joint Parliamentary Committee on Corporations and Financial Services
Inquiry into consumer protection in the banking, insurance and financial sector (submissions close 7 March 2017) Senate Standing Committee on Economics