Those in the corporate world with dirty white collars may soon have a new bête noire in the form of Paul Appleby, the man behind last week’s garda raid on Anglo Irish Bank. But when it comes to proving criminality, Appleby will have his work cut out for him
THE NEWS during the week that officials and gardaí working under Paul Appleby, the Director of Corporate Enforcement, were raiding Anglo Irish Bank may have invited visions of an Elliot Ness-type clean out of Corporate Ireland in some minds.
A melodramatic and unprecedented development such as a senior banker being brought to be arraigned before the Bridewell District Court obviously can’t be ruled out, although the history of Appleby’s office to date gives reason not to bet on such an outcome any time soon.
Few people who know Appleby would doubt his resolve or feel that he might shrink from pursuing such a course if he thought it proper. It is more the case that pursuing mobsters such as Al Capone is more straightforward than proving corporate crime.
“I think he is an absolutely fantastic guy,” says Niamh Brennan, Professor of Management and Director of the Academic Centre for Corporate Governance at the Quinn School of Business in UCD. “I admire him enormously and I think he is very measured and very professional. He has a difficult and challenging position and he is dedicated to his job.
“I believe he has the focus, determination and steeliness to pursue wrongdoing as appropriate. I have confidence in him as a person.”
Brennan believes the more bread-and-butter aspects of the work of Appleby’s office – educating the business community about company law, following up on company law breaches such as excessive borrowing from companies by their directors, the securing of court-imposed restrictions on directors who have breached company law – have made a huge difference in the business world. “It is a very significant improvement on what was there previously, which was nothing,” she says.
Appleby was appointed in 2001 by the then Minister for Enterprise, Trade and Employment, Mary Harney, who created the Office of the Director of Corporate Enforcement (ODCE). In the wake of the 1997 McCracken (Dunnes Payments) tribunal report, Harney – a great supporter of businesspeople and enterprise generally – was unwavering in her pursuit of the corporate dodginess that had been exposed, appointing company law officers to inspect the late Des Traynor’s Ansbacher operation, Ciaran Haughey’s Celtic Helicopters and Michael Lowry’s Garuda Helicopters.
At the time, Appleby was the most senior civil servant in the department responsible for company law. It was said he and two others shared this brief, along with other duties.
Harney’s unflinching pursuit of the Ansbacher scandal, which involved some of the most senior figures in Irish business, and her determination to establish a corporate enforcement agency, constituted a sea change in the political attitude towards wrongdoing at the highest levels. She saw the punishment of corporate wrongdoers as being important to the success of the Irish business sector generally.
Since its establishment, Appleby’s office has pursued hundreds if not thousands of company law inquiries involving excessive loans being taken out by company directors, improper books of account being kept, and such matters. The work is rarely front-page news and has been criticised as bureaucratic harrassment by some business people, but Appleby argues that corporate wrongdoing is a threat to normal, lawful business.
“I would see it as having been very beneficial,” says a company law expert who did not wish to be named. “He has definitely improved things and done a good job within the limits that are there. But if you’re looking for heads to roll, it’s a whole different ball game.”
Experts on company law and corporate crime all agree that it is a frustratingly difficult area in which to secure convictions. Evidence of corporate fraud and corporate crime can be difficult to collect, and in criminal cases it has to be shown beyond reasonable doubt that the defendent intended to commit a crime when carrying out whatever act is before the court.
Charges of corporate wrongdoing tend to quickly become buried in complexity, not least because the people against whom the allegations are being made are usually very well heeled and can engage expensive legal teams.
The huge Fyffes/DCC insider dealing case is indicative of the issues involved, even though it was a civil case. Both sides had eight-figure budgets for legal fees. The defendents, former DCC boss Jim Flavin and his company, had a project manager handling their team.
At issue was whether some trading reports Flavin had in his possession contained information that was price-sensitive. The High Court judge said they didn’t. The Supreme Court said they did.
What chance then of convincing 12 ordinary jurors that complex corporate law crimes, say involving arcane banking arrangements, have been proven beyond reasonable doubt?
(The Fyffes/DCC sage rumbles on. Last year Appleby’s office successfully petitioned the High Court for the appointment of an inspector to DCC and senior counsel Bill Shipsey’s work is continuing in private.)
Two years ago, in the wake of convictions in the US courts in the Enron case, Appleby appeared to indicate he was content with how matters were proceeding with this office.
“While the US have the reputation of being aggressive on investigating corporate malpractice, we pursue matters as strongly as we need to, in the circumstances,” he said. “We must also operate within the law, given that we ourselves operate to ensure that others operate within the law.
“Clearly, we need to strike a balance between going over the top and acting appropriately.”
And in truth, the situation in the US is not much different. Richard Painter is a Professor of Law at the University of Minnesota who has worked for the White House and was involved in moves that led to the enactment of the Sarbanes Oxley laws in the wake of the Enron scandal.
“Even though we have more criminal statutes that any other country that address corporate fraud, we have relatively few prosecutions,” Painter told The Irish Times. Although high-profile cases such as those of Ken Lay of Enron or Conrad Black of Hollinger Inc get a lot of media coverage, “prosecutions are not particularly frequent and that’s because of the prosecutorial difficulties,” he said. These difficulties led to the emphasis of the Sarbanes Oxley act, which seeks to impose regulations and obligations with the aim of catching the wrongdoing at the time it is being committed, rather than seek to prosecute it afterwards.
There were a lot of complaints about the act in the period since it came into law, although, as Painter observes, there have been a lot fewer complaints in the past year.
While Appleby’s public comments quoted above appear to indicate he was happy then with how the development of his office was proceeding, there are reasons for believing that, behind the scenes, there were tensions with the Government.
Documents revealed under the Freedom of Information Act to RTÉ in 2007 showed that Appleby had been seeking more resources since 2005 (Harney was by then Minister for Health) and considered the staffing he had to be “wholly inadequate”. He was seeking 20 more staff, including more gardaí.
When the matter was raised in the Dáil, the then Taoiseach, Bertie Ahern, seemed to become annoyed. “It is not that Mr Appleby’s work is not considered important . . . He has 36 , so it seems extraordinary that he could want another 20 . . . One would not receive such an increase in any department . . . He will have to wait his turn.”
Eventually, eight more staff were assigned, and came into place at the beginning of this year. In the Dáil this week, Leo Varakar of Fine Gael returned to this issue of the refusal to grant Appleby’s requests for more staff.
“The Government’s decision to starve the ODCE of essential resources proves further that Fianna Fáil is too close to many vested interests in its Galway tent. Its negligence on white collar crime has now brought this country to the brink.”
However, the Government this week said Appleby’s office would have whatever resources it needed to investigate matters to do with Anglo Irish Bank.
The unnamed company law expert quoted above believes attitudes are changing towards corporate crime, and high-profile convictions are likely to arrive here some time (relatively) soon.
CV Paul Appleby
Who is he?Director of Corporate Enforcement, the agency that enforces company law
In the news because: This week officials from his agency (the ODCE), along with members of the Garda Bureau of Fraud Investigation, raided the headquarters of Anglo Irish Bank
Most likely to say: "Achieving greater compliance with company law is in the interest of business generally"
Least likely to say:"Ah sure lads I know you were only trying to make a few quid. If no one else learns about it then you won't hear anything more from me"
Essential trivia: The ODCE's offices on Parnell Square are owned by a company owned by elderly property developer John Byrne, who was named in the Ansbacher Inspectors' report