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Thursday, 29 March 1979
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Mr JACOBI (Hawker) -Whilst I support the Passports Amendment Bill and will press our amendments to it, the Minister for Foreign Affairs (Mr Peacock) will acknowledge my persistent efforts to eliminate the high incidence of child abduction within and from Australia, and the need for urgent legislative and administrative changes to reduce it. I commend the honourable member for Kingston (Mr Chapman) and in particular my very good friend the Adelaide journalist, Dick Wordley, for their contribution. I note the Minister's intimation in his second reading speech that the recommendations of the interdepartmental committee which he set up in response to my earlier request are currently before the Cabinet. Therefore, I will reserve my remarks on that important matter until the legislation comes before the House. However, I intend to speak at the Committee stages in reference to clause 8 in particular.

I deplore the Government's decision, as set out in proposed new section 7b, and its effect upon corporate crime in this country, At present passports can be withheld or withdrawn by the Minister if State corporate affairs commissions or companies offices reported that an investigation was in progress. However, under this amendment, according to the Minister, this practice will be discontinued. In explanation, he said that in recognition of the Government's policy in relation to human rights, and the view that the Passports Act should neither be an extension of the judicial system nor be expected to impose any more restraint on a person than a court would be prepared to impose, the Government decided to change the practice. As from the date of proclamation of the amending Bill, passports will be denied only where- among other reasons- a warrant exists for an applicant's arrest or the applicant is the subject of an Australian court order or parole conditions restraining him from obtaining a passport or leaving Australia. I suggest that, beyond question, corporate crime is rife and that its insidious effects are being felt throughout Australia. Over the last half decade or more $ 1,000m has been siphoned from investors in one form or another.

Let me just cite a few cases involving individuals who have been associated with corporate crime. I refer firstly to a firm of solicitors, Murray and Moloney of Granville, Sydney. Mr Brian John Moloney has been associated with a deficiency of $175,000 in his trust account. He has not been seen since December 1977. He is believed to have gone overseas. In relation to M.G. Securities Australasia Ltd, Mr Morris Glickman is to face 20 fraud charges, covering an estimated $940,000. That is associated with an investment company and a home building company. He left for Israel in January 1978. Extradition proceedings were commenced in July 1978. In relation to All-Size Cartons Ltd, Mr James Thomas faces 44 charges of obtaining money through false pretences and forgery involving some $228,000. In September 1978 a London magistrate's court ordered his extradition to Australia.

In relation to the Barton group of companies, Mr Malcolm Llewellyn-Dance was charged under a section of the New South Wales Companies Act with making false statements with intent to deceive. Extradition proceedings were commenced on 8 September 1976 to order his return from England. The amount involved was $1.5m. In relation to Employers Corporate Investments Pty Ltd, a director, Jack Rainsford James, has disappeared with funds amounting to three-quarters of a million dollars. The company collapsed in 1976, with deficiencies totalling $5m. It is presumed that he has gone overseas. The company was involved in the investment of superannuation funds.

Both Thomas and Alexander Barton faced initially 28 charges of fraud and conspiracy totalling $4.5m. The prosecution alleged that this amount was unlawfully sent out of the country to Switzerland, ostensibly to buy oil leases in New Zealand, but that no money had been sent in this way at all. The collapse of the Barton group of companies involved shareholders funds amounting to $25m. Extradition proceedings were commenced in Paraguay but the Bartons returned voluntarily in January 1977. The overall estimated cost of extradition proceedings was $lm. I raised the case of Barton four days before he left the country but I could not get any action on it. I can appreciate this Government's lack of sensitivity in dealing with corporate criminals. One has to accept that fact; I accept it. Let us not have this arrant nonsense about protecting the little man. Surely honourable members opposite do not have the gall to claim that that is part of their political philosophy.

If one looks at that summary it would seem that the old practice of the Minister witholding or withdrawing the passport of a person suspected of corporate crime might not have been exercised to its fullest extent, I regret to say. This may have been due to poor communications between corporate officers and the Minister or to a multitude of reasons which it is impossible to ascertain. A comparison of the occasions on which the Minister has withheld or withdrawn passports of persons suspected of corporate crime in the last five years with the number of extradition proceedings commenced in that time show that five passports were withdrawn or withheld as opposed to 60 extradition proceedings. It should be pointed out that all these extradition proceedings do not relate specifically to persons associated with corporate crime. The exact number is not known although it may be presumed that they comprise a substantial proportion of that number. If one analyses the information available on extradition proceedings in the case involving Thomas and Alexander Barton, as I said earlier it indicates that the cost will be in the vicinity of $lm. On a simple cost benefit analysis, the nil costs associated with the Minister's power to withdraw or withhold a passport of a suspected corporate criminal as opposed to the expensive costs of extradition and the loss of investors' money associated with corporate criminals who flee, it would seem that as a result of the proposed new practice in this Bill the Government and the Australian people are paying and will continue to pay a substantial price in the cause of human rights and civil liberties. It never fails to amaze me why society persists in looking down on blue collar crime but not so on white collar crime.

Let me make one important observation. Directors of companies and lawyers who handle trust accounts are custodians of people's assets, whether they are in the form of shares, premiums, life policies, debentures or trust funds. I concede that a director or indeed a lawyer has an entitlement to freedom of movement. No one questions that basic tenet; I do not. However, if a thorough and detailed investigation by competent officers, be they corporate, insurance or taxation, discloses that people's- an individual's, or indeed companies' which lodge for insurance a deposit or claim- assets are in jeopardy, then I suggest that one right must be sacrificed for the other. Let me take the general insurance field of which I have at least some knowledge. I might say that it is not as simple as the Minister suggests. It is not a simple question of hiding behind the twin screens, if you like, one being used as an extension of the judicial system and the other the policy relating to human rights. In reaching a balance in justice, protection and equity, one needs a high degree of specialised knowledge of the complexities of this area, and I suggest that that speciality is not the exclusive preserve of the judiciary.

Let me take up some very telling arguments put in the debate on the Insurance Company Bill in the House of Lords in 1973. This highlights the difference between my Party and the Government. This is what the Minister in charge of that Bill dealing with general insurance had to say. He said:

What is so special about insurance business that it should need so much more surveillance than business of other kinds? . . . People and companies seek the protection of insurance against risks that could cripple them financially, possibly with serious repercussions upon their families and their employees . . . when the policy holder puts down his money he has to put his trust in the integrity and competence of the insurer; if this trust is misplaced his own prudence in insuring is to no avail . . . there are circumstances in which the Government must be in a position to react quickly and appropriately in order to protect the interests of policy holders, interests which may extend many years into the future. . . 'the Government' . . . has carefully considered the arguments which have been advanced in various quarters for hiving off this responsibility to . . . specialised independent agency or to the industry itself.

This is what the Minister in the House of Lords said:

I do not believe that either House of Parliament would willingly see Ministers divest themselves of accountability for the protection of the public in this area . . . Provided that adequate resources are made available . . . there is no reason to suppose that a Government Department is inherently less capable of effective supervision than some other form of organisation . . .

I want to emphasise what regrettably is little understood and that is the disastrous economic backlash on people, companies, employees and on the community when a company such as an insurance company, in particular, goes into liquidation or collapses. Despite all the best endeavours to strengthen the solvency provisions of the Insurance Act or to strengthen the surveillance procedures, powers are needed and must be held in reserve which fully protect the shareholder, the insured, whether an individual or a company, a taxpayer or, equally important, an employee.

There should be powers to ensure that his assets are redeemable, recoverable, protected and available, and are not appropriated, stripped or syphoned off for the exclusive benefit of company directors. They belong to the individual whether they be placed by an individual or a company. Those assets are inviolable. What right has any director to use those assets other than in the interests of the shareholder? He loses that right the moment he attempts to embark upon fraudulent misrepresentation or misappropriation. Let me deal with the collapse in Britain of Vehicle and General Insurance and its effect in Australia. That collapse involved an amount of $56.3m. It occurred because the inspecting officers in the responsible department did not carry out the inspection procedures which should have been done. That sort of thing cannot be tolerated. It cannot be left to the judiciary, I suggest. It requires action between departmental officers and the Minister. If I may turn to the collapse of VIP Insurances Ltd -


Mr Graham - It is fair criticism.


Mr JACOBI - Yes, it is fair criticism. I raised the question of the collapse of VIP Insurances. I put it to the Treasurer (Mr Howard) that following the collapse of VIP in which Mr Makler syphoned off $2m, he left 60,000 policy holders without coverage. I asked the Treasurer, to safeguard the interests of policy holders, shareholders and creditors in the future, whether he would take appropriate action to prevent directors or other officers of companies leaving Australia when such action is recommended as a result of inquiries by either corporate or insurance affairs commissioners. At that time I alleged that it was highly probable that the VIP company was involved in the transfer of reinsurance funds outside Australia and I asked the Treasurer whether he would take immediate steps through the Reserve Bank to block the loopholes. I do not think that was the case with VIP but it may well have been the case.

It is quite obvious to me that the Government or the responsible Minister is unaware of the detailed procedures set down in the Insurance Act of 1975. When we have reached the conclusions which the Government has, we ought to study it. Under the Act there is a provision whereby the Insurance Commissioner can, if he thinks that an authorised insurance company is unlikely to meet its commitments, serve notice on the company -


Mr DEPUTY SPEAKER -(Hon.Ian Robinson) - Order! I wonder whether I can draw the attention of the honourable member to the Bill before the House.


Mr JACOBI -Yes. The Bill before the House is dealing with the question of withholding or the issuing of passports and the matter that is very important to me is the question of what we are going to do about corporate criminals. I am arguing for the status quo and suggesting that the amendment in the Bill ought not to be carried. I forgive you, Mr Deputy Speaker, if someone does not understand the Bill, but I rather assume that I do.

Under the Act, there is a provision whereby the Insurance Commissioner can, if he thinks that an authorised insurance company is unlikely to meet its commitments, serve notice on the company that it provide him with certain specified information within not less than 7 days. In addition, the Commissioner can direct that a specified asset or assets be not disposed of or removed from Australia. If, after receiving the required information, the Commissioner considers the company's position to be unsatisfactory, he can ask it to show cause why an inspector should be appointed to investigate it. If the company fails to show cause, the Treasurer can appoint an inspector.

These procedures are designed to be utterly fair to a company, its officers and staff. However, in consequence of this fairness, a person who is connected with a company affected in the way I have outlined and who thinks that he has committed some criminal act would have adequate warning to remove himself beyond the reach of the law before a full investigation could be carried out and criminal charges laid. As things stand, the Minister for Foreign Affairs could be approached by the Treasurer and asked to exercise his discretion and to withdraw a suspected person's passport at a fairly early stage of proceedings, say when the Commissioner asked for information or when the company was asked to show cause why an inspector should not be appointed. The Commissioner would not advise the Treasurer to seek implementation of the procedures except as a last resort. In this type of situation there may be very grave suspicions that a person has committed a criminal offence but, as often happens, there may not yet be sufficient evidence to convince a jury of the person's guilt.

If the Act is changed as proposed by this legislation, a person who has acted illegally would have very adequate warning of any charges which might be brought against him and would be able to leave the country before sufficient evidence was gathered by an inspector to permit a prosecution to be mounted. That is the important aspect of the proposed change to the Act. As I see it, a judge would not withdraw a person's passport unless a very thorough investigation had been carried out. In other words, there would need to be a prima facie case made out for a person to answer criminal charges and, in the type of situation that I have outlined, I doubt very much that there would be enough time to bring charges before the person could leave the country. That is what happened, I suggest, in relation to VIP. It has happened with a lot of insurance companies, regrettably, throughout the years. I think that the Government ought to understand that when we are dealing with an insurance company we are dealing with a set of circumstances different from those which apply to other companies. If a company collapses on the stock exchange its downstream effect is not so dramatic. But an inspector appointed under the Insurance Commissioner has to be very sure that an examination of a company is held in camera. Nothing will destroy an insurance company more quickly than an indication that it is on the way to liquidation or insolvency. There are involved in this area factors which are vastly different from those in the corporate area or taxation area.

The point I make is that even greater responsibility rests on the Government in cases where people put their trust in an insurance company to cover themselves for a contingency. If that insurance company goes into liquidation, more often then not in Australia, regrettably- there is no trust to underpin such a company- that person carries his own liability. There is no way out of that situation. His whole business and his whole life can be destroyed. What I am putting quite simply is that there are circumstances involved at which the Minister and the Government ought to look seriously. I am arguing sincerely that under no consideration should we allow the situation which is proposed in this Bill. After the Minister has received a report from the Treasurer, the withholding of a passport or the refusal to issue a passport should not be conditional on the requirement of a judicial warrant. It may not be expedient or it may not be right to commence court proceedings against an insurance company- that is, a director of an insurance company- for obvious reasons. What I am suggesting to the Government is that it ought to maintain the status quo, because I think in the prevailing circumstances it is more efficient and more effective.







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