Corporations Act, major offences are generally prosecuted by the DPP. This occurs in accordance with a Memorandum of Understanding (MOU) between the DPP and ASIC: see MOU dated 1 March 2006, which is available on the ASIC website.
118 Welsh, above n 16, p 21.
119 Ibid, p 20, Table Two: Number of criminal prosecutions commenced and civil penalty proceedings issued alleging a contravention of Corporations Act 2001 (Cth) ss181,182 ,183 or184.
120 Ibid. In 2001, eg, Welsh states that the total number of criminal prosecutions under s 184 totalled 12 as opposed to 0 civil penalty applications under ss 181, 182 or 183. It should be noted, however, that in June 2001, ASIC instituted civil penalty proceedings in the HIH case against Adler, Williams and Fodera, while in December 2001, it commenced civil penalty proceedings in the One.Tel case against John David (Jodee) Rich and Bradley Keeling, its former Joint Managing Directors, Mark Silbermann, its former Finance Director and John Greaves, its former Chairman: see author’s previous work for a fuller discussion of these proceedings: Comino, “The enforcement record of ASIC”, above n 86, pp 196-200 and pp 206- 207.
121 But see discussion below, nn 130 - 131.
See ASIC, “Bo Long investment scheme, three charged”, Media Release 03-019, 17 January 2003.
122 See ASIC, “Gold Coast resident pleads guilty”, Media Release 03-025, 24 January 2003. Kawada pleaded guilty to 16 charges under the Corporations Act and Queensland Criminal Code, which included pleading guilty to two counts of failing to act honestly in the exercise of his powers and discharge of his duties as an officer of the company.
124 See ASIC, “Melbourne solicitor sentenced on ASIC charge”, Media Release 03-139, 29 April 2003.
125 See ASIC, “Tasmanian directors to stand trial on insolvent trading charges”, Media Release 03-153, 16 May 2003.
126 See ASIC, “Former Shepparton company director jailed”, Media Release 03-161, 22 May 2003.
127 See ASIC, “Launceston company director sentenced to twelve months jail”, Media Release 03-163, 23 May 2003.
128 See ASIC, Adelaide company director jailed”, Media Release 03-275, 1 September 2003.
129 See discussion above, n 92.
130 Discussed above , nn 122 – 129.
131 See H. Bird, D. Chow, J Lenne and I. Ramsay, Research Report: ASIC Enforcement Patterns, Centre for Corporate Law and Securities Regulation, The University of Melbourne, 2003, p xiii. See also H. Bird, D. Chow, J Lenne and I. Ramsay, “ Strategic Regulation and ASIC Enforcement Patterns: Results of an empirical study” (2005) 5 Journal of Corporate Law Studies 191.
132 See Bird et al, ibid (2005), p 227. Civil enforcement actions were brought to court in 122 matters and penal actions were brought in 1316 matters, but because many of the latter cases involved external administration, if these were excluded, the number of penal matters brought to court was reduced to 450.
134 Hawkins, Environment and Enforcement, above n 25
135 Ibid, pp xii- xiii.
136 Ibid, p 205.
137 In the language of the Cooney Committee, above n 4, pp 188 and 191, this conduct can be equated with the most serious contraventions, those ‘genuinely criminal in nature’, that is, where company directors acted ‘fraudulently’ or ‘dishonestly’, recommending that criminal sanctions apply in such cases.
138 See ASIC v Vizard (2005) 54 ACSR 394. ASIC commenced civil penalty proceedings against the defendant, seeking a declaration that the defendant’s conduct as a director of Telstra Corporation Limited (Telstra) had contravened Corporations Act, s 183 (formerly Corporations Law, ss 232(5) and 183) by improperly using secret boardroom information to trade in shares in three listed companies in which the telco had an interest to gain an advantage for himself and/or others.
139 In ASIC v Vizard (2005) 54 ACSR 394 at  405, Finkelstein J stated: “The defendant was a director of Telstra, one of Australia’s largest companies. He owed his position to the belief that he was honest and capable. Highly confidential information came his way in his capacity as a director. He used that information for the purpose of benefiting himself and his family. This was both dishonest and a gross breach of trust. Not only that, the defendant well knew that what he was doing was wrong. His breach of trust was carefully concealed and only discovered by chance. Everything was done for personal gain…It was only because of the vagaries of the marketplace that the defendant did not realise his gain.”
140 The laying of criminal charges against Adler, for instance, arising out of his conduct as a director of the HIH group of companies was vindicated by the following comments made by Dunford J of the New South Wales Supreme Court in sentencing him to jail: “The offences are serious and display an appalling lack of commercial morality…Directors are not appointed to advance their own interests but to manage the company for the benefit of its shareholders to whom they owe fiduciary duties… They were not stupid errors of judgement but deliberatelies, criminal and in breach of his fiduciary duties to HIH as a director”: see ASIC, “Rodney Adler sentenced to four-and-half years’ jail”, Media Release 05-91, 14 April 2005 (emphasis added). See also R vAdler (2005) 53 ACSR 471.
141 See discussion below, AWB.
142 See discussion below, James Hardie.
143 On 4 July 2005, when ASIC announced its decision to bring civil penalty proceedings, it issued a media release stating: “ASIC has filed a Statement of Agreed Facts with the Federal Court of Australia in which Mr Vizard agrees with the facts that give rise to the allegations. Mr Vizard has agreed with ASIC that it is appropriate for the Federal Court to declare that he contravened his duty to Telstra in using the Telstra information”: see ASIC, “ASIC commences civil proceedings against Stephen Vizard”, Media Release 05-190, 4 July 2005. Although Vizard tried to deny his insider trading confession: see B. Speedy, “Vizard denies insider trading confession”, The Australian, 18 July 2005, p 29, he later cooperated with ASIC and admitted his insider trading in telecommunications shares: see discussion, below n 159.
144 See Speedy, ibid.
145 See J. Hewett, ‘Two men and a case to answer’, AFR, 23-24 July, p 20.
146 Ibid, quoting Hartnell.
147 See Gilligan, Bird and Ramsay, above n 18, pp 38-42. Their research found that the relationship at the time (mid-1998) was positive across the regions, although there was some variation. See also Farrar, Corporate Governance, above n 43, pp 315-320. Farrar explains how the differing attitudes of ASIC and the DPP have, in the past, resulted in relations between the two organizations becoming strained, although he believes that the relationship has since settled down. ASIC sees its character as commercial and professional, clearly having an affinity with commerce, which is in contrast to the legal culture of the DPP, whose primary role is criminal law investigations and prosecutions. Tensions reached crisis proportions in September 1992, after Michael Rozenes of the DPP criticised Hartnell, then ASIC Chairman, as the ‘gentleman regulator’ who preferred to focus upon easier civil actions rather than harder criminal prosecutions, which led to the then Attorney-General, Michael Duffy intervening and issuing a written direction telling both parties to co-operate in the prosecution of serious criminal offences. An MOU was signed, dated 22 September 1992, detailing the close consultative steps involving ASIC and the DPP right from the start of an investigation and making it clear that the decision whether ASIC could lay criminal charges rested with the DPP. This MOU has been replaced by a new MOU expressed to be “to substantially the same effect”: see discussion, above n 117.
148 But note that concerning enforcement of violations of securities laws, the SEC and Department of Justice cooperate in this area.
This problem of the DPP’s general insistence on a signed witness statement before it will prosecute has been long recognised: see, eg, J. Longo, “ASIC powers -where to from here?” (2001) 21 Australian Corporate News 385, p 386. Longo was the National Director of Enforcement of ASIC until March 2000.
149 It should be noted, however, that Longo has explained that generally the reason that the DPP will not decide to prosecute in the absence of signed statements from material witnesses even where a signed transcript of that person’s evidence on oath is available under the ASIC Act, s 19, is because it is not in a form that can be included in a hand up brief, since it could contain inadmissible evidence. Accordingly, another solution is to enact reforms to strengthen ASIC’s powers to compel any witness who has given evidence in an examination to sign a written statement of that evidence so that it can be used in the prosecution process as were proposed (but not proceeded with) by the Financial Services Reform Bill 2000 (Cth).
150 See Corporations Act, s 1311 and Sch 3.
151 See, eg, Criminal Code Act 1899 (Qld), s 408C, which deals with fraud, where offenders may be liable to imprisonment for ten years in certain circumstances.
152 See R v Adler (2005) 53 ACSR 471. See also Adler v R (2006) 57 ACSR 675, where Adler’s appeal against this sentence was dismissed by the NSW Court of Criminal Appeal.
153 See Corporations Act, s 1316.
154 See A. Cameron, “Enforcement, Getting the Regulatory Mix Right” (1994) 4 Aust Jnl of Corp Law 121 at 123. ASIC was not prevented from bringing criminal proceedings against well-known Melbourne business identity, Solomon Lew, concerning the Yannon transaction, which cost the retailing group Coles Myer $18 million because the action was statute-barred. But, the fact that the matter was over five years old when ASIC’s investigation commenced highlights the difficulties that Cameron discusses. The matter did not become public until 1995 when the then finance director of Coles Myer, Philip Bowman, came forward about the deal that involved a shelf company, Yannon Pty Ltd purchasing $25 million in preference shares in Lew’s company, Premier Investments Ltd from FAI Insurances Ltd, where Coles Myer assisted with the purchase by providing guarantees: ASIC News, “Yannon too hard: ASIC bows out” (2000) 1 Australian Corporations Law – Bulletin, 14 January 2000: see http://online.butterworths.com (Accessed 21 March 2000).
155 Cameron, ibid.
156 See ASIC v Vizard (2005) 54 ACSR 394. On the issue of disqualification, even though ASIC had requested a five-year ban in the light of Vizard’s admission of his wrongdoing and the contrition he expressed, Finkelstein J at - found that: “disqualification for 5 years is not sufficient. I appreciate that I need not be too concerned with specific deterrence. The defendant’s very public disgrace suggests that it is unlikely that he will be given the opportunity of again becoming a director of a sizeable publicly listed company. In any event, it is common ground that he is unlikely to offend again. My real concerns here are with punishment for retributive purposes and general deterrence, but principally the latter. Indeed general deterrence is of primary importance in cases of this kind. A message must be sent to the business community that for white collar crime “the game is not worth the candle”, to use the language of a Canadian judge, McDermid JA, in R v Jaasma (1976) 1AR 553 at 555”. On the other hand with respect to the pecuniary penalties, Finkelstein J at - thought that although Vizard’s actions were “within the category of a worst case for an offence of this type. Nonetheless it would be inappropriate to impose something close to the maximum pecuniary penalty ($200,000) for each contravention. First to impose the maximum penalty would be to ignore those factors that the law says should be taken into account in sentencing. Here the significant factors are the public disgrace which has been suffered by the defendant and his family, the genuine and unreserved contrition expressed by the defendant and the admissions made by him, which in this case certainly saved the time and expense of what might otherwise have been a rather lengthy trial. Second, there is the submission by ASIC, supported as it is by the defendant, that the appropriate penalty for each offence is $130,000. The cases, including decisions of the Federal Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; 141 ALR 640 and Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (2002) ATPR 41-880;  FCA 619, hold that I should not depart from the penalty recommended by the parties unless it is clearly out of bounds”. He went on to criticize the proposed penalty as “low” and said that: “Left uninstructed I would have imposed a higher penalty, but not substantially different from that suggested”, although he added: “If this penalty is insufficient, parliament should increase the maximum”, suggesting that it may require review.
157 See, eg, J. Mc Cullough, “One law for rich, another for richer”, The Courier Mail, 30-31 July 2005, p 27. Mc Cullough wrote:“[H]ere is Steve Vizard, clearly an insider abusing a position of trust, potentially many times - not just once - and he gets a slap on the wrist.”
158 See discussion above n 89.
159 Australian Securities and Investments Commission v Macdonald and Others (No 11) (2009) 256 ALR 199; 71 ACSR 368;  NSWSC 287; BC20090303649; and Australian Securities and Investments Commission v Macdonald and Others (No 12)  NSWSC 714; BC200907531.
160 See ASIC, “James Hardie Group civil action”, Media Release 08-201, 5 September 2008. Interestingly, it should be noted that, in addition, to announcing that it would not bringing any criminal proceedings against former James Hardie directors or executives, ASIC announced that it would discontinue its indemnity claim, which was part of the civil action and which sought an order requiring JHINV to execute a deed of indemnity up to a maximum of $1.9 billion, or such amount as James Hardie Industries Limited (JHIL) or its directors considered necessary to ensure that JHIL remains solvent, for example, as a consequence of incurring liabilities in regard to asbestos related claims. In this media release, ASIC stated that the “need for that claim has been superseded by the Final Funding Agreement becoming fully operational”, explaining that when it commenced the civil penalty proceedings in February 2007, that it had indicated to the market that if the conditions precedent to the Final Funding Agreement were satisfied which it believed at that time have been met, that it would not pursue the indemnity claim against JHINV. But note discussion at n 165.
161 The under-funding by this amount was one of the findings of the ‘Jackson report’, which is discussed, above n 45.
162 See M. Jacobs, “Civil case only for ex-Hardie people”, The Weekend AFR, 6-7 September 2008, p 2 (emphasis added). But note recent developments, where James Hardie is now claiming that the financial crisis and downturn in the housing market and construction industry have affected its operating cash flow position so that it may not be able to meet its obligations to fund future claims. In fact, James Hardie did not make a payment in 2009 and it seems that it will also not make a payment in 2010. Further, it has been reported that the company would be seeking a government bail-out of about $200 million to enable it to meet its obligations: see A. Grigg and M. Skulley, ‘Hardie fund seeks $200m help’, AFR, 18 August 2009, p 3.
163 In reality, ASIC does not act alone in major matters: see earlier discussion, n 117. Besides ASIC and the DPP, the Oil-for-food Taskforce is also investigating the issuing of criminal proceedings in this matter. The Australian Federal Police which is part of the taskforce, however, has recently dropped its investigation, but ASIC’s criminal investigation is continuing: see J. Eyers, ‘AFP drops inquiry into AWB officers’, The Weekend AFR, 29-30 August 2009, p 7.
164 Westpoint, which raised funds for property development projects offering high returns to unsophisticated investors, collapsed in February 2006 owing about $300 million to about 4,000 investors.
165 Administrators were appointed on 23 March 2007 after the Fincorp group of companies, which specialised in property development and investments and which raised funds from the public to carry out these activities through ‘first ranking notes’(First ranking notes were notes issued by Fincorp secured over its assets by a floating charge) and ‘unsecured notes’ (Unsecured notes were issued by Fincorp but not backed by any charge or other security) collapsed, owing over $200 million to note holders. There were about 8,000 investors in Fincorp in first ranking notes and unsecured notes.
166 ACR, which was placed into voluntary administration on 28 May 2007, was a property development financier that used a similar business model to that of Fincorp, raising money from the public through “Deposit Notes”. Deposit Notes are unsecured notes issued by ACR, the repayment of principal and interest of which rank behind repayment of secured debt by ACR and equally with other unsecured loans owed by ACR. ACR had issued approximately $330 million of Deposit Notes to about 7,000 investors.
167 Opes Prime collapsed in April 2008.
168 See, eg, R. Harley, “Collapse! Why more investors are taking the fall: Regulators are under pressure as more innocent investors get burned”, The Weekend AFR, 2-3 June 2007, pp 1, 21-23.
169 See, eg, M. Drummond, “Gentler ASIC steady as he goes’, AFR, 11 May 2007, p 81.
170 See ASIC, Annual Report 2007- 2008, p 5, for the results of that stakeholder survey. The full survey results are available on the ASIC website, www.asic.gov.au/strategicreview (Accessed 10 July 2009).
171 ASIC’s strategic review and restructure are discussed below, nn 194 – 198.
172 This expression is used by Ayres and Braithwaite, Responsive Regulation, above n 22, p 44.
173 See ibid, pp 44 - 47.
174 Ibid, p 44. Ayres and Braithwaite explain that they are not interested in how this is accomplished in terms of the genetic endowments, rational calculation, or human training of the dog, but rather, they are interested in the strategic effects through which it is accomplished.
176 See Hawkins, Environment and Enforcement, above n 25.
177 See Ayres and Braithwaite, Responsive Regulation, above n 22, p 45. Ayres and Braithwaite refer to the costs of managing such an appearance, including in backsliding and cross-negotiation to extricate the agency from the risk of an appeal or an unsuccessful prosecution. They also raise the problem of whether a regulatory agency could sustain such a fragile image of invincibility in a more litigious business regulatory culture, such as in the United States.
178 But note the problems associated with the ASIC Act, s 19, discussed above nn 146 – 148 and 151, that bedevilled ASIC’s ability to bring a criminal case against Vizard. Additionally, ASIC’s investigation and enforcement powers are narrower than some of its foreign counterparts, such as the SEC, where there is arguably a case for its powers to be expanded to achieve improved enforcement action: see T. Middleton, “ASIC’s investigation and enforcement powers-current issues and suggested reforms” (2004) 22 C & S LJ 503.
179 See Ayres and Braithwaite, Responsive Regulation, above n 22, p 46.
180 Even though ASIC commenced civil penalty proceedings in December 2001, only proceedings against two of the defendants namely, Keeling and Greaves have been finalised. The proceedings against Rich and Silbermann are yet to be concluded. Proceedings against these defendants have been the subject of many procedural challenges, including a successful appeal to the High Court in ASIC v Rich (2004) 220 CLR 129; 209 ALR 271. For a detailed discussion of these proceedings: see the author’s previous work, eg, Comino, “The enforcement record of ASIC”, above n 86, pp 205- 208.
181 See, eg, J. Collett, “Human cost of ASIC failures”, The Sydney Morning Herald, 6 June 2007, p 8; and P. Manning, “Danger do not enter”, AFR, 21 July 2007.
182 See later discussion at n 193.
183 See also Dellit and Fisse, above n 18, p 593.
184 Ibid, pp 593- 594. This approach departs from the traditional rule-bound ‘command and control’ conception of legislation.
185 Ibid, pp 595- 596.
186 Ibid, p 36.
187 See also ALRC, Background Paper 7, “Review of civil and administrative penalties in federal jurisdiction”, above n 40, p 10.
188 Ibid, citing F. Haines, Corporate Regulation: Beyond Punish or Persuade, Clarendon Press, Oxford, 1997, p 219.
189 Ibid, citing C. Parker, The State of Regulatory Compliance: Issues, Trends and Challenges, PUMA/REG (99) 3 Report prepared for the OECD Public Management Committee, p 51.
190 See, eg, The Editorial, “Fincorp shows ASIC needs more intelligence”, The Weekend AFR, 31 March-1 April 2007, p 62 (emphasis added). Westpoint investors were offered a “fixed” return of 6 percentage points above bank deposit rates, a margin that should have reminded them of the old saying that ‘if something sounds too good to be true, it usually is’, while Fincorp was offering up to 8.5per cent on its current debenture issue and up to 10 per cent on past issues to its investors. See also the results of the stakeholder survey discussed above, n 173, for evidence of this point.
191 See ASIC, “ASIC announces executive appointments”, Media Release 08-191, 22 August 2008.
192 See ibid, for details of the new structure and appointments, which became effective on 1 September 2008. ASIC’s new ‘financial economy’ structure is made up of twelve stakeholder teams, and eight deterrence (enforcement) teams. The stakeholder teams include accountants and auditors; insolvency practitioners and liquidators; corporations; market participants; investment managers; super funds; and deposit-takers, credit and insurance providers, while the new deterrence teams have been formed “to bring sharper focus to the investigation and prosecution of serious misconduct”. Each team is headed by a Senior Executive Leader. The introduction of Senior Executive Leaders replaces two previous levels of senior management by combining Executive Directors and Directors into one level. Senior Executive Leaders also head ASIC’s new ‘real economy’ teams. In addition, ASIC has created a new role of Chief Legal Officer (CLO), which is akin to Corporate General Counsel of large companies, who reports directly to the Commission. The CLO also leads ASIC’s new team of Special Counsel, and contributes to legal professional development for the whole of ASIC. The role of Special Counsel is to provide legal, strategic and other input into major cases and to assist the deterrence teams. Concerning recruitment in regard to the twenty-five positions set out in this media release, the appointments made by ASIC involved internal promotions (sixteen) and external recruiting (nine). See also J. Cooper, ASIC hot topics, an edited version of a presentation made to the Institute of Actuaries of Australia/Finsia, Business Luncheon, Sydney, 17 July 2008, p 4, ASIC website (Accessed 11 November 2008). This is what the ASIC Deputy Chairman had to say about the strategic review when he posed the question: “What does it mean for the industry? - The aim is for ASIC to: better understand the markets it regulates; be more forward-looking in examining issues and assessing systemic risks; be much clearer in outlining to the market why it has chosen to intervene and the behavioural changes it is seeking; and have a clearer set of priorities (principal priorities being retail investors and insider trading, market manipulation and disclosure).” On the issue of how this would be achieved, Cooper listed that ASIC would make additional investment in market research and analysis; appoint an experienced external Advisory Panel drawn from sectors of the economy to advise ASIC’s Commission on market developments and potential systemic issues; abolish the former ‘silo’ directorates of ASIC and replace them with 18 ‘outward-focused’ stakeholder teams, eg for investment managers, investment banks, superannuation funds, financial advisers, retail investors and consumers and others; recruit more senior-level personnel from the markets; appoint more Commission members; and train up existing staff through industry secondments.
193 But note that previous attempts by ASIC to improve its workings have not always met with success. The expansion of the Compliance directorate “to give greater emphasis to real-time regulation” in 2006, for instance, did not prevent losses from similar collapses as that of Westpoint. The Compliance directorate was expanded in the aftermath of the Westpoint collapse and criticism that ASIC could have prevented the massive losses from it if it had been more proactive: see ASIC, “Working for Australia: ASIC Annual Report 2005- 06”, Media Release 06- 378, 31 October 2006.
194 See A. Jury, “Chanticleer- Regulator tries to reinvent itself’, AFR, 9 May 2008, p 76.
195 See A. Midalia, “ASIC moves to boost street cred”, The Weekend AFR, 23-24 August 2008, p 7. These appointments include former ASX executive and AXE ECN Pty Limited Chief Executive Officer, Greg Yanco as head of ASIC’s market participants (stakeholder) team within its ‘financial economy’ branch and Victorian barrister, Michael Kingston, as ASIC’s CLO.
196 See also Dellit and Fisse, above n 18, p 608.
197 Ibid, p 583.
198 Ibid. See, eg, McCullough, “One law for rich, another for richer”, above n 160. This article reported on the apparent injustice of ASIC’s treatment of Vizard in failing to bring criminal proceedings against him when there was evidence of deliberate and repeated dishonest conduct, whereas other defendants who were guilty of the same sort of conduct faced criminal actions.
199 Ibid. See, eg, earlier discussion at n 159, where ASIC was criticised by the court for requesting only a five-year ban on managing companies against Vizard.