Serious Fraud Office (Abolition and Transitional Provisions) Bill

Hon PHIL GOFF (Minister of Defence) Link to this

I move, That the Serious Fraud Office (Abolition and Transitional Provisions) Bill be now read a first time. I intend that the bill be considered by the Law and Order Committee and that the committee report finally to the House on or before 15 August 2008.

In summary, this bill disestablishes the current small and stand-alone Serious Fraud Office and transfers those important functions, powers, and commercial fraud investigative capabilities into the larger police infrastructure. This bill is the second of four major legislative initiatives by this Government to tackle serious and organised crime in New Zealand. Those four measures are the Criminal Proceeds (Recovery) Bill, the Serious Fraud Office (Abolition and Transitional Provisions) Bill, the Organised Crime (Penalties and Sentencing) Bill, and the Search and Surveillance Powers Bill. The new powers, penalties, and law enforcement improvements provided in these four bills will enable tougher investigation and tougher action against organised crime and gangs. These criminal groups plague our communities with intimidation, illegal drugs, identity fraud, serious property crimes, and violence.

This particular bill must be viewed in the context of the creation of the new Organised and Financial Crime Agency of New Zealand. This agency will be created within the police, and its mission will be to improve the safety and security of New Zealand by combating serious organised and financial crime through an inter-agency partnership approach. Amalgamating the skills and experience of the Serious Fraud Office and the police will bring a new capability to tackle corporate fraud and sophisticated organised crime groups. The Organised and Financial Crime Agency of New Zealand offers a mechanism to increase the attention given to serious and complex fraud, while significantly challenging those engaged in domestic and international organised crime. Accordingly, this bill disestablishes the Serious Fraud Office so that its existing functions and powers can be re-formed into a permanent financial crime task force within the Organised and Financial Crime Agency of New Zealand. Combining the skills, abilities, tools, and resources of these two organisations will allow us to better focus our forensic accountants and financial investigators on the unravelling of complex financial dealings wherever they may occur. These illegal financial arrangements are not the domain just of commercial fraud but the mechanism by which organised crime launders its money, hides its assets, and attempts to create a front of legitimacy for criminal wealth derived at the cost of New Zealanders.

The Serious Fraud Office was established in the wake of the 1987 share market collapse. However, since the late 1980s the nature and scale of fraud offending has changed. Fraud has become more complex and widespread. The results of globalisation, computers, and Internet access provide for levels of anonymity, speed, and identity fraud well beyond those of the 1980s. In addition, more than ever, organised criminal groups in New Zealand are using commercial and financial tools as part of their criminal offending. To their credit, I believe that the small group of people working in the Serious Fraud Office to date have done an admirable job of keeping pace with changes in the commercial fraud sector. They are to be congratulated. But the growth of fraud generally and the expansion of organised crime has led to the development of specialist commercial fraud and financial crime investigation teams in the police and other Government departments. This can result in jurisdictional overlaps, competition for expertise, difficulties with coordination amongst agencies, and reduced overall effectiveness.

Against that background, it makes sense to integrate the Serious Fraud Office within the police to allow the greatest degree of flexibility and coordination in the investigation of serious complex fraud and financial crime. This much-needed pooling of personnel and expertise will act as a resource for investigations around the country. It will ensure that the whole range of illegal and harmful commercial activity employed by both company fraudsters and organised crime can be addressed. Accordingly, Subpart 1 of Part 2 of the bill contains the provisions required to disestablish the Serious Fraud Office and amalgamate its current resources and expert personnel into the police. This includes provisions to ensure that the current Serious Fraud Office investigations and prosecutions continue under the new umbrella of the Organised and Financial Crime Agency of New Zealand.

Since the Government’s announcement that it would amalgamate the Serious Fraud Office with the police, we have received expert advice that much of the Serious Fraud Office’s investigative capability is linked to its document production and compulsory examination powers. These powers are seen as essential tools in the investigation, detection, and unravelling of complex commercial transactions and serious commercial fraud. They often facilitate the cooperation of good corporate citizens whose ability to assist authorities may be hindered by fears of potential civil liability at the hands of less scrupulous clients. The Government is committed to retaining this current investigative capability and ensuring that banks, accountants, and other professional advisers are able to assist the police. However, the Serious Fraud Office’s current framework for these powers is out of step with modern police practices and human rights safeguards that have developed to prevent potential abuse. Thus we have restructured these investigative tools to better reflect our modern expectations of criminal investigations and bring them into line with the Law Commission’s proposed comprehensive reform of the search and surveillance law. These powers will now be the subject of independent judicial authorisation, and applications for these orders will require approval by the Commissioner of Police or his delegate. In those rare instances where compulsory examination orders are sought in respect of individuals whose knowledge is obtained in a social or non-business context, such applications must also receive the additional approval of the Secretary for Justice. I do not consider these new safeguards to be of any hindrance to the efficient investigation of corporate or financial crime. Indeed, they are disciplines that are welcomed by the police.

As this bill relates to the repeal of the Serious Fraud Office Act, the powers provided to police for the investigation of serious or complex fraud are transitional. These powers expire on 31 July 2011 or an earlier date by Order in Council. It is intended that these powers will be eventually overtaken by the wider reforms set out in the Government’s Search and Surveillance Powers Bill, once it is considered and enacted by Parliament.

Finally, I note that clauses 35 to 43 of the bill retain the secrecy provisions from the current Serious Fraud Office Act. This type of investigation requires the analysis of large amounts of commercially sensitive information, and the retention of these provisions ensures that the current high standards of confidentiality are maintained by the Serious Fraud Office and will continue in the hands of the Organised and Financial Crime Agency of New Zealand. Officials will continue to look at this issue across the wider police operation to determine whether similar provisions should be put in place for all police investigations.

Some will question the disestablishment of the existing Serious Fraud Office. However, I have confidence that combining this small specialist office with the greater resources and support structures of police will have only benefits for the investigation of serious fraud throughout New Zealand. I thank those existing staff and experts within the Serious Fraud Office for a job well done, but they should now look forward to the future and the even greater benefits that their expertise will bring to all New Zealanders. Their ability to investigate and capture serious or complex commercial fraud will be enhanced, and now their financial investigation expertise can be used to capture P manufacturers, drug smugglers, gangs, and other violent, organised criminal groups that threaten and destroy the lives of New Zealanders every day. I commend this bill to the House.

SIMON POWER (National—Rangitikei) Link to this

I thank the Minister for outlining the provisions of the bill. If the bill passes its first reading, the Law and Order Committee will welcome the opportunity to deal with this issue. In particular, I note the report-back date of 15 August 2008. It was interesting that when the Organised and Financial Crime Agency of New Zealand was first mooted as a good idea, everything was going to be up and running by 1 July this year—a date that is now well out of reach.

National, of course, supports all moves to deal with gangs and organised crime. But I stand here today in the House to say that the National Party is extremely concerned about the disestablishment of the Serious Fraud Office and will be opposing this bill at its first reading. Indeed, the Minister’s statements about the establishment of the Serious Fraud Office in the wake of the 1987 sharemarket crash were, without sounding insensitive, on the money, and it seems to me that there has never been a more important time, with the large number of finance company collapses that we have seen in recent months, for an organisation like the Serious Fraud Office to do its work, and I will come back to that shortly.

The National Party remains slightly unconvinced about the birth of the Organised and Financial Crime Agency of New Zealand. We know, of course, that the idea of an organised crime agency was launched at a hurriedly put together press conference on the same day that the former Minister of Corrections was due to come home from an overseas rugby trip with one of his officials who had been suspended from work at that time. We know from looking at background documents that very little policy work had been done leading up to that announcement. In fact, the powers that were to be held by the so-called Organised Crime Agency, as it was then known, were not clear, and it took months and months to get information about what sorts of abilities this particular organisation would have.

It seems unfortunate that with that policy work taking so long to get done this Government now wants this legislation rushed back to the House on 15 August, like the electoral finance legislation, the emissions trading scheme legislation, the real estate legislation, and the bail legislation. I urge the smaller parties in this House to think very carefully about voting for legislation that would remove the Serious Fraud Office from our law books. The Government is proposing a very substantial change, and at a time when the papers are describing work that is being done to deal with those people who have lost substantial amounts of money because of finance collapses. I ask other members of the House to consider these comments from an article dated 3 May entitled Blue Chip Investors Battle for Justice: “The Securities Commission is limited in what it can do about Blue Chip because it was property investment. Property is not covered by the Securities Act …”, meaning that the Serious Fraud Office has an extraordinarily important role to play here. In fact, Grant Liddell, the interim appointed chief executive of the Serious Fraud Office who was put in that position by sloppy planning by the Government over the new Organised Crime Agency, said: “The SFO has spent a substantial amount of time and resources” on Blue Chip since the February liquidations. The paper itself describes the Blue Chip issue as “firmly in the soon to be disestablished SFO’s court.” Now, whether or not an investigation goes ahead, we know that Mr Liddell, who is the existing director of the Serious Fraud Office, had this to say: “We have had over 150 investors contact us and have made a large number of inquiries concerning the issues in this case, and we’re nearly at a point where I will determine whether an investigation using our statutory powers ought to proceed.”

What the Government is proposing here today is to replace this body—and let us be clear about this, because the Minister, in fairness to him, did allude to this—that has already undertaken substantial investigations into these issues, with a body that has fewer powers to make those investigations. Although any organisation that has as its goal the tracking down and prosecution of organised crime and gangs is to be welcomed, one cannot help but feel that fraud could well be sidelined if a specialist organisation is not retained to deal with that particular issue. In fact, the Minister of Justice herself has confirmed that gangs will be “very much the focus of this new OFCANZ body”, which is fine in itself, but that does not give us confidence that these complex issues of fraud will be dealt with in the same way.

In his final annual report, retiring Serious Fraud Office director David Bradshaw said that serious and complex fraud remained an issue, but that every year several cases his office investigated would not be regarded a priority by police. Mr Bradshaw also questioned whether the balance of New Zealand’s laws was tipping too far in favour of the rights of defendants. Although I do not stand here to agree with Mr Bradshaw on every matter that he raises, I can say that one thing that would concern National is if, on the removal of the Serious Fraud Office, fraud took second place at the very time when expertise is needed to deal with these issues around so many collapsed finance companies.

National is not convinced that this legislation, nor the background work behind the Organised and Financial Crime Agency of New Zealand, has been well-thought-through. We are not convinced that a body that is also charged with dealing with gangs and organised crimes, but has fewer powers than the Serious Fraud Office, would be as intent or as focused on issues of fraud as the Serious Fraud Office has been. I am not saying that the Serious Fraud Office has not had its difficulties. I am saying that to replace it with a body with a wider mandate across organised crime and gangs, but with fewer powers, at a time when we have seen about $1.6 billion of investors’ money lost, is not a smart thing to do.

On that basis I can stand and let the House know today that, of course, National shares concerns about issues relating to organised crime and gangs, and supports any moves made by any political party to deal to that scourge of society, but wiping out the Serious Fraud Office at a time when specialist fraud powers are needed to deal with the current climate around finance companies seems to lack a considerable amount of thought and foresight.

CHARLES CHAUVEL (Labour) Link to this

It is disappointing to hear that the National Party appears to have changed its position on the Serious Fraud Office (Abolition and Transitional Provisions) Bill, but I suppose it is no surprise given that positions seem to change quite regularly on that side of the House.

Dr RICHARD WORTH (National) Link to this

It is always an excellent outcome to be invited by an opposing member of the House to comment on legislation. I am delighted to take this call in respect of the Serious Fraud Office (Abolition and Transitional Provisions) Bill. My delight, I hope, is tempered by dismay from Mr Chauvel that I will not take the stance he so keenly wants me to take. National opposes this legislation, and I believe that there is very good reason for doing that. I remember, as a lawyer, the circumstances when the Serious Fraud Office was set up in 1990 following the 1987 sharemarket crash, when there was widespread public concern about corporate misconduct.

Just thinking back to those days, some 18 years ago now, I say that there were companies that developed overnight, including the like of Omnicorp and Equiticorp, with practices that were later judged to be extraordinarily shady. So it was that the Serious Fraud Office Act was enacted in 1990. It was modelled on what had been a proven institution in the United Kingdom—the Serious Fraud Office; an organisation of the same name—with the intention that this small, specialist, multidisciplinary agency would fill a gap between existing law enforcement and regulatory agencies. Although it is right to say that since 1990 the nature and the scale of fraud offending has changed, it is also the case that the changes that have occurred are changes that are—and, I am certain, will be—within the scope of the Serious Fraud Office as it is now established to deal with.

I would make the comment, however, that over the period that the Serious Fraud Office has been established, some doubts have been expressed about the culture of that office. Many of the comments are anecdotal. Some of the comments may not be true, but it is right to say—certainly from a lawyer’s perspective—that some of the criticisms of the Serious Fraud Office that have ascribed to some members of that office an almost cowboy character have done nothing to advance the image of that office. So a culture change may well have occurred, but certainly there was a period where the Serious Fraud Office was bedevilled by its image.

I also say that in the world of pursuing so-called white-collar criminals, there are particular difficulties. Those charged with such offences often have substantial means and substantial resources that can be deployed in defence of charges brought against them. So although it is right to say, perhaps, that the nature and scale of fraud offending has changed, nevertheless many of the activities and structures that are now being set up to take advantage of criminal activity are not, in any way, new structures.

One of the major problems, I suggest, with this bill, which the Government seems determined to pass, is that it strips away significant powers that the Serious Fraud Office had. At the time, those powers were seen as powers of substantial constitutional significance. One of those provisions, section 27 of the Serious Fraud Office Act, is headed “Privilege against self-incrimination no excuse”. There is an American expression, “Pleading the Fifth Amendment”, and that is, in effect, claiming the privilege of not incriminating oneself. And here, in that section, that privilege is swept away with these words: “No person shall be excused from answering any question, supplying any information, producing any document, or providing any explanation pursuant to section 5 or section 9 of this Act on the ground that to do so would or might incriminate or tend to incriminate that person.” There was good justification for that provision in 1990, and there remains great justification for the retention of that provision in 2008. Just in the last 12 months we have seen some 19 finance companies collapse. We have seen activities, particularly activities involving the two companies Blue Chip and Bridgecorp, that clearly called for intensive investigation.

It was under section 9 of the Serious Fraud Office Act that the director of the office could require production of documents. He could require—it has always been a male director—a person whose affairs were being investigated, or any other person for that matter, to attend before the director and to answer questions in respect of any matter that the director had reason to believe might be relevant to the investigation. Those are powers needed today to tap into the real issues that touch serious fraudulent activity, yet the Government, with what it says is its passion and its commitment to law and order, would see those provisions removed. This is assuredly not the time to do that.

So here we have the Government moving to make it easier for white-collar crime to occur, and having no real justification, at all, for legislation of the type that would abolish the Serious Fraud Office and set up an organisation called “OFCANZ”—the Organised and Financial Crime Agency of New Zealand. It is held out that this agency will be able to do a better job than the Serious Fraud Office. I think not. I think that the Serious Fraud Office is well resourced. It has a competent director in Grant Liddell, who has an enviable reputation in the law. I think that the Serious Fraud Office is more than able to tackle, on a strong basis, these aspects of white-collar offending that concern us all. So it is that National, I am certain, is correct in stating its opposition to this bill with its lack of merit.

RON MARK (NZ First) Link to this

It is quite interesting listening to this debate. I will put on the record before I start that New Zealand First has agreed to support this bill to go to a select committee. I note, with a degree of satisfaction, that it just happens to be going to the Law and Order Committee, the committee I chair. I point out that that is an interesting committee, because it has seven members: three National members, three Labour members, and one New Zealand First member. I also point out to the House that much of the criticism I have heard here tonight from National members, who have now indicated that National will vote against this legislation at this stage, was not aired when this bill was first publicised. In fact, since it first became apparent that this bill was going to come to the House, the concerns that are now being expressed by the National debating team today have simply revolved around the concerns that New Zealand First raised right at the outset. I am left blinking and wondering, because Mr Power did not exactly express those concerns then. But I have a sneaking suspicion that he has had a bit of counsel along the way somewhere; he certainly now recognises one of the concerns that New Zealand First had right at the outset.

We understand that this is the first piece of legislation within a package of legislation that is all aimed at dealing with organised crime, serious fraud, money laundering, and the recovery of assets gained through the illicit activities of organised crime—recovery of assets legislation. I guess both Mr Power and I were a little bit gobsmacked when we had the recovery of the proceeds of crime bill come to the Law and Order Committee, because contained within that bill we found that the recovery body designated in that legislation to be responsible for taking action to confiscate the assets of criminals was to be the Serious Fraud Office. Mr Power and I sort of looked at each other; I do not know whether we were looking at each other for the same reason but I think we had thoughts going through our heads as to why the Serious Fraud Office would be doing that task.

I guess that one of the other reasons New Zealand First did a double take is that, quite frankly, everybody knows that the relationship between my leader, the Rt Hon Winston Peters, and the Serious Fraud Office over the years has not been a very comfortable one for the office. The battles he has had, and the statements he has made over the years, in respect of its failure to investigate, and its failure to prosecute, certain matters relating to the wine-box inquiry are legendary, and are infamous. The clashes at the select committee table, when it was alleged that the head of the Serious Fraud Office was getting advice from a Minister, are well documented, and people could be forgiven for wondering why New Zealand First would have any interest in or any concerns whatsoever about the notion, the concept, the idea of disestablishing the Serious Fraud Office, because it is an organisation the Rt Hon Winston Peters has often said he has absolutely no faith in.

New Zealand First has been told by the Government that it believes there are many reasons now why the Serious Fraud Office has passed its use-by date and its services are no longer required, and there are reasons why its functions should be picked up by the police. The Government believes that the police have developed a capability with the finance intelligence agency, and that they are quite capable of picking up this role. The Government believes that the Serious Fraud Office has become a little insular and a little isolated, and that it has about 25 new cases a year but that some do not get pursued. That is funny, because in all the time I have sat on the Law and Order Committee, one of the things I have been gravely concerned about is the number of fraud cases that have been taken to the police but never ever picked up. I have three major cases sitting on my desk in my office right now—one of them going back to the Tui Cooperative Dairy Co. days—cases that the police have been repeatedly requested to investigate but they have failed to do so. They have been requested to prosecute, but they have shown little interest in doing so.

So we get to this point with some reservations and some concerns. New Zealand First has agreed to move this legislation forward to the select committee, but we will be looking for a broad view by all participating members of the committee as they look at the total issues and seek to assure the public—by either endorsing the legislation as it is currently written, or amending it—that this new body will be able to perform the functions, the tasks, for which it is going to be made responsible. We are concerned about the denigration of the powers of the investigating body—the Organised and Financial Crime Agency. I think the bottom line is that although we understand the concerns that have been expressed by the Minister today, and by other people, as to the range of powers there now should be within the police fold, or the range of powers that should now be vested in the commissioner through this body, we also do not underestimate the need for such powers when investigating high-level white-collar crime, money laundering, and organised crime on this scale and at this level. We understand the Minister’s reason for having judicial oversight of the exercising of those powers, but at this point I think it would be fair to say that we want to discuss and pursue those matters further.

It worries us that on television tonight there was a lady from Tauranga—90 years of age, with the name of Gwendoline—who stands to lose her home as a result of Blue Chip’s activities. It interests us that the allegations and accusations are swirling around Mr Bob Clarkson right now. We wonder why he is not now to stand in Tauranga, but we know that many people in Tauranga are talking about him and Blue Chip. We saw a lady on television tonight who is losing her home, and we wonder to what level and depth the Serious Fraud Office has already commenced its investigations into Blue Chip’s activities. So the National Party and Dr Worth are quite right to highlight the need for Blue Chip to be investigated thoroughly by a fully competent body whose powers have not been in any way diminished.

New Zealand First proudly stands by the fact that its reputation has been as a party that wants to clamp down on and wipe out organised crime as much as possible. We want to see credible law enforcement agencies that are empowered to do so. We believe that for far too long the police have not lived up to their obligations and responsibilities with regard to investigating and prosecuting fraud. So we want to be absolutely assured, in supporting such a bill as this one, that the police will pursue with vigour their responsibilities and that we will not continue to hear in the future the same sorts of excuses and the same sorry tales that we have been hearing for the last 10 years about police failure to investigate fraud.

This legislation will place a serious and onerous task upon the New Zealand Police—a task we do not expect them to shrink from. If in the examination of this bill and in the hearing of submissions New Zealand First is in any doubt whatsoever as to the commitment, the capacity, and the drive of the New Zealand Police to investigate and prosecute serious fraud with vigour, then there is a very strong possibility that we will not support this bill.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Tēnā koe, Mr Assistant Speaker. Tēnā tatou katoa e te Whare. Tēnā koe, Anikaaro. Yesterday the whole context of fraud, corruption, and serious crime took an interesting and, I have to say, a bloody pleasing turn—

CHESTER BORROWS (National—Whanganui) Link to this

I rise to speak in respect of the Serious Fraud Office (Abolition and Transitional Provisions) Bill to clarify a number of issues raised by my colleagues Simon Power and Richard Worth and in response to some of the comments made by Mr Ron Mark. I want to look at the history of the Serious Fraud Office Act 1990. I note that that legislation had its third reading in June 1990, a month before the New Zealand Bill of Rights Bill was introduced to the House.

National’s major problem with the bill as it reads at the moment is that it takes away a number of the serious investigative powers that are open to the Serious Fraud Office. The reason why it is said that these powers should be removed is that the legislation predates the New Zealand Bill of Rights Act. It seems strange to me that the Serious Fraud Office bill would have been introduced to the House and then given its third reading within a month of the introduction of the New Zealand Bill of Rights legislation, and not be given the protections of the New Zealand Bill of Rights Act by the same Government that introduced it, without good cause.

I say to the House that good cause exists right now. We have not seen an environment like this, with a number of finance companies going under and mum and dad investors being hurt, since the crash of 1987. Of course, the Serious Fraud Office grew out of the 1987 crash. It is interesting to note the Rt Hon Jonathan Hunt’s comments at the time, in respect of the Serious Fraud Office Bill. During its second reading debate he said: “The bill provides the Serious Fraud Office with forceful and rigorous powers to combat serious or complex fraud. It also provides protections to deal with possible abuses of those powers. While the passage of the bill will not, of course, eliminate fraud, it will assist in the battle against serious and complex fraud.” He commended the bill to the House. The comments he made at that time, from the other side of the House, are just as fitting today as they ever were.

It was also interesting to note the comments made before tea by the Hon Phil Goff. A comment was made in respect of companies like Blue Chip going under. He made some disparaging comments in relation to Blue Chip and asserted that National wanted to protect its mates. We have to remember just who has been affected by the collapse of Blue Chip and other similar companies.

One of the victims happens to be my mother-in-law. She is a lady who had very little money but she had an asset, which was a nice home in Nelson. It was worth a lot of money. She decided she wanted to shift to be close to her family, which includes me, fortunately. She shifted from Nelson to South Taranaki. She was able to buy a house of much less value than the one she sold, so she had a significant amount of money to invest. Her money was invested, on the advice of advisers, in companies, of which Blue Chip was one and Bridgecorp was another. Those companies went under, and she did her dough. She is now 82 years of age and does not have much, except her home, and not a lot of assets. Now is not the time to be withdrawing those powers from the Serious Fraud Office.

National believes that the Serious Fraud Office has had some concerns, and of concern is the number of million-dollar costs that have been awarded against it. Also, we note the way the investigations have been run over time. A number of serious charges have been thrown against various defendants, and gradually they have fallen away. A number of companies have gone down for what have been a large number of more trivial offences, such as using a document, and the rest, which any constable in the Criminal Investigation Bureau could prefer and successfully prosecute.

National’s concern, though, is not only the reduction in powers under the Serious Fraud Office Act and their dissipating away once they have moved to the police but also the state of fraud investigation in this country at the moment at the hands of the police.

Last year in the review of the Police Act a number of us heard speakers at a seminar talking about what the review would mean. One of those speakers was a man called Ron McQuilter, the Managing Director of Paragon New Zealand. He started his discussion with a true case, and I will read just a few lines of it to the House: “John is a senior auditor with a Government department. In September last year John lodged a complaint with the police that an employee had stolen $80,000. After hearing nothing for 4 months, in January 2006 John wrote to the police inquiring as to the progress of his complaint. Ten days later they called to say they could not find the file, but they would get back to him. On 26th February 2006, some 5 months after he had laid the complaint, John received this letter.” Mr McQuilter proceeded to read out to the seminar a letter he had received from the police that said that the police would not be investigating the complaint—in spite of the fact that it was an $80,000 theft and the offender was identified—for several reasons out of a possible five reasons: it was not a significant priority at that time, they did not have the staff to do it, and so on.

Later on, Mr McQuilter got in touch with the detective senior sergeant who had written him the letter. When he spoke to him, the detective senior sergeant said: “We can’t handle it at this time. We can’t give a time frame, and we don’t like it any more than you do.” The fact is that corporate fraud, or fraud in general, has not been listed as a key strategy of the police for a number of years because they are focusing on violence, drugs, traffic, organised crime, burglary and theft from or of cars.

The question then is: can it really be that bad? Mr McQuilter said: “Well, let us consider the police statistics themselves.” Police statistics for the year 2005-06 detail that the resolution rate for dishonesty complaints is 15.5 percent out of 36,407 complaints in Auckland alone, and 32,125 complaints in Manukau. That means that in these two districts alone some 57,491 complaints per year, or 4,790 complaints per month, are not resolved. The total number of non-resolved dishonesty complaints for the entire country is 184,965 per year, or 15,500 per month.

The problem is that the police do not have the ability, either through resources or manpower, or for whatever reason at the moment, to do the job on fraud that people expect them to do. Moving the Serious Fraud Office into the police poses a number of concerns. One of them is that they will be used to clear a backlog of other fraud that is not being attended to at the moment. The other concern is that part of the Organised and Financial Crime Agency of New Zealand initiative will see the fraud aspect being run alongside such things as a national gang strategy and operations relating to gangs. Gangs will be a distraction. There needs to be an emphasis on gangs. The Minster has admitted she has dropped the ball on gangs when she admitted she dropped the ball on P. But that emphasis will be to the detriment of dealing with fraud investigations.

The initiative for this particular legislation came in only in the last half of last year, in the middle of a Law and Order Committee consideration of the Criminal Proceeds (Recovery) Bill. It was done ad hoc and sloppily. In December the Minister was sent by Cabinet to go back and have another think about it. We now find it before the House in a form such that Government members cannot tell us how it is will work. In answers to questions I have received back in the last 2 days, the Minister cannot even tell us how many people will be working in the office, how it will be manned, or what other staff requirements there will be.

National is not prepared to support this piecemeal, on-the-trot legislation at this stage, although we see that it has a number of laudable objectives. We will deal with clear law that is open and transparent before the House and before the New Zealand public. That is what we are here to do and that is what we as members of this House are tasked to do.

NANDOR TANCZOS (Green) Link to this

The Greens are supporting this bill going to a select committee. However, we do so with a number of reservations and after some lengthy discussion among ourselves. I guess we take a position similar to the one outlined by Ron Mark on behalf of New Zealand First.

The Government has made the point that the nature and scale of fraud offending has changed since the 1990s. Fraud, it says, is now made more complex by globalisation, computer and Internet access, and identity fraud. It talks about the anonymity and speed that these things allow. It says that although there still exists a category of fraud that is strictly the criminal abuse of commercial practice and not covered by the taint of organised crime, there is a clear track of convergence between organised crime interests and the commercial world. The more serious organised criminal enterprises, the Government says, are using commercial and financial expertise as devices not just to launder the proceeds of the crime or to accrue assets but also to utilise financial processes and decision makers within the system for criminal financial gain.

This may be so, but it does not demonstrate to us that a dedicated Serious Fraud Office is no longer required. Although there is no doubt that organised criminals use complex financial transactions both to hide their wealth and to create further wealth, that has always been the case, and I am not sure exactly why that is an argument for disestablishing the Serious Fraud Office. So our first concern is that the Government has not clearly demonstrated the need for this legislation.

I heard Mr Goff speak at the beginning of this debate about how this legislation will allow the police to crack down on drug dealers in particular. I guess he does not mean the shareholders in DB Breweries Ltd, Lion Nathan Ltd, Philip Morris, British American Tobacco, or Glaxo Smith Kline. I know that these kinds of bills—and the Criminal Proceeds (Recovery) Bill is another very good example—always hold up drug dealers as being the most heinous type of criminal, despite drug transactions being made generally on a “willing buyer, willing seller” basis. But in this focus on targeting drug dealers, the fear of many is that white-collar criminals, who actually defraud both the Government and ordinary people of their property, who often leave elderly people robbed of their savings, and who reduce unwary investors to penury, will become simply a secondary concern for investigators. That is not to say that gangs do not engage in activity that robs often the poorest people and causes tremendous hardship in their communities; it is simply to reiterate the point made by a number of previous speakers that the effects of crime are not lessened by being of a corporate nature and that, unfortunately, the discussion focused on crime and criminal investigation too often centres on a class-based myopia. So that does reduce the focus on white-collar crime.

In any case, when we look at what the organised crime unit is likely to spend most of its time doing, there is no doubt that busting gangs is much more sexy work for the police, and actually also a whole lot easier, because unravelling the complex strands of financial crime is an enormously difficult task. Perhaps it is that complexity that has meant that the Serious Fraud Office has not been as effective as many had hoped when it was established.

Certainly, it is no incentive for the police to go after white-collar criminals. This, I guess, is really our second reservation, because although the Government has assured us that the focus on serious fraud will not be lost in this new organised crime unit, I am not at all sure what the guarantees are within the bill. I am unclear what will lock in a focus on serious fraud, and without such an assurance we cannot really be satisfied. That is not to say that the Serious Fraud Office itself has been satisfactory in this area, anyway, but the solution to that, as my colleague Mr Harawira indicated, may well be more a case of boosting the Serious Fraud Office, perhaps reforming elements of its legislation, and ensuring that it undergoes a meaningful culture change rather than wrapping up the agency and folding it into an organised crime unit.

So, as I indicated, the Greens are supporting this bill going to the select committee, because there are issues here that need to be properly discussed and aired, and we think it is important to provide an opportunity to hear from the public, and from experts in the field, about the best way forward in addressing these serious issues. But we give no assurance of further support unless the evidence more clearly stacks up that this is the best way to move forward.

Hon NANAIA MAHUTA (Minister of Customs) Link to this

I move, That the Serious Fraud Office (Abolition and Transitional Provisions) Bill be considered by the Law and Order Committee and that the committee report finally to the House on or before 15 August 2008.