If integrity commissions shouldn’t ask nasty questions in public, why can, and do, royal commissions?
The Hayne Royal Commission gave a very hard time to quite a number of bankers and financial advisers, both during its hearings and in its reports. Scott Morrison, who was Treasurer when it was set up fought very hard against its establishment, but once it was set up, tut-tutted with the best of us when it became clear that some of Australia’s most senior businessmen had the ethics of polecats.
Banking careers were ruined at many levels of the major banks. Among the casualties were chairs of bank boards, chief executives, managers of particular divisions and folk who had implemented schemes designed to extract money from customers for services which were not performed, or which, if performed, were no more than rip-offs.
What was probably worst was the public humiliation. Respectable folk, many of whom were captains of industry and best mates of any number of senior politicians, found themselves squirming before the commissioner as they were called upon to account for behaviour which had clearly put bank profits before customer interests, and, in some cases, seemed to have crossed ethical and legal lines into being outright fraud or larceny.
Compounding the disgrace was the fact that many of those being cross-examined by counsel assisting felt ambushed – not having been told in advance precise details of the allegations they would be asked to answer. The commissioner was ready enough to hear both sides, but not necessarily ready to do it immediately, before the reputational damage was done. Vagueness, obfuscation or stonewalling did not work before the commissioner – and many of those who reverted to the policeman’s or politician’s form of self-defence — “I don’t know”, or ‘I can’t remember’ – were often quickly presented with documents under their own signature, or showing their presence at particular meetings, which made their involvement clear.
When the report was submitted, everyone, from the top to the bottom of the banking industry, and the financial advice industry did imitations of Rupert Murdoch’s contrition for the London phone bugging scandals. They admitted fault. They were sorry. They would amend their processes and systems of accountability and promised that nothing like this could ever happen again.
The new Treasurer, Josh Frydenberg, showed rather more signs of enjoying the bankers’ ordeal than his predecessor, now prime minister. But he did not have the chutzpah to claim, as Morrison did, all of the credit for a commission he had opposed until it was impossible to resist, and which he had forecast would find little. There would be fresh, tougher legislation, and action against people who had let us all, not least true believers in the Liberal Party, down.
The government promised implementation of most of the recommendations, including sending cases to the Director of Public Prosecutions and others. Not many prosecutions have ensued, which is pretty much par for the course with anything referred to the office of the DPP. DPPs lack investigative resources and enthusiasm for prosecuting any matter that is not a lay-down misere, unless the pretence of a tough stand, at least for a while, suits the interests of the government of the day. Moreover, the office seems to lack the experience and the competence for white-collar crime, one of the reasons why the weakened “cops on the block” had to revert to “soft regulation”, “self-reporting” and unenforceable civil “gentleman’s undertakings”.
It is not entirely clear that the sundry embarrassments, humiliations and turns in the pillory for bankers were quite enough. Less than a year after the report, and the contrite promises, some of the banks are at it again, with rorts involving billions. The regulatory agencies – attacked by Hayne, by other inquiries and most recently by Grant Samuel, for their poor cultures – have plainly much more to do to keep the bastards honest.
Yet another of their problems, apart from continuing ones with resources, experienced staff and investigators, and the DPP – is the fact that almost all of the senior chaps who had so disappointed the government only a year or so again now seem to be best friends with senior ministers again.
Similar shaming exercises have occurred with the royal commission into aged care, and, more recently, with the commission into disadvantages suffered by disabled people. The commissioners cannot possibly deal with the full litany of complaints from all parts of Australia. So they are instead trying to take representative samples of serious problems and issues. Like Hayne they will make full use of the fact that they are an inquisition, not a court of law.
The hearings will be a form of theatre, with disclosure of scandals, discrimination and ill-treatment sheeted home to the individuals or institutions responsible, with people forced to explain and defend their actions, their policies, and, in some cases, reasons that the spectre of handsome profits (from taxpayer funds) saw staff and services cut beyond minimums promised, and actually magnified massive assaults on human dignity and well-being.
Whether the findings of the commissions will lead to better outcomes is not yet clear. But it is rather more likely that the reports will be successful in focusing political, stakeholder and, most significantly, public attention on the problems that any number of previous reports provided, without fanfare, to government. There are hundreds on the file but not a great deal of evidence of action, even when they have been as scathing as Lynelle Briggs. It’s the publicity that creates the public mood for change.
Exposure and the fear of exposure is usually the greatest single deterrence to unconscionable conduct. Even there, on the evidence, it appears that successive governments have organised too little continuous public scrutiny to make the deterrence effective.
I have long argued that misbehaviour by the underclasses, the criminal classes and poor people generally, particularly young poor people is of a quite different order from misconduct by bankers, aged care providers, bureaucrats, professionals and, usually, police men and women. For the former, crime is usually opportunistic and not much premeditated. There are those immersed in police culture, such as Peter Dutton (ex-cop) Scott Morrison (son of a cop) who think that higher penalties and tougher judges reduce crime. But such people are rarely deterred by punishment, or announcements of higher punishments.
By contrast, criminal or unconscionable behaviour by the middle classes usually involves calculation. The person considers what is to be gained. They estimate the chances of being caught – the higher the chance, the greater the benefits have to be to be worth the risk. And they consider what will happen if they are caught, even by accident. For some that will be the risk of jail, or a substantial fine. But we know that an even greater deterrence is disgrace before the world, disgrace and banishment from one’s workplace, disgrace in one’s community and in one’s family.
That there are still too many people who are corrupt, offering or receiving bribes, skimming money, and lying and cheating is a measure of the fact that many types of misconduct, fraud or corruption are still judged by the perpetrators as a reasonable bet.
There are two major ways of upping the ante against them. The first is making it more obviously likely that one will get caught. That is not necessarily by putting more cops on the block; it can be equally a matter of increasing audit functions, using computers and other processes to draw quicker attention to anomalies, and making processes more open and transparent so funny business is more obvious.
The other way involves making worse the consequence of being caught. The best way of doing so is to work on increasing the likelihood of disgrace. Clear dishonesty almost always involves loss of job and personal publicity, shaming before one’s former colleagues, friends and family. There’s hardly anything better for this than a public inquiry. The courts may perform a subsidiary function — not least of setting financial penalties and jail terms, as well as determining formal guilt. But court cases are these days less well reported, and the shame factor is much more diluted than with public exposure.
The problem with this sort of insurance against white collar crime and corruption is that sometimes the finger will point at people who may be innocent of what is alleged. They may suffer the embarrassment, the shame and the disgrace, but not deserve it.
There will be others who can never be successfully prosecuted, because the evidence against them, including admissions made in public hearings, cannot be used in criminal proceedings. There will be others plainly blameworthy for reprehensible conduct, who have, nonetheless, committed no criminal offence. There will be – there always are – people with large sums of money they are willing to spend buying time, finding technical defences, and leaning on politicians. Their tactics sometimes spare them, even when they are at fault.
I did not hear Christian Porter, the Attorney-General, complain loudly at the pillorying of bankers or nursing home operators. But he is very concerned that any sort of national integrity commission might name people for misconduct, in circumstances where they cannot be prosecuted. This is, he thinks, far too great a risk. Perhaps that is because the person in question might be a politician like him. Or one of their close advisers.
But he is using the risk of unfair disgrace as his chief argument for a useless and toothless Integrity Commission, if we must have one at all.
“There is an obvious value in a powerful investigative body of broad jurisdiction that’s properly designed and equipped to successfully investigate contravention of commonwealth law amounting to corruption in the public sector (and thus provide a standing deterrence to such behaviour),” he said at the national press club on Wednesday.
“But this objective must always be balanced with the foundational goal of any liberal democracy – to treat individuals with fairness and justice when their rights or reputation are at risk of serious deprivation by an adverse finding of criminality or corruption.
“As important as detecting and deterring corruption is to this government – we must always design systems to prevent injustice and unfairness to people investigated and accused by the overwhelming authority of the state….
“Many times with bodies of this type, processes have fallen well short of long accepted standards of justice and fairness.
“And there have been clear contraventions of the most foundational right in the justice system – the right to be presumed not to have done something criminal in the eyes of the public and the government until it has been proven that you did.”
Not all of his examples of unfairness slap me in the face. He instanced Nick Greiner, for example. The NSW ICAC, in 1992, thought it corrupt that he made a deal with a political colleague who had defected to the cross-benches that he resign (creating a by-election which the Liberals would win) in return for a senior appointment to the NSW public service. Jobs in the public service are supposed to be given on merit, not between mates without any sort of merit process, and such appointments were not in Greiner’s gift. The ICAC Commissioner, Ian Temby, thought the conduct corrupt under the then definition in the Act, given that the purpose of the appointment was not to put in the best person in the job but to improperly secure a political advantage.
Later, (after Greiner resigned as premier and member of parliament) the NSW Court of Appeal disagreed with Temby 2-1, arguing unconvincingly that such a finding could be made only on legally objective criteria, and that Temby had not used them. The ICAC Act was later amended to reflect this view. By whatever standard, Greiner’s actions were open to strong criticism.
We could be pretty sure that the old definition (which was objective enough, in my opinion) would never be in a Commonwealth Bill. That’s because it could lead to results, obviously undesirable from Porter’s point of view, of allowing close examination of whether there was some improper purpose, rather than merit, in the selection of a host of former Liberal members, staffers, donors, and friends and relations to plum jobs at the Administrative Appeals Tribunal, probably forever fatally damaging any external confidence in its impartiality.
Another example he gave of unfair publicity was of a former NSW prosecutor, Margaret Cunneen. NSW ICAC believed – I think on the basis of conversations legally tapped – she had counselled her son’s girlfriend to affect an asthma attack so as to avoid being Breathalysed after a car accident. I expressed my view at the time that this was not a fit subject for an ICAC investigation, and the courts later agreed, causing even more weakening of the legislation. Ms Cunneen has absolutely denied saying whatever she was alleged to have said. ICAC might have been the wrong body to investigate, but an investigation of some sort by someone else might have been warranted.
Other instances given by Porter include people who were collateral casualties of a West Australian Corruption and Crime Commission hearing into the corrupt lobbying behaviour of Brian Burke, a former premier and lobbyist who used to use old networks to get favourable outcomes for clients. The CCC was taping the bignoter and braggart as he talked to, boasted and cajoled old political contacts on both sides, colleagues for whom he had done favours, senior bureaucrats and excessively friendly and obsequious journalists. He probably overestimated his power and influence, substantial and sinister as it was. Yet the Burke hearings, and findings, did much more good than harm, even if one accepts that the evidence against some people mentioned in dispatches was slight. More good was done by exposing him than harm done to others.
The problem of an open and powerful Commonwealth Integrity Commission is that it would not fall under political control. Heaven knows, it could even be effective, if the government chose someone competent. And it might cause big problems for government.
A Commonwealth Integrity Commission could, for example, investigate political decision-making processes with rural grants, water allocations, or party fund-raising, not least ways of funnelling developer donations (banned in state politics) back to state branches of the party. Perhaps, from a political point of view, a bit risky, even if one could be sure that Labor, with its own patronage problems and practised jiggery-pokery with donations would in due course be equally vulnerable.
But it could also expose misbehaviour by bureaucrats, not least some of those who seem to have made themselves immune to any form of accountability or scrutiny. To do that, though, it would have to have a different structure, staffing and methodology than the commission for law enforcement integrity, which has proven altogether too timid, ineffective and seemingly unwilling to go after anything substantial.
Perhaps Christian Porter’s focus on the fairness and justice, particularly against “the overwhelming authority of the state” might be extended to ensuring open and accountable justice for people accused of national security crimes. Whatever Porter believes about the circumstances of these cases, it is plain that they cannot be said to be instances of the rule of law in operation. That the courts, in the exercise of their judicial functions, seem to be going along with massive secrecy, closed courts, and breaches of the principle that an accused has a right to hear and cross-examine evidence against him seems to me an affront to the idea of justice.
I have never known of a national security secret (even in wartime about ULTRA) more important than fundamental human rights to a fair trial. That the present guardians of the increasingly totalitarian national security state think otherwise says more about their fitness for power than about new balances between freedom and security. Christian Porter is not a guardian of our liberties, but a clear and present danger to them.
Jack Waterford is a former Editor of The Canberra Times