Following the civil penalty proceedings, it is quite possible to imagine that Mr Adler and Mr Williams thought the legal proceedings against them were over.
However, ASIC, with the prosecuting authority (the Commonwealth Director of Public Prosecutions – DPP) laid criminal charges against them both. Mr Adler immediately called “foul” according to the legal concept of double jeopardy. The idea of double jeopardy is defined as: “placing of an accused person in peril of being convicted of the same crime in respect of the same conduct on more than one occasion” in Nygh and Butt, Butterworths Concise Australian Legal Dictionary (1998) at page 125. It was tested in the courts in Connelly v Director of Public Prosecutions [1964] AC 1254. However, the Australian courts thought differently and distinguished the officers’ personal duties to the company from those of the criminal activity which undermined the confidence of the Australian financial markets. Thus, a criminal prosecution was allowed to proceed based on similar events to the civil penalties.
It should be noted that in the mean time the High Court had ruled in ASIC v Rich [2004] HCA 42; (2004) 50 ACSR 242 that civil penalties are akin to criminal proceedings and thus the regulator must take care in respect of discovery and use of documents to breach the privilege of penalties and forfeiture. Further refinements on who may bring a civil penalty case (ASIC and or the company that has suffered losses) has been carefully examined by Justice Bergin in the NSW Supreme Court in One.Tel Ltd (in liquidation) v Rich [2005] NSWSC 226.
However, on 15th December 2004 Mr Williams pleaded guilty to three criminal charges for being reckless and failing to use his powers for a proper purpose in signing a letter, knowing it to be misleading on 19 October 2000. He also authorised the issue of a prospectus that contained a material omission on 26 October 1998 and authorisation statements in the 1998-99 HIH Insurance annual report, which he knew were misleading by overstating the operating profit by $92.4 million. Mr Adler waited until the beginning of his criminal trial on the 16 February 2005 to plead guilty to four criminal charges. These charges related to two counts of disseminating false information on 19 and 20 June 2000 that were likely to induce a person into buying HIH shares. Also, one count of obtaining money by false statements under the NSW Crimes Act 1900 and one count of being intentionally dishonest by not acting in the best interests as a director of HIH under s 184 Corporations Act.
On the 14 April Mr Adler was sentenced to four and a half years imprisonment, with a non-parole period of two and a half years for these charges in R v Adler [2005] NSWSC 274. A day later, Mr Williams was sentenced to four and a half years, with a non-parole period of two years and nine months in R v Williams [2005] NSWSC 315. Under the sentencing guidelines, the judges had to take into account the different sentencing regimes under the Commonwealth law and under the NSW state laws, as well as the discounting for the guilty plea. Mr Williams in fact received a 25 per cent discount for his early plea, where as Mr Adler only received a 10 per cent discount for his guilty plea on the first day of the criminal trail.
These high profile criminal sentences, on top of the earlier civil penalty actions, should be considered in the context of the managing director of HIH Insurance being sentenced to just 15 months jail (R v Cassidy [2005] NSWSC 410).
Research on corporate crime
Over the last decade I have been monitoring and examining the enforcement actions of the corporate regulators. Thus, so far this financial year ASIC has jailed 21 people, with an average term of 3.68 years. This could be interpreted to mean that both Mr Adler and Mr Williams received above average jail terms. The longest sentence imposed of these recent corporate criminals is Ms Donna Tung Sing Ho who was sentenced to nine years' jail, with a non-parole period of three years, after pleading guilty to nine charges of dishonestly using over $1.5 million of investors' money between August 1997 and April 1999. Ms Ho was convicted in October 2004 by the Queensland Supreme Court.
On average over the last 10 years 6.8 people per year are sentenced to between two and four years jail, while 4.8 people are sentenced to between four and eight years jail. Further research shows that over the past ten years only four people have been sentenced to imprisonment for longer than 10 years, while nine people have been given sentences between eight and ten years long.
It is difficult to directly compare criminal cases and their sentences, but as a question of public policy it is a relevant question ask whether Mr Adler and Mr Williams’ breaches of the law in relation to their roles of directors are less serious than those of Mr Higgins, a former financial adviser who misappropriated $1.7 million from nine clients. Mr Higgins was sentenced on 23 March 2005 to eight years imprisonment with a non-parole period of five years by the Downing Street District Court in NSW. As with Mr Williams and Mr Adler his actions involved 15 charges under the NSW Crimes Act and three counts under the Corporations Act for dishonest conduct in relation to financial services and products while carrying on a financial services business.
Professor Michael Adams is the Perpetual Trustees Australia chair of financial services law and professor of corporate law at the University of Technology Sydney’s Faculty of Law
Visit www.riskmanagementmagazine.com.au to view part I of Professor Adams’ opinion
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