When Westpoint’s company secretary, Graeme Rundel, slipped $10,000 into the Western Australian and National Liberal Party’s coffers in November 2004, the donation was to be armour for the impending collapse. What the Westpoint network failed to appreciate was that Australia’s Liberal Party needed no economic inducement to revel in doctrines of self-regulation and non-intervention.
Under the auspices of Liberal Party market ideology, the Australian Securities and Investment Commission (ASIC) has become a blazing effigy of market regulation narrowly centred on commercial efficiency. Joe Hockey, who at the time was financial services and regulation minister, exquisitely encapsulated this spirit in an address to the Australian Corporate Lawyers Association in 2001:
Following the collapse of HIH and One.Tel some doomsayers were hopeful that the Government would panic about corporate standards in Australia and throw years of corporate regulation based on self-regulation out the window. They were wrong. Each corporate failure must take its course.
Chris Pearce MP, parliamentary secretary to the Federal Treasurer has also declared his dedication to throwing oversight of modern corporate governance to the whims of the market in an address to the ASIC 2006 summer school:
Just as we need to approach calls for yet more regulation with scepticism, we need to be highly critical of complex regulatory solutions to problems … Those of you who have met with me, or heard me speak before, will know that reducing the regulatory burden, and improving regulatory efficiency, are major preoccupations of mine.
But how many more large-scale corporate failures and backyard-managed investment scheme cons will it take for this government to reconsider the true efficacy of sacrificing stringent corporate regulation and oversight for “commercial solutions” to rectify deception, incompetence and business failure?
In the last ten years we have been besieged by the disillusioning spectre of:
- HIH: somewhere in the vicinity of $3.6 and $5.3 billion;
- OneTel: collapsed owing $600 million as of May 2001;
- Sons of Gwalia: a reconciliation of the trading accounts revealed exposure to losses of $125million;
- Harris Scarfe: at least $70 million owed to the ANZ Bank alone; and more recently
- Westpoint: touted to be in the $400 million ball park, but time and political expediency will tell the true magnitude of loss.
Without detracting from the moral wickedness of the cavalier charlatans behind these corporate collapses, ASIC’s non-interventionist stance has compounded corporate failure in Australia.
Westpoint: a case of politicised non-intervention or sophisticated con?
In May this year, a senate committee questioned ASIC in relation to its handling of Westpoint. The committee came to the conclusion, “that ASIC cannot be blamed for the deception and/or inept behaviour of the parties that contributed to this corporate collapse”.
While ASIC and its enforcement directorate cannot be blamed for Westpoint, regulatory intervention may have mitigated the extent of investor loss. The real point of contention is whether ASIC had the information, jurisdiction or bureaucratic will to pursue Westpoint earlier.
In 2000, consumer advocate Denise Brailey, of litigation funder IMF, held a meeting with ASIC in which she expressed serious concerns about Westpoint. The Department of Consumer and Employment Protection in Western Australia communicated similar concerns in 2002 and the Real Estate Consumers' Association put in their two cents worth in 2001. Westpoint just had to “take its course” as Hockey would say.
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