The Office of the Director of Public Enforcement: Past, Present, and Future

Louis Gribbin Bourke – Spring 2019

1. Introduction

The failed prosecution of former Anglo-Irish Bank chairman Sean Fitzpatrick was due to serious procedural failings on the behalf of the Office of the Director of Corporate Enforcement (ODCE)[1]. This sparked political outrage[2] and the need for ODCE reform was identified[3].

The General Scheme of the Companies (Corporate Enforcement Authority) Bill 2018[4] outlines proposed reforms to the ODCE. In order to put these reforms in context, it will be necessary to firstly consider the background to the formation of the ODCE. The structure and performance of the ODCE will then be examined. This will allow for a critical analysis of the reforms contemplated by the General Scheme.

2. Background to the formation of the ODCE

Enforcement of company law was minimal in Ireland in the 20th century. This was punctuated by high-profile scandals which damaged Ireland’s commercial reputation[5]. A major cause of this was the lack of white-collar crime expertise in An Garda Síochána[6]. Of the men recruited to form the police force in 1922, only 3% had previous policing experience[7], the majority were former IRA members or farmers[8]. The life of members at the time was described as ‘Military’[9]. As McGrath notes, men of such experience were not suited to detect corporate crime[10]. Although a dedicated ‘Fraud Squad’ was later established, it was ineffective[11].

The Irish attitude to corporate enforcement and to the formation of An Garda Síochána is, arguably, an example of the post-colonial ‘improvisation’ described by Ramshaw[12]. The lack of re-deployed Royal Irish Constabulary members in the force, combined with the casual attitude to the administrative side of the operation[13] are evidence of an improvisatory rejection of the previous, British, modes of practice.

A series of high-profile corporate misconduct scandals[14] in the 1990’s led to the commissioning and publication of the ‘McDowell’ Report[15], which lamented a lack of enforcement of company law and that most corporate offences had never been prosecuted[16]. It called for the establishment of the ODCE[17].

3. Operation of the ODCE

The Office of the Director of Corporate Enforcement was established in 2001[18] and currently has its statutory basis in the Companies Act 2014[19]. The regulatory work of the ODCE can be understood as falling under three broad headings:

1.      Identification of Potential Non-Compliance with Company Law

2.      Investigation of Potential Non-Compliance with Company Law

3.      Enforcement of Company Law

3.1. Identification

Primarily, the ODCE identifies instances of potential non-compliance by reviewing submitted information[20]. The majority of this takes the form of liquidators reports[21] submitted under section 682 of the Companies Act. Other sources of information include complaints from members of the public[22]. The ODCE reviews this information and identifies which cases to pursue.

The ODCE also identifies lines of investigation independently. It does this by conducting its own research into potential non-compliance and by identifying new issues that become evident through its investigations[23].

3.2. Investigation

The ODCE has four means of investigating non-compliance with company law:

1. Meeting with persons relevant to the investigation[24].
2. Exercising civil powers to compel entities such as companies, auditors and liquidators to submit relevant evidence[25].
3. Exercising criminal law powers of search, arrest and detention[26]. It is worth noting the great strides that have been made by the ODCE in recent times in advancing their digital capabilities in this sphere[27].
4. Liaison with other statutory authorities[28].

3.3. Enforcement

The ODCE employs a ‘graduated’ approach to enforcing company law[29]. This approach is characterised by reacting to non-compliance in a non-adversarial way where possible[30]. This non-adversarial approach has involved distributing guides on compliance with company law, delivering informative presentations and issuing reminders to file annual returns, among other measures[31].

Where this approach is unsuccessful, the ODCE takes formal steps to enforce company law[32]. The ODCE employs a variety of formal measures in enforcing company law. In civil law, these include the seeking and enforcement of orders of restriction[33] and disqualification[34], applying for the appointment of inspectors [35], and seeking the reduction of director’s loans[36].

In criminal law, the ODCE has focused in recent times on investigating a small number of instances of serious corporate wrongdoing such as the Anglo-Irish Bank Cases[37]. This is evident in the reduction in numbers of summary prosecutions taken by the ODCE[38].

4.Staffing of the ODCE

As recommended by the ‘McDowell’ Report[39], the ODCE is part of the Department of Business, Enterprise and Innovation[40]. The ODCE is led by the Director of Corporate Enforcement, Ian Drennan[41] (DCE). The DCE is supported in their work by staff from different professional backgrounds. The ‘McDowell’ report envisioned that the staff, working in co-operation with members of An Garda Síochána, would comprise of solicitors, accountants, administrative staff and clerical staff[42]. At present, the ODCE is staffed with professionals from the above areas with the addition of a digital forensics specialist, and barristers[43].

5. Performance of the ODCE

The performance of the ODCE came under scrutiny[44] after the acquittal of Sean Fitzpatrick, and scepticism surrounding the performance of the office is still evident in the Oireachtas[45]. However, it must be recognised that the Fitzpatrick investigation does not represent the totality of the work done by the ODCE. This section will examine the failure of the Fitzpatrick investigation as well as the ODCE’s performance overall.

5.1 The Fitzpatrick Case

The collapse of several Irish banks, including Anglo Irish Bank, left what has been described as an ‘indelible mark’[46] on the Irish people due to the economic suffering caused. Thus, a failure to hold one of those responsible for this suffering reflected poorly on the ODCE.

Sean Fitzpatrick was charged with providing false statements to auditors and furnishing false information[47] in relation to massive loans made to him by the bank[48]. He was acquitted on all charges, on the direction of Judge John Aylmer, on the basis of procedural shortcomings[49] including the coaching of witnesses, contamination of evidence, the partisan nature of the investigation and the shredding of documents by the lead investigator[50].

The reasons for the failure of the ODCE here were arguably resource-related. Ian Drennan described the scale of the Anglo Irish Bank investigations as unprecedented, and stated that the ODCE did not properly deal with this[51]. Furthermore, lead ODCE investigator, Mr. Kevin O’Connell, had no previous experience relevant to investigating indictable offences[52]. This evidence shows that the ODCE was under-resourced both quantitatively and qualitatively during the Fitzpatrick investigation.

5.2 ODCE Success

MacCarthaigh notes that analysing the performance of state bodies is difficult to do in absolute terms given a lack of baseline data[53]. It is submitted that this applies to the ODCE as its function has been maturing and changing over the past number of years[54]. Furthermore, since the ODCE has no competitors in Ireland, comparative analysis is not possible.

Considering the above evidence, it is submitted that analysing the quantity of ODCE outputs is not a useful means of assessing its performance. I submit that the success of the ODCE might be better assessed by taking a qualitative approach. Although a deeper investigation into the ODCE would be necessary to accurately assess performance, the following examples show how a qualitative assessment might be of use. 

Firstly, as McGrath notes[55], the ODCE has prosecuted many offences in company law that had never been previously been prosecuted. Given that the non-prosecution of many offences was identified as a major problem in the ‘McDowell’ Report, this evidence shows that the ODCE has been, to some degree at least, successful.

Secondly, assessing annual-returns compliance rates might be a useful means of determining performance. The Companies Registration Office has declared that in 2018, 94.8% of companies complied with their annual-returns obligations[56]. This data is evidence that the ODCE has been effective in fulfilling its role of encouraging compliance with company law[57], especially in light of the dismal rates of annual-returns compliance that existed before the establishment of the ODCE[58].

6. Reforms made to the ODCE

There has been no statutory reform of the ODCE since the failed prosecution of Sean Fitzpatrick. However, other changes have been made. Specialist staff, in the form of digital forensics experts have been appointed for the first time[59]. ODCE staff have also been given training in criminal procedure[60].

7. Proposed Reform: Corporate Enforcement Agency

Under the General Scheme, the government proposes to establish an independent agency – The Corporate Enforcement Agency (CEA) - for the enforcement of company law, replacing the ODCE[61]. This proposal was first published in a government report in 2017[62]. It was supported by the Law Reform Commission, which agreed that an independent agency was needed[63]. The Law Reform Commission also recommended that a dedicated unit for the prosecution of corporate offences be established[64]. The General Scheme does not mention this recommendation as it was published after the circulation of the General Scheme[65].

The government also proposes to afford additional evidence-gathering powers to the new agency[66]. The proposed legislation is projected to be enacted in the second quarter of 2019[67]. It is submitted that whilst this package of reforms is not revolutionary, they represent a change for the better.

The CEA would differ from the ODCE in several organisational ways. It would not, however, have any new functions[68]. The CEA would have more control over internal policies and procedures[69]. The CEA would be a commission, as opposed to an office[70]. The CEA would have between one and three members, or commissioners, at any one time. This variability is designed to allow the CEA to adapt to varying workloads. The CEA would be responsible for its own staffing, subject to the approval of the Minster for Business, Enterprise and Innovation, and the Minister for Public Expenditure and Reform.

This reform would be of value: it would remove a layer of bureaucracy that currently exists in the hiring process of the ODCE[71]. This would hopefully make for more efficient hiring.

The above ministers would still control the financing of the CEA[72]. Government attitude towards the agency is, therefore, still a key concern. In sum, the above reforms represent a meaningful step towards addressing the issues of flexibility and autonomy that have affected the ODCE in the past.

The CEA would also have improved evidence collection powers. Evidence ordinarily dismissed as hearsay would be admissible in CEA investigations[73]. The CEA would also have the power to use its own digital technology to collect digital evidence when investigating[74]. This would solve problems which face the ODCE at present: sometimes companies’ digital infrastructure frustrate ODCE efforts to collect evidence[75]. Furthermore, since a company’s equipment could be considered evidence, using it could be viewed as interfering with evidence[76]. Moving away from this practice is of merit.

7. Social Policy Analysis

In light of the above discussion, it is submitted that the reforms proposed by the General Scheme are of practical merit. It is also submitted that, when assessed through the lens of social policy, the formation of the CEA is to be welcomed. This is an important consideration those sceptical of these reforms might view them as an unjustified attempt to reduce government accountability for corporate governance or alternatively as a move purely designed to satisfy a political demand for change which has arisen due to the Fitzpatrick saga.

The claim made by the General Scheme that the establishment of an agency will allow for greater hiring autonomy is well-founded. The Organisation for Economic Co-operation and Development argues that agency formation allows for more managerial flexibility in terms of recruiting individuals with specific specialist skills[77]. MacCarthaigh notes that agencies, in general, have more discretion in human relations matters than government departments[78]. Given that personnel issues are at the core of this programme for change, it is heartening that the proposals are in line with the views of public policy experts.

MacCarthaigh also notes that in the case of the Road Safety Authority, political support and saliency were a key factor in the success of that new agency[79]. It is submitted that there is great appetite for reform in the sphere of corporate enforcement at present, due to the Sean Fitzpatrick trial, which should be harnessed.

It follows that if there was ever a time to establish the CEA, this is it.

8. Conclusion

The corporate enforcement landscape of the 20th century gave rise to a clear need for the establishment of the ODCE. The ODCE has been successful in fulfilling the purpose that was envisaged for it at the time of its formation, in 2001. However, the need for ODCE reform is clear. It must be better equipped to adapt to change in the spheres of commerce and technology. It is submitted that the General Scheme contains measures which will go a long way towards achieving this.

References

[1] Department of Business, Enterprise and Innovation, ‘An account of the shortcomings identified by Judge Aylmer of the Circuit Court concerning an investigation by the Office of the Director of Corporate Enforcement’ (4 December 2018) 6; <https://dbei.gov.ie/en/Publications/Account-Judge-Aylmer-investigation-ODCE.html> accessed 14 March 2019.

[2]Conor Gallagher, ‘Calls for head of ODCE to resign after Seán FitzPatrick acquitted’ The Irish Times (May 24, 2017); <https://www.irishtimes.com/news/crime-and-law/calls-for-head-of-odce-to-resign-after-se%C3%A1n-fitzpatrick-acquitted-1.3093902> accessed 14 March 2019.

[3] Department of Business, Enterprise and Innovation, ‘Measures to Enhance Ireland’s Corporate, Economic and Regulatory Framework’ (2 November 2017) <https://dbei.gov.ie/en/Publications/Measures-Enhance-Irelands-Corporate-Economic-Regulatory-Framework.html> accessed 14 March 2019;

Law Reform Commission, Report on Regulatory Powers and Corporate Offences (LRC 119 – 2018).

[4]Department of Business, Enterprise and Innovation, ‘General Scheme of the Companies (Corporate Enforcement Authority) Bill’ (October 2018) <https://dbei.gov.ie/en/Legislation/General-Scheme-Companies-Corporate-Enforcement-Authority-Bill-2018.html> accessed 14 March 2019.

* Referred to as the General Scheme’ from hereon.

[5] Report of the Company Law Review Committee 1958 (Dublin: Stationary Office, 1958) 48.

[6] Joe McGrath, ‘The prosecution of white-collar crime in a developing country; A case study of Ireland in the twentieth century’ in Judith van Erp, Wim Huisman and Gudrun Vande Walle (eds), The Routledge Handbook of White-Collar and Corporate Crime in Europe (Routledge 2015) 399, 400.

[7] Vicky Conway, Policing Twentieth Century Ireland: A History of An Garda Síochána (Routledge 2013) 31.

[8] McGrath (6) 400.

[9] Vicky Conway, Policing Twentieth Century Ireland: A History of An Garda Síochána (Routledge 2013) 32.

[10] McGrath (6) 400.

[11] McGrath (6) 401.

[12] Sara Ramshaw, ‘Improvising (Il)Legality: Justice and the Irish Diaspora, N.Y.C., 1930-32’ (2013) 3(1) Irish Journal of Legal Studies 90, 106.

[13] Vicky Conway, Policing Twentieth Century Ireland: A History of An Garda Síochána (Routledge 2013) 32.

[14] McGrath (6) 414.

[15] Report of the Working Group on Company Law Compliance & Enforcement 1998 (Dublin: Stationary Office, 30 November 1998).

[16] Report of the Working Group on Company Law Compliance & Enforcement 1998 (Dublin: Stationary Office, 30 November 1998) 10.

[17] ibid 40.

[18] Company Law Enforcement Act 2001, s 7.

[19]Companies Act 2014, ss 945-957.

[20] Office of the Director of Corporate Enforcement, Annual Report 2017 (Dublin: 2018) 11 <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

[21] ibid 23.

[22] ibid 23.

[23] ibid 31.

[24] ibid 34.

[25] ibid 34.

[26] ibid 34.

[27] Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019, 6-7.

[28] Office of the Director of Corporate Enforcement, Annual Report 2017 (Dublin: 2018) 34 <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

[29] Paul Appleby, “Compliance and enforcement - the ODCE perspective” in Shane Kilcommins and Ursula Kilkelly (eds), Regulatory Crime in Ireland (First Law 2010) 177, 185.

[30] Joe McGrath, Corporate and White-Collar Crime in Ireland: A New Architecture of Regulatory Enforcement (Manchester University Press 2015) 151.

[31] ibid 154.

[32] Paul Appleby, “Compliance and enforcement - the ODCE perspective” in Shane Kilcommins and Ursula Kilkelly (eds), Regulatory Crime in Ireland (First Law 2010) 177, 185.

[33] Companies Act 2014, s 820.

[34] Companies Act 2014, s 844.

[35] Ian Drennan, ‘Opening Statement to the Joint Oireachtas Committee on Business, Enterprise & Innovation:19 February 2019; regarding Pre-Legislative Scrutiny of The General Scheme of The Companies (Corporate Enforcement Authority) Bill 2018’ (Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019) 3; <https://www.oireachtas.ie/en/committees/32/business-enterprise-innovation/documents/> accessed 14 March 2019.

[36] Office of the Director of Corporate Enforcement, Annual Report 2017 (Dublin: 2018) 40 <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

[37] Office of the Director of Corporate Enforcement, Annual Report 2017 (Dublin: 2018) 43 <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

* See attitude towards summary prosecutions.

[38] Office of the Director of Corporate Enforcement, Annual Reports 2014-2017 (Dublin: 2015-2018); <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

* See Table

[39] Report of the Working Group on Company Law Compliance & Enforcement 1998 (Dublin: Stationary Office, 30 November 1998) 40.

[40] Joint Committee on Business, Enterprise and Innovation Deb 5 February 2019, 5.

[41] Companies Act 2014, s 949; Drennan (n34).

[42]  Report of the Working Group on Company Law Compliance & Enforcement 1998 (Dublin: Stationary Office, 30 November 1998) 55.

[43] Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019, 6.

[44] Declan Brennan, ‘Calls for heads to roll in State watchdog after acquittal of Seán FitzPatrick’ thejournal.ie (May 24, 2017); <https://www.thejournal.ie/sean-fitzpatrick-acquittal-3405329-May2017/> accessed 14 March 2019.

[45] Joint Committee on Business, Enterprise and Innovation Deb 5 February 2019, 7.

[46] Simon Carswell, ‘Anglo’s failure and the banking meltdown left an indelible mark on the body politic’ The Irish Times (November 13, 2013); <https://www.irishtimes.com/business/anglo-s-failure-and-the-banking-meltdown-left-an-indelible-mark-on-the-body-poitic-1.1593406> accessed 14 March 2019.

[47] Department of Business, Enterprise and Innovation Account (n 1) 13.

[48]‘Sean FitzPatrick acquitted on all charges’ RTé News (May 23, 2017) <https://www.rte.ie/news/ireland/2017/0523/877300-sean-fitzpatrick/> accessed 14 March 2019.

[49] Department of Business, Enterprise and Innovation Account (n 1) 26.

[50] DPP v Fitzpatrick (HC, 23 May 2017); <https://static.rasset.ie/documents/news/sean-fitzpatrick-full-ruling.pdf> accessed 15 March 2019.

[51] Drennan (n 34) 4.

[52] DPP v Fitzpatrick (HC, 23 May 2017); <https://static.rasset.ie/documents/news/sean-fitzpatrick-full-ruling.pdf> accessed 15 March 2019

[53] Muiris MacCarthaigh, ‘Research Paper No 1: National non-commercial State Agencies in Ireland’ (State of the Public Service Series, Institute of Public Administration, 2010) 22; <https://www.ipa.ie/_fileUpload/Documents/StateAgenciesReport.pdf> accessed 14 March 2019.

[54] Office of the Director of Corporate Enforcement, Annual Report 2017 (Dublin: 2018) 43 <https://www.odce.ie/en-gb/publications/corporatestatutory/annualreportsreviews.aspx> accessed 14 March 2019.

* See attitude towards summary prosecutions.

[55] Joe McGrath, Corporate and White-Collar Crime in Ireland: A New Architecture of Regulatory Enforcement (Manchester University Press 2015) 166.

[56] Companies Registration Office, ‘In 2018 the CRO had a 94.8% Annual Return compliance rate.’ (Twitter post, 22 February 2019); <https://twitter.com/cro_ie/status/1098990943536070661> accessed 15 March 2019.

[57] Companies Act 2014, s 949(1)(a).

[58] McGrath (6) 408.

[59] Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019, 6.

[60] Department of Business, Enterprise and Innovation Account (n 1) 9.

[61] General Scheme (n 4) 8, 10.

[62] Department of Business, Enterprise and Innovation, ‘Measures to Enhance Ireland’s Corporate, Economic and Regulatory Framework’(2 November 2017) 8; <https://dbei.gov.ie/en/Publications/Measures-Enhance-Irelands-Corporate-Economic-Regulatory-Framework.html> accessed 14 March 2019.

[63] Law Reform Commission, Report on Regulatory Powers and Corporate Offences (LRC 119 – 2018) 39.

[64] ibid 40.

[65] Joint Committee on Business, Enterprise and Innovation Deb 5 February 2019, 10.

[66] General Scheme (n 4) 69-72.

[67] Department of Business, Enterprise and Innovation, ‘Regulatory Impact Analysis: Companies (Corporate Enforcement Authority) Bill’ (October 2018) 4; <https://dbei.gov.ie/en/Legislation/General-Scheme-Companies-Corporate-Enforcement-Authority-Bill-2018.html> accessed 14 March 2019.

[68] ibid 7.

[69]General Scheme (n 4) 13.

[70] ibid 16.

[71] Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019, 7.

[72] General Scheme (n 4) 39.

[73] ibid 70.

[74] ibid 71.

[75] Sabha Greene, ‘Presentation by Officials of the Department of Jobs, Enterprise and Innovation to the Joint Committee on Business, Enterprise and Innovation’ (Joint Committee on Business, Enterprise and Innovation Deb 5 February 2019) 2; <https://www.oireachtas.ie/en/committees/32/business-enterprise-innovation/documents/> accessed 14 March 2019.

[76] Joint Committee on Business, Enterprise and Innovation Deb 19 February 2019, 16.

[77] OECD, ‘OECD Public Management Reviews; Ireland: Towards an Integrated Public Service’(OECD Publishing: Paris 2008) 307; <https://doi-org.ucd.idm.oclc.org/10.1787/9789264043268-en.> accessed 14 March 2019.

[78] Muiris MacCarthaigh and Paul Turpin, ‘When, why and how to set up a state agency: The case of the Road Safety Authority’ (2011) 3(2) Irish Journal of Public Policy, <https://publish.ucc.ie/ijpp/2011/02/MacCarthaigh/02/en> accessed 14 March 2019.

[79] ibid.