Firms warned that their ‘near-crimes’ carry the same penalties as drug lords’ offenses


Justice

Lawyers say a police test case seeking to seize $10 million in assets under proceeds of crime laws will have broad implications across all manner of legitimate industries.

On September 15, 2015, Jamey Lee Bowring, a welding contractor with Auckland-based hazardous materials recycling company Salters Cartage, died when gas from a waste oil storage tower exploded, catapulting him into the air and in a parking lot.

Four other men were injured.

Bowring, who was 24, had not received a health and safety orientation at the potentially dangerous site. He was not given a gas detector or told what was in the tank he was welding. Salters’ bosses didn’t even know he was there.

Investigators found the company guilty of “numerous failings” in health and safety. The judge who heard the case in 2017 called it a “catastrophic breach of security”.

Judge Richard McIlraith sentenced Salters chief executive Ron Salter to four and a half months house arrest and a $25,000 fine. The company was ordered to pay $370,000 – the highest penalty on record at the time.

Salter has served his sentence and paid his fines.

So it came as a shock when, more than two years later, police sought the seizure of nearly $10 million of his assets under the Proceeds of Crime Act, the first time the law has been enforced. used to confiscate property from a legitimate business owner, although someone convicted of a crime.

Seizure is normally used against criminal gang members and drug dealers. These are people whose source of confiscated assets is as murky as the operations in which they are involved.

But that’s not the case with Ron Salter’s company. His hazmat business makes legitimate money from legitimate customers.

The case is still in its infancy, mired in the details of the police obtaining a restraining order on Salter’s assets. This is the first part of the process, preventing anything from being used or sold while the case is in progress.

But police told Newsroom they were preparing to launch the cranky part of the case — seeking a permanent forfeiture order for $9.7 million in assets — “in the near future.”

“A very low threshold”

And that’s what worries lawyers and their clients.

If Salter’s health and safety lapses could trigger seizures of proceeds of crime, what other corporate wrongdoing might also fall under the law? they wonder.

“The scope is huge and the law has a very low threshold,” says Tim Clarke, Bell Gully partner and employment law specialist.

“It attacks profit from ‘significant criminal activity’, but then defines ‘significant criminal activity’ as something where the proceeds of crime acquired or derived from the criminal activity have a value of $30,000 or more.

“In today’s world, that’s not a high threshold. You could very easily have a minor regulatory violation considered “significant criminal activity”.

The $30,000 profit from corporate wrongdoing could qualify as “significant criminal activity,” attorney Tim Clarke said. Photo: Supplied

The Occupational Health and Safety Act is one of many pieces of legislation where criminal prosecution, and therefore proceeds of crime lawsuits, could be possible, says Blair Keown, Clarke’s colleague at Bell Gully.

The Fair Trading Act, for example, the Financial Markets Conduct Act, the Resource Management Act, the Real Estate Agents Act and the Overseas Investment Act.

All have potential penalties considerably over $30,000.

A real estate agent convicted of not having a license or lying to clients could have their assets confiscated, as could a merchant making misleading claims about their products (for example, that a vinyl handbag is leather ), or a business owner advertising a deal they don’t intend to offer for a significant period of time.

“It’s not just the final part of the process, the confiscation, that should be the focus,” Keown says. [which might be guaranteed by an owner’s house or office]or it could have an impact on contractual relations with other companies.

“Salter is an example of what could happen. The application covers identifiable properties that have mortgages on them. If the holdback is ordered, there could be difficulties under the mortgage.

A restraining order on ownership could have a significant impact on a company’s ability to do business, says Blair Keown. Photo: Supplied

Changing behaviour

Police say Ron Salter took advantage of his lack of attention to health and safety at his sites. He and/or his company made more money during the year than they would have if Salter had invested in the equipment, processes and training necessary to keep his staff and workers safe. its subcontractors.

Which is probably true, although quantifying it can be difficult.

It might be difficult to determine how much of its profit stems from its lack of investment in health and safety. But this problem will come later.

It’s not just about the money, police Detective Inspector Craig Hamilton told Newsroom.

“Police’s focus on recovering the proceeds of crime is part of our strategy to prevent crime and deter people from participating in it. Our goal is to change behavior.

If the prospect of losing their home, their bach, their fancy cars, or the office building they own makes people think twice about their business practices, that wouldn’t be such a bad thing.

It’s delicate. The police could rightly argue that businesses that stay on the right side of the law won’t be stunned. And few people would have sympathy for a loan shark, dubious pyramid scheme designer, or other fraudulent merchant whose assets are at stake as a result of their misdeeds.

If the prospect of losing their home, their bach, their fancy cars, or the office building they own makes people think twice about their business practices, that wouldn’t be such a bad thing.

But Clarke and Keown argue that many pieces of legislation governing people’s business behavior are seen as regulatory rather than criminal by business owners – “quasi-criminal” at worst.

And because of the way the laws work, the prosecution doesn’t have to provide an intent for someone to be found guilty. Salter didn’t want to kill his welding contractor.

The confiscation could be disproportionate.

V illegitimate legitimate businesses

“There are many criminal activities that are close in nature to regulatory transgressions, requiring no culpability or negligible culpability on the part of business owners or directors, but with proceeds or benefits of at least $30,000 could be drawn,” Clarke and Keown wrote in a recent paper.

Matt Blomfield views the asset forfeiture request as a second punishment for his client. Photo: Supplied

A Salter spokesman, Matt Blomfield, goes further.

“If a drug dealer owns a house and pays for a new roof with drug money, the police can take the house. Police can also take uncontaminated assets at the value of the benefit they say [the drug dealer has] received as a result of criminal activities.

“It’s hard for me to draw a parallel between a gang member who sells meth and Salters Cartage who collects and recycles used oil…Police say the revenue Salters Cartage has received is like the drug money. If so, so does the revenue of the hundreds of companies convicted each year of health and safety breaches in New Zealand, not to mention other regulatory breaches.

Double dipping

There is also the issue of dual criminality: the principle that a person should not be subject to two prosecutions or penalties for the same offence.

Blomfield maintains that Ron Salter has served his sentence and paid his fines. Now her house, her daughter’s house, her bachelor’s degree, and her business are on the line.

Myriam Mitchell says if the police win against Salters, companies should think twice before pleading guilty in a case. Photo: Supplied

Another labor lawyer, Myriam Mitchell of Copeland Ashcroft, says confiscation is a potentially greater deterrent than a fine, and as such police actions could help maintain working conditions. fair competition between companies that invest in health and safety and comply with the law in other regions, and those that do not and therefore have lower costs.

Even so, she sees a level of double-dipping in the police action.

“Nobody has much sympathy for the Salters of this world, but the judge in the Salter case looked at the offense and imposed a fine that he thought was justified. He could have imposed a higher fine.

Mitchell says the main lessons for companies from the Salter proceeds of crime case — if the police are successful — relate to how companies litigate if they are sued.

Pleading guilty could reduce a person’s sentence and legal costs, but could later come back to haunt them under the Proceeds of Crime Act.

“Be very careful about what you are pleading guilty to and be very careful about accepting statements of fact at sentencing, as it will be important to have an accurate description, in terms of the seriousness of the offence, how long it has been going on and if it has been repeated.

“It will have wider implications.”

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