Let us ensure our legislative processes are ever vigilant against the likes of Bond and Skase so … the Australian people will have faith in the ability and priority of government to bring those to justice who would otherwise seek to damage our reputation as an honest and fair country.
Senator Murray, 1997 1
It is often said by Bond’s supporters that he at least stayed to face the music, unlike Christopher Skase. But it is not clear that he stuck around willingly to take his punishment. When he was made bankrupt in April 1992, both his Australian and British passports were confiscated by his trustee in bankruptcy, Bob Ramsay, so he had little choice but to stay put. Even if he had left Australia illegally, he would not have lasted long offshore. Thus the biggest difference between Bond and Skase may simply have been that Skase had a passport, while he did not.
It is also often said that Bond’s $1,200 million fraud on Bell Resources was a victimless crime. But the company’s many shareholders who lost their savings would hardly agree. And it was certainly a crime that benefited Bond and his family. At least $55 million of the money taken from Bell ended up in Bond’s private company, Dallhold Investments, whose bank accounts were used by Bond to fund his own lavish spending.
But even if Alan is a notch up from Skase, which seems unlikely, considering the scale of his crimes, the real scandal of the Bond story is that he managed to hang on to a very large, very public fortune and make a very big fool of the Australian judicial system in the process.
One cannot be sure exactly how much Bond and his family got away with from the $5 billion wreckage of Alan’s businesses, but even if they had only escaped with Upp Hall in the UK, it would be scandal enough. From 1991 to 1995, Bond swore black and blue that this $12.5 million English country mansion belonged to Jurg Bollag, yet as soon as his bankruptcy was annulled, the charade was abandoned. In the year 2000, it is the Bonds, not the Bollags, who are lords of the manor, and it is the Bonds who are again the legal owners.2
And of course Upp Hall was not the only valuable asset the Bond family walked away with. They also hung on to a huge amount of wealth—probably amounting to several tens of millions of dollars, in jewellery, property and family trusts— which came from Alan Bond’s now-collapsed business empire.
Looking at Bond’s bankruptcy and at other cases involving rich, well-advised businessmen, it is clear that trusts have the capacity to make a mockery of Australia’s bankruptcy laws. Bond’s trustee in bankruptcy, Bob Ramsay, initially believed that it was perfectly reasonable for people to shelter assets from their creditors by parking them in trusts. But by the time he finished with Bond he wasn’t so sure. In March 1995, a couple of weeks after Bond’s release from bankruptcy, a frustrated and disappointed Ramsay gave an interview to Business Review Weekly, in which he said, ‘A trust is only a device to put assets at arm’s length … there is a moral case for reconsidering the status of those assets’. Or in other words, maybe we should change the law in Australia to stop creditors being dudded in this way.3
Attacking the status of trusts would undoubtedly create storms of protest from the legal profession and their well-heeled clients, but it is worth noting that most European countries, whose legal systems are not based on English law, refuse to accept that trusts are anything more than a device for cheating creditors. These Civil Code countries treat the apparent owner of an asset as the real owner and ignore trusts that have been erected to keep creditors at bay. Surely it should be possible, even in our common-law system, for Australia to do the same.4
In the meantime, we are forced to tinker at the margin, by catching money on the way into trusts or on the way out again. One of the so-called ‘Skase amendments’ to the bankruptcy laws in 1991 attempted to stop rich bankrupts receiving vast amounts of money from trusts or ‘friends’ and living the high life, while their creditors got nothing. This provision, which came into effect just after Bond was bankrupted, required bankrupts to pay half their ‘income’ above $24,000 to their creditors. But in Bond’s case it failed, because the law was badly drafted, and the Federal Court ruled that he did not have to pay.5
On the other side of the equation, we could do more to prevent assets being placed in trust, or given away to family and friends as bankruptcy approaches. The law in this area has been changed constantly since the 1980s but has not really been toughened. Today, a trustee in bankruptcy can claw back all transfers of property (or gifts) made below market value in the two years before bankruptcy.6 But if the Hawke Government had accepted the proposals of the Law Reform Commission back in 1988, trustees would have been allowed to go back four years in certain circumstances. The Bond family would then have had to prove that the $26 million they received from Alan between April 1988 and April 1992 had not been given to them with the intention of denying money to Bond’s creditors.
In 1995, another attempt to make the law bite harder was abandoned in the face of determined opposition from the legal and accounting professions. This would have altered the definition of insolvency from the present one, where you are broke if you cannot pay your debts ‘as and when they fall due’, to a situation where you would be judged to be broke if your liabilities (including personal guarantees) exceeded your assets. The relevance of this is that a trustee can overturn transactions up to five years prior to the bankruptcy if it can be shown that the debtor was insolvent when money was given away. The new test, which is used in the USA, would have been far simpler and far harsher, and would have caught far more people attempting to cheat their creditors. It would also have trapped Bond, and allowed Bob Ramsay to recover some of the millions Bond gave to family and friends as his empire collapsed.
But the drawback, as far as accountants and solicitors were concerned, was that this new definition of insolvency would also have snared a large number of accountants and solicitors, who signed over assets to their families or to trusts in the early 1990s to protect themselves from professional negligence actions stemming from the corporate collapses of the 1980s. So the change was never made.
Even more blatant than Bond’s use of trusts, however, was the way in which he stashed millions of dollars overseas. It was obvious to anyone familiar with the case that the money was there. Yet the tyranny of distance and the difficulty of getting overseas cooperation made it impossible for investigators to get their hands on the money or to bring criminal charges against Bond for concealing it.
The key problem for those chasing Bond was that the millions were either hidden in Switzerland or controlled by a man who lived there. And this posed insuperable difficulties both for the police and Bond’s bankruptcy trustee. Shortly after Bond’s discharge from bankruptcy in 1995, Ramsay stated confidently that he would have got his hands on Alan’s fortune if he had only had a few more weeks. But nowadays he accepts that he would never have succeeded.7 Had the money still been in Jersey, as it was in the 1980s, it might well have been a different story, because the Jersey courts are keener to help foreign investigators.
But the money was not in Jersey because it had been moved. And herein lies the rub. In these days of electronic transfers, you can move money twice round the world in twenty-four hours, yet it takes investigators months, if not years, to get the foreign court orders they need to find the funds. And as soon as investigators get close, the money can be moved again. Meanwhile, those who have hidden the assets can use the courts to stall their pursuers for years.
As Bob Ramsay so eloquently describes it, it is like giving the criminals a 100-mile start in a 101-mile race.8
Once money gets offshore, it is difficult and expensive to trace. And lack of funds in bankruptcy or liquidation means there often aren’t enough resources to chase the money far enough. More to the point, it is not worth creditors funding the search unless there are many millions of dollars hidden overseas. There’s no point in risking $2 million to get back half that amount.
John Broome, the former chairman of the National Crime Authority, says that it is incredibly easy to get money out of Australia even with the reporting requirements that now cover large cash transactions or international money movements. ‘Give me $10 million in Australia and a week to spread it around the world, and I could have it hidden in places that no investigator would ever discover it,’ he says. Where, I ask? He reels off the Philippines, Singapore, Japan, Eastern Europe, even London. And how? ‘Buying shares in one place, selling in another, sending the money through a couple of banks, and a couple of companies. It’s not a problem to do it. It’s a nightmare to unravel. The best the investigators will get is evidence of a crime. Their chance of getting hold of the cash is just about zero. The ones you catch, they either make a stupid mistake, or you get lucky. And if you get the sort of advice that’s available to people like Bond and Skase, you’ll never get them.’9
Broome’s answer is to lock up a few advisers. On top of that, it would be worth taking away the protection of legal professional privilege in bankruptcy cases, as they do in the UK, so that expert advice on how to hide assets would be exposed to public view if the client became bankrupt. This might cause lawyers and accountants to think twice about advocating or defending dishonesty in the way that some clearly do. A third line of attack, which was introduced in the USA in 1997, could require lawyers to certify that they have made reasonable inquiry into the accuracy of what their bankrupt clients tell the court. This would have been particularly useful in the search for Bond’s fortune.10
Australia’s top corporate cop from the 1980s, Henry Bosch, shares the view that lawyers rather than the law are at the root of the problem. Amid all the editorials calling for the law to be changed in 1995, following Bond’s discharge from bankruptcy, the Sydney Morning Herald focused on Bosch’s disgust at ‘how far respectable and apparently honest lawyers will go in representing the interests of clients who they must know are behaving unethically and perhaps illegally’.11
Senator Murray from Western Australia clearly agreed that lawyers and the legal system were to blame for Bond’s escape. On 19 November 1997, in the Senate, he gave his home-town hero a blast under protection of parliamentary privilege.
Like many Australians I have been frustrated by the failed pursuit of the Alan Bond millions.
I am advised that documents recovered by the AFP have revealed a number of significant transactions involving millions of dollars spirited into and out of the country by Mr Bond during his bankruptcy, none of which has ever been disclosed to his trustee.
The AFP investigation is now four years old and has not yet delivered any charges. Thousands of hours of investigative work and many millions of dollars have been spent investigating Bond. It seems Mr Bond has had available to him these missing millions and has consequently been able to mount a sufficiently funded legal challenge to every possible threat of prosecution. Why any lawyer would be prepared to profit from such missing millions is beyond understanding. Federal Justice Ron Merkel, in dismissing a recent application by Bond and his banker Jurg Bollag, said it was an audacious and serious misuse and abuse of the litigation process.12
Murray went on to tell the Senate about the enormous number of other legal actions that Bond had taken, either to avoid giving evidence or to challenge his sentence.
Such an abuse of our legal system is a sad indictment upon our legal system which allows wealthy individuals to mount a number of successive appeals not available to ordinary Australian citizens. This is especially unpalatable when the wealth has been acquired, as has been proved beyond reasonable doubt in the Bond case, from corporate victims.
Let us ensure our legislative processes are ever vigilant against the likes of Bond and Skase so, as we move towards the next century, the Australian people will have faith in the ability and priority of government to bring those to justice who would otherwise seek to damage our reputation as an honest and fair country.
In some ways, of course, Bond was special. He was richer, smarter and more determined than most corporate criminals. And he was also more persuasive. But in another way he exemplified our inability to deal with complex white-collar crime. In the 1980s, he made a monkey out of the corporations laws and tax laws; in the 1990s, he made a fool of the bankruptcy laws and the legal system.
The lesson of Bond is an old one—that there’s one law for the rich and one law for the poor. Or maybe no law for the rich. If you have enough nerve and enough money and your lawyers are smart enough, you have an exceptionally good chance of beating any investigation. You deny everything; you fight every legal point; you exhaust your pursuers by delaying and delaying and delaying.
But the legal system and the judges who run it must share the blame for this. It is simply not acceptable for people like Bond to be allowed to paralyse the courts for years on end, without ever winning a trick, and without ever paying a penalty. It is one thing to ensure people’s rights to a fair trial, it is another to allow highly paid lawyers to bring the judicial process to a grinding halt. Judges need to be tougher on those who appear before them. They need to run their courts properly.
In this context, perhaps the biggest insult to the legal system and the Australian people was the way in which Bond managed to avoid answering questions about his offshore assets in the Federal Court in May 1994 by claiming that he had suffered severe brain damage.
The convenient illness is nowadays the last refuge of the scoundrel, whether it be Skase with his emphysema, Suharto with his stroke or Pinochet with his senility. But rarely has an affliction been so obviously concocted as it was with Bond’s amnesia. The courts in this country had the opportunity on several occasions to rule that he was fit to answer questions on oath, as the law demands, and to punish him for not doing so. But the courts failed woefully on almost every occasion. Bond’s loss of memory became a national joke, much loved by cartoonists and columnists. Yet it was Bond who had the last laugh.
Here, again, one must highlight the role of Bond’s lawyers and medical experts, who assisted him in his pantomime. It is perhaps worth noting that Alan’s chief criminal lawyer, Andrew Fraser, who acted for Bond while he was claiming brain damage, now faces charges in Victoria of trafficking in cocaine. It is perhaps also worth noting that Tim Watson-Munro, the psychiatrist who made the statement about Bond’s inability to run a corner store, pleaded guilty in late 1999 to possession of the drug and to having a $2,000-a-week cocaine habit, or should one say, addiction.13
But Bond was not the only one who got away with a fortune. His managing director at Bond Corporation Holdings, Peter Beckwith, also had trusts in Jersey and almost certainly took advantage of Bollag’s services to hide money overseas. And he was just as successful in hanging on to it—or his widow was, after he died of a brain tumour in 1990.
Beckwith’s trustee in bankruptcy, Garry Trevor, told creditors in December 1997 that he had identified a string of foreign properties that he believed belonged to Beckwith. These included an English manor house sold for $1.8 million, a villa in France, a condominium in Colorado and a house in Chelsea. Together, these would have been worth a minimum of $5 million, yet Beckwith’s creditors were advised that it would be too hard and too expensive to go chasing them.14
Beckwith’s house in Jutland Parade, Dalkeith, which he signed over to his wife before his death, sold for $8.5 million in 1997, but his creditors had to take lengthy legal action even to get a share of that. They ended up settling for $2.68 million, most of which was eaten up in legal costs, and in the end Beckwith’s creditors received a paltry $850,000 for the $32.9 million they were owed—or just 3.6 cents in the dollar.
So it wasn’t just Bob Ramsay who was unsuccessful in cracking the pot of gold. Nor was it just Alan Bond who got away with it. There were plenty of other smaller fry in the 1980s and 1990s that police simply didn’t bother to chase because they weren’t a national priority or a national disgrace. Their losses and their fortunes were mere tens of millions.
Indeed, possibly the most remarkable aspect of Bond’s conviction for the Bell fraud was that the police and the Australian Securities Commission did finally get their man. It took them seven years, three investigations, a team of twenty investigators and 1.2 million documents to pin him for the biggest fraud in Australian history. But the police who chased Bond’s bankruptcy offences (which carry far more modest penalties) did not have the budget or the political commitment.
Perhaps it’s not surprising that the people who led the various Bond investigations in the 1990s have now left the police and gone to private pastures. The pay is better there, the burden of proof is lighter, and it is arguably easier to ensure that justice is done.
It would be nice to think that in the future this might change and the system might do better. But I for one won’t hold my breath.