It seems no one wants to upset the ASIC apple cart to enforce disclosure laws.
THERE must be a Sir Humphrey Appleby clone in Canberra, someone telling any meddlesome new minister or incoming administration, ”whatever you do, don’t lay a finger on that golden goose!”
That golden goose is the hundreds of millions of dollars the corporate regulator rakes in each year for the federal government, roughly half of which is said to be remitted to the states in compensation for disbanding the state regulators in the 1980s.
This Antipodean Appleby runs a tight ship. Last year, ASIC’s collection for Canberra shot up from $640 million to $685 million, while expenses edged just $4 million higher to $72.5 million.
On the income front, they charge the highest fees in the world for the public to access a page of public information. On the expenses front, they don’t prosecute much. Courts and lawyers cost too much.
If this was the police force they’d be chasing one in 25 murderers – those who were easy to catch, couldn’t afford a good lawyer, and had high media value. With the notable exception of National Party firebrand John Williams, the senator who headed up the insolvency inquiry and wants ASIC decommissioned for incompetence, few in Canberra are wont to rock the boat.
Yet, while a good old media ”crackdown” here, a white paper there, and the odd prosecution has hitherto kept the commission on the asset side of the political ledger, a liability now looms large. Down the parliamentary corridor, into the lower house and across the aisle from the commission’s Canberra arch critic John Williams, the new parliamentary secretary to the Treasurer, Bernie Ripoll, eased into his new chair, after the ministry reshuffle, with a rude awakening this week.
ASIC’s compliance regime is a complete shemozzle – ”a national disgrace”, as University of New South Wales academic and expert on regulation and disclosure, Jeffrey Knapp, puts it.
Two billionaire Liberal supporters, big minerals extractors and critics of the government, Clive Palmer and Gina Rinehart, were not even bothering to file reports for their flagship companies.
The floodgates opened. Online yesterday, BusinessDay ran a list of prominent multinational companies and other large corporations with big government contracts that were either late in filing or had not bothered at all.
We are talking detention centre operator Serco, prison operator Australian Correctional Services and G4S Custodial Services, lottery provider Intralot Australia, Reed Constructions, Thiess and three water contractors: United Water International, Veolia Water and Suez Environnement.
The Corporations Act was being broken or ignored at every turn, by big names. What was going on at the small end of town? Total chaos?
”The financial reporting omissions and irregularities relate to some of Australia’s most economically or politically important companies,” Knapp said yesterday. ”The accounting profession, ASIC’s so-called co-regulator, has also let down the public.”
The big accounting firms know the laws of financial reporting and they have an obligation to see that their private clients comply with those laws.
The rampant failure of governance is an embarrassment that can hardly be ignored. It needs to be cleaned up before it erodes the integrity and authority of government and its agencies.
Serco Australia, the company that has a billion-dollar detention centre deal with the government, doubled its net profit to $40 million the year before last. But Serco cannot manage to comply with the Corporations Act and file its accounts on time. And this is the local arm of a top 100 company listed on the London Stock Exchange.
Among the multinationals toting government contracts, some, like Serco, are chronic late filers. Others have failed to lodge accounts at all. Many operate in sensitive industries such as gambling, water, prisons, transport and health.
”The failure of the Rinehart and Palmer companies to file accounts with ASIC in a timely manner is just the tip of the iceberg,” said a source who monitors compliance with government contractors. ”I am aware of literally hundreds of large proprietary companies that should file within four months of year end but either do not file at all or are late in filing.”
One of the reasons the disclosure laws are in place is to protect creditors and staff of big private companies. Reed Constructions Australia Pty Ltd, for instance, had not lodged last year’s accounts until this week. They were five months late and, in the meantime, the company had hit the wall, leaving its creditors in the lurch, despite having booked substantial revenues from the government’s school building program.
The subcontractors owed $80 million by Reed could have prepared for the worst five months ago, had Reed been forced to comply with disclosure laws.
The clear message for Canberra is that large sections of the business community, including the big audit firms, do not take their laws too seriously.
Perhaps Sir Humphrey could ride to the rescue with a quiet suggestion that travesty be turned to triumph by raising penalties for late filers and making some money out of it. The joke might soon wear thin.