Sentencing, deterrence and custodial sentences
In part, the varying views expressed by inquiry participants regarding
the adequacy of penalties for white-collar crime and misconduct reflected
equally divergent views as to the purpose of penalties within the broader
compliance and enforcement framework. Some inquiry participants, including
regulatory and enforcement agencies, argued that the primary purpose of
penalties for white-collar crime and misconduct was one of deterrence, at both
the individual level and the wider community level. However, others suggested
that it was important not to overstate the relationship between penalty
settings and deterrence, and cautioned that doing so risked setting and
imposing penalties that were disproportionate to the wrongdoing, ineffective in
deterring wrongdoing, or both.
These competing perspectives were apparent in the different views
expressed by inquiry participants regarding the effectiveness and
appropriateness of custodial sentences for white-collar criminals. Some
submitters argued that imprisonment is the strongest deterrent available for
white-collar criminals and would-be criminals. Others, however, countered that
imprisonment is rarely justified in cases of non-violent crime—including white-collar
crime—and is, at any rate, ineffective in deterring offenders.
This chapter outlines and considers the different views expressed by
inquiry participants on the above matters.
Purposes of penalties and sentencing
Penalties for white-collar crime, as is the case for penalties in the
criminal justice system more broadly, serve multiple purposes. A number of
inquiry participants pointed to these multiple purposes. For example, the
Uniting Church (JIMU) noted that a penalty regime in the criminal justice
system should serve three purposes: protecting the community from further harm;
rehabilitating the offender; and deterring both the offender and others from
Just as penalties may be set with multiple purposes in mind, in
sentencing criminal offenders courts will have regard to a range of considerations
and purposes. A number of jurisdictions have set out in legislation the
multiple purposes of sentencing and other matters to which a court should have
regard in passing sentence. For example, in Victoria the Sentencing Act 1991,
as Victoria's Sentencing Advisory Council has explained, summarises the
purposes of sentencing as potentially including:
just punishment – to punish the offender to an extent and in a way that
is just in all the circumstances
deterrence – to deter the offender (specific deterrence) or other people
(general deterrence) from committing offences of the same or a similar
rehabilitation – to establish conditions that the court considers will
enable the offender’s rehabilitation
denunciation – to denounce, condemn, or censure the type of conduct
engaged in by the offender
community protection – to protect the community from the offender
a combination of two or more of these purposes.
The Victorian Sentencing Advisory Council also points to a range of
factors that must be taken into account when sentencing an adult, including
(but not limited to) the maximum penalty for the offence, the nature and
gravity of the offence, the offender's culpability and motivation, the harm
caused by the offence, and so on.
Similarly, section 16A of the Crimes Act 1914 (Commonwealth) outlines
the matters to which a court should have regard when passing sentences in
While legislation may guide courts on the matters they should have
regard to in sentencing, the CDPP explained that in sentencing judges are ultimately
required to 'instinctively synthesise' a broad range of factors in order to:
...arrive at a sentence 'that is of a severity appropriate in
all the circumstances to the offence'. They do so within the parameters of the
maximum penalty prescribed by statute for the offence(s) and through the
application of relevant common law sentencing principles.
Indeed, as Professor Michael Adams, Dr Tom Hickie and Mr Ian Lloyd
QC noted in their joint submission, it is trite law that in setting an
appropriate sentence, a judicial officer must have regard to the multiple
purposes of sentencing.
Some submitters pointed to the multiple purposes of penalties for white-collar
crime specifically, both in terms of the maximum level of those penalties and the
extent to which courts impose them. For example, Professor Haines, while noting
the importance of setting penalties with a view to deterrence, also pointed to
the importance of setting penalties to a standard that was consistent with public
So, in this regard, if there is a significant loss, where
somebody has taken illegal financial advice and they are living a life of
poverty—they may have lost their house and so on—they look at this and say, 'I
have lost $500,000' or $100,000 or whatever it is, 'but this person who stole
$20 shoplifting has gone to jail'—whatever the comparison is. There does need
to be some kind of parity in terms of possible penalties between the two,
otherwise there is an issue of public legitimacy in what is going on here.
Other submitters, and in particular submissions provided by individuals
who had suffered as a result of white-collar crime or misconduct, emphasised
the importance of using the penalty system to provide 'justice' for victims.
More than any other factor, however, the evidence received suggested
that, first and foremost, penalties should be designed and imposed with a view
to deterring offenders and would-be offenders. The next part of this chapter
considers the relationship between penalties for white-collar crime and
misconduct and deterrence.
Penalties and deterrence
The relationship between penalty settings and deterrence was, as noted
above, a major focus of this inquiry. A range of submitters, including
regulatory and enforcement authorities, emphasised that strong maximum
penalties and tough sentencing were critical in deterring further misconduct by
a specific offender—that is, 'specific deterrence'—and deterring would-be
offenders in the wider community from committing offences—that is, 'general
Regulatory and enforcement agencies were as one in arguing the
importance of penalties in deterring white-collar crime and misconduct. For
example, the ACCC submitted that both specific and general deterrence relied on
penalty settings, and this in turn was critical in encouraging compliance with
the Competition and Consumer Act. It added:
To prevent infringing behaviour both the theoretical maximum
penalty and the penalties obtained must have a strong deterrent effect. To be
effective, the prohibitions must be able to be efficiently enforced by the ACCC
and private litigants, and the penalties achieved must outweigh the gains that
businesses obtain from anti-competitive or unfair conduct.
The CDPP advised that 'general deterrence' was, in fact, the primary
sentencing objective in cases of white-collar crime, and explained that this
was particularly true given the nature of offending and offenders in white-collar
cases. It submitted that there is:
...a very considerable body of appellate level case law which
underscores the seriousness of white-collar crime and its impacts on the
community. That case law also entrenches the principle that 'general
deterrence' is the primary sentencing objective. This is very important because
white-collar offenders typically come before sentencing courts with evidence of
impressive character and no prior criminal convictions. In different
circumstances, 'prior good character' may operate to significantly mitigate an
offender's sentence. However, courts recognise that it is often this factor
which enabled the offence by allowing white-collar offenders to obtain and
exploit a position of trust. Accordingly, sentencing courts give little weight
to prior good character when sentencing white-collar offences.
As such, the CDPP explained, many individuals convicted of serious
white-collar crime offences are routinely sentenced to significant terms of
(The deterrent effect of imprisonment is discussed in the next part of this
One of the arguments put to the committee during the inquiry was that
because white-collar crime and misconduct is difficult to detect and prove,
there is a particularly pressing need to set penalties at a level that will
deter misconduct. For example, in making the case for introducing stronger
civil penalties in relation to insider trading, Dr Overland highlighted the
difficulties in detecting and proving such cases:
Accordingly, those who might be tempted to engage in insider
trading, on the assumption that they are unlikely to be caught or convicted, or
severely punished if they are, need to be deterred from considering such
activity. If those who are convicted or found liable in civil penalty
proceedings are seen to be subject to serious and significant penalties, the
deterrent effect will be much greater.
In contrast, Professor Bagaric dismissed the theory of general
deterrence as an 'absolute myth'. He argued that while it might seem
counterintuitive, the severity of penalties had little effect on the thinking
of offenders, unlike the risk of detection (a matter covered in the previous
Ninety-three per cent of criminologists around the world know
that there is no correlation between the severity of the penalty and a
reduction in crime. Common sense tells us that there is. We all think that
people act rationally and prudently when they are considering what actions to
do next. We make the assumption that when people are about to commit a crime,
whether it is an assault or a white-collar crime, that they sit back and
reflect, 'If I do this, what is going to happen to me?' and that if the
consequence is really bad—it could be jail for 10 years—they will not do it. It
does not work. The empirical evidence shows that it does not work.
We could escalate white-collar sentences to a mandatory 30
years imprisonment for every white-collar crime. Do you know how much crime
that would reduce? Zero. The only thing that will reduce white-collar crime is
to increase the perception in people's minds that if they do something wrong
they will get caught.
Clarifying his argument, Professor Bagaric suggested that deterrence
worked in an absolute sense, but not in a marginal sense. Absolute deterrence,
...contends that, in order for the risk of detection to be
effective, people need to understand that if they are caught there needs to be
a hardship and unpleasantness that is going to be associated with that. But the
unpleasantness does not have to be something that is going to damage the
taxpayer even more by five years imprisonment. The unpleasantness can be a
community-based order. That would be sufficient. The unpleasantness can be
stripping of their assets. That would be sufficient. The unpleasantness just needs
to be something that the person would seek to avoid. It does not have to be
grotesquely over the top compared to the level of harm of their crime.
Deterrence does work in an absolute sense but not in a marginal sense.
The IPA was also critical of the concept of 'general deterrence'.
The IPA suggested that it was widely accepted that 'general deterrence is a
weak justification for increasing penalties because it effectively punishes
someone for the potential crimes of others'.
Custodial sentences for white-collar offences
Differences between submitters about the purpose of penalties and their
relationship to deterrence found their clearest expression in evidence
concerning the use of custodial sentences in white-collar crime cases. Some
submitters argued that imprisonment was a critical part of the criminal penalty
framework, particularly because of its strong deterrent effect. The committee
also received a large number of submissions from individuals who had suffered a
loss due to white-collar crime or misconduct, and many of these individuals
emphasised what they regarded as a need for stronger custodial penalties. In
contrast, some witnesses argued that prison was rarely an appropriate or
proportionate response to white-collar crime, and some also argued that it was
not an effective deterrent.
This part of the chapter examines these various views, starting with a
consideration of the availability and use of custodial sentences for
white-collar crime in Australia.
Availability and use of custodial
sentences for white-collar crime
In its submission, the CDPP noted that in considering whether or not
penalties for white-collar crime are adequate, there are two main issues:
...first, whether courts are discharging their existing sentencing
discretion appropriately; and second, whether the statutory maximum penalty for
the offence is appropriate.
On the whole, the evidence received by the committee would suggest that
the maximum terms of imprisonment available for white-collar crime are broadly
consistent with settings in foreign jurisdictions. In this sense at least, the
maximum penalties would appear adequate, although some submitters, and in
particular victims of white-collar crime and their advocates, nonetheless
argued that higher maximum terms of imprisonment should be introduced. However,
for the most part, inquiry participants suggested that, to the extent
sufficiently strong custodial sentences are not being handed down to
white-collar criminals, this might be attributed to a reluctance on the part of
enforcement agencies and prosecutors to seek custodial sentences or a failure
by the courts to impose adequate custodial sentences.
According to ASIC, maximum terms of imprisonment available in Australia
are broadly consistent with settings in comparable foreign jurisdictions. The
exception, it noted, was the United States, which has significantly higher
maximum prison terms compared to other jurisdictions.
ASIC provided a table comparing maximum prison terms across various jurisdictions
for a range of white-collar offences demonstrating this point (reproduced as
Table 4.1 below).
Table 4.1: Comparison of
prison terms (years)
|| Insider trading
|| Market manipulation
|| False statements
|| Unlicensed conduct
| Hong Kong
| New Zealand
| United Kingdom
| United States
* Under s409 of the Singapore Penal Code,
criminal breach of trust by a public servant, or by a banker, merchant or
agent, attracts imprisonment for life, or imprisonment for up to 20 years. Like
the fraud provisions in a number of other jurisdictions, this offence is not
specific to the provision of financial services.
** Fraud offences that amount to ‘securities and
commodities fraud’ attract a maximum prison term of 25 years under the Sarbanes-Oxley
Act 2002 (US): see 18 U.S.C. § 1348.
Australian Securities and Investments Commission, Submission 49, p. 8.
Dr Overland, addressing penalties for insider trading specifically,
noted that maximum custodial sentences for insider were consistent with other
jurisdictions (with the exception of the United States).
However, Dr Overland noted that the terms of imprisonment imposed in even
the most serious cases of insider trading had not approached the maximum
penalty. For example, Mr Luke Kamay, an NAB banker who had conspired with an
Australian Bureau of Statistics employee to access and trade on embargoed data,
was sentenced to seven years and three months' imprisonment, for what the judge
called the 'worst case' of insider trading he had seen in Australia. Dr
Overland submitted that if 'offenders who engage in the "worst" and
"most serious" cases of insider trading do not receive the maximum
available sentence, it is hard to argue that the criminal penalties need to be
The Australian Shareholders' Association (ASA) allowed that current
maximum terms of imprisonment and fines in Australia for white-collar crime
were 'broadly consistent' with those available in foreign jurisdictions.
However, the ASA suggested that there:
...appears to be a reluctance to pursue and/or impose custodial
sentences other than in very exceptional cases. In some cases, even where a
custodial sentence is imposed, it is wholly or partially suspended. What we
have seen is a penchant for weak punishments such as good behaviour bonds or
community service orders even when the admitted wrongdoing has been serious,
deliberate and systematic (for example, fraud). There is also a lack of clear
consistency in the sentencing of offenders.
Thus, whilst there is a framework in Australia that might be
considered comparable to overseas jurisdictions in terms of criminal penalties,
the fact that the actual penalties imposed are towards the lower end of the
spectrum produces an outcome that is both inadequate to deter offenders and
encourage proper compliance by individuals. It also attacks public confidence
and the integrity of markets and the financial system as a whole.
Mr Stephen Mayne, representing the ASA, suggested that ASIC was
reluctant to pursue the 'big players' in policing white-collar crime, instead preferring
to focus on the 'small fish'. Mr Mayne further argued that fewer and fewer white-collar
criminals were going to jail as a result of an ASIC-led prosecution. Instead,
he argued, ASIC tended 'to settle and go the civil route and do the
infringement penalties and do the enforceable undertakings and not actually
take the hard yards'.
The evidence received from the ASA appeared to reinforce claims made elsewhere
about the number of people being sent to prison as a result of action taken by
ASIC. For example, as the United Church (JIMU) reported in its submission, an
analysis of ASIC and court records undertaken by a journalist indicated that in
the two financial years ending July 2015, 58 individuals had been convicted and
sentenced for corporate crime. Of these, 46 per cent received a
custodial sentence, although the majority of those individuals received
suspended sentences, good behaviour bonds or intensive correction orders. Those
imprisoned served an average of 20 months before become eligible for
However, the IPA challenged the notion that white-collar criminals are
currently being treated leniently by the courts, suggesting the 'evidence for
such leniency is unclear, and has a number of complexities'.
Will 'doing time' deter
A range of submitters argued that there was no stronger deterrent for white-collar
criminals than the risk of receiving a custodial sentence. For example, the
Arguably, nothing deters would-be white collar criminals more
than a realistic prospect of imprisonment. Whereas a fine can be factored into
the 'cost of business' and potentially offset by profits from the offence,
imprisonment impacts at a very direct and personal level.
Noting the high costs of financial crime in Australia, and the harm such
crime can have on individuals and society as a whole, the AFP submitted that
criminal penalties, including imprisonment for individuals, are a 'proportionate
and dissuasive measure to combat serious financial crime'.
The AFP expressed support for the CDPP's submission in relation to the
deterrent effect of jail terms:
Fines can be factored into the cost of business. I think a
realistic prospect of imprisonment is a more effective deterrent in relation to
this sort of criminality. We are talking about very serious criminality in the
Commonwealth space, where taxpayers and the government are being defrauded of
many millions of dollars. The point I make again is this: our focus is on those
professional facilitators and organisers and our strong view is jail is a very
effective deterrent in that space.
ASIC also suggested that 'imprisonment is a significant deterrent' for
Mr Rowan Davis, Special Counsel at ASIC, told the committee that in his 22
years of experience investigating and prosecuting white-collar crime, he had
found that the prospect of imprisonment provides a powerful deterrent to
white-collar criminals. In making this point, Mr Davis explained that
white-collar offending often involves significant and sophisticated
pre-planning over a period of time, and in this context the threat of imprisonment:
...rings loud and clear. I say that in terms of my experience,
in part from seeing contemporaneous evidence of people in the process of
committing crimes—including telephone intercepts, emails et cetera—where the
fear of imprisonment will actually be spoken about it. Unfortunately, that has
not necessarily had the effect of causing them to desist, but it is a real
factor. In my view, the fact that we still have white-collar crime does not
speak to those who are actually deterred as a result.
Mr Davis also suggested that, aside from arguments regarding general
deterrence, imprisonment played a role in registering the community's
disapprobation for white-collar crime.
While some witnesses argued that imprisonment was rarely the most
appropriate or proportionate response to white-collar crime (as discussed
further below), Dr Overland noted that jail, fines and restitution were not
mutually exclusive. She noted, in particular, that in criminal proceedings,
'for the majority of white-collar crimes, there are fines that can be imposed
in addition to the imposition of a jail term, and sometimes there is an
emphasis on one over another'.
Victims of white-collar crime on
The committee received a large number of submissions from victims of white-collar
crime and advocates writing on behalf of victims. The overwhelming view
expressed in these submissions was that maximum terms of imprisonment should be
higher, and more white-collar criminals should be receiving prison sentences.
The Banking & Finance Consumers Support Association (BFCSA) pointed
to the Icelandic example of prosecuting and, in many cases, imprisoning
executive officers of banks and financial institutions in the aftermath of the global
financial crisis (GFC). According to the BFCSA, the use of custodial sentences
in Iceland has served as a powerful deterrent to would-be white-collar
criminals in the Icelandic banking sector. The BFCSA submitted that a similar
'zero tolerance' approach, and the use of 'tough penalties' (along with improved
enforcement and a better understanding of predatory lending, mortgage fraud and
other 'control frauds'), should apply in Australia.
The BFCSA argued, on behalf of its members, for:
...heavy custodial sentences as strong deterrents for the
future. We collectively seek the most appropriate penalties to match the
magnitude of damage to people's lives, the homelessness, and the stress of
financial loss. It is time to get serious for the sake of future generations in
terms of housing and general financial stability.
More specifically, and addressing what it suggested was criminal
activity on the part of lenders and other participants in the banking and
financial sector, the BFCSA submitted:
In the public interest and with the clear intention to stop
these activities, we believe 25 years with a non-parole period is a fair
sentence and a significant deterrent. Given the magnitude of the criminal
intent, the Cartel activity and, the staggering loss of homes, which will
continue well into the future, after the last Low Doc Mortgage is sold and
signed up, no lesser sentence is adequate.
BFCSA Members also recommend 20 years with a non-parole
period for regulatory executives found guilty of criminal neglect.
Ms Merilyn Swan noted that, as of January 2016, 29 bankers in
Iceland had been sentenced to prison for their roles in Iceland's banking
crisis during the GFC. Ms Swan, while emphasising the central importance
of a strong corporate regulator, submitted:
Iceland's approach to breaches of fiduciary duties by CEOs
and senior bank management would be welcomed by many in Australia who feel CEOs
expressing their apologies for widespread financial misconduct within their
organisations is simply not good enough.
The HNAB-Action Group argued that white-collar criminals should face
prison time 'for at least as long as it takes all the offender's victims to
receive restitution and compensation'.
A large number of submissions received by individuals relaying their own
experiences with alleged predatory lending and mortgage fraud, also called for
increasing the incidence and duration of custodial sentences for white-collar
criminals in banks and other financial institutions.
Is imprisonment a proportionate and
effective response to white-collar crime?
Not all inquiry participants agreed that sending a larger number of white-collar
criminals to prison for longer periods of time would be effective or proportionate.
Some questioned why white-collar criminals should be subject to different
treatment than other non-violent offenders, questioned whether imprisonment was
a proportionate or cost-effective response to the offending in most instances,
and challenged the idea that stronger custodial penalties would have a
meaningful deterrent effect. These views are summarised below.
Some submitters stressed that custodial sentences should always be
considered a punishment of last resort. For example, Dr Zirnsak explained that the
Uniting Church (JIMU) regarded imprisonment as an appropriate penalty only in
'extreme cases' where there was a need to protect the community or 'send a
signal about deterrence in some cases for really egregious crimes being
Dr Zirnsak suggested that deterrence could be provided through other sanctions:
In these kinds of crimes, if there is transparency, the
potential for that public disclosure does in itself add a penalty, in addition
to what we think should be adequate civil penalties, to ensure that there is no
profit out of the crime. Other sanctions might be being banned from certain
roles, certain industries, not being able to be a director, depending on the
type of crime. There are a range of sanctions that could be applied, in the
case of white-collar crime.
Dr Zirnsak told the committee that criminological research appeared to
suggest that when it came to deterrence, the likelihood of detection (a matter
discussed in chapter 3) was more important than the threat of imprisonment:
If you had the choice between having a handful of high
profile, very strong imprisonment sentences versus lots of detection with more
middle level sanctions, then our understanding would be the system where you
have more detection and more middle level sanctions is probably a much greater
deterrent and far more effective than simply: 'I'll take my chances. It's about
one chance in a 100 I get caught, but if I get caught I'm going to go to prison
for a long time.' Our understanding is that the research increasingly suggests
that is not as effective as the other one.
The Queensland Law Society acknowledged that white-collar crime can and
has 'damaged whole industries and devalued entire markets, and in such
circumstances the enormity of the crime, the harm caused and the informed
intent behind the wrongdoing will justify custodial sentences of significant
Nonetheless, the Queensland Law Society maintained that in many instances white-collar
crime arises through ignorance, performance pressure or poor decision-making,
and in such circumstances, and unless there is a physical threat to the
community, imprisonment is unlikely to achieve the objectives of sentencing.
Alternative, non-custodial sentences, including community service orders, are
likely to be more appropriate, and far less costly to the taxpayer. The
Queensland Law Society added that non-custodial sentences can also be used in
conjunction with fines and compensation orders to enhance deterrence.
The IPA argued that that the imprisonment of non-violent criminals,
including 'white-collar criminals'—a categorisation it suggested was
problematic and risked undermining equality before the law—was
rarely rational or appropriate. The IPA pointed to evidence that suggesting
that increasing sentence severity, including incarceration, has no effect on
levels of criminal activity.
The issue, the IPA suggested, was not whether to punish non-violent criminals,
but rather whether the punishment was proportionate to the offence. In this
sense, it made the case for penalising white-collar crime in a way that was
consistent with the treatment of other non-violent crimes:
Violent offenders need to be incarcerated, but prison is
expensive and strongly correlated with repeat and escalating offending. For
this reason, non-violent offenders are increasingly given alternative
punishments. This recognises that the costs of imprisonment for people whom we
are merely mad at, as opposed to afraid of, are not justified by the benefits
that you get from that punishment. This is the context for the central
contention of our submission: white-collar crime is not special and
white-collar criminals should not be singled out for special treatment. The
principles that apply to the punishment of non-violent offending also apply to
The IPA also argued that in cases of non-violent crime, imprisonment
should be seen as a last resort and reserved for 'recidivists or people who
have otherwise indicated through their behaviour that they simply will not
respond to alternative punishments'.
In most cases, it argued, alternative punishments for white-collar criminals
would be more effective and proportionate:
Home detention and community service can be sufficiently
punitive to deliver retribution for the victim and society. Professional
disqualification is an effective specific deterrent that reduces the criminal's
chance of reoffending. Restitution orders and fines can be used to make the
victim whole, and this should be at the heart of the criminal justice system,
especially in relation to crimes that involve money.
As noted previously, the IPA was critical of the concept of 'general
deterrence'. With regard to imprisonment as a form of general deterrence, the
Imprisonment as a penalty has a very specific purpose in
sentencing—that is, to separate people from the public to protect the public.
That is the unique feature of prison itself. General deterrence in any other
circumstance is not an acceptable justification on its own. What we need is to
achieve the other objectives with sentencing in punishing the criminal. Prison
has not worked well to achieve the other objective of sentencing. It has not
worked well to prevent recidivism. It does not provide any restitution to the
victims of crime. There is a reason to believe that prison is also a poor
mechanism for rehabilitation. On its own, prison would only be used as an idea
of general deterrence, and we believe that is weak in and of itself.
Some inquiry participants questioned whether the benefits to the
community of imprisoning white-collar criminals justified the cost. For
example, in their joint submission, Professor Adams, Dr Hickie and Mr Lloyd QC
highlighted the high cost of incarceration, and emphasised the need for a
'careful balancing act between the sentencing of white-collar criminals and the
costs associated for the state'.
The argument has been made for many years that an affluent
white collar criminal should not be treated more favourably than the
traditional perpetrator of street crimes which perpetrator [sic] would in the
main come from a less affluent socio-economic background. Whilst this
proposition is perhaps self-evidently correct, it ignores the cost to society
of housing the white collar criminal and the fact the white collar criminal
poses no real threat to the physical well-being of the citizen in the street.
Professor Adams, Dr Hickie and Mr Lloyd QC also submitted that there was
little evidence to suggest that imprisonment of offenders was effective in
reducing the rates of recidivism of offenders. They argued that:
...if one of the aims of imposing a custodial sentence on an
offender is rehabilitation of that offender, then current sentencing practices
arguably fall woefully short of achieving that aim. This then begs the question
of how and why a custodial sentence should apply to a white collar criminal.
Professor Adams, Dr Hickie and Mr Lloyd QC argued that hitting the
'hip-pocket nerve' of offenders and retrieving ill-gotten gains would, along
with the stigma of a conviction, were the major deterrent factors for
white-collar criminals, and the threat of imprisonment was less relevant in
The effects of a conviction on a white collar criminal are
undoubtedly at the core of punishment and deterrence because they impact upon
the offender's ability to carry on their business. Such effects may include
travel visa denials and the inability to engage upon their licensed profession
(disbarment for lawyers and licensing for traders and other business
professionals) and the ability for such offenders to earn money and raise funds
in the future. These effects flowing from a conviction [simply] do not normally
apply to the usual non-white collar crime offender. It can be argued, save and
except for financial punishment, the imposition of a prison term in reality
does little to deter a white collar criminal for re-offending.
Professor Bagaric argued that prison should be reserved for criminals
who pose a physical risk to the community.
When it comes to sentencing white-collar offenders, in most
situations, we should not put them in prison. We need to implement other more
cost-effective sanctions in order to deal with them.
Professor Bagaric also emphasised the need to have regard to the
principle of proportionately in sentencing. He suggested that a custodial
sentence was in most instances not a proportionate response to the harms caused
by white-collar criminals:
Imprisonment is a profoundly damaging sanction. People that
go to prison not only suffer the hardship of deprivation of liberty while they
are there, the chances of them being subject to a significant violent crime go
up tenfold. When they get out, their life expectancy is reduced. When they get
out, their lifetime earning is reduced by about 40 per cent. Imprisonment for
any case of institutional types of insider or white-collar crime is almost
always a grossly disproportionate penalty hardship for what they have done.
In discussing the importance of the principle of proportionately,
Professor Bagaric argued that a bifurcated response to white-collar crime was
needed in which the focus was on harms caused:
There are only two forms of basic white-collar crime. One is
where mums and dads, and individuals get hurt and lose their life savings and
their houses, and causes significant damage to people. In rare instances, the
only appropriate response to that may be a jail term. But, for the
institutional type of white-collar crime, in nearly no cases should any of
those people come anywhere near a prison. There are other forms of sanctions
that are proportionate to the harm that they do.
Some witnesses and submitters suggested that calls for harsher prison
sentences for white-collar offenders were based less on evidence and more, as
the IPA put it, on 'anti-market populism'.
Similarly, Professor Bagaric told the committee that penalties should be based
on evidence, rather than what 'feels right'. The starting point in a discussion
about penalties, he argued, should be that:
...the harshest penalties in our criminal justice system need
to be reserved for the people we are scared of—not the people we are angry at.
We and the community are angry at white-collar offenders.
Why? Because they are greedy and quite often they are lazy. That does not
justify us, in a logical and empirical manner, imposing the harshest penalties
in our system—being imprisonment—on these people. The impact of imprisoning
many white-collar offenders is that we, paradoxically, punish the taxpayer and
ourselves even more.
Some inquiry participants took issue with the notion that imprisonment
was not a proportionate response to the harms caused by white-collar crime (and,
as noted in the first chapter, many witnesses were keen to emphasise the extent
of these harms). Making the case for imprisonment as a condign punishment in
cases of white-collar crime, Mr Davis, ASIC Special Counsel, was critical of
the underlying assumption in Professor Bagaric's suggestion that imprisonment
should be saved for the worst type of offender, suggesting:
...there is a risk there of perhaps underestimating the impact
that financial crime can have on the victims of financial crime. In my experience,
that can be devastating.
Asked about the point made by some witnesses that imprisonment should
always be a last resort, Mr Davis also indicated that it was already the case
that prison sentences were only handed down when no other penalty was deemed
I might indicate that legislative guidance does exist in the
Commonwealth Crimes Act in relation to imposing a sentence in prison: the court
has to be satisfied that no other sentence is appropriate. So in a sense the
court is required to go through that stepped reasoning process, as it were, of
'No, this is not appropriate; this is not appropriate,' and we end up at a
sentence of imprisonment.
As summarised below, there was some discussion during the inquiry about
whether mandatory minimum sentences might provide one way of better deterring
white-collar offending, particularly in light of the difficulties involved in
successfully prosecuting offenders.
Dr Overland suggested that, rather than increasing the maximum custodial
sentence for insider trading, consideration should be given to a mandatory
minimum sentence of six months imprisonment for all offenders convicted of insider
trading, 'other than in the most extenuating circumstances'.
This, she submitted, would have a positive impact on general deterrence:
While the availability of increasingly severe penalties may
appear to have a general deterrent effect, it is the actual penalties imposed
on those convicted of insider trading which are most likely to have an impact.
Potential insider traders are unlikely to be deterred from engaging in insider
trading just because a greater maximum sentence is possible, if they regularly
see that those who are convicted of insider trading are not given a severe
sentence. Thus, when the penalties imposed, even for the cases considered to be
in the “worst category”, do not approach the existing maximums, an arbitrary
increase of maximum penalties is unlikely to have a significant impact on
While judicial discretion must be preserved in matters of
sentencing, consideration should be given as to whether it is appropriate to
legislate for a minimum sentence of six months’ imprisonment, other than in the
most extenuating circumstances, for those convicted of white collar crimes such
as insider trading. This ensures that all potential offenders are aware that
imprisonment is a certainty for those identified and convicted of insider
trading, thus increasing the deterrent effect of the penalty.
On the whole, witnesses appearing before the committee expressed caution
or opposition to the concept of mandatory sentencing. The Queensland Law
Society indicated that, in addition to viewing imprisonment as a last-resort
punishment, mandatory sentencing restricts 'a court's ability to address issues
specific to the offender and can result in harsh and unjustifiable sentences,
as well as decreasing the likelihood of guilty pleas being entered'.
Referring to Dr Overland's suggestion that consideration be given to a
mandatory minimum sentence for insider trading, the CDPP also expressed concern
about the impact this might have on encouraging offenders to plead guilty:
One issue about that is that it can have an impact on whether
persons plead or not, and that is certainly what happened in the
people-smuggling space, where, once defendants realised that, no matter how
good their mitigating circumstances, they were going to jail for X
period—bearing in mind that was a minimum of three years—that did significantly
impact on the plea rate. From the community's perspective, that means a lot
more expensive trials have to be conducted. If there were to be a mandatory
minimum, my personal view would be that there would need to be a get-out clause
to cater for the special circumstances or the exceptional case, because there
is always a case that comes along where one might feel that it is not
appropriate that this individual go to jail.
For its part, the IPA argued that mandatory sentencing not only removes
the judiciary's ability to properly consider the facts of a case in sentencing,
but also leads to overincarceration which the taxpayer has to pay for.
Mr Theo Alexander also sounded a note of caution in regard to mandatory
sentencing, advising the committee that there was no evidence that mandatory
sentencing was effective as a deterrent.
Taking a different approach on the question of mandatory penalties, Dr Zirnsak
suggested that consideration should be given to:
...a mandatory limit to wipe out the profit that was made from
the criminal activity, and the penalty should be higher than that, because
clearly if all you do is lose what you gained, that is still not necessarily a
significant enough deterrent. I do think that is the case. Also, those kinds of
penalties are only going to be on what the detected benefit was as well, so
there is some risk that a person may have gained a greater benefit that goes
undetected. This is not unknown in Australian law. I know, for example, that in
the antibribery section of the Criminal Code there already is this ability to
level a penalty that is a multiple of the benefit gained through the bribe if
that can be determined by the court.
The committee acknowledges the concerns of some inquiry participants,
and in particular of victims of white-collar crime and their advocates, that
maximum prison terms for white-collar offences should be increased. However,
the committee is satisfied that the maximum prison terms available in Australia
are comparable to those available in similar foreign jurisdictions. While the
committee does not preclude the possibility that maximum terms of imprisonment
for certain offences should be increased, broadly speaking the committee
considers current maximum terms of imprisonment for white-collar crime to be
The committee considers that custodial sentences have an important role
to play in deterring and punishing white-collar crime. Indeed, the committee is
inclined to agree with the suggestion that arguably nothing deters a
white-collar criminal more than the realistic prospect of imprisonment.
Moreover, this inquiry has helped underline the harms caused by white-collar
crime, both at the individual level and in the community more broadly, and
agrees that imprisonment is often an appropriate and proportionate response to
white-collar crime. Equally, the committee notes the severity of imprisonment
as a punishment, and agrees that the courts should only impose a term of
imprisonment as a 'last resort' punishment. However, the committee has seen no
evidence to suggest that the courts currently regard it otherwise.
The committee would have strong reservations in relation to any steps to
introduce mandatory sentencing in relation to white-collar offences. While deterring,
detecting and prosecuting white-collar crime and misconduct is often very
challenging, this in itself would not justify steps that would remove the
discretion of the courts in sentencing. Mandatory sentencing might also reduce
the prospects of guilty pleas or cooperation in white-collar crime cases.
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