Nothing But A Fraud

at

90250688Mercille

From top: Tanaiste Joan Burton launching a ‘dole cheat’ helpline in 2012 and Dr Julien Mercille

The coalition’s agenda:

Tough on welfare fraud.

Soft on corporate crime.

Dr Julien Mercille writes:

Last week confirmed once again that in Ireland, the government always finds the resources to control ordinary people, while the establishment gets away with it. Indeed, a lot of energy has been put into tackling welfare fraud while corporate crime is left undisturbed.

Transparency International released a report ranking OECD countries for their efforts to reduce corporate bribery and corruption. Among 41 countries, Ireland comes near the bottom, meaning that our government has one of the worst records of all. This is not the first time that international organisations have warned of the lack of progress on fighting corruption in Ireland.

The report investigates the extent to which action has been taken against Irish companies and individuals who bribe public officials abroad to obtain contracts, licences and concessions.

Only four countries are classified as having adopted an “active enforcement” stance, which is good. Six others are deemed to have “moderate enforcement”, and nine “limited enforcement”. Then, 20 countries conduct “little or no enforcement” to ensure their firms do not spread corruption around the world. Ireland, you guessed correctly, is in this last category.

Incidentally, Greece, which has been demonised in the media for its corrupt practices, comes out better than us, in the third category.

Transparency International stated that Ireland pledged to tackle bribery when it ratified the OECD anti-bribery convention 12 years ago. But since then, “there has not been a single prosecution and there are no signs that the law will be enforced”. This contrasts sharply with the top four countries (Germany, Switzerland, the UK and the US), which have completed over 215 prosecution cases in total.

The conclusion: “Precious few resources are invested in tackling corruption or white collar crime in Ireland and it appears that helping fighting international bribery is not a government priority either”.

Now, compare this to our government’s energetic efforts to fight social welfare fraud.

To get an idea of the problem, consider that the Department of Social Protection spends about €20 billion annually in social welfare payments. Fraud amounts to about €40 million a year, or a rather small 0.2% of total spending. Sure, fraud is a problem, but it’s not as if the system is in disarray.

Nevertheless, Joan Burton’s department is conducting a full-scale assault on fraudsters.

Last week, reports came out again that since December 2014, 20 police officers have been assigned to a Special Investigation Unit (SIU) to assist Joan to catch those who commit welfare fraud. The Gardaí are stationed throughout the country.

But this is not all. The Department’s Compliance and Anti-Fraud Strategy proudly lists a number of cutting-edge measures it is now taking, including:

– Over 1 million reviews of welfare claimants conducted in 2014.

– Over 900 staff working on fraud in the department and in communities throughout the country.

– 600 cases now before the courts, and there is even a target to submit 300 fraud cases for prosecution in 2015.

– Inspections at airports, construction sites and road checkpoints.

– Predictive Analytics Modeling: analytical techniques to identify claims that are more likely to be fraudulent.

– Legislation enacted in 2012 now allows for up to 15% of a person’s social welfare entitlement to be deducted without his or her agreement when there has been overpayment in the past.

It is understandable that some steps be taken to reduce welfare fraud. But the problem is that the policy is once again directed at ordinary people, while elites get away with it.

First, as stated above, no significant steps have been undertaken to tackle corruption and white collar crime.

Second, if unemployment was lower, we’d save a lot on welfare payments. Therefore, the austerity implemented since 2009 by Labour, Fianna Fáil and Fine Gael politicians accounts for a significant chunk of welfare expenses since it has raised unemployment and lowered people’s incomes.

Third, corporate welfare is huge in this country. Think of our ultra-low 12.5% corporate tax rate. Think of the €64 billion we injected in the banks to bail them out. Or the €365 billion bank guarantee we provided to banks. When is the police going to investigate that with the same amount of detail as for welfare claimants?

Now imagine the following:

900 staff dedicated to catching white collar crime. Over 1 million reviews this year alone of government and corporate officials’ expenses. 600 cases of bankers brought before the courts and prosecuted for the reckless moves they made that triggered the crisis. Gardaí units investigating the IFSC (International Financial Services Centre) and interviewing bankers.

Predictive Analytics Modeling to spot which bankers are more likely to cause trouble in the future. Inspections in Parliament offices to find out which politicians exactly had the brilliant idea of implementing austerity since 2009. Legislation to take money straight out of those guys’ salaries when fraudulent practices are detected.

Those kinds of policies should be on political platforms in the upcoming elections. It would gather quite a few votes.

Julien Mercille is a lecturer at UCD. His new book, Deepening Neoliberalism, Austerity, and Crisis: Europe’s Treasure Ireland (Palgrave) is out. Twitter: @JulienMercille

(Sasko Lazarov/RollingNews.ie)

80 thoughts on “Nothing But A Fraud

  1. Nikkeboentje

    “Incidentally, Greece, which has been demonised in the media for its corrupt practices, comes out better than us, in the third category”….based on my experiences in the country, I think Greece just hides it better than Ireland.

    1. italia'90

      Can you give us some examples from your banking experience?
      Come on, we’re all friends here and nobody is going to rat on you.

      1. Nikkeboentje

        I was never asked to make an “ancillary payment” to anyone in Ireland, ever. My first day in Athens meeting potential business contacts at least 50% told me to factor in “ancillary payments” into my budget!

        1. italia'90

          That’s a problem I have also encountered when dealing with “fixers” or a legal “advocates” on the continent.
          However, the silent corruption culture here is boiled down to the”10%” price tag that has to be factored in to every quote when dealing with a politicians pet project, a local government contract or an even bigger EU funded infrastructural project.
          To win a sealed bid here, you have to be known to pay the “10%” commission.

          1. classter

            italia’90
            Can you explain the ‘10%” commission’?

            I have never seen such a thing in Ireland. Are you saying you have to pay a bribe? Or are you suggesting that you will be expected to distribute largesse of a value of 10% of the contract to the politician’s constituency? OR what exactly?

          2. italia'90

            That’s right BrownBull, we’ve never had corrupt politicians in the pockets of big developers in this country, no siree!
            Ray Burke, Liam Lawlor, Frank Dunlop to name but a few well known fixers and the Mahon Tribunal are all in the nations collective imagination?

            I have personal experience, dealing in local projects where 10% is paid, as Cluster says “in largesse” or in other forms. I’ve attended meetings where the contractor asked “how do you want your 10%?”

            How do people think the same small coterie of people and developers win so many projects?
            It’s not because they are as efficient as the Germans or as attentive to detail and precision engineering as the Japanese?
            We get the worst of the worst here and it took a boom and a bust to expose the culture here once again.

            Deny it if you like, this is the best little corrupt country to do business in.
            As the Italians say, “A fish rots from the head”.

          3. dereviled

            On that note I would recommend “The Dark Heart of Italy” by Tobias Jones for an insight into a powerful economy beset by corruption and “Mafia Republic…” by John Dickie for some indication of the forces involved and the price paid by the population.

  2. Snake

    Julien is now a parody of himself. The biggest barrier to effective social welfare is the perception that many of the recipients are fraudulently claiming. Just look at the arguments put forward by the Tories in the UK. Without a system that tries to ensure that social welfare is reaching the people who need it then the neo liberals will be able to attack the system as a whole.

    1. classter

      I thought he struck rather an even-handed note on this exact point.
      ‘It is understandable that some steps be taken to reduce welfare fraud. But the problem is that the policy is once again directed at ordinary people, while elites get away with it.’

      Do you dispute this point?

      1. Padi

        I work hard, pay lots of taxes and don’t claim any social welfare. Am I not a citizen and an ordinary person too?

        1. classter

          You are but if you cheat your taxes, the Revenue is able and willing to pursue you.

          But for some other crimes, hypothetical examples below:
          If you corruptly win a state licence
          If you engaged in some sophisticated but destructive scam artistry in the IFSC
          If you run a massive food company which has found many times to have had inaccurate labelling (risking huge damage to a massive Irish industry)
          If you take bribes to rezone large areas in the greater Dublin area
          If you steal/attempt to steal assets from a bailed-out bank

          The state is not set-up to deal with you so well.

          Lowry has had serious findings made against him in two public inquiries but will retire on a very generous pension. Wherever you sit on the political spectrum, that sits in the craw.

    2. Dόn Pídgéόní

      Its misinformation not a perception. The media are complicit in perpetuating the myth of benefit fraud in the UK. The Tories are getting away with it because Labour is eating itself rather than opposing their policies in any effective way.

    3. Clampers Outside!

      Like Don said, for the most part benefit fraud in the UK is a creation of the UK govt and media by citing extreme examples to work people into a frenzy and get them, voters, at each others throats.

      Do some readin’

  3. Jonotti

    Predictable tosh.

    Total tax revenue last year was 44 billion. 20 billion of this, so 46%, was spent on welfare. That is an outrageous amount and every effort to reduce unnecessary spending should be applauded.
    Corporate fraud is a completely sepperate issue but you never fail to miss a false dichotomy.

      1. Owen C

        Why are you referencing the 2012 report when there has been massive improvements seen in the following 2013 and 2014 reports? So much progress that it actually makes Ireland 17th out of 150+ and the biggest improvement of any country within the top 40.

        1. Clampers Outside!

          Because
          It mentions DOB / Moriarty specifically. Yet that creep DOB somehow believes he can sue for protection of a non-existent “good name and rep”.
          No one at all from that time has been brought to justice. No one! And that’s what Julien was speaking about.

          This is not about, how Ireland without Denis O Brien was able to repair the damage he and others like him did. It’s about them not being held to account.

    1. classter

      ‘Cept he addressed this. he is not suggesting that welfare fraud be ignored, only that it sends all the wrong signals when the focus is on welfare fraud but white collar crime is almost completely ignored.

      1. bisted

        …the entire amount of welfare fraud is less than the discount from a single Nama transaction I can think of…

    2. Brendan

      “20 billion of this was spent on welfare”
      20 billion was spent on social protection, of which the largest category is pensions. Only 22% of that 20 billion is spent on working-age income supports.

  4. classter

    I think there is a misguided view amongst many older irish of the generations before us that poor business ethics is not ideal but some of these kinds of cowboys ‘get things done’.

    I don’t think that the cost of white collar crime even on a purely pragmatic bad for business level is accepted/realised.

    1. Clampers Outside!

      True !

      If they did, Denis wouldn’t be suing anyone, because he’d have nothing to sue for to protect some nonsense lie about him having a ‘good name and rep’, not that he has in my book.

    2. Kieran NYC

      +1

      ‘He might have screwed everyone else, but he didn’t screw me/tossed me a few aul pennies, so I’ll vote for him/hold rallies of support in Cavan.’

      That’s where DO’B went wrong. He should have paid off more people. Buying the Irish soccer management was just small potatoes.

  5. CousinJack

    Points well made.
    There is no interest in this society in policing the elite, when the vulnerable can be persecuted. Irish government institutions reflect the irish catholic institutions from which they obtained their philosophy and morality

  6. J

    “corporate welfare is huge in this country … when is the police going to investigate this”
    Julien, regarding your above statement please enlighten me as what exactly police should investigate? Are you calling for your local Garda to ascertain if our CT rate, capital allowance, grants, tax breaks etc are all legitimate policies?
    “inspections in Parliament offices to find out which politicians exactly had the brilliant idea of implementing austerity since 2009”
    Julien, austerity is a fiscal policy that was introduced to reduce debt deficit. It is a policy that is open to different interpretations and definitions, not subject to one universal school of thought. What inspections do you propose to be carried out? Are you suggesting a shoot to kill policy of all politicians that “had the brilliant idea of implementing austerity since 2009”

        1. Tidy Dave

          In fairness, you do waffle a good bit there. Especially the “shoot to kill policy” bit.
          The best example of a useful investigation would be one based on the Moriarty Tribunal; specifically the O’Brien bribe to Lowry. Lowry’s still a serving politician – elected time and time again by his electorate. That’s a textbook example of unaccountablity.
          I hold out for something to come of the Moriarty findings, perhaps naively, but if you think things can ever get better, why bother doing anything at all?

          1. Kieran NYC

            “Lowry’s still a serving politician – elected time and time again by his electorate. That’s a textbook example of unaccountablity.”

            That’s a textbook example of accountability – he is put before the electorate time and time again and they don’t care that he’s a crook.

        1. J

          Dave , Julien did not address the issue of accountability nor made any reference to any of the tribunals. He made the following statement “inspections in Parliament offices to find out which politicians exactly had the brilliant idea of implementing austerity since 2009”. I picked him up on this statement and used language reflective of the banality of his statement.

          1. J

            Eamonn, I merely corrected a presumption . No words of complaint used. Wow, you do indeed live up to your surname.

          2. Clampers Outside!

            Didn’t mention the Tribunals?

            What do you think “Soft on corporate crime” means? That’s the Tribunals right there, which were extremely soft on corporate crime.

  7. Dubloony

    He’s getting a few things mixed up.
    Calling the 12.5% corporate tax rate a crime doesn’t necessarily make it so. Its policy, so nothing for gardai to investigate.
    If you are working and claiming the dole, it is fraud. There is something to investigate and prosecute.

    The banking investigations have taken far too long to bring to trial and I agree that additional resources should be given to those cases.

    1. Snake

      Hear hear. Personally, I would not have a job if it were not for the 12.5% tax rate. I know that there are many thousands of people like me who pay ~50% tax into public coffers (and rightly so) who would be taking money from social welfare if the corporate tax rate is increased. What we need is a collection system that ensures that those trying to avoid paying their fair share get punished. We are a small country on the periphery of Europe, from an FDI perspective, everything is slanted in favour of the big European economies. Our corporate tax level is the only ammunition that we have.

  8. dereviled

    Accountancy Ireland estimated €900 million in corporate fraud:
    http://www.accountancyireland.ie/Archive/2007/December-2007/Reducing-Fraud-A-Programme-That-Will-Deliver-Benefits-on-the-Bottom-Line-/
    Do we have a comparison re: welfare fraud?
    Traditionally small businesses such as farms, builders and pubs depended on ‘casual’ labour; are they still abusing the system in employing welfare recipients?
    Signing-on and off for occasional work is a total pain, you have to keep going to the local welfare office, they won’t accept mail or phone calls and you lose some days welfare outside of your workin days and may have to wait to have payments reinstated.

  9. Owen C

    “Transparency International released a report ranking OECD countries for their efforts to reduce corporate bribery and corruption. Among 41 countries, Ireland comes near the bottom, meaning that our government has one of the worst records of all. This is not the first time that international organisations have warned of the lack of progress on fighting corruption in Ireland.”

    First of all, Transperency Intl runs a headline survey every year called it’s “Corruption Perceptions Index”. Ireland ranks 17th out of 150 countries, and has actually improved its score in each of the last three years (2014 the last released). In fact, in this period, Ireland has made the most progress of ANY country in the top 40 (from 69/100 to 74/100). This obviously doesn’t fit with Merceille’s narrative, so lets ignore the main report this organisation issues and go for a smaller, less frequent, and less useful one.

    https://www.transparency.org/cpi2014/results

    Secondly, the report which Merceille seems to refer to is one solely related to foreign bribery, nothing about general corruption, and hence the reference to “exporting countries”. So the report has absolutely nothing to do with corruption generally and the enforcement of white collar crime across the whole economy. I know, Merceille cutting corners, who’d have guessed it? Also, what other nefarious countries have we been grouped with? 19 other countries (ie Ireland is grouped with 50% of all OECD countries) including those rampantly corrupt nations such as Japan, Denmark, Belgium, & Spain. So some context is perhaps needed.

    https://www.transparency.org/news/pressrelease/20_major_exporting_countries_violate_international_law_obligations

    1. Snake

      Please leave Julien alone, you cannot expect a hobbyist blogger to actually have the wherewithal to build a cogent, robust argument.

      1. classter

        This a cogent argument though, no?

        There is very little enforcement of high-level white collar criminality in Ireland. The Guards have very little resources or expertise in this area.

        The Revenue seems to be pugnacious & effective dealing with everybody up to and including the upper middle class. We seem to be able to enforce TV licence fines. Serious findings were made in a number of tribunals over the past few decades & yet the Guards didn;t seem to have found a decent starting point in any of them.

        1. pardon

          Classter, no issue with basic premises of argument. Issue lies with very lazy thought process of last five paragraphs.

          1. classter

            Why? It is fair to point out that we are generous with large corporations & perhaps we are not so vigorous at ensuring that what they do is above board, or that they won’t go overboard & risk damaging our reputation.

            I also think it is a reasonable suggestion that there be a criminal investigation into the circumstances surrounding the bailout etc. I still don’t know what happened the night of the guarantee. Do you? I still don’t understand how Anglo could possibly have been treated the same as AIB & BoI. I don’t understand how there were so many meetings without minutes or so many social occasions where the financial catastrophe underway wasn’t even raised.

            I don’t see what is lazy about the idea of pursuing while collar fraud like we do welfare fraud.

  10. Atticus

    “Over 900 staff working on fraud in the department and in communities throughout the country.”

    “Fraud amounts to about €40 million a year”

    What’s the average wage in the Civil Service? €40K?

    So we’re spending €36m to save €4m a year? That’s a fecking bargain!

    1. Cian

      Atticus, that is a good return. We spend €36M, save €40M which is a (direct) net savings of €4M each year.
      There is also the on-going savings: the people stopped last year (probably) aren’t continuing their fraud into this year. You should include the preventative side – people will think twice about fraud. This is more difficult to calculate.

      I agree that we should *also* enforce corporate crime.

    2. Bob

      I don’t think that’s right. They stop €40 million worth of fraud this year and so there’d be less next year. So they’d need to spend less on it next year and there’d be less money being lost through fraud as well. So it all adds up.

    3. J

      Classter, agree somewhat with pardon. No issue with the general premises of the post, nor the suggestion that all fraud regardless of it’s nature, beneficiaries etc should be investigated. I agree. I do not however see any collation between the crackdown on benefit fraud and our 12.5% CT rate. He didn’t address the issue of tax avoidance, mitigation , evasion .He made a blanket statement that corporate welfare should be investigated by police. Perhaps too literal a reading of a BS post, but I do think certain journalistic standards should be maintained to ensure credibility.

  11. phil

    I suspect the Government is interested in tackling white collar crime, but like all governments they have their group of ‘preferred’ businessmen , and you cant have a quango or a group of independent executive public servants investigating ‘corruption’ without the ‘context’ of the Government in power. They might rightly prosecute the wrong people, in the view of any current government.

    I also believe that once you open the door to zero tolerance on corruption we will all be touched by it. That means an end to cronyism, and end to picking up the phone to your TD and asking him to intervene in something or other, and in my view an end to privacy i.e. total transparency where the individual or a company comes into contact with the state.

    While I say bring it on, I’m not sure the Irish people are ready for or would want an end to corruption.

  12. rob

    theres a lot of people nit pickin over this piece .. i think the part to not lose sight of, is how the government in this country would rather go after a small amount of social welfare fraudsters over pennies, than go after the likes of who broke the entire nation. its laid out in fact. so if anyone is fine with things being run like that, i will fight you .. name a time and place and ill be there, and we’ll fight.

    1. Cian

      I think there is a difference in scale: the law surrounding welfare is straightforward, and if someone claims more that they are entitled to it is fraud and straightforward to convict.
      It doesn’t just apply to social welfare – there was the guy importing garlic and not paying the correct duty – straightforward fraud.

      The examples used above “bankers brought before the courts and prosecuted for the reckless moves they made that triggered the crisis”. Is recklessness a crime? Were laws broken?

      1. Domestos

        Investigate asset “management” in the time prior to bankruptcy of anyone who had debts of over X amount vis-a-vis fraud. This is what kept the property lawyers busy for a couple of years when no-one was buying or selling anything.

    2. ReproBertie

      “Fraud amounts to about €40 million a year” says Julien

      “the government in this country would rather go after a small amount of social welfare fraudsters over pennies”, says Rob.

      €40M is more than a few pennies.

  13. Derek

    Some facts for the author:

    Revenue Commissioners Annual Report 2014 – Intro (p24)
    The overall yield from audit and compliance intervention activity increased by 11.3%, from €548.3 million in 2013 to €610.4 million in 2014. The yield from non-audit compliance interventions increased by 14.9%, to €271.6 million (of which €9.68 million was sent for enforcement). 7,636 audits were completed in 2014 yielding €338.8 million (of which €53.5 million was sent for enforcement).

    Prosecutions for Serious Tax and Duty Evasion (p33)
    “Serious non-compliance is something we are determined to tackle. In 2014 the following results were achieved:
    • 27 criminal convictions for serious tax and duty evasion – see Table 23 on page 76.
    • 16 of the convictions were for serious tax offences. Custodial sentences, ranging from 3 months to 9 months were imposed in 3 cases. A further 5 cases received suspended custodial sentences. Fines amounting to €57,250 were also imposed.
    • 11 of the convictions were for serious duty offences. A custodial sentence of 18 months, was imposed in 1 case. Suspended custodial sentences were handed down in a further 8 cases.
    • At end-December, 115 cases of serious evasion or fraud were in the investigation process, and a further 64 cases were with the Director of Public Prosecutions or in the judicial system.”

    Tax Avoidance Cases (p34)
    At the end of 2014 the following cases were being actively managed by Revenue:
    • 450 cases under the general anti-avoidance legislation covering a potential €170 million in tax.
    • 11 cases where Revenue is seeking to apply the European Court of Justice principles of ‘Abuse of Practice’ in VAT, covering a potential €33 million in tax.
    • 253 cases where Revenue is tackling avoidance using the normal tax code covering potential tax in excess of €144 million.

      1. maisoui

        He managed to hoodwink UCD. Ireland, sure isn’t it a grand old country. Anyone can be anything.

    1. dereviled

      I think everybody acknowledges we have white-collar crime and that steps are being made to tackle it.
      But how much crime? Is there an estimate, as with the grand estimate of €600million in welfare fraud announced in 2011:
      http://www.businessandleadership.com/business/item/32345-burton-launches-social-welf
      … which turned out to be a bright shining lie:
      http://politico.ie/society/truth-about-social-welfare-fraud
      I don’t agree with welfare fraud but the paltry numbers involved and the zeal with which it has been prosecuted contrasts sharply with that of white collar crime.
      From The Association for Criminal Justice Research & Development (ACJRD)
      “7.6.1.1 One of the consequences of the distinction between ordinary crime and regulatory crime is that there is a facility to correlate cumulative statistical data on the former but there is no comparable cumulative statistical data across all aspects of White Collar Crime that can influence necessary criminal justice policy-making in the regulatory crime sphere.”
      http://www.irishtimes.com/news/crime-and-law/white-collar-crime-reports-going-unread-amid-endemic-lack-of-resources-1.1817109

      1. New Person A

        It’s easier to prosecute the poor and uneducated criminal who fiddles the dole rather than the well heeled golfing banker who fiddles the balance sheet and can afford an expensive brief

        1. Denis Murphy

          Well said, That’s what this so called government are doing, Robbing the poor to help the rich

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