A police test case to seize millions of dollars in assets under proceeds of crime legislation will have wide-ranging implications in all sorts of legitimate industries, lawyers say.
On September 15, 2015 Jamey Lee Bowring, a welding contractor at South Auckland hazardous materials recycling company Salters Cartage, died when gas in a waste oil storage tower exploded, catapulting him through the air and into a car park.
Bowring, who was 24, hadn’t received a health and safety induction onto the potentially dangerous site. He wasn’t given a gas detector or told what was in the tank where he was working. Salters bosses didn’t even know he was there.
Investigators found the company guilty of "numerous failings" around health and safety. The judge hearing the case in 2017 called it a “catastrophic safety breach”.
Judge Richard McIlraith sentenced Salters managing director Ron Salter to four-and-a-half months home detention and fined him $25,000. The company was ordered to pay $370,000 – the highest penalty ever at the time.
Salter served his time and paid his fines.
So it was a shock when, more than two years later, police applied to seize between $5.5 million and $8 million-worth of his assets under the Proceeds of Crimes Act, the first time the act has been used to confiscate property from a legitimate business owner, albeit one convicted of a crime.
Seizure is normally used against criminal gang members and drug dealers. These are people where the provenance of the assets being confiscated is as shady as the operations they are involved in.
But that's not the case with Ron Salter’s company. His hazardous materials business makes lawful money from legitimate clients.
The case is still at an early stage, bogged down with the nitty gritty of police getting a restraining order over Salter’s assets. This is the first part of the process, preventing anything being used or sold while the case is going on.
But police told Newsroom they are preparing to launch the grunty part of the case – applying for an order to confiscate those millions of dollars of property permanently – “in the near future”.
'A very low threshold'
And that’s what’s got lawyers and their clients worried.
If Salter’s health and safety breaches could trigger Proceeds of Crime seizures, what other corporate wrongdoing could also come under the statute? they wonder.
“The scope is massive and the statute has a very low threshold,” says Bell Gully partner and employment law specialist Tim Clarke.
“It attacks profit from ‘significant criminal activity’ but then defines ‘significant criminal activity’ as something where the proceeds of crime acquired or derived from the criminal activity have a value of $30,000 or more.
“In today’s world that’s not a high threshold. You could very easily have a minor regulatory offence deemed ‘significant criminal activity’.”
The Health and Safety at Work Act is one of a number of bits of legislation where criminal prosecution, and therefore Proceeds of Crime proceedings, could be possible, says Clarke’s Bell Gully colleague Blair Keown.
The Fair Trading Act, for example, the Financial Markets Conduct Act, the Resource Management Act, the Real Estate Agents Act, and the Overseas Investment Act.
All have potential penalties considerably more than $30,000.
A real estate agent convicted for being unlicensed or for lying to their clients could find themselves having their assets confiscated, as could a shopkeeper making misleading claims about their products (say, that a vinyl handbag is leather), or a company owner advertising a deal they don’t intend to offer for any meaningful period of time.
“It’s not just the end part of the process, the forfeiture, that should be the focus," Keown says. "A restraining order, which prevents a property being used, could give rise to defaults around a company’s lending [which might be guaranteed by an owner’s house or office], or it might impact on contractual relationships with other companies.
“Salter is an example of what could happen. The application is over identifiable properties which have mortgages over them. If the restraint is ordered, there could be difficulties under the mortgage.”
Behaviour change
The police argue Ron Salter profited from his lack of focus on health and safety at his sites. He and/or his business made more money over the year than it would have done if Salter had invested in the equipment, processes and training needed to keep his staff and contractors safe.
Which is likely true, although quantifying that might be hard.
How much of his profit stemmed from his lack of investment in health and safety could be tough to determine. But that problem will come later.
It’s not just about the money, Police Detective Inspector Craig Hamilton told Newsroom.
“Police focus on the recovery of proceeds of crime is part of our strategy to prevent crime and deter people from involvement in crime. Our purpose is to change behaviour.”
If the prospect of losing their house, their bach, their fancy cars or the office building they own makes people think twice about their business practices, that wouldn’t be such a bad thing.
It’s a tricky one. The police could rightly argue that businesses which stay on the right side of the law won’t get pinged. And few people would have sympathy with a loan shark, dodgy pyramid scheme designer or other rip-off merchant whose assets are on the line as a result of their misdeeds.
If the prospect of losing their house, their bach, their fancy cars or the office building they own makes people think twice about their business practices, that wouldn’t be such a bad thing.
But Clarke and Keown argue many of the bits of legislation governing people’s business behaviour are seen as regulatory, rather than criminal by company owners – “quasi-criminal” at worst.
And because of the way the laws work, the prosecution doesn’t have to provide intention for someone to be found guilty. Salter didn’t mean to kill his welding contractor.
Confiscation could be disproportionate.
Legitimate v illegitimate businesses
“There are many criminal activities that are close in nature to regulatory transgressions, requiring no or negligible culpability on the part of business owners or directors, but from which proceeds or benefits of at least $30,000 might be derived,” Clarke and Keown wrote in a recent paper.
A Salter spokesperson, Matt Blomfield, takes it further.
“If a drug dealer owns a house and pays for a new roof with drug money, the police can take the house. The police can also take untainted assets to the value of the benefit they say [the drug dealer has] received as a result of criminal activity.
“It’s hard for me to draw a parallel between a gang member selling methamphetamine and Salters Cartage collecting and recycling waste oil... The police are saying the income that Salters Cartage received is like drug money. If it is, so too is the income of the hundreds of businesses convicted of health and safety offences in New Zealand every year, let alone other regulatory offences.”
Double dipping
There’s also the issue of double jeopardy: the principle that a person should not be subject to two prosecutions or punishments for the same offence.
Blomfield argues Ron Salter has served his time and paid his fines. Now his house, his daughter’s house, his bach and his business are on the line.
Another specialist employment lawyer, Myriam Mitchell of Copeland Ashcroft, says confiscation is a potentially more material deterrent than a fine, and as such the police actions could help maintain a level playing field between companies that invest in health and safety and follow the law in other areas, and those who don’t and who therefore have lower costs.
Even so, she sees a level of double dipping in the police action.
“No one has much sympathy for the Salters of this world, but the judge in the Salter case looked at the offending and came up with a fine that he believed was justified. He could have come up with a higher fine.”
Mitchell says the major lessons for companies from the Salter proceeds of crime case – if the police are successful – are around how businesses plead if they face prosecution.
Pleading guilty might reduce someone’s sentence and legal fees, but later might come back to haunt them in terms of the Proceeds of Crimes Act.
“Be very careful what you plead guilty to and be very careful about agreeing to statements of fact in sentencing, because it will be important to have an accurate description, in terms of the seriousness of the offending, how long it’s been going on, and whether it’s been repeated.
“That will have wider implications.”
