Editorial: Fraudsters with benefits
A law that converts criminal prosecution into a negotiated fee is just a risk wrongdoers are pricing into their business plans
Across 11 agreements to recover €34.2 million in unpaid tax, offenders who secured negotiated settlements with the Tax Commissioner paid penalties amounting to just nine cents for every euro owed, even before accounting for the leniency of the repayment plans themselves.
In one of these cases, the accused was granted a 12-year payment plan: an almost unthinkable prospect when the financial penalty being paid back seems to be over a period longer than most criminal sentences would have run.
Today, the American-style DPA (deferred prosecution agreement) has become a model of “negotiated settlements” and is often billed as a pragmatic tool in combatting complex corporate crimes like bribery and money laundering. Supporters see in it a resource-efficient alternative to lengthy trials, in the hope that it encourages corporate reform through self-reporting and hefty financial penalties.
In an editorial last August, we said the new law is a positive development in the fight against tax evasion – but it goes without saying that there should be a clear distinction between the small fry and the premier league of tax fraudsters and money launderers.
In a country that often complains about the lack of financial probity – especially a small society where the ill-gotten gains of embezzlement and corruption are often quite conspicuous – removing the court process for money laundering and tax evasion suspects is simply looking like a get-out-of-jail free card for these ‘Monopoly players’.
Maltese court procedures and trials may be notoriously lengthy, but that hardly is a decent reason for allowing suspects to avoid conviction and its collateral consequences.
The public is now in the dark as to the extent of how much the adversarial nature of traditional justice, is losing out to the compromising spirit of a negotiated settlement.
Are these settlements actually encouraging the major wrongdoers to self-report in the hope of avoiding a public trial? Or will they just confer serenity to those who are able to pay cash for their financial misdemeanours, bribery and corruption?
The minimal role of judicial supervision makes a mockery of the criminal justice system: only an impartial judge, not a prosecutor, can render proper justice.
If the court does not weigh the settlement agreement presented by the Tax Commissioner against the public interest, such rubber-stamping simply confers more discretion to the prosecution.
Even more controversially, the law allows the absorption of money laundering charges into every tax settlement. Money laundering is, by definition, the apparently legitimate use of the proceeds of a financial crime.
As the Daphne Foundation correctly observed, when money laundering charges arise from tax evasion rather than direct corruption, the exclusion mechanism in the law does not apply. The law effectively ‘launders’ money laundering charges through the tax settlement mechanism.
Ultimately, it is now becoming apparent that the government has engineered a rescue mechanism for those who have already been charged before a court, whose cases are on the cusp of judgment.
With a liability ceiling of €1 million in penalties regardless of the scale of the underlying breach, the criminal exposure on any amount of tax fraud is extinguished for a flat fee.
What happens to those who walk away from judgment with a negotiated settlement: will the warranted professionals that aid and abet money laundering and tax evasion be disbarred and barred from public procurement contracts?
Deterrence requires credible punishment risk. A law that converts criminal prosecution into a negotiated fee, available retroactively, with little judicial oversight or no mandatory compliance consequences, is just a risk that these wrongdoers are pricing into their business plans.