Monthly Archives: August 2012

Blind Justice?

Sometimes when I’m reading the news I feel like I’m in a Bob Dylan song.  Especially this week when there have been some interesting stories about the justice system.  And how justice doesn’t always seem to be blind.

In New Zealand since 2006, 66 finance companies have failed.  Down here, finance companies are places where people put their money to invest, so when a finance company fails, you lose your money.  The reason that most of them have failed is the economy, coupled with the stuff that usually happens when people get their hands on other peoples’ money and have no restrictions or accountability on what they do with it.  It’s sort of like the US savings and loan industry in the 1980s.

As a result of these failures, a lot of the locals—including a sizeable number of mom and pop investors–have lost about NZ $8.7 billion which is about US $7 billion. 

To date–and probably forever–a grand total of five executives, all from one company, have been charged and found guilty (five from another company have been charged but not tried).  Those ten guys account for over a billion of the total loss.  Of the five executives found guilty, three got jail with the maximum sentence being 6 and half years.  The other two got home detention.  The main reason that sentences were handed out at all was because of what appears to be a lack of any remorse on the part of the executives.

For one thing, other than being in jail or home detention, they don’t have a lot to be sorry about.  Their assets are all in trusts so they are not available to the people who got ripped off.  And speaking of rip offs, the ringleader actually applied to the courts for legal aid on the grounds that because his assets were in a trust he didn’t have the money to defend himself.  The judge said no.

And speaking of remorse and punishment, one of the guys on home detention is doing his time in his mansion while appealing the harshness of his sentence.  Last week when the appeal was being heard, the judge asked where the guy was.  It turned out that due to a loophole in the bail laws, the guy got to keep his passport and is currently in Europe at his daughter’s wedding. 

This rather broad definition of home detention is upsetting to the people down here.  Especially the 14,500 former clients of his company who are out an average of $34,000.

The chairman of another finance company that went bust got off scott free.  He is building a $30 million mansion in Auckland (with a 12 car garage) in spite of protests by neighbours who say the house is so big it will block everyone’s view.  When he was asked about whether he was concerned about an elderly couple who had lost $80,000 when his Ponzi scheme collapsed, his arrogant reply was, “I’ve lost more.” 

What makes all this even more interesting is what happens when a non white collar type runs afoul of the law, as in the case of the so-called “Runaway Millionaires.” 

In 2009, a struggling small business owner applied to the bank for an overdraft of $100,000.  The bank said yes, but then, as a result of a “clerical error,” actually gave him $10,000,000.  It just appeared in his account.

I’m not sure what you would do if that happened to you but this guy, who, unlike the jailed finance company directors, now admits that he was wrong, took the money and his partner and went to China.  They didn’t leave an audit trail.

You can guess the rest of the story.  Law enforcement isn’t all that interested in pursuing the guys who stole $8.7 billion from a bunch of small investors.  But keep ten million from a bank whose profits are up 13% this year and who charge you $50 if you accidentally transfer money into a wrong account and want them to reverse it, and you’ve got Interpol all over you.

They found the fugitive instant millionaire, and most but not all of the money—he’d visited some casinos in Macau–and yesterday he got four years in jail.  Oh.  And the bank fired the clerk who made the mistake.

The press is hailing this triumph of the justice system.  “The pair have cost taxpayers tens of thousands of dollars,” as if we should be happy that they have been brought to justice. 

I’m not saying that the guy should get a medal or anything, but if you look at the big picture, four years for what he did seems a little out of proportion to the punishments being doled out for hurting thousands of people through reckless decisions driven by greed. 

I think the public would be much happier if justice were a little more blind and the guys who have cost us hundreds of millions paid a more reasonable price.

Everything’s Broken

Be honest.  Admit that you were surprised when you heard that the NASA Mars lander didn’t crash land as many were predicting. 

Not to appear cynical, but it seems as if we are becoming used to things not working.  Like last month when the NatWest Bank computer suddenly stopped working and people couldn’t access their money.  Or last week when NYSE stock market pricing was affected by some mysterious computer problem.  Not to mention the Facebook IPO being affected to the tune of billions because the NASDAQ computers barfed when they were overwhelmed by the volume of transactions.

The questions are always the same—How could that happen?  Didn’t anyone anticipate a problem? Wasn’t anyone checking?

I’m not sure what’s going on.  One very plausible theory is that things have gotten so complicated that it’s impossible for anyone to see the big picture and that’s why things fall through the cracks. 

But I’m thinking that perhaps it is because many people have come to believe that rules don’t apply to them, whether we’re talking about the laws of gravity, computer programming or securities markets.

This has been nicely demonstrated down here recently with the Miss New Zealand contest.  The winner becomes Miss New Zealand and gets to represent us in the Miss Universe competition. 

Back in June, Miss New Zealand was crowned.  The very next day the articles started to appear:  “Miss New Zealand May Be Stripped of Her Tiara.”

Like, who cares? Was my first reaction, although that thought may have occurred at exactly the same time as They still have Miss Universe?

I figured that it was going to be another one of those stories about how she had posted a naughty picture on Facebook or had unpaid parking tickets or something. So I didn’t even bother to read the story.

But later in the day, I heard people talking about it and that led me to do some more research. It turns out that Miss New Zealand might lose her tiara because she isn’t a New Zealander.

As I mentioned, some people just don’t think the rules apply to them.  But after all, it is the age of globalization.  And you don’t seem to need very firm roots in the country you might be representing in the Olympics nowadays.  So do we really need to quibble about whether Miss NZ is in fact a New Zealand citizen?

The young woman who won is a 22 year old from South Africa.  She’s been here since she was sixteen and is a permanent resident but has never taken up citizenship.  Under the rules, that’s not good enough.  You need to be a citizen.

So how could a South African have been crowned Miss NZ?

Did she withhold that fact?  No.  Were the contest officials unaware of it?  No.  In fact, they even told her that she had no chance of winning.  But she’d paid her $3,000 “sponsorship fee.”  And apparently no one is going to tell someone with a check for $3,000 to go away because they aren’t eligible.

No, the organiser tells them that they can enter but they can’t win.  But that they will gain valuable experience from going through the process of entering and not winning.

According to the article I read, this happens all the time and in this case, because of a something less than Zuckerberg-esque glitch, the judges declared her the winner.

And that’s when it really got interesting.

Day 1—Miss New Zealand says not to worry, her citizenship will be fast tracked and everything will be fine because it’s just a question of the “paperwork” being sorted out and she can’t wait to meet Donald Trump.

Day 2—It turns out that the third runner up was also not a citizen.  She is an Australian who has lived in NZ since she was 12.  Her response?  “I thought citizenship was automatic.”

Day 3—Disclosure is made that since 2006 only two Miss New Zealands have not been blonde and this is because one of the sponsors “prefers blondes” and therefore judges are pressured to pick them as winners. (Yes, the winner is blonde).

Day 4—The headlines read:  “Miss Universe NZ Refuses to Step Aside.”  The article reveals that she has “hired lawyers” to fast track her citizenship application and support her claim to the throne.

A week or so later, at the end of June, she appeared on television saying that she was being “bullied” into stepping down.  Pageant organizers backed off saying if she gets citizenship by August 1st all would be forgiven.

During July, the wannabe queen showed her commitment to New Zealand citizenship by flying off to South Africa from where she lobbed observations about NZ that were somewhat inconsistent with a desire for fast-tracked citizenship.  For example, she said in an interview that while in NZ she mostly hung around with other South Africans because she preferred their company, that she was going to find a South African husband and, worst of all, that one of the most popular local rugby teams “suck.”

I’ve heard of burning your bridges behind you, but this sounds like burning your bridges in front of you.

The pageant organizer texted her to say, “You have a lot to answer for when you see me on your return.”

Well, guess what?  August first came and went and the queen didn’t get NZ citizenship.  So she was formally “stripped” of her tiara.  The next day, the organizer of the event here retired for health reasons.  And the defrocked queen has announced that she will not be stepping down, behaviour reminiscent of Colonel Gaddafi and Bashar al-Assad, two other people who think that rules don’t apply to them.