Of Bailouts & Fraud: The South Canterbury Finance Company Saga

On December 7th, 2011, the Serious Fraud Office announced it was laying 21 charges against five people in the failed lending company South Canterbury Finance, which came to national attention in August 2010 when the National-led government bailed out the organisation for $1.6 billion (£729 million) under the 2008 Crown Retail Deposit Scheme that was introduced by the Labour-led government shortly before their defeat in the 2008 elections to protect individual depositors in organisations such as banks and financial companies in the event they collapsed. 

The bailout caused major controversy because many of the people who were bailed out were not covered by the Crown Retail Deposit Scheme.  The bailout came about at a time when the National-led government had been cutting back on government spending and encouraging people to “tighten their belts” to reduce costs but which seemed to be able to find $1.6 billion to bail out a business whose demise had come about as the result of the mismanagement of the organisation by both the late Alan Hubbard and his board of directors.

SFO

According to the Serious Fraud Office the charges the five people face include theft by a person in a special relationship, obtaining by deception, false statements by the promoter of a company, and false accounting.   If they are found guilty the five could face a maximum penalty of between seven and ten years’ imprisonment.   At the time of writing the names of those charged have not been named.  The Serious Fraud Office has stated this fraud case has been a very complex one and is regarded as the largest case of white collar fraud in New Zealand history.

According to the Serious Fraud Office the charges the five people face include theft by a person in a special relationship, obtaining by deception, false statements by the promoter of a company, and false accounting.   If they are found guilty the five could face a maximum penalty of between seven and ten years’ imprisonment. 

 

The Serious Fraud Office is to be commended for taking this action against white collar fraudsters as such actions are all too rarely undertaken here in New Zealand and elsewhere against such fraudsters.  However, it cannot be ignored that capitalism is ultimately a fraudulent system that makes the extravagant claim that it rewards people on the basis of hard work, innovation and skills when the more inconvenient truth that being born into the right class, having the right political connections and knowing the right people is the real basis of advancement in a capitalist society, as has been starkly brought out into the open with the payment of multi-million dollar payouts to failed Chief Executive Officers whose actions have destroyed businesses and destroyed the livelihoods of hundreds, if not thousands, of people who’ve lost virtually everything including their homes. 

It would be more reasonable to propose that capitalism itself should be in the dock, not just the five individuals whose greed led to New Zealand’s biggest business failure and bailout since the Bank of New Zealand fiasco in 1991 and the largest fraud case in this country’s history.  It is capitalism that created the conditions which enabled such fraud to occur in the first place and which allows the capitalist class to defraud the working class on a daily basis through charging them for the very things their labours produce at a price which most working people can no longer afford and which continues to rob them of the basic right of being rewarded on the basis of “From each according to their ability, to each according to their need” as stated so plainly by Karl Marx.

Only with the creation of a truly socialist society can we look forward to a society where bailouts and fraud will be nothing more than words in a dictionary, rather than the realities of living in a capitalist society where, once in a while, a handful of the worst offenders get arrested and put on trial.