The obvious question

The High Court today found former Prime Minister Jenny Shipley and the other directors of Mainzeal liable to pay a total of $36 million in damages to liquidators over the company's collapse. In the process, it found that the company had been trading while insolvent and that the directors had breached their duties in allowing it to continue to do so. Which seems to be a straight-up violation of s380(4) of the Companies Act, carrying a penalty of 5 years imprisonment. Which invites the question: why weren't Shipley and the others prosecuted? Or do those laws against corporate fraud mean nothing?

Obviously its not ideal for a civil trial to happen before a criminal one, and for potential defendants to be forced to disclose evidence and their defences before possibly facing prosecution - but at the same time, given what has emerged, its also very much not ideal to let such an egregious breach of the law go unpunished. And if the Financial Markets Authority is so crap that they've got to learn about this sort of criminality from liquidators suing people, then you really have to ask if they're fit for the purpose of enforcing our laws at all.

Meanwhile there's another curious feature, and that is the amount owed by the Mainzeal directors will apparently be mostly covered by liability insurance. Which seems... odd. Most insurance policies for us dirty peasants include a clause saying that they won't pay out for intentional, reckless or criminal behaviour - so they won't pay out if you burn your own house down, or if you crash your car while drunk driving or robbing a bank. Are the rules different for rich corporate directors? If so, it seems to be a perfect case of moral hazard, not to mention a terrible business decision on the part of the insurer. We have enough problems with corporate sociopaths engaging in reckless and criminal behaviour, without insurance companies encouraging them to commit further ones by covering their costs if they are caught.