• Is the fine an appropriate penalty?
• Setting fines

IS THE FINE AN APPROPRIATE PENALTY?

6.1 The fine is, in general, the main sentence that can be imposed on corporations in New South Wales and in other Australian jurisdictions. The utility of the fine as a penalty for corporate offenders has, however, been the subject of much debate.¹ Fines are said to be inadequate in achieving the objectives of sentencing. Some of the reasons for this proposition are surveyed in the following section.

Ineffectiveness in deterring corporate crime

6.2 Corporations are seen as profit-maximisers and if the expected penalty cost does not outweigh the expected gain from the offence, a corporation might choose to take the risk of being detected and prosecuted. Large corporations may treat relatively low fines as mere business losses, outweighed by the economic gains obtained from the commission of offences.² Fines may also be seen as insignificant in comparison to the more urgent business forces driving managerial decision-making. They may be construed as mere licence fees for illegitimate corporate business operations.³

6.3 Fines may be insignificant in relation to the size and financial position of large companies. For example, in a decision of the NSW Industrial Relations Commission that involved the death of a worker resulting from breach of the occupational health and safety law,⁴ a large corporation and its subsidiary, were fined $120,000 and $150,000, respectively.⁵ The fines imposed represented a small fraction of the two companies’ gross revenue that year, which when combined was about $983,000,000.⁶ It is arguable that a fine that is minuscule compared to a company’s turnover and which does not make a substantial dent in its profit, could be viewed by a company as a mere cost of doing business, not something that should significantly influence the usual course of its business.

6.4 For smaller corporations, or for subsidiaries of larger corporations, a fine of an amount that accurately reflects the gravity of an offence may well be beyond their means. This results in what is referred to as a wealth boundary or “deterrence trap”, which arises where a corporate offender does not have the resources to pay a fine in an amount theoretically required for effective deterrence. For example, a $5m fine has no more effect on a corporation with few assets than a $500,000 fine would if both fines were beyond the resources of the corporation, since the additional deterrent effect of imprisonment is not available. The corporation’s wealth (or rather lack of it) is, therefore, an effective barrier to achieving adequate deterrence by means of fines alone.⁷

6.5 However, corporate decisions may not be based on profit-maximising motives alone. Non-financial values, such as prestige, are also important in the business decisions that companies make. Fines do not address the non-economic motivations that lead to the commission of some corporate offences, for example “the urge for power, the desire for prestige, the creative urge, and the need for security”⁸ and consequently, their effectiveness in deterring these kinds of crimes is limited.

Ineffectiveness in rehabilitating offenders

6.6 When a corporation is sentenced to pay a fine, it is not compelled to review its management structure or reform the internal procedures or policies that contributed to or caused the wrongful conduct giving rise to the offence. Rather, organisational reform is left to the corporation to initiate itself, the assumption being that the corporation will be motivated to do so in order to avoid re-offending and the imposition of further fines. However, a fine may not be sufficient to compel the corporation to correct its systemic or procedural faults.⁹ A corporation may determine that the costs of adopting measures to correct the corporation’s work systems are higher than the costs of incurring further fines. The insufficiency of fines to effect rehabilitation finds support in a relatively old empirical study on the impact of prosecutions and fines under the Trade Practices Act 1974 (Cth).¹⁰ The study found that in approximately 40% of the cases studied, companies convicted under the Act did not carry out any significant organisational reform. This Act has since been revised to give greater power to courts to make orders directed at achieving change within the organisation to prevent repetition of the offence and to ensure future self-regulation.¹¹

Ineffectiveness in denouncing corporate offences

6.7 It may be argued that fines trivialise the gravity of corporate crime and that they do not sufficiently denounce serious criminal conduct. It has been suggested that fines convey the message to the community that corporate crime is less serious than other crime and that corporations can buy their way out of trouble. “[T]hey create the impression that corporate crime is permissible provided the offender merely pays the going price”.¹² Moreover, the corporate sentencing regime’s reliance on fines seems to indicate that the social harm caused by corporate crime is purely economic in nature. Sole reliance on a monetary sanction tends to diminish the significance of the non-economic harm caused, such as irreparable damage to the environment, or human death or injury sustained in a workplace accident.

Adverse effects on third parties

6.8 One of the main criticisms of fines is that they punish certain groups of people who may not have any involvement in the commission of the offence, including the corporation’s shareholders, employees, creditors, and customers. As one commentator put it, “the costs of deterrence tend to spill over onto parties who cannot be characterized as culpable”.¹³ This phenomenon is commonly referred to as “spillover”.¹⁴

6.9 It has often been said that it is not the company that ultimately pays the fine, but rather, the corporation’s shareholders,¹⁵ who experience the loss resulting from a fine in the form of a fall in the value of their shares and a reduction in dividends.¹⁶ The cost of the fine may also be passed on to others, including: consumers, for whom prices of products or services may increase; and employees of the corporation – whose wages or jobs may be affected.¹⁷ The corrective force of fines is dissipated to the extent that they “spill over” or are “passed on” to groups who are powerless to prevent future corporate violations of the law.¹⁸

6.10 Some commentators, economists in particular, argue that “spillover” is a myth,¹⁹ or at least, overstated. They argue that spillover effects will occur only to the extent that the affected group was enjoying a benefit from the organisation’s illegal activity, a benefit corresponding to an external cost previously imposed on the victims of the crime. Rather than unjustly penalising the “innocent,” it is argued that fines restore efficient resource allocation. Debunking the unfairness argument of spillovers, one commentator argues that there is no reason “why shareholders should not bear these costs since they benefit from corporate crime, have all the privileges associated with limited liability and rarely suffer the environmental hazards produced by their corporations”.²⁰

6.11 The Commission is of the view that concern about the effect of a sentence on third parties is not in itself a reason for rejecting that sentence as the proper response to criminal conduct. Sanctions imposed on individuals often have a punitive effect on those not responsible for the crime, such as dependent children where a parent is sentenced to imprisonment. Yet the general rule in the case of individual offenders is that a court can only take hardship to innocent third parties into account in extreme cases.²¹ The sentencing of a corporation should generally not be approached any differently. However, because of the potentially larger number of third parties who may be affected by corporate crime, the court may, in appropriate cases, be more willing to consider the impact of fines on third parties, at least where criminal liability is also visited on the corporation’s officers and where the company has not in fact benefited from the conduct.²²

Difficulty of enforcing fines

6.12 From a practical point of view a system relying on fines alone presents problems. There will be situations where a corporation may avoid paying a fine due to such factors as insolvency or its position within a corporate group. The NSW State Debt Recovery Office has received a total of 24,000 corporate matters since 1998 and has recovered moneys from 33% of this class of fine defaulters.²³ Provisions are available for dealing with individuals who do not pay their fines, including, ultimately imprisonment. Other options include driver licence or vehicle registration suspension or cancellation; civil enforcement, including seizure of property and garnishment; and community service orders.²⁴ The Fines Act 1996 (NSW) provides that these enforcement mechanisms (other than community service orders and imprisonment) also apply to corporations.²⁵ However, such options as may apply to corporations may not be feasible when the corporation is part of a corporate group and need not necessarily earn income or own property. There is little point in imposing a further fine to deal with a corporation that does not pay a fine. A full range of sentencing options other than fines is therefore necessary if only to provide courts with alternative penalties in the event that a corporation defaults in the payment of a fine. This point is discussed more broadly in the context of the consequences of a company failing to carry out the orders of a court.²⁶

The Commission’s view

6.13 The limitations of the fine as a penalty should not be overstated. It may be argued that a conviction, in itself, can have a rehabilitative or deterrent value. Regardless of the form of penalty imposed, a conviction may signal to the corporation, its management and owners, that their operational system has failed and a correction is required. Moreover, a conviction, irrespective of the particular sanction, may give the corporation “a stigma that, unlike monetary loss, cannot simply be written off as a business cost or passed on to others”.²⁷ The threat of stigma that follows a conviction may in some instances effectively deter the corporation and others who value their prestige and goodwill, from committing further offences.

6.14 Notwithstanding the criticisms of the fine, the Commission’s position is that it should remain the primary penalty for corporate offenders. The maximum fine embodies the legislative view, based on community standards, of the seriousness of criminal conduct.²⁸ The additional penalties endorsed in Chapter 5, such as correction orders, may not be capable of achieving this function.

6.15 In addition, fines are arguably an appropriate sanction in certain circumstances, such as cases involving less serious “regulatory” offences. An illustration of one such regulatory offence would be breach of mandatory reporting requirements that are technical in nature and where the only harm that results is the cost to the government in enforcing its rules; for example, some violations of tax laws concerning the failure to furnish documents to the Australian Taxation Office.²⁹ Such offences do not involve substantive tax offences (for example, tax fraud) but rather, involve technical violations, such as the failure to lodge the required forms on time.³⁰

6.16 Fines are relatively inexpensive and easy to administer and enforce. They do not involve government intervention in the internal affairs of a corporation. Fines also generate revenue for the State.

6.17 Nevertheless, in certain circumstances fines are inadequate or inappropriate. Certain offences committed by corporations reflect failure in the organisation’s systems of work and management practices. In those circumstances, it would be useful to have sanctions, such as the correction orders proposed in Chapter 9, that are directed at achieving change in the organisation’s structure or culture to prevent repetition of the offence and facilitate future self-regulation.

6.18 Fines alone may also be inadequate in circumstances where the corporate offender has demonstrated a criminal propensity, that is, where they are likely to commit further crime, based on factors such as their past criminal record and consistent failure to take rehabilitative measures. Moreover, fines are inadequate punishment for the most extreme cases of corporate crime, in particular where a corporation has operated primarily for a criminal purpose or primarily by criminal means. In these cases, there is a need to explore sentencing options that will incapacitate these types of corporate offenders.³¹ Other sentencing options such as publicity orders and community service orders may also be useful to the extent that they avoid some of the limitations inherent in fines, for example, by providing greater scope for denunciation, or simply by providing an alternative penalty where a corporation is unable to pay the appropriate amount of fine.³²

6.19 By themselves, these sanctions may not always be capable of achieving all of the various objectives of sentencing. However, if these sanctions are combined with a fine or other penalties, such as corporate probation, society’s goals of punishing and preventing corporate crime are more likely to be achieved.³³

6.20 The Commission is of the view that fines should be part of a wide range of sanctions available to the courts that is sufficiently flexible to cope with relatively minor contraventions as well as more serious corporate offences. This approach acknowledges that fines are not always an adequate penalty and, that no single sanction will ever be a perfect punishment for corporate crime. The Commission, in Chapters 7-12 of this Report, examines the sentencing options that may be used in addition to, or as alternatives to fines, with a view to determining which of them should be adopted in this State.

SETTING FINES

6.21 While there is a clear need for new sentencing options for corporate offenders, the Commission is of the view that fines should remain an integral part of the system of sentencing corporations. There remain outstanding some particular issues concerning fines as penalties for corporate offenders. One is whether the maximum amounts contained in existing statutes are adequate. Another is whether there is a need to examine how courts currently determine the appropriate amount of fine in each case.

The level of fines

6.22 The level of fines that can be imposed on corporate offenders is illustrated in various statutes that regulate corporate activity.³⁴ The maximum amounts vary considerably. Some of the highest amounts are in the areas of environment protection, occupational health and safety, and public health:

• $10,000,000 – marine pollution (in particular, discharge by a ship of oil into State waters, and discharge of noxious liquid substance from a ship);³⁵
• $1,100,000 (10,000 penalty units) – the contravention of a direction from the Chief Health Officer to retract or correct information or advice issued by the supplier to the public in relation to the safety of the supplier’s drinking water;³⁶
• $1,000,000 – wilful or negligent disposal of waste in a manner that harms or is likely to harm the environment;³⁷
• $825,000 (7,500 penalty units) – failure by a corporation to provide safe systems of work.³⁸

6.24 In the Commission’s consultations, representatives from regulatory agencies indicated that there is no need for change in the level of fines,⁴⁰ due to relatively recent increases in statutory maxima, for example, under the Protection of the Environment Operations Act 1997 (NSW) and the Occupational Health and Safety Act 2000 (NSW).

Consistency in fines

6.25 The current system by which the courts in New South Wales determine the amount of fines for corporate offenders is the same as that used in sentencing individual offenders. Under the general sentencing regime, the legislature prescribes the maximum penalty and the judiciary relates these to particular cases, applying long established sentencing principles.

6.26 Foremost among these principles is proportionality. Courts are required to examine the objective seriousness of the offence and then look at other variables to ensure that the penalty does not exceed that required by the seriousness of the crime. These variables include the degree to which the offender was responsible for the offence and other subjective factors that relate to the offender, such as its character, and response to the occurrence of the offence. Some of the most important factors relevant to setting the penalty for corporate offenders are canvassed in Chapter 4 of this Report. The principle of proportionality operates to restrain excessive, arbitrary and capricious punishment, and at the same time requires that a sentence is not excessively lenient. In short, the objective is to obtain a punishment that is just under the circumstances of each case.

6.27 In addition to the proportionality principle, the common law has developed other principles, discussed in detail in our Discussion Paper 33,⁴¹ that are relevant in arriving at sentence in any particular case. Some of these are:

• Consistency: The principle applies to the exercise of the court’s discretion in sentencing in order to avoid inappropriate disparities between the sentences given to co-offenders as well as between offenders accused of the same or similar types of offences.⁴²
• Totality: This principle states that the total sentence imposed upon an offender convicted of more than one offence must reflect the totality of the offending. The rationale behind this principle is that the aggregate sentence should be just and appropriate to the totality of the criminal behaviour.⁴³
• The statutory maximum is to be imposed for the worst class of cases: The statutory maximum is to be reserved for the worst category of offence (not the worst case that can be imagined) to which it applies.⁴⁴

6.29 The Commission is, however, of the view that any sentencing regime should have sufficient flexibility to enable the courts, in their discretion, to fix penalties that take account of the unique situations and frequently complex facts that are raised in dealing with corporate offenders. This flexibility is desirable both in the fixing of fines, where fines are appropriate, as well as in setting the appropriate mix of fines and other sentencing options in relation to individual corporate offenders.

The United States experience

6.30 Attempts have been made to constrain the courts’ sentencing discretion in the United States by developing a system of fines for corporate offenders that is certain, precise, uniform and rational. One reason for this development was evidence that suggested that the sentencing of organisational offenders was inconsistent and disparate. A 1988 study of US federal court cases⁴⁵ found that the penalties imposed on organisations did not “fit” the harm, in the sense that the median fines that the courts imposed on organisations was less than the actual economic loss caused by the offence. Moreover, the study looked at whether comparative harms had been treated equally and found several instances where similar crimes had resulted in very different sanctions. Two of the models developed to deal with these perceived problems are discussed in the following paragraphs.

Optimal penalties model

6.31 A model for sentencing corporate offenders that has received some consideration in the criminal literature,⁴⁶ and that was initially pursued by the United States Sentencing Commission, is the so-called “optimal penalties” model, which takes a law and economics approach to penalties. It is based on the premise that companies are rational entities that act in the pursuit of self-interest, here meaning (essentially) the maximisation of profits. Companies that violate the law do so on the basis of a calculation that the expected benefits of committing crime outweigh the expected costs. Accordingly, the model seeks to deter corporate crime by setting the penalty at a level that is equal to the harm caused by the offence. The model, therefore, relies on a treatment of crime and its enforcement as a “problem of minimising total social cost”. The major assumptions of this model are:

• Criminal conduct is prohibited chiefly because of the harm it causes to individuals and society at large.
• Crime and its enforcement and punishment are costly to society.
• It is not certain that criminal conduct will be enforced or punished.

6.33 In its basic form, the optimal penalties model would require courts to base the amount of fines on two calculations:

• the value, converted into money, of all harm caused by the offence; and
• the probability of conviction, often expressed as the multiplier of the chances of punishment.

6.35 At most, the optimal penalties model provides an arguably theoretically coherent basis for penalty-setting in a civil or administrative regulatory context. Its emphasis on the harm caused by the offence and on “social compensation” means that it fails to mirror the objectives of criminal punishment, especially retribution, deterrence and denunciation.

6.36 Further, the model presents intractable practical problems. The first obstacle is quantifying all the social harm that results from offences. An objective calculation of the extent of harm arising from a violation inevitably requires the subjective assessment of harm that cannot be precisely quantified.⁴⁹ Thus, the penalties calculated may in practice be no less arbitrary than penalties assessed under a less complicated model.

6.37 The estimation of the second component of the formula, the probability of detection, also presents a formidable problem. It has been proposed that this figure could be calculated in terms of the combination of estimates by law enforcement agencies, statistical modelling and qualitative analysis of offences in terms of detectability (for example, by examining the inherent characteristics of an offence to rank its detectability in comparison to other offences). The United States Sentencing Commission made an exhaustive effort to come up with a reliable means of calculating probability of detection of crime but in the end conceded that “any estimates of multiples reflecting the probability of detection, however they are derived, are likely to be very rough estimations”.⁵⁰ The Sentencing Commission eventually abandoned the optimal penalty model because of this problem.⁵¹

6.38 Besides the practical problems of implementation, the optimal penalties model has also been criticised on the basis that its assumption of corporate rationality does not reflect reality. The assumption is that companies that violate the law do so on the basis of a calculation that the expected benefits of committing crime outweigh the expected costs.⁵² There are empirical studies suggesting “that corporations are not solely driven by self-seeking individuals who are concerned exclusively with profit maximisation, but may also be motivated by non-financial concerns including a concern for social responsibility and respect for the rule of law.”⁵³

6.39 Finally, the optimal penalty model does not take into account notions of fairness. Its largely amoral approach to penalty setting makes it prone to generating outcomes that are unfair. For example, according to the model, repeat violations by the same offender would actually lower the penalty for that offender because a finding of violation raises the probability of detection. As such, the model ignores the social meaning of repeat offending.⁵⁴ Further, the proposition that the same levels of compliance can be achieved by varying penalties in response to variations in the probability of detection can result in excessively harsh and oppressive outcomes. An example of this can be seen in the area of litter prevention:

[A]ssume that one aim of the law is to eliminate street litter, and that if all instances of street littering were detected, absolute deterrence would be achieved if a penalty of $10 applied to the offence of littering. However, if in fact because the risk of detection for littering were tiny (say, 0.001 percent), then according to the deterrence model a $1 million penalty ($10/0.001 percent) would be required in order to ensure that littering is sufficiently deterred.⁵⁵

6.40 In 1991, the United States adopted Guidelines for the sentencing of organisational offenders that were developed by the Sentencing Commission and contained in Chapter 8 of the US Federal Sentencing Guidelines Manual. Among other things, the Guidelines rationalise the system of setting fines for organisational offenders that commit certain federal offences.⁵⁶ Under the Guidelines, judges must set the fine according to a formula whereby a “base fine” is multiplied by a “multiplier”, which is intended to reflect the organisation’s “culpability”.

6.41 The first component of the formula, the base fine, is the greater of:

(i) the Guidelines-prescribed minimum base fine, or

(ii) the organisation’s pecuniary gain from having committed the offence, or

(iii) the pecuniary loss from the offence caused by the organisation, to the extent the loss was caused intentionally, knowingly or recklessly.⁵⁷

6.43 The multiplier is a function of the organisation’s “culpability score”, which depends on certain aggravating and mitigating factors. These factors are:

(1) level of authority;

(2) size of the organisation;

(3) prior criminal history;

(4) violation of a court order, including a probation order;

(5) obstruction of justice;

(6) effective program to prevent violations of law; and

(7) self reporting, cooperation with authorities and acceptance of responsibility.

6.45 Hence, if the base fine was $10 million in the above example, the judge must, using 2.0 and 4.0 as the minimum and maximum multipliers, impose a fine of at least $20 million but not more than $40 million. In determining the amount of the fine within the applicable Guidelines range, the court should consider other factors set out in the Guidelines.⁶² These factors are non-binding policy guidelines, unlike the factors that go to the culpability score, which are mandatory in nature.⁶³ It must be added that, even if the culpability score dictates a fine that is relatively low, the Guidelines mandate that the total sanction must always be greater than any gains from the offence.⁶⁴ Moreover, if the minimum Guidelines fine is greater than the maximum fine authorised by statute, the maximum fine authorised by statute is the one that should be imposed.⁶⁵

6.46 The principles underlying the Guidelines’ provisions relating to fines do not depart from traditional principles of sentencing. The seriousness of the offence, as measured by the loss or gain from the offence, remains a paramount consideration in setting the fine. At the same time, the Guidelines embody the “just punishment” principle by taking into account the culpability of the organisation in the calculation of the fine. For example, the Guidelines provide for a substantial increase in the culpability score if the convicted organisation has encouraged, or has been indifferent to, violations by its employees;⁶⁶ but discount the fine if the organisation accepts responsibility for the offence.⁶⁷ In addition, the Guidelines contain principles derived from the deterrence model – for example, by discounting the fine if the convicted organisation is able to demonstrate that it took steps to prevent the commission of the offence by its employees.⁶⁸

6.47 The Guidelines, however, sharply constrain judges’ discretion in the setting of fines. The fine provisions in the Guidelines are not mere policy statements, but mandatory provisions that impose the precise formula judges must use in determining the range of fine imposed on organisational offenders. The Guidelines also codify the factors that indicate the offender’s level of culpability, and assign a specific value to each factor. The United States Sentencing Commission was explicit in its objective of structuring judicial discretion to attain certainty in sentencing organisational offenders and to ensure the imposition of serious penalties for such offenders.⁶⁹

6.48 The results of empirical studies to determine whether the Guidelines have achieved their objective of increasing the monetary penalties for corporate offenders have been mixed. One study, which used data from the United States Sentencing Commission, found that as a general rule, there was no evidence of a statistically significant change in the levels of monetary penalties imposed on corporations under the Guidelines as compared to pre-Guidelines cases.⁷⁰ Another study, using a different set of data and examining convictions of publicly held corporations only, found that these kinds of organisations have been subject to substantially higher criminal fines since the adoption of the Guidelines. Among other things, the study concluded that, “the Guidelines appear to have imposed a binding constraint on the exercise of judicial discretion, which caused an increase in criminal fines”.⁷¹

6.49 To date there have been no studies that indicate whether the Guidelines are reducing disparity in sentencing.⁷²

Relevance of US Guidelines in New South Wales

6.50 The United States Sentencing Guidelines system of setting fines for corporate offenders was introduced as part of a package of sentencing reforms which responded to evidence, or perceived evidence, of widespread, inexplicable and unjustifiable disparities in sentencing outcome; as well as to concerns of sentence leniency.⁷³ But these concerns were the product of a sentencing regime in which judges (who were often elected) were not required to give reasons for their sentences and seldom did so in practice, the sentences they imposed being essentially unreviewable on appeal.⁷⁴ Not surprisingly, before the sentencing reforms of the 1980s, no sentencing jurisprudence had developed in the United States.⁷⁵ The principle of consistency as an independent and important legal requirement of sentencing was simply unknown. Sentencing law in New South Wales is (and has always been) different to this.

6.51 Consistency is a clearly articulated principle of sentencing equally applicable to fines as to other sentencing dispositions. It applies to the exercise of the court’s discretion in sentencing to avoid inappropriate disparities between co-offenders and offenders generally convicted of the same or similar types of offences.⁷⁶ The principle is reinforced by the existence of appellate control, which assists in the quest for consistency. In the Commission’s view, there is no convincing empirical evidence of general sentencing disparity in New South Wales,⁷⁷ let alone in relation to the sentencing of corporate offenders.

6.52 Even if sentence disparity were demonstrated in practice in New South Wales, the Commission would not favour the response of the US Sentencing Guidelines, which seeks to achieve consistency in fine levels for federal offences by requiring judges to impose fines within compulsory and narrow ranges, absent extraordinary circumstances. Such a response to disparity is, essentially, the inappropriate and unjust creation of a rigid uniformity. Corporate cases are too complicated to be governed by binding “one size fits all” sentencing formulae.

6.53 The imposition of statutory maximum penalties is aimed at obviating sentence leniency in New South Wales. If fines in particular areas of the law are thought to be too lenient, the appropriate response is for Parliament to increase the statutory maximum penalty. A common law rule has developed whereby any increase in maximum penalties through legislation is considered a public expression by Parliament of the perceived seriousness of the offence,⁷⁸ which requires courts to give effect to the intention of the legislature that existing sentencing patterns move towards higher penalties.⁷⁹

6.54 There is some evidence to indicate that courts do in fact impose higher penalties following increases in the statutory maximum. Between 2000-2001 the NSW Land and Environment Court imposed an average fine of $15,912 on corporate offenders for the offence of water pollution under the former Clean Waters Act in a sample of 21 cases, the largest single fine within this sample being $40,000.⁸⁰ The maximum penalty for this offence for corporate offenders was increased from $125,000⁸¹ to $250,000 under the Protection of the Environment Operations Act 1997 (NSW).⁸² In 15 convictions of corporate offenders for the same offence under the new Act in the same period (2000-2001), the Land and Environment Court imposed an average fine of $27,617, with the largest individual fine in this sample being $60,000.⁸³ It would appear that the legislative increase of statutory maximum penalties to adjust the sentencing patterns of judges seems an effective method of achieving higher penalties. The alternative route taken in the United States of constraining judicial discretion through a mandatory fine formula, which has had varied success in raising the level of fines for organisational offenders,⁸⁴ therefore seems unnecessary.

1. See, for example, B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211; B Fisse, “Reconstructing corporate criminal law: deterrence, retribution, fault, and sanctions” (1983) 56 Southern California Law Review 1141; Australian Law Reform Commission, Sentencing: penalties (Discussion Paper 30, 1987) at para 290; B Fisse, Sanctions against corporations: economic efficiency or legal efficacy? (Sydney University, Transnational Corporations Research Project Occasional Paper No 13, 1986); J Braithwaite and P Grabosky, Occupational health and safety enforcement in Australia: a report to the National Occupational Health and Safety Commission (Australian Institute of Criminology, Canberra, 1985) at 89.

2. J C Coffee, “‘No soul to damn no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 390.

3. United States v Wise (1962) 370 US 405.

4. WorkCover Authority of NSW (Inspector Ankucic) v McDonald’s Australia Ltd (2000) 95 IR 383.

5. The maximum fine that could have been imposed was $550,000.

6. The corporations involved were MacDonald’s Australia Ltd and its subsidiary MacDonald’s Properties (Australia) Pty Ltd. According to their respective Financial Statements for the year ending 2000, the gross operating revenue of MacDonald’s Australia Ltd was about $774,000,000, while that of MacDonald’s Properties (Australia) Pty Ltd was about $209,000,000.

7. C Wells, Corporations and criminal responsibility (2nd ed, Oxford University Press, 2001) at 32; J C Coffee, “‘No soul to damn no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 390; B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 217-219.

8. Fisse at 218-219.

9. Fisse at 225-226.

10. A Hopkins, The impact of prosecutions under the Trade Practices Act (Australian Institute of Criminology, Canberra, 1978).

11. See para 5.15.

12. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 220.

13. J C Coffee, “‘No soul to damn: no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 341.

14. Fisse at 228.

15. See Coffee; C Kennedy, “Criminal sentences for corporations: alternative fining mechanisms” (1985) 73 California Law Review 443.

16. C Kennedy, “Criminal sentences for corporations: alternative fining mechanisms” (1985) 73 California Law Review 443 at 449.

17. M Jefferson, “Corporate criminal liability: the problem of sanctions” (2001) 65 Journal of Criminal Law 235 at 238-239.

18. E H Miller, “Federal sentencing guidelines for organizational defendants” (1993) 46 Vanderbilt Law Review 197 at 206.

19. Miller at 206, citing J S Parker, “Criminal sentencing policy for organizations” in United States Sentencing Commission, Discussion materials on organization sanctions (1988); M Metzger and C Schwenk, “Decision making models, devil’s advocacy, and the control of corporate crime” (1990) 28 American Business Law Journal 323 at 337.

20. C Wells, Corporations and criminal responsibility (2nd ed, Oxford University Press, 2001) at 36, citing F Pearce, “Corporate crime” (1987) 7 Critical Social Policy 116.

21. See R G Fox and A Freiberg, Sentencing: State and Federal law in Victoria (2nd ed, Oxford University Press, 1999) at 342-344; K Warner, Sentencing in Tasmania (2nd ed, 2001) at 115.

22. See R v Wattle Gully Gold Mines NL [1980] VR 622.

23. Information supplied by T Jessup, NSW State Debt Recovery Office (26 May 2003).

24. Fines Act 1996 (NSW) Pt 4.

25. Fines Act 1996 (NSW) s 98. Income related collection mechanisms have also been proposed for both individual and corporate offenders to overcome the significant costs involved in imposing alternative enforcement mechanisms: B Chapman, A Freiberg, J Quiggin, D Tait, Rejuvenating financial penalties: using the tax system to collect fines (Australian National University, Centre for Economic Policy Research, Discussion Paper 461, 2003).

26. See Chapter 13.

27. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 229.

28. See also para 4.12.

29. A majority of these prosecutions are made under the Taxation Administration Act 1953 (Cth) s 8C(1)(a), which punishes failure to furnish an approved form or any information to the Tax Commissioner: Information supplied by the Bureau of Crimes Statistics and Research (19 August 2002).

30. Information supplied by K Marsh, Technical Advisor, Prosecution Area, Sydney Advanced Legal Team, Australian Taxation Office (6 November 2002).

31. See Chapter 9.

32. See Chapters 10 and 11.

33. See Chapter 5.

34. See Appendix A of this Report, which contains a list of more than forty NSW statutes that provide specific penalties for corporations.

35. Marine Pollution Act 1987 (NSW) s 8 and s 18.

36. Public Health Act 1991 (NSW) s 10C.

37. Protection of the Environment Operations Act 1997 (NSW) s 119.

38. Occupational Health and Safety Act 2000 (NSW) s 12.

39. R v Oliver (1980) 7 A Crim R 174 at 177. See also the cases cited in para 4.12.

40. Regulatory and Prosecution Officers, Consultation.

41. See NSWLRC DP 33 at para 2.2.

42. See Lowe v The Queen (1984) 154 CLR 606; Bugmy v The Queen (1990) 169 CLR 525. See NSWLRC DP 33 at para 3.38-3.40.

43. See NSWLRC DP 33 at para 3.41.

44. R v Oliver (1980) 7 A Crim R 174; Ibbs v The Queen (1987) 163 CLR 447 at 451-452.

45. M Cohen, et al, “Report on sentencing organizations in the Federal Courts 1984-1987”, in United States Sentencing Commission, Discussion materials on organizational sanctions (1998).

46. See, for example, M Block, “Optimal penalties, criminal law and the control of corporate behavior” (1991) 71 Boston University Law Review 395; J Parker, “Criminal sentencing policy for organizations: the unifying approach of optimal penalties”(1989) 26 American Criminal Law Review 513; K Yeung, “Quantifying regulatory penalties: Australian competition law penalties in perspective” (1999) 23 Melbourne University Law Review 440.

47. J Parker, “Criminal sentencing policy for organizations: the unifying approach of optimal penalties”(1989) 26 American Criminal Law Review 513 at 552-553.

48. Parker at 552-553.

49. K Yeung, “Quantifying regulatory penalties: Australian competition law penalties in perspective” (1999) 23 Melbourne University Law Review 440 at 453-454.

50. I Nagel and W Swenson, “The Federal Sentencing Guidelines for corporations: their development, theoretical underpinnings, and some thoughts about their future” (1993) 71 Washington University Law Quarterly 205 at 219.

51. J Steer, “Changing organizational behavior – The Federal Sentencing Guidelines experiment begins to bear fruit” paper presented at the Twenty-Ninth Annual Conference on Value Inquiry, Tulsa, Oklahoma (26 April 2001) at 5.

52. K Yeung, “Quantifying regulatory penalties: Australian competition law penalties in perspective” (1999) 23 Melbourne University Law Review 440 at 453.

53. Yeung at 454.

54. Yeung at 454.

55. Yeung at 454.

56. The fine provisions of Chapter 8 of the Guidelines are limited to offences for which pecuniary loss or gain can be more readily quantified, such as fraud, theft and tax offences. They do not apply to most provisions that involve the environment, food, drug, agriculture and consumer products, individual rights, administration of justice and national defence.

57. United States Sentencing Commission, Guidelines manual (2002) § 8C2.4.

58. The base fine is set out in an offence level table, which is the result of the distillation and rationalisation of the numerous penalties the US Congress has enacted for federal crimes committed by organisations.

59. United States Sentencing Commission, Guidelines manual (2002) § 8A1.2. The commentary states that gain can result from either additional revenue or cost saving.

60. United States Sentencing Commission, Guidelines manual (2002) § 8A1.2.

61. The value of these variables was the result of a comprehensive study, unprecedented in the American criminal justice system, of every federal case from 1984-1990, in which about one hundred factual variables that can occur in organisational crimes were coded for computer analysis and Commission review. Using this information, the Commission was able to understand how such factors affect sentencing and was able to assign specific values to the aggravating and mitigating factors set out in the Guidelines.

62. United States Sentencing Commission, Guidelines manual (2002) § 8C2.8.

63. I Nagel and W Swenson, “The Federal Sentencing Guidelines for corporations: their development, theoretical underpinnings, and some thoughts about their future” (1993) 71 Washington University Law Quarterly 205 at 243.

64. United States Sentencing Commission, Guidelines manual (2002) § 8C2.9.

65. United States Sentencing Commission, Guidelines manual (2002) § 8C3.1(b).

66. United States Sentencing Commission, Guidelines manual (2002) § 8C2.5(b).

67. United States Sentencing Commission, Guidelines manual (2002) § 8C3.1(g).

68. United States Sentencing Commission, Guidelines manual (2002) § 8C2.5(f).

69. United States Sentencing Commission, “An overview of the federal sentencing guidelines” (as at 12 June 2003) «http://www.ussc.gov/training/fsgovr03.pdf». See also I Nagel and W Swenson, “The Federal Sentencing Guidelines for corporations: their development, theoretical underpinnings, and some thoughts about their future” (1993) 71 Washington University Law Quarterly 205 at 210.

70. J Parker and R Atkins, “Did the corporate criminal sentencing guidelines matter? Some preliminary empirical observations” (1999) 42 Journal of Law And Economics 423. The study, however, found that there was a marginally significant change for property offences and that this was the sole exception.

71. S Alexander, J Arlen and M Cohen, “Regulating corporate criminal sanctions: federal guidelines and the sentencing of public firms” (1999) 42 Journal of Law And Economics 393. The study constructed its own data obtained from the Sentencing Commission and a range of other sources such as the Wall Street Journal Index, Corporate Crime Reporter, Lexis/Nexis, Westlaw.

72. Information from P Desio, Public Affairs Officer of the US Sentencing Commission (27 November 2002).

73. See especially M E Franklin, Criminal sentences: law without order (Hill and Wang, New York, 1972).

74. For example, Dorszynski v United States (1974) 418 US 424 at 431.

75. For a contemporary view see F Gaudet, G Harris and C St John, “Individual differences in the sentencing tendencies of judges” (1933) 23 Journal of Criminal Law and Criminology 883 at 893-895.

76. See para 6.27.

77. See NSW Law Reform Commission, Sentencing (Report 79, 1996) at para 1.11-1.12.

78. Camilleri’s Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683; R v H (1980) 3 A Crim R 53 at 65; R v Howland (1999) 104 A Crim R 273.

79. See para 4.11-4.12.

80. Environment Protection Authority v Sydney Water Corporation [2000] NSWLEC 156.

81. See Environmental Offences and Penalties Act 1989 (NSW) s 8B(1)(a), which provided that a corporation guilty of an offence against the Clean Waters Act is liable for a maximum penalty of $125,000.

82. Protection of the Environment Operations Act 1997 (NSW) s 123. If proceedings are brought in a local court, the maximum penalty able to be imposed is 200 penalty units: s 215.

83. This amount was imposed in the following cases: Environment Protection Authority v Devro-Teepak Pty Ltd [2000] NSWLEC 275; Environment Protection Authority v Byron Shire Council [2001] NSWLEC 54; Environment Protection Authority v BHP Steel (AIS) Pty Ltd [2001] NSWLEC 214.

84. See S Alexander, J Arlen and M Cohen, “Regulating corporate criminal sanctions: Federal guidelines and the sentencing of public firms” (1999) 42 Journal of Law and Economics 393.