Dealing with Government Fraud: Insurers as Disruptors and Auditors as Insurers: - by Michael S.

The courts have agreed with the lawyers and MBIE that commerce in New Zealand is run on MBIE rules, which allow the enforcement of illegal contracts. They have said that Parliament gave the power to MBIE's tribunals (the Employment Relations Authority and the Employment Court) to make law and to change law, and so to overrule Parliament.

Although the Attorney-General has started to get involved with those antics now, he and his predecessors not only let it go on but they cooperated. In fact even this Attorney-General, David Parker, has cooperated, by appointing as judges the lawyers who were the most enthusiastic supporters of making new law.

The new law was apparently focused on coverups for public servants who were stealing money and property. It made it illegal to report fraud if a coverup had been agreed and signed off by MBIE, making the fraud "confidential".

Later the law was extended to MBIE and its judges claiming a right to "fine" people for reporting fraud, to an employment contract being enough to invoke the MBIE laws. Now those laws extend to everyone, so anyone can be made subject to gagging orders and fined or sent to prison if they breach them. The gagging orders don't even have to have been made against them, as they can be enforced against anyone. But it has become clear that this is another form of resistance to "AML" or anti-money laundering.

To avoid detection, the supporters of the new system brought it in bit by bit, layering the disguises on top of each other until the system was rotten right through if your point of view is democracy, and you think that government departments like MBIE, and judges, should implement the laws made by Parliament.

Financially this system benefits New Zealand substantially. As well as allowing managers to profit by taking money home with them, it allows the financial services industry to continue unfettered by AML, and it allows the government also to bring in money from insurance companies. That means bringing money into New Zealand, not just in fees for moving money (and moving, or laundering, dirty money in particular can attract high fees) but also in insurance contributions.

A question we have to ask is whether insurance companies will put up with this indefinitely. There are now reports that insurance representatives routinely attend MBIE mediations, so that they can be party to whatever contract is made there. The point of attending an MBIE mediation would be that that is the situation where anyone can now make an illegal contract (one to commit a crime, such as defrauding an insurance company) and get the agreement enforced - but also suppressed.

Another question we have to ask is where the government will find the money to deal with payments to all the defrauded employees when the current staff at MBIE and advisers at Parliament change, if the new staff and advisers are not supportive of this way of doing things, or if the insurance companies (who are based overseas) realise that the New Zealand government is taking them for a ride.

One possibility is to sue the auditors. The Auditor-General, an officer of Parliament, has been accepting the enforcement of illegal contracts, but subcontracts his work to the "Big Four" management consultants such as EY.

There is a precedent for a big management consultancy cooperating with corrupt organisations to suppress false accounting on a grand scale. In 2001, the Texas energy company Enron collapsed, taking with it one of the "Big Five", their accountants Arthur Andersen. That's why there is now just a "Big Four".

It looks as though EY has been going the same way as Arthur Andersen. In Germany, EY is part of a huge financial scandal involving about €2,000,000,000. They have recently claimed that evidence against them about their audits of Wirecard and Wirecard AG cannot be published because it is "commercially sensitive".

At the moment, the courts accept that, but it's only temporary. We will have to see later what they do with the evidence. We are seeing more and more court systems bend to commercial practices that need to be conducted in secret.

Wirecard and Wirecard AG do online money transactions. Their specialism began with pornography.

There are types of pornography that are illegal, and would definitely require secrecy, as all illegal operations do. That is why MBIE brought in suppression at the same time as validating and enforcing illegal contracts.

That is the suppression that the insurance companies are currently accepting in New Zealand. It is suppression of commercial deals, even from the scrutiny of the courts. If secret deals are enforceable, and that is the law, then even honest judges will be corrupted by the law.

It is one thing to have public servants working in a corrupt and failing legal system, when a democratically elected Parliament has failed. It is another to have Parliament's will flouted by public servants who are supported by judges.

So this is an Enron style problem, both in principle and maybe in the amount of money involved. Maybe it has Enron style solution.

It is easier for a government to deal with negligent auditors than it is for it to deal with corrupt officials and lawyers that that same government has appointed as judges. Audit reports should at least have been qualified by reference to the many types of accounting fraud routinely used by publicly-paid lawyers to establish the system for validating and enforcing illegal contracts. Those routine frauds are easy to identify, and the international accounting systems that management companies like EY say they use would require them to report them.

It is also easier to sue auditors than to get money back from corrupt officials, especially those with overseas bases.

It could be time for the government to consider negotiating with its auditors about their negligent approach to auditing, so the government can meet its liabilities to the hundreds and thousands of its own citizens that have suffered from MBIE policies on allowing illegality.

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