The Police have won an unexpected victory – taking over a long resented competitor, though they will not be willing or able to maintain its anti-fraud impact.

It is a weird decision, not least because it appears to have been made without warning or prior staff work. Perhaps the SFO scalp is another bauble for W Peters.  Sitting beside him I’ve seen his hatred of the SFO on the Select Committee annual review of that office. I guess no scandal-monger wants capable independent investigation of their allegations of fraud or corruption (or for that matter of any such claims against them).

The decision is bad news for NZ’s commercial community. Serious fraud has generated specialist prosecution units around the world, for good reason. Ours has been successful, in relative terms. In my opinion some of the turn-around in perceptions of business morality since the late 80’s could be attributed to their work.

The team will not be preserved. Many of them consciously chose to leave the Police.

That loss of the SFO corporate memory and the people in it will be a relief to some of our most cunning crooks.

Worse, the team is unlikely to be rebuilt in better form. A vast bureaucracy like the Police will find awkward the quirky specialists they’ll need to employ. Police pay scales will be troublesome. SFO specialists are often idealistic refugees from finance or law jobs, not natural ‘cops’.

The odds are against the Police putting any priority on fraud or indeed any property crime. Ask your neighbour about their response to a burglary complaint. The’ve already signalled that they want the SFO to chase gangs, with the name they propose for the new unit (‘Organised Crime unit’). That has nothing to do with fraud. Most fraudsters are lone operators. Even the big corporate cheats do not operate out of sight. Fraud and organised crime are linked only in lefty anti-business rhetoric.

Every business person has a stake in upholding and improving standards of honesty. Over time unpunished fraud and effective impunity will cause standards of commercial morality to spiral down. Our reputation will suffer, but that is secondary to the costs to NZ of more habitual dishonesty. The routine precautions required to do business where there is a loss of mutual trust , where there is an expectation that cheats do prosper, will far outweigh any savings that promised by the proponents of “bigger is more efficient” in bureaucracies.

Fraud is extremely hard to pursue. Around the world, statistics driven Police forces ruthlessly focus on maximising reportable clearance rates. Even if that is not their current intention, they will suck away commercial crime resources to areas where they get more convictions per hour of investigation.

I wonder how much research the govenment conducted on the Police ability to hold the types of expert needed for chasing corporate liars. There is not much drama in most fraud work. The normal Police culture is focussed on working out who did it. In fraud there is rarely much doubt about who did it – all the work is in finding exactly what they’ve done, and whether it was illegal or just immoral. The very demanding job of establishing the case to the required standard of proof needs a team culture that rewards and inculcates attributes very different from those of a typical vicious crime investigation. The Police culture does not reinforce the mana or job satisfaction of the boffins who must patiently pore through the books.

There are more political reasons. There are grounds to suspect a culture of political cowardice at very senior Police levels. If there is not cowardice there is certainly political correctness that is a soft form of corruption or favouritism. Ask the woman whose court order was ignored by the Police who watched her husband’s stolen body being buried in breach of the order.

Among other more sinister examples is the never explained Police failure to pursue Labour’s electoral frauds. I do not trust Police HQ. They unapologetically gave recklessly or deliberately untrue written answers to some of my Parliamentary questions.

Parliament will find it much harder in future to demand accountability for pursuing white collar crime. Police are rarely called upon to report to the Opposition in Parliament on the conduct of individual cases, the way the SFO has had to account. Statutory independence allows the NZ Police immunity from pursuit of decisions to prosecute or not to prosecute, even if there is widespread anxiety about corruption.

We should not be concentrating all the nation’s investigative resources and expertise in one organisation. It would be insurance to keep an alternative centre that could be beefed up if a septic element in the Police culture can not be eradicated.

There is a constitutional problem too. The SFO has been given extraordinary powers, and exemptions from normal rules that protect liberties from abuse of police powers (e.g. search and seizure, the power to compel evidence from people with no culpability). Some more offensive powers are in the Criminal Proceeds Bill. When the SFO is rolled into the Police it will be impossible to sequester those exceptions. No one will want to vote to remove them. Anti-fraud laws have been misused overseas. The US RICO (Racketeering and Corrupt Organisations) law has been used now in areas remote from what the legislators would have expected.

Accountability for spending on white collar crime will be reduced. Even if a dedicated budget is preserved, when it is held within a vast organisation the insiders can always finesse the outsiders (auditors and enquiring Parliamentarians). Standard bureaucratic practice when a budget is under pressure is to kill something popular (the Police do it periodically with the harbour Police boats).

They’ll always be able to ask, when criticised for not pursuing some fraudster, “which murderer don’t you want hunted down”.