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	State Trustees lose disabled and mentally-impaired life savings by investing in high-risk funds by Chris Vedelago Fairfax News, agencies Australia - Victoria   February 2015   The life savings of disabled and mentally impaired Victorians have been lost by the state-owned company that administers their estates after it invested their money in high-risk funds.   A news investigation has found that State Trustees ignored its legal obligation to act in the best interests of clients, allowing its financial planning division to speculate in high-risk investments that led to substantial losses.   This included putting savings and money from government pensions with LM Investment Management, a Gold Coast-based scheme that lost $800 million when it collapsed in 2013 amid allegations of misconduct.   State Trustees controls more than $1 billion belonging to 9500 vulnerable people who have been deemed unfit to manage their own financial affairs and now depend on the investments made in their names to meet their living expenses.   State Trustees would not reveal how many of its clients lost money in the schemes, citing privacy laws and the need to protect "community confidence" in the system.   Among the victims was Christa Simmons, a 75-year-old woman with dementia who was under the administration of State Trustees for 15 years before her death.   Due to privacy laws, the family of Ms Simmons has been kept in the dark about her finances since the Guardianship & Administration Board (now VCAT) appointed State Trustees her financial and legal administrator in 1997.   "It"s State Trustees – it"s practically the government. You assume they have the highest level of integrity and there"s checks and balances in place. We never had any reason to suspect otherwise," her daughter Darlene told reporters.   But documents show a State Trustees financial planner invested a significant portion of her entire savings in a "pension account" that fed into three investments with high- to very high risk ratings.   In 2010, State Trustees reviewed Ms Simmons investment position and noted her risk profile should be "moderate". The report recommended that the pension account be transferred to a marginally safer financial product that charged lower fees and commissions.   The recommendation was not implemented and two years later the account had lost nearly all its value.   The major problem was a significant investment made on her behalf in a mortgage fund run by entrepreneur Peter Drake, founder of now-defunct LM Investment Management. When the fund ran into trouble in 2009 all investments were frozen, leaving investors to watch as its value dropped but their money could not be withdrawn. LM eventually collapsed with losses estimated at $800 million.   At the time of her death in 2012, Ms Simmons had just $3700 left in her pension account in potentially accessible funds.   The family of Ms Simmons was completely unaware of the troubled state of her finances until she died, when they began to question State Trustees about her will. But the group, acting as her legally appointed administrator and executor, refused to disclose detailed information.   After a protracted dispute, her daughter took over as executor and obtained some of her mother"s records.   "It"s unfathomable how a government body awarded guardianship over frail, sick and vulnerable people appear to have a licence to gamble with their savings with impunity for the loses," Darlene said. She is now considering taking legal action.   It is not known exactly how many other of the State Trustees 9500 clients may have lost money in risky investments.   Documents show the three financial products Ms Simmons money was invested in required State Trustees to make a minimum buy-in investment of $20,000, $25,000 and $100,000 for each, suggesting many other clients have been assigned stakes as well to meet this target.   State Trustees has ignored repeated requests to provide figures about its investment activities or losses.   With State Trustees claiming it cannot disclose information about losses due to privacy rules, it is likely any potential victims may never know they are victims.   The collapse of LM is now the subject of a pending class action lawsuit by law firm Slater & Gordon, which is seeking compensation for investors tipped into the fund on the advice of their financial planners.   Financial planner-turned-whistleblower Jeff Morris, who exposed wide-ranging malfeasance inside the Commonwealth Bank"s financial planning arm in 2013, said the problems at State Trustees would likely go beyond just one rogue planner.   "The lack of accountability to clients and secrecy in this case makes that a racing certainty. No competent adviser would put clients into these dodgy mortgage funds but it is important to remember that the incompetence is systemic because it is the dealer group that decides the menu of products that planners can recommend," he said.   The losses are the latest in a series of scandals to plague State Trustees, which was the subject of a damning report from the Auditor-General in 2012 that found it could not demonstrate it acted in the best interests of its clients.   "Flawed implementation, ineffective oversight, and a failure to regularly and systematically test how effective controls are in practice, limit the assurance it can provide ... about organisational compliance and performance," the report said.   In 2009, State Trustees agreed to pay $13.5 million in compensation to investors that were burned in the collapse of Perth-based property scheme Westpoint.   It was also blasted by the Victorian Ombudsman over the quality of care provided to vulnerable people following an investigation in 2003.   * Article 21 of the Universal Declaration of Human Rights stipulates, “the will of the people shall be the basis of the authority of government.” Corporate capture is defined by the undue influence that corporations and corporate culture exerts over public institutions, manipulating them to act according to their priorities, at the expense of the public interest and the integrity of the systems required to respect, protect and fulfill human rights. Through corporate capture parties exert political influence over the legislative process, and the state regulators charged with enforcing laws, weakening provisions in the law or their implementation.   Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating.   University of Chicago economist, George Stigler first highlighted regulatory capture, in 1971, publishing his famous essay “The Theory of Economic Regulation” in the Bell Journal of Economics and Management Science. He studied reported empirical data from various markets and concluded that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit”.   Regulatory Capture writes Adam Thierer, a senior research fellow from the George Mason University:   “Regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends. Capture theory is closely related to the “rent-seeking” and “political failure”. Another term for regulatory capture is “client politics,” which according to James Wilson, “occurs when most or all of the benefits of a program go to some reasonably small interest (industry, profession) but most or all of the costs will be borne by a large number of people (for example, all taxpayers).”   While regulatory capture cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity. Because regulatory capture conflicts with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a fair bit of denialism.   Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.   Corporate and Regulatory Capture is the prevailing sad reality across Government, accountability agencies and regulatory bodies across Australia, and in too many "developed" economies worldwide.
	Economic Dimensions of Mass Atrocities: International Criminal Law’s Business or Blind Spot? by Barrie Sander   Addressing the Economic Dimensions of Mass Atrocities: International Criminal Law’s Business or Blind Spot?   The past few decades have witnessed a burgeoning literature examining the economic dimensions of modern warfare. Indeed, if Prussian general and military theorist Carl von Clausewitz could argue in 1832 that war is merely a continuation of politics by other means, more recent studies seem to suggest that modern conflict is often as much, if not more, a continuation of economics by other means.   For international criminal lawyers, the question that naturally arises from such studies is the extent to which international criminal law can and should address the economic dimensions of mass atrocity situations. With this question in mind, this post summarises three perspectives from which scholars and practitioners have been examining the potential and limits of international criminal law as a response to the political economy of mass atrocity situations.   Beginning with the most critical literature, a number of studies have sought to illuminate the economic aspects of conflicts that international criminal law is least equipped to confront: the structural economic causes of violence. Structural causes of conflicts, whether political or economic, often fall beyond the purview of international criminal law since they are generally too remote to be of legal relevance to the culpability of the defendants on trial.   As such, international criminal law has tended to be blind to factors as diverse as land distribution, extreme poverty, demographics, social marginalisation, and widespread economic injustice, all of which may be brought about by the normal operation of the global economy. As Mégret has provocatively put it, international criminal law has been at permanent risk of grossly underestimating “such trivialities as the world’s billion poor, 800 million hungry, 2.4 billion without sanitation, or 90 million children without basic education”. Whilst these forms of extreme structural violence are generally not sufficient causes of mass atrocities, it is widely accepted that deeply embedded inequalities have often pre-existed the onset of violent conflict.   In addition, the interventions of the International Monetary Fund and the World Bank in conflict-affected societies have also fallen beyond the reach of international criminal law. In this regard, a range of studies relating to the former Yugoslavia, Rwanda and Sierra Leone have illuminated how the structural adjustment programmes advocated by these international financial institutions may have compounded rather than assuaged already volatile situations, primarily as a result of being implemented in disregard of the social and political sensitivities of the countries in question.   Finally, humanitarian aid agencies have also escaped the attention of international criminal law. Often intervening in conflict situations under a veil of neutrality and benevolence, recent studies have suggested that humanitarian aid agencies have at times exacerbated rather than alleviated situations of structural violence (for example, social inequality and land concentration in Rwanda) as well as repressive governmental policies (for example, the forced displacement of the Acholi population in Uganda). The failure to scrutinize such behaviour has resulted in what Alex de Waal has famously referred to as “humanitarian impunity”.   It should be emphasised that most of these studies do not suggest that interrogating the structural economic causes of violence or the interventions of international financial institutions or humanitarian aid agencies should fall within the purview of international criminal law. Rather, they seek to reveal the constructed invisibility of these economic factors within international criminal law processes in an effort to illuminate the limits of the criminal law as a policy response to episodes of mass violence. For these scholars, the solution is not necessarily to reform international criminal law, but to look beyond it.   The Rights Perspective: Reading Economic, Social and Cultural Rights into International Criminal Law   In 2006, then-UN High Commissioner for Human Rights, Louise Arbour, delivered a landmark lecture in which she lamented the marginalization of addressing gross violations of economic, social and cultural rights (ESCR) within the field of transitional justice. Arbour argued that this neglect was “symptomatic of a deep ambivalence within justice systems about social justice” as well as the fact that ESCR were often mistakenly seen “not as entitlements but merely as aspirational goals whose achievement no one can be held accountable for”. In response to this situation, Arbour issued a call for action, including a specific call for further research on the adjudication of ESCR violations as international crimes.   Since then, a number of scholars have taken up Arbour’s challenge. Particularly notable in this regard is the recent book by Evelyne Schmid, which sets out to demonstrate the overlap between ESCR violations and the existing definitions of international crime categories. Whilst acknowledging the limits of the overlap, Schmid’s study is significant for undermining the widespread belief that ESCR are not and cannot be dealt with by existing international criminal law.   One example, which illustrates the potential of international criminal law to address violations of ESCR, is the war crime of pillage. As far back as Nuremberg, the war crime of pillage has been applied to situations involving the systematic exploitation of natural resources. Such precedents reflect the potential of this war crime to at least partially address ESCR violations associated with the so-called “resource curse” that tends to underpin many modern-day conflicts.   Yet, despite these early precedents, pillage charges at more recent international criminal courts have consistently overlooked its application to illegal resource extraction. For instance, whilst Charles Taylor was convicted of aiding and abetting pillage in Sierra Leone, his conviction was limited to traditional looting of personal property rather than the systematic exploitation of diamonds and other natural resources that characterised the conflict more generally. As such, some scholars have considered the case to represent somewhat of a missed opportunity, particularly in terms of constructing a convincing narrative of the underlying conflict.   In light of such examples of prosecutorial and judicial reticence, an important task for scholars and practitioners going forward will be to identify which ESCR violations should be prioritized within prosecutorial strategies under existing statutory frameworks, as well as which factual scenarios may benefit from the adoption of more tailored international crime definitions that are better equipped to meet the empirical realities of modern conflicts.   The Business Perspective: Prosecuting Commercial Actors Implicated in International Crimes   Last, but by no means least, a range of studies have recently explored in what circumstances international criminal law can hold commercial actors responsible for their participation in the commission of international crimes. Examples of the linkage between commerce and atrocity are plentiful. They include: the use of slave labour in business supply chains; the involvement of corporations in the pillage of natural resources; the involvement of private security firms in acts of torture; and fuelling the commission of atrocities through the supply of goods and services to armed groups.   When considering the international criminal responsibility of commercial actors, it is important to distinguish between the responsibility of individual business leaders who work for private corporations, and the responsibility of corporate entities per se. In either case, however, aside from the trials of German industrialists in the aftermath of the Second World War and a few other isolated cases, to date there has been near-perfect impunity for both corporations and business leaders implicated in the commission of international crimes.   One reason for this marginalization may reside in the fact that corporate entities per se have consistently fallen outside the personal jurisdiction of international criminal courts (although it is important to remember that several domestic criminal courts have been granted jurisdiction over such entities, as has the yet-to-be operationalised African Court of Justice and Human Rights). Another reason may be the focus of international criminal courts on those “who bear the greatest responsibility” for crimes within their jurisdiction, a criterion that has tended to exclude the prosecution of corporate actors.   Regardless of the precise reason behind the marginalization, arguably more significant is the recent surge of activity amongst scholars and civil society groups concerning how to reignite the liability of commercial actors for international crimes.   Amongst civil society, particularly notable is the landmark study by the International Commission of Jurists, which explored various forms of corporate complicity in the commission of international crimes. More recently, the International Corporate Accountability Roundtable (ICAR) and Amnesty International have launched a project that specifically aims to address the challenges of prosecuting corporate crimes, including but not limited to international crimes.   At the ICC, the Office of the Prosecutor previously committed to encourage and support national prosecutions of corporate representatives, initiating a network of national law enforcement agencies for the purpose (LEN). Whether the Prosecutor will also take the further step of launching thematic prosecutions against individual business leaders within conflict situations currently under investigation at the ICC remains to be seen.   These efforts have also been supported by ongoing research conducted in the academic sphere. For instance, the Journal of International Criminal Justice hosted an important special issue on the subject, whilst James Stewart has very much been leading the charge with a range of papers and symposia, encouraging a collaborative and inclusive approach to the topic.   In light of this recent surge in research, some initial challenges to corporate prosecutions have already been identified. At the domestic level, the greatest challenge may end up being a lack of political will, particularly given that both home and host States may have vested interests in turning a blind eye to corporate involvement in atrocities. More generally, Grietje Baars has argued that efforts to prosecute corporate actors are likely to lead only to “cosmetic changes on the surface of ongoing corporate involvement in conflict”, whilst at the same time serving “to actualize, legitimate and thus strengthen” existing structures of corporate authority within global governance.   Despite these challenges, the conviction continues to gain momentum that commercial actors are the business of international criminal law, with considerable efforts now underway to make criminal prosecutions a reality. Only time will tell whether such efforts will bear fruit in practice.   For a long time, it was widely believed that the economic dimensions of mass atrocity situations were somewhat of a blind spot of international criminal law. Yet, as this post has revealed, these dimensions are gradually becoming mainstreamed within international criminal research projects, which have begun to examine both the limits and potential of using international criminal law to address various economic aspects of mass atrocity situations.   And while it remains to be seen whether these projects will manage to spark a shift in international criminal practice, it is clear that confronting at least some of the economic dimensions of mass atrocity situations is now very much on the agenda of those working in the field.   http://www.justiceinconflict.org/2015/06/08/addressing-the-economic-dimensions-of-mass-atrocities-international-criminal-laws-business-or-blind-spot/
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