Back blogging again after a few months of enforced absence during a period of political, home, work and academic pressures. Sharing some thoughts on Mick Wallace today and his escapades.
In brief I believe the recent revelations about Independent TD Mick Wallace leave more questions open than answered and add up to a litany of violations of company law which could strip away his corporate protection.
The headline breach is of under-declared tax, itself a criminal offence, but that is only one of many violations which may arise from the financial dealings of Wallace’s firm. It appears to me that Wallace’s claim to position himself apart from company affairs may not stand up to closer legal scrutiny.
Rightly people are focusing on the headline breach of the tax evasion. Whilst this is massively serious there are numerous other company law breaches which flow from his actions. Under the Companies Acts Deputy Wallace could be held liable at least for reckless trading, fraudulent trading and failure to keep proper books of account. Both criminal and civil consequences can result and most significantly the separation between the company and Mr. Wallace the individual then breaks down. Basically he loses the claim to separate legal personailty once certain improper actions are proven which on the facts of this case mirror Re PSK Construction where an almost exactly similar scenario saw separation stripped away.
If any one of his many creditors, including the revenue, moved a motion to wind up the company as it would be entitled to do if it cannot pay its debts then it is quite likely the corporate legal separation would be removed and Mr. Wallace would become personally liable for the company debts were any of the above charges were to be found against him. There are also incredibly obvious breaches such as being apparently a single director company which is clearly prohibited under company law. You would wonder who, if anyone, was advising him of his legal responsibilities or did he choose to ignore such advice if received.
UPDATE – A report in today’s press suggests Mr. Wallace sold his vineyard to his brother recently as part satisfaction of a debt. Again if I was in the shoes of the liquidator I would be looking at whether this was a “fraudulent preference” where one creditor is preferred over another, the intention being to deny other creditors access to the same limited resources. Given the preference / disposition was to a connected person (family member) this transaction could be undone in the event of a liquidation. – UPDATE ENDS
Of course we all want businesses to succeed rather than fail and for jobs to be saved. But breaking the law is never the right option. For a company in his circumstances one obvious alternative would have been examinership which could have saved jobs and the company by restructuring the debts, working with the courts rather than against them. I would strongly urge anyone in this position to consult with a legal or financial advisor instead of embarking on an illegal path, no matter what the motivation. Jobs and companies can be saved in other, more proper and permanent ways and without resorting to illegality.
In terms of the wider political implications, the public rightly demand a higher standard from politicians today and the same standard has to apply across the board. All politicians have a duty to earn and restore the public trust and all citizens must be equal before the law. No excuse is ever good enough for defrauding the tax payer. I am well aware my own party has had issues in the past and is taking serious measures to address them. I had no hesitation in doing what was necessary at my first ever meeting of the national executive in the aftermath of Mahon. I believe my own generation of politicians has no truck with excuses from any person, in any party, in any position. It is a basic political entitlement that those who ask the public trust should earn it and be clearly able to demonstrate why.
Based on the information now available, I don’t agree with you, James. Having now looked at the judgment in Re PSK, I can see where you are coming from, but that case was different in one crucial respect: the failure to declare or pay the correct amounts to Revenue was adjudged – although I must say that Finlay-Geoghegan’s conclusion to that effect is difficult to understand, on the facts set out in the judgment – to have had a direct role in the failure of the company, and the enormous losses suffered by creditors of PSK. I cannot see such a role in Wallace’s circumstances.
Failure to pay a creditor on time is not the same as fraud. I am genuinely astonished at the number of lawyers who appear to believe that it is.
Thanks for the comment Fergus. As I see it there are various violations of the acts he could be found in breach of with varying degrees of fit and probability. If one of the creditors pulls the plug and the company cannot realise its debts the liquidator is going to look whether there are ways to pierce the veil and render him personally liable, especially given the background. We know from Re Hunting Lodges that a single transaction can suffice for fraudulent trading. Also in this case it was more than not paying a creditor on time. He deliberately under-declared to the revenue: he said that in the Times and on Morning Ireland. Reckless trading is another possibility – if he endangered creditors by continuing to trade whilst in breach. In Re Hefferon Kearns we see mala fides is not necessary to ground reckless trading. This was found in PSK too though I take your point about the circumstances there. He can hardly have been keeping proper books of account given the situation either. I think a criminal charge of fraudulent trading is always difficult to fix but I think piercing the veil is a real possibility from one of the many potential scenarios. At worst (for him) he could be held liable for all the debts incurred since the under-declaration : at best he could still be found personally liable for the costs of the liquidator.
James,
Of course those possibilities exist in principle, but nothing you add now suggests that they are in reality applicable to Wallace’s case.
Under-declaration is not in itself fraudulent. If you give a truthful declaration, and then pay either yourself or another, that might be fraud.
Our information is that Wallace’s companies did not have the cash. Ergo, no fraud. (On basis of information provided, at any rate).
Well I suppose everything’s always arguable in a court room! To be honest from the couple of interviews I heard on Thursday I thought he was a bit presumptive with his whole “nothing to do with me guv” SLP defence. Me thinks the gentleman doth protest too much. Will be interesting to see how it all pans out anyway, from all perspectives.