Should a convicted fraudster be allowed to work as an insolvency practitioner?

If your spontaneous answer is “no way!”, then you agree with the board of RITANZ, the professional body for insolvency practitioners.

In a recent decision, RITANZ excluded Damien Grant from the profession.

Grant, the owner of Waterstone Insolvency, is a colourful figure. Not only is he a successful entrepreneur and an opinionated columnist for Stuff, more importantly, Grant is also an ex-criminal convicted for credit card fraud and his involvement in a share-trading scam.

So, to make the opening question more precise, should Damien Grant be allowed to continue working as an insolvency practitioner – a job he has been doing for the past 14 years?

Phrased this way, your answer to the question will most likely become less spontaneous and less certain.

After all, 14 successful years in business is a long time. It might outweigh his criminal past.

And what if you learnt that Grant’s last criminal conviction and prison sentence date back even further: 1994, to be precise. Would that change your view about his application?

At this stage, I need to make a full disclosure. I provided an affidavit in support of Damien Grant to be licenced.

Based on my experience as an economist, I testified that my trust in the insolvency practitioners’ profession would not be diminished if Grant remained one of them.

My second disclosure is that I am not just an economist but also an academic lawyer. I received my doctorate in law in Germany, and so I look at Grant’s case through the lens of comparative law.

My doctoral thesis was on a comparative law subject, and I find it fascinating to compare legal systems.

Here, though Grant would have never guessed, he is unlucky not to be German. Because had his case unfolded in Germany, he would not need to worry about his professional future – or the future of his employees and family.

In some ways, New Zealand is quite a progressive country when it comes to dealing with ex-criminals. In 2004, the Clark Government introduced the Clean Slate Act. It makes it possible for reformed offenders to move on from their past after seven years of good behaviour. When asked about past convictions, they can say then that they have none.

The Clean Slate Act was crafted with the best intentions, and seven years is quite a low number by international standards. But, as is so often the case in the law, terms and conditions apply.

The most problematic one is this: once sentenced to imprisonment, the Clean Slate Act is no longer available to you. It does not matter if your prison sentence was seven, 17 or 26 years ago.

Many other countries, particularly outside the common law, take a different approach. I will use Germany as an example, but the situation is similar across continental Europe.

Like New Zealand, Germany maintains a register for criminal convictions. And just like in New Zealand, a federal law prescribes that after specified times, entries from the register must be deleted.

The difference is this: the length of time depends on the severity of the crimes. A life sentence, for example, will never get deleted. Prison sentences up to three months usually disappear after five years; prison sentences up to one year are gone after 10 years; everything else is gone after 15 years. Again, some T&Cs apply.

In Grant’s case, his criminal record would have shown a clean slate from 2009. From then on, in Germany he could have legally said that he has no criminal record. And that would not have been the only positive consequence for him.

Not only that Grant could have presented a clean record. It would have been illegal for anyone to use his past record against him.

Germany’s Federal Central Register Act explicitly states that once the entry has been erased from the register, the conviction may no longer be held against the person concerned and may not be used to his disadvantage.

Had Grant’s case happened in Germany, it would have been illegal for RITANZ to go back to 1994 and unearth Grant’s historic conviction.

Unfortunately, this is not Germany. And this is not just unfortunate for Grant but for New Zealand. For a country that tries to reduce its prison population and reintegrate offenders into society, the Clean Slate Act is simply not good enough.

Despite the law being what it is, RITANZ’s decision is not good enough either. Though Grant’s criminal record stands, it should be at least mildly embarrassing for the organisation to base their judgment on a fossilised record and nothing else.

Which brings us back to the starting question: Should a convicted fraudster be allowed to work as an insolvency practitioner?

The answer must not depend on whether the ex-offender is a prominent columnist or whether his professional peers like him. But it ought to depend on how many years have passed since his conviction.

It is time for RITANZ to correct their ruling, and for New Zealand to modernise the Clean Slate Act.

Dr Oliver Hartwich is the executive director of The New Zealand Initiative (www.nzinitiative.org.nz). He holds a doctorate in law from the University of Bochum (Germany) and provided an affidavit for Damien Grant to support his licensing application.