"Bad actor" Facebook Inc given £500,000 maximum fine - any future breach may cost up to £1.4bn

The Guardian, 11 July 20018:

Facebook is to be fined £500,000, the maximum amount possible, for its part in the Cambridge Analytica scandal, the information commissioner has announced.

The fine is for two breaches of the Data Protection Act. The Information Commissioner’s Office (ICO) concluded that Facebook failed to safeguard its users’ information and that it failed to be transparent about how that data was harvested by others.

 “Facebook has failed to provide the kind of protections they are required to under the Data Protection Act,” said Elizabeth Denham, the information commissioner. “Fines and prosecutions punish the bad actors, but my real goal is to effect change and restore trust and confidence in our democratic system.”

In the first quarter of 2018, Facebook took £500,000 in revenue every five and a half minutes. Because of the timing of the breaches, the ICO said it was unable to levy the penalties introduced by the European General Data Protection (GDPR), which caps fines at the higher level of €20m (£17m) or 4% of global turnover – in Facebook’s case, $1.9bn (£1.4bn). The £500,000 cap was set by the Data Protection Act 1998.

As one of the IT whistleblowers described the situation...

Just to sum up. 1) Facebook broke the law. 2) Cambridge Analytica broke the law. 3) Vote Leave broke the law. 4) LeaveEU broke the law. 5) Brexit and Trump were both won through breaking the law. 6) Facebook let it all happen and covered it up. https://t.co/CAOrP5rKry

— Christopher Wylie 🏳️🌈 (@chrisinsilico) July 11, 2018

Meme of the Week

via Twitter

Quotes of the Week

“The LNP state conference was just 3 old real estate agents short of banning sex because it might lead to dancing.”  [Possum Comitatus, commenting on conservative politics in Queensland, Twitter,  8 July 2018]

“Trump is not an unusual American president with contrarian ideas. He is an off-the-charts repudiation of everything the United States has stood for since 1945: representative government, liberty, the rule of law, free trade, a rules-based international order, open societies, pluralism and human rights.”  [Journalist Roger Cohan, writing in The New York Times, 9 July 2018]

How Trump's corporate tax cuts played out in the US economy

Crikey.com.au, 10 July 2018:

Evidence is now emerging of just how extraordinarily wasteful Donald Trump's trillion-dollar corporate tax cut has been as the results -- or lack thereof -- filter into the real US economy.

It's now well-established that the bulk of the tax cuts have gone into record-breaking share buybacks and increased dividends by US companies, with hundreds of billions of dollars flowing or set to flow back to investors. But not a lot of the rest is flowing into extra investment -- the raison d'etre of company tax cuts. New investment data shows US equipment investment fell in the first quarter of the year compared to the final quarter of 2017. How about wages, which are supposed to increase due to company tax cuts (at least according to Mathias Cormann)? In June, monthly wage growth in the US fell to 0.2% from 0.3% in March, lower than expected and leaving wage growth at 2.7% for the 2017-18 year. Inflation in the US was 2.8% for the year to May, suggesting US workers are actually going backwards after inflation.

US unemployment is at 4% (up a tad) — far below our own level of 5.5%. Like the Kiwis, the Americans can’t get wages to grow even with full employment — or even with tax cuts that have massively inflated the US deficit at a time of peak employment.

The fact that Trump and his GOP cronies have pushed the US budget deficit toward $1 trillion a year (remember when the Republicans were the party of fiscal restraint?) at a time of such strong employment also has implications for the stimulatory effect of such largesse. New research from the San Francisco Federal Reserve shows that fiscal stimulus is significantly weaker at times of expansion than during recessions, and that the Republican tax cuts will not meet what the paper terms the “overly optimistic” expectations of boosters. Instead of the boost to US GDP growth this year of about 1.3 percentage points estimated by the Congressional Budget Office and other forecasters, they write, “the true boost is more likely to be less than 1 percentage point,” with some studies pointing to as little as zero.....  

Read the full article here.

Five to face Brisbane court over serious breaches of environmental law

It is thought that up to 320 square kilometres of agricultural land around Chinchilla may be at risk from contamination by chemicals and gases, due to alleged mismanagement of underground burning by Linc Energy Limited.

In November  2016 former Linc Energy chief executive Peter Bond along with four former staff members – Donald Schofield (managing director), Stephen Dumble (chief operations officer), Jacobus Terblanche (chief operations manager) and Darryl Rattai (former general manager) – were summonsed for breaching environmental law.

However their matters were adjoined until after The Queen v. Linc Energy Ltd was concluded and are all five are now due to face a committal hearing in the Brisbane Magistrates Court this month.

BRIEF BACKGROUND

ABC News, 11 May 2018:

A gas company has been fined a record $4.5 million for causing serious environmental harm at its underground coal gasification plant on Queensland's western Darling Downs.

Linc Energy was found guilty by a District Court jury in Brisbane last month after a 10-week trial.

The company was charged with five counts of wilfully and unlawfully causing serious environmental harm between 2007 and 2013 at Hopeland near Chinchilla.

Linc Energy mismanaged the underground burning of coal seams, which caused rock to fracture and allowed the escape of toxic gases which contaminated the air, soil and water on site.

The court heard the highest fine imposed upon a company so far in Queensland for similar offending was $500,000.

Linc Energy did not defend itself during the trial because it is now in liquidation.

Five executive directors have been charged with failing to ensure compliance of the company and are due to face a committal hearing in the Brisbane Magistrates Court in July.

Prosecutor Ralph Devlin told the court the company knew it was causing damage but pressed ahead with operations, and described its offending as "serious".

"The defendant acted in devious and cavalier way … its motivation was commercial gain," he said.

"It pursued commercial interests over environmental safeguards."

The court heard there would be monitoring and remediation of the site for decades to come, and it will take potentially between 10 to 20 years for groundwater to recover.

The Sydney Morning Herald, 10 April 2018:

“It was an undefended case, the liquidators chose not to defend it, so, of course, there is going to be a guilty verdict,’’ he [Peter Bond] told The Australian of Monday's court ruling.

“It means nothing; there was no one in court to call bullshit and there was a lot of bullshit to that case."

Excerpt from THE QUEEN v. LINC ENERGY LTD (IN LIQUIDATION), 11 May 2018, Sentence:

HIS HONOUR: On the 9th of April 2018, Linc Energy Limited in liquidation was found guilty by a jury of five counts of wilfully and unlawfully causing serious environmental harm. That followed a 10-week trial, and the offence is contained in the Environmental Protection Act. There was no appearance by the defendant in in  liquidation pursuant to an order of the Supreme Court under the Corporations Law. The liquidators did not have to appear. That caused particular difficulties during the trial and also has an impact on sentence proceedings as I have not been assisted by any submissions on behalf of the defendant in relation to penalty.

As the defendant is a corporation, the only penalties that are open are financial: either a fine or compensation. The provision in relation to the imposition of fines is covered by sections 45 to 48 of the Penalties and Sentences Act. The first aspect of that is that, pursuant to section 48(1)(a) and (b) and subsection (2) of that Penalties and Sentences Act, the Court must take into account:

 …so far as is practicable, the financial circumstances of the offender and the nature of the burden the imposition of the fine would have on the offender.

Section 48, subsection (2) provides the Court may fine if it is unable to find out the  matters referred to in subsection (1). There is no information before me as to the circumstances of the liquidation of the corporation. I am unaware of any of its assets or liabilities, or whether it will have the capacity to pay fines. As to the utility of imposing a financial penalty on a corporation in liquidation, there are no restrictions in law as to that. Indeed, the cases referred to me demonstrate it is appropriate, 25 whether as a need for denunciation or general deterrence of specific criminal conduct…..

In relation to counts 1 to 3, a combination of section 437 of the Environmental Protection Act 1994 and 45 section 181B of the Penalties and Sentences Act 1992 provides a maximum penalty of five times the 4165 penalty units, that is, a total of 1,561,875 thousand dollars for each of the offences covered in counts 1 to 3……

In my view, the defendant put its commercial interests well above its duty to conduct its processes in a way that safeguarded the environment. This is shown by its continued efforts to be seen as a successful Gas to Liquid producer on a commercial scale, where it operated gasifiers clearly above hydrostatic pressure to produce suitable gas for the GTL process, well knowing that contaminants were escaping widely and that damage to the land structure was occurring. As I have noted during the course of argument, there are varying degrees of wilfulness, which is an element of each offence.

The Prosecution have submitted that the appropriate way to approach the quantum is 45 by assessing the maximum and then reaching an appropriate proportion to address each offence. In terms of the section I earlier quoted in relation to the quantum of  fines, it seems to me the damage occasioned by each of these offences is significant and needs to be taken into account in the calculation of a quantum. In relation to each of counts 1 to 3, I accept the Prosecution’s submission that it is appropriate to impose 50 per cent of the maximum in relation to those.

In relation to each of counts 4 and 5, as I have noted, there are aggravating features. The defendant was well aware of the problems with the site and proceeded in disregard of its own experts. They had clearly advised the site was unsuitable because of the earlier gasifier operations; however, the defendant persisted simply 10 on a commercial basis.

In relation to the final count, the defendant purposely hid the issue of groundwater contamination from the regulator. I accept the Prosecution’s submission that fines in relation to each of those later offences should be at 75 per cent of the maximum.

I intend to reduce each of those fines to recognise the totality issues that I have spoken about, including the interplay between each offence and the damage that has actually been occasioned. On each of counts 1, 2 and 3, I fine the defendant the sum of $700,000. On each of counts 4 and 5, I fine the defendant the sum of $1,200,000. Convictions are recorded. The Prosecution does not seek its costs in relation to this Prosecution.

Don't expect your residential electricity costs to come down anytime soon

In three years time the amount of revenue electricity network companies can charge customers will be reduced, which according to the Australian Energy Regulator in its Draft Rate of Return Guideline "could [not would] result in household customers’ bills decreasing by around $30 to $40 per year".

Remembering all the other failed assurances that the cost of residentail electricity would come down, it is a brave individual who takes this latest prediction at face value.

Australian Financial Review, 10 July 2018:

The Australian Energy Regulator has moved to significantly cut the amount of revenue electricity network companies can charge customers in a bid to take the pressure off households and businesses enduring high power prices.

AER chair Paula Conboy said it would reduce average household electricity bills by about $30 to $40 a year….

But energy network companies claim the new guidelines will strip about $2 billion in revenue over the next five years and threaten future investment in the energy sector.

Morgan Stanley said the rule, if confirmed, would cut valuations of listed grid owners such as Spark Infrastructure and Ausnet Services, while adding it "could have been worse".

Energy users welcomed the move as a sign the regulator is prioritising the interests of consumers although Energy Consumers of Australia acting head Lynne Gallagher said the proposed reduction in the rate of return able to be earned on capital could have been bigger.

"There is no doubt that there could be some disappointment from some consumer groups with this decision, but it is a much better outcome than we've seen in previous years on this issue," Ms Gallagher said....

AusNet said that if the rule is confirmed, the reductions would apply to its power distribution network from the beginning of 2021, in transmission from April 1 2022 and in gas from January 1 2023. Spark said the rule would apply to its various assets in 2020, 2021 and 2023….

Mr Turnbull is also expected to use his speech in Brisbane to talk on the long-awaited Australian Competition and Consumer Commission into electricity prices which is expected to be released this week. The ACCC report is expected to be used as a reason not to call a royal commission into electricity prices as being pushed by the Greens. 

Australian Competition and Consumer Commission, Restoring electricity affordability & Australia's competitive advantage, 11 July 2018, excerpts:

Australia is facing its most challenging time in electricity markets. High prices and bills have placed enormous strain on household budgets and business viability. The current situation is unacceptable and unsustainable. The approach to policy, regulatory design and promotion of competition in this sector has not worked well for consumers. Indeed, the National Energy Market (NEM) needs to be reset, and this report sets out a plan for doing this…….

There are many causes of the current problems in the electricity market. At all stages of the supply chain decisions have been made over many years by many governments that set the NEM on the wrong course.

In networks, the framework that governs regulation of monopoly infrastructure was loosened, leaving the regulator with limited ability to constrain excess spending by network owners. The limited merits review (LMR) regime allowed network owners to appeal regulatory decisions and recover billions of additional dollars from consumers. It led to significant increases in prices, has drawn out the length of time taken for revenue determinations, and has created significant uncertainty around network pricing. In addition, increased expenditure on networks was driven by reliability standards for some networks that were set too high, without due regard for consumers’ willingness to pay for marginal increases in reliability.

In generation, against ACCC advice, the Queensland and New South Wales (NSW) governments made decisions regarding the operation and ownership of generation assets giving rise to concentrated markets. In Queensland, the government consolidated the generation assets of three businesses into two. In NSW, as one example, both generators owned by Macquarie Generation were sold to AGL, missing an opportunity to deliver a competitive market structure by selling them to separate buyers.

Most state governments put in place excessively generous solar feed-in tariff schemes with a view to encouraging consumers to install solar photovoltaic (PV) systems. Under these schemes, the subsidy paid to consumers for the energy produced by their systems outweighed, by many multiples, the value of that energy. Take up of the schemes exceeded all expectations, in part due to dramatic declines in solar PV installation costs. The substantial cost of the schemes continues to be spread across all electricity users.

The main enduring policy instrument for encouraging low-emissions electricity generation is the Renewable Energy Target. While it has been effective at encouraging wind and solar generation capacity installation, it has also distorted the investment that has occurred in the transition from higher carbon technologies to lower ones. The subsidies received for installing wind and solar made the business case for doing so compelling but did so in a way that was indifferent to the ability to provide energy to the market when demand requires it.

At a time when gas-powered generation has become more important with the exit of large coal-fired plants, the extent of LNG exports from the East Coast and government moratoria on on-shore gas exploration and development have stifled the availability of gas at a low price.

Electricity retailers have also played a major role in poor outcomes for consumers. Retailers have made pricing structures confusing and have developed a practice of discounting which is opaque and not comparable across the market. Standing offers are priced excessively to facilitate this practice, leaving inactive customers paying far more than they need to for electricity. Pay on time discounts, which have emerged as a response to attempts to constrain late payment fees, are excessive and punitive for those customers who fail to pay bills on time. [my yellow highlighting]

One for the history buffs out there

Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS), The NSW Aborigines Protection/Welfare Board 1883-1969 Map