Prosecuting Serious Fraud
... a glance at the future
Around this time two years ago we were all getting used to the dreaded phrase ‘credit crunch’ and its unpleasant consequences – around that time also, American investor Bernie Madoff must have been a very worried man. Readers will recall that the extremely successful trader Madoff pleaded guilty last March to fraud charges in the US – accepting that the asset management arm of his firm was really just a giant ‘Ponzi fraud’. Such frauds are really very simple in their conception; you take money from one investor and pay it to an earlier investor, pretending that that is the return on his/her investment. Since Madoff there has been the Sir Allen Stanford scandal; Stanford was charged a year ago. He is another American billionaire and cricket magnate of Antigua. He too is accused by the American Securities and Exchange Commission (SEC) of a massive Ponzi fraud. Over the last two years, fraud allegations have been springing to the fore with almost boring regularity. Fraud investigations range from the mundane exaggeration on a mortgage application to embezzlement by multi-nationals and wealthy businessmen on a global scale. Times are a changing – more existing frauds, large and small, are being exposed and more people are prepared to take risks; either to commit a fraud or invest in an ‘opportunity’ they might not have done 2 years ago. In this article we look at the prosecution of fraud offences and take a glance at the future.
Serious Fraud Office
The SFO was established in April 1988, its remit has never been to prosecute all cases referred to it; it takes on the largest, most complex cases, often with an international dimension and where the value of the fraud exceeds £1m. It has been extensively criticized over the years for the poor conviction rate in the cases they do prosecute; the conviction rates for SFO cases fell from 82% in 2002/03 to just 61% in 2007/08. There has long been a demand for a shake-up and the SFO was frequently compared to the American SEC and other agencies which were seen as tougher and more effective. That comparison now seems a little unfair, given that America seems to be the birthplace of the credit crunch and the greatest fraud of all time (Madoff); not to mention the Enron scandal. The SEC came under fire for failing to prevent Madoff, meanwhile the SFO increased its success rate in 2008/09.
The SFO has now refocused and there is a greater concentration on fraud prevention and the use of the civil courts. The SFO obtained its first ever Civil Recovery Order in a case in which the firm Balfour Beatty was required to pay £2.25m in 2008 in connection with corruption allegations. No criminal conviction was required.
International co-operation
The Director of the SFO is promising a new age of international co-operation with similar agencies. This too marks a recent trend – in the Marine Hose case, prosecuted by the Office of Fair Trading in June 2008, jail sentences were handed out to three British men accused of cartel offences. This was part of a carefully orchestrated operation on both sides of the Atlantic. The men were arrested in the States whilst the British authorities carried out raids at their business and home addresses here. Following a plea bargain in the US, the men returned to the UK in December 2007 to face arrest on charges of dishonestly bid rigging, market sharing and price fixing. The men pleaded guilty. The authors of this article were involved in a case (SEC v Manterfield) where the US SEC pursued a British hedge fund manager who is alleged by the US authorities to have operated a fraudulent investment scheme in the United States. The SEC’s website describes the unusual move of seeking a freezing order from a foreign court; i.e. the High Court as Mr. Manterfield held assets here. The case in part revolved around issues about whether the SEC’s action was truly civil in nature; given the draconian nature of some of the penalties that could be imposed on Manterfield in the US in the event of failing in the ‘civil’ action.
The world’s finance authorities seem to be coming together more and more to tackle the credit crunch and international fraud. A very recent example is the global settlement reached last month between the SFO, the American Department of Justice and BAE Systems PLC. This was a first; a coordinated global settlement of criminal investigations in two jurisdictions. BAE Systems had been fighting long-running investigations of bribery allegations in several countries. In the UK, the company agreed to plead guilty and pay £286m in fines in the UK – and a far larger amount in the US in connection with regulatory filings and undertakings. A further impact here is that SFO staff who had been tied up for protracted periods can now clear the BAE files off their desk and move onto smaller, more domestic cases.
Plea bargaining
The Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud was introduced in May last year. It is at least a step towards US style plea bargaining. On 25th September 2009, Mabey & Johnson Limited, an English company supplying bridging equipment, largely to the third world, was sentenced at Southwark Crown Court after pleading guilty to corruption offences prosecuted by the SFO. It was fined £3.5m and had a confiscation order made against it in the sum of £1.1m. It was significant because it was the first successful prosecution of a company for overseas corruption and was also the first time that a case was disposed of following the SFO engaging in plea discussions with the company under the AG’s Guidelines. There will be more to come. Of course the scheme depends upon a recommended sentence being made – the sentence is always up to the Judge but if Judges ignore the recommendations then the scheme will fall into disrepute. For our part we see problems; especially so in respect of suspects who naturally are mildly interested in talking to the opposition, only to find themselves being offered a deal that pretty much guarantees their liberty, but at the cost of becoming a witness for the prosecution or perhaps pleading to something they don’t believe they are guilty of. There is obvious scope for injustice. Even innocent defendants can be seduced by the certainty of a guaranteed outcome, even if that outcome is unpleasant. In the end, if the State has got a good enough case then it should forget about saving money by entering agreements and simply prosecute – the jury is the best guard against injustice and not all American imports are beneficial.
Civil recovery
The authors are presently engaged in an appeal case which involved a lengthy trial of a man and woman accused of drug trafficking and money laundering. The alleged offences themselves took place between 10 and 20 years ago in Spain and Portugal – in Portugal there were two criminal trials and both were acquitted! The case was pursued here, complete with evidence that would never normally be seen in a criminal court. Much of the evidence was in the form of hearsay account in witness statements. There was no jury. What kind of trial is this – answer, a civil trial at the High Court! What the police could not prosecute in the UK for lack of evidence was pursued in the civil courts by the Serious and Organised Crime Agency (SOCA) under its powers of civil recovery contained in the Proceeds of Crime Act 2002. We are seeing more and more of this.
SOCA’s powers to claim civil recovery of what it claims to be the proceeds of crime has been extended to the major law enforcement agencies since April 2008. We have already mentioned the SFO, who are now using this power. Customs and Excise too are starting to get used to the idea of pursing a civil remedy. Their man does not go to jail but may lose everything he owns – all on the lower standard of proof of the balance of probabilities.
It is that standard of proof which is now under challenge – the case of SOCA v Gale and others is being heard at the Court of Appeal at the end of April. Recent developments in human rights case law and in confiscation law has presented the Court of Appeal with an opportunity of insisting that where criminal allegations are made, the criminal standard of proof should apply – whatever label is put on the proceedings. Watch this space!
Criminal trials without a jury
The Criminal Justice Act 2003 introduced the notion of non-jury criminal trials in cases where there is a clear and present danger of jury ‘knobbling’ – the first such trial is currently being heard at the Royal Courts of Justice as this article is being drafted. But the Act sought to go much further and introduce, as perhaps almost the norm, the possibility of trial without jury in cases of complex fraud. However after the Act came into force, the then Attorney General subsequently sought to repeal those provisions and to replace it with new provisions under the Fraud (Trials Without a Jury) Bill. It is with pleasure we report that the Fraud (Trials Without a Jury) Bill was voted down by the House of Lords in March 2007.
Thus in the midst of so much change, and so many threats to our basic system of criminal justice, it is ironic that it is the un-elected side of Parliament which, yet again, strives the furthest to preserve our most precious liberties.
Aziz Rahman is a Solicitor-Advocate and Partner at the leading Criminal Defence firm Rahman Ravelli Solicitors, specialising in Human Rights, Financial Crime and Large Scale Conspiracies/Serious crime. Rahman Ravelli are members of the Specialist Fraud Panel.
Jonathan Lennon is a Barrister specialising in serious and complex Criminal Defence cases at 23 Essex Street Chambers in London. He is a contributing author to Covert Human Intelligence Sources, (2008 Waterside Press) and has extensive experience in all aspects of the Proceeds of Crime Act 2002.
Progress is threatened by cuts
Conservatives ‘want change’
All-white juries do not discriminate
Unexpected ‘special’ Legal Visits
Influenced by inner anger
250 prison teaching jobs to go
Petition to make trainee psychologists answerable to a higher body
Month by Month
Methadone concerns
Double invisibility
Twice the punishment
The forgotten victims
The best brains?
Doing Things Differently
Public persona … private person
Proactive progression
The inside story
POCA’s furry feline friends
Supporting evidence
Current page: Prosecuting Serious Fraud
Transfers from prisons to mental health units
War Torn
Cycles of the Planets
PSO Watch - It's political
insidetime
|
|
Issue : September 2010
Back Issues
Browse and Search Tools
View headlines by category
Search headlines | All headlines
Search mailbag | All mailbag
Search poems | All poems
September 2010 Headlines
£2bn Cuts
Guilty until proven innocent - historic cases
Prison psychologists - biased practitioners
What’s in your file?
Abuse of Process
Parole woes!
Recent developments in The Law of Confiscation
Month by Month
My Precious
Halden Prison, the stuff of dreams
The lamp must still burn
Sentencing review: what’s it all about?
‘Shout OXO’ before you die
What’s a ‘psychopath’, a ‘DSPD’ and should Peter Sutcliffe ever be released?
The innocence of prisoners’ children
Your Children Your Rights
The rules are simple, choose your own loophole
Lie detector tests and you
Rule 39 Correspondence - guidance
About Us
About insidetime
Directors
Editorial Team
InsidePoetry Book
The
insidepoetry book
is a collection of 213 poems by 202 prisoners of all backgrounds.
Availabe to buy from this site!
Subscribe
You can subscribe to insidetime Newspaper and get the paper each month delivered to your door!
Advertise
Advertise your business or solicitors office to a highly defined target audience.
Other Publications
Inside Time has produced a number of books and publications you can purchase online.
Contact Us
All contact info for the Operations office and the Editorial Team.
Site Map
Our site map page contains links to all pages on the insidetime site.
External Links
These links open external websites which you may be interested.
WikiCrimeLine
Banks On Sentence
insideinformation
Prisons
Everything you need to know about visiting people in prison; procedures, opening times, directions etc.
Comprehensive information about each prison regime; lock down times, facilities, healthcare etc.
insideinformation Book
Help and Support
Various pages of information for help and support organisations and networks for those in custody as well as recently released. Also information for friends and family.
Grants and Funding
This grants and funding pdf document aims to meet the need of prisoners and ex-offenders for accurate, up to date information on the supplementary funding available to prisoners.
Rules and Regulations
Information on rules & regulations used throughout the prison service.
Glossary of Terms
The Glossary of Prison Related Terms explains what all the acronyms and terms stand for with prison related matters. Includes links to external sites to further explain things.
Fact Sheets
We have produced many Prison Related Fact Sheets inc. Legal Fact Sheets, Parole Fact Sheets and Other related information.
Find a Solicitor
You can search our solicitor database for listings of solicitors in your area that provide the services you require.
Address Finder
You can search our address database in many ways to retrieve contact information for all those elusive addresses you need in a hurry.
Prison Law pdf
This document provides details of leading training providers who offer sound professional training.
Other Publications
Inside Information has produced a number of books and publications you can purchase online.
Site Map
Our site map page contains links to all pages on the insideinformation site.
Contact Us
Use the Contact Us Feedback form to send us suggestions, plus our address and phone numbers.