Tag Archives: conspiracy

Seeing the crescent – or the whole moon?

Crescent moonHow should a forensic accountant approach a confiscation case? Should he (or she) focus on the benefit and available amount asserted in the prosecutor’s s16 PoCA 2002 statement – or consider the wider aspects of the proceedings? Should he study the bright crescent, or the whole of the moon?

The prosecutor’s s16 statement

The s16 statement may have been written by a financial investigator who has been involved in the case before and during the trial and who will bring to his s16 statement his knowledge of the circumstances of the case, the indictment and the judge’s sentencing remarks.  That can mean that the benefit in the s16 statement fairly and properly reflects the situation of the convicted defendant.

However, in my experience this is often not the case, particularly where there has been more than one defendant convicted at trial.  Sometimes the author of the s16 statement adopts a one-size-fits-all approach to the confiscation – going overboard with ‘cut and paste’ to speed up the production of multiple s16 statements.

But confiscation is very much focused on each single defendant.

The forensic accountant

The forensic accountant who is provided only with the s16 statement and its appendices, may be (at that stage) unaware of important features of the specific charges of which this defendant was convicted and relevant details of his unique role in the offending.

Obtaining copies of the indictment and perhaps the judge’s sentencing remarks, or the prosecution opening, may provide information of key relevance to benefit which is not to be found in the s16 statement.

So a little digging by the forensic accountant may bear fruit.

Conspiracy

This is particularly so in conspiracy cases where the s16 statement may blithely treat all convicted defendants as having jointly obtained the full benefit derived from the conspiracy.  But did the evidence at trial support that view?  The judge’s sentencing remarks may throw some light on this, perhaps indicating a more limited role for a particular defendant involving a more restricted benefit for him.

Tax evasion

Another fertile area of challenge surrounds convictions for offences such as “being knowingly concerned in the fraudulent evasion of tax”.  This is an example of an area in which there may be a disconnect between the criminal conduct and the benefit derived from it.

Consider the case of a company director who deliberately submits false VAT returns for his company to enable it to retain or obtain the funds it needs to continue a legitimate trade.  The director may be quite properly convicted of the offence.  In these circumstances the s16 statement is likely to assert that he has benefited to the extent of the tax evaded.  But has he?  Undoubtedly the initial beneficiary will have been the company rather than the director.

The disconnect between offending and benefit

As long ago as 2008, in the case of CPS v Jennings [2008] UKHL 29 the court authoritatively stated,  “A person’s acts may contribute significantly to property … being obtained without his obtaining it. But … a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained, which must be read as meaning ‘obtained by him’.”

That is as true today as it was then.

Whether, and to what extent, the director has himself obtained a benefit demands careful investigation, it is by no means a foregone conclusion.

There are many more examples in which establishing the benefit obtained by a particular defendant demands a wider consideration of the circumstances of the case and the essential principles of confiscation law and practice.

Ideally these issues will have been identified and addressed by the defendant’s legal team and set out in detailed instructions to the forensic accountant.

But in practice this is often not the case for one reason or another.

Criminal lifestyle

Importantly the issue of whether a defendant has a ‘criminal lifestyle’ – triggering the draconian statutory assumptions – may depend upon whether he has obtained from his offending a total benefit of at least £5,000 (in England and Wales).

So not only may the benefit derived from the defendant’s ‘particular criminal conduct’ be important in itself, it may be the key to establishing – or not – a much larger benefit figure.

The danger of focusing only on the s16 statement is that the forensic accountant may fail to appreciate the importance of relevant matters which are not referred to within that statement.

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

UK Supreme Court rules on benefit obtained jointly

Supreme Court logoThe UK Supreme Court has finally and firmly ruled out apportionment of benefit obtained jointly in its judgment on 18 June 2014 in the cases of R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36.

The Supreme Court confirmed that where benefit is jointly obtained by more than one defendant then each defendant obtains the whole of the benefit obtained jointly, for the purpose of confiscation proceedings.

 

Benefit “obtained”

Benefit arises where a person “obtains” an asset or evades a liability as a result of or in connection with criminal conduct, see s76 Proceeds of Crime Act 2002.  But the Supreme Court points out, in para [42] of Ahmad, whilst a criminal may sometimes become the owner of property obtained through crime, in many cases he does not do so.  When a person “obtains” a chattel, money, a credit balance or land through criminal dishonesty, he does not acquire title to, or ownership of, the item in question, although he does acquire control over it.

As was pointed out by Lord Walker and Hughes LJ in Waya [2012] UKSC 51, para [68], a person who dishonestly obtains property has “at most a possessory interest good against third parties, and thus of no significant value”.

 

Contrasting “obtaining” and “ownership”

The Supreme Court considered that cases under the 2002 Act involve “obtaining” not “ownership”, and, even if they did involve ownership, the Court were doubtful whether that ownership would be technically joint, para [55].

In paras [60] to [62] of Ahmad the Supreme Court set out their thinking in rejecting arguments for apportionment of benefit.  The argument for apportioned valuation is that s79(3) requires the valuation of the property obtained to take into account the interests of accomplices.  This argument misunderstands the purpose and effect of s79(3) said the Supreme Court.  A defendant who steals property or obtains it by deception does not acquire ownership of that property.  Likewise if two defendants jointly misappropriate property, neither of them obtains a legal interest in it and neither has an “interest” for the purpose of s79(3).  In relation to each of them, the value obtained is the value of what they have taken, which is the market value of the misappropriated property.  Thus, once a defendant has obtained the property, whether solely or jointly, that market value is the value of what he has obtained.

The “interests” of a defendant’s co-conspirators are not to be taken into account when valuing the property for the purpose of assessing the value of the property which the defendant “obtained”.  Furthermore when one is valuing the property which a conspirator, including a defendant, has “obtained”, one is not normally valuing an “interest” at all.

 

Whether benefit was obtained jointly

However the Supreme Court also confirmed, by references at paras [41] and [46] to [51], that Crown Courts should not be too quick to conclude that benefit has been jointly obtained when there is evidence which suggests that it may not have been.  Judges in confiscation proceedings, said the Supreme Court, should be ready to investigate and make findings as to whether there were separate obtainings.

David

P. S.  A separate blog article “Supreme Court caps confiscation enforcement” deals with the cap on enforcement of confiscation orders which was also dealt with in the UK Supreme Court judgment in R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36.

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

Appealing out of time after a change of law

When the law changes can an appeal be made to the Court of Appeal outside the normal time limits?

Normally an appeal against a decision of the Crown Court in England and Wales has to be submitted within 28 days of the decision. But the Court of Appeal can give leave for an appeal to be heard where the deadline has been missed – and has done so in some cases where the deadline has been missed by months or even years.

Where a defendant has suffered a decision which, though it appeared to be well founded at the time it was made, now appears to be incorrect in the light of subsequent case law, what is the position regarding the submission of an appeal out of time?

This is an issue which arises from time to time – and may be particularly topical following the decision of the UK Supreme Court in the case of R v Waya [2012] UKSC 51.

 

The general rule

The general rule is that the Court of Appeal will not allow an appeal to be made out of time if the only reason for the appeal is that subsequent cases have shown the previous perception of the legal position was mistaken.

This was set out many years ago in the case of R v Mitchell [1977] 65 CAR 185 when it was said that, “It should be clearly understood, and this court wants to make it even more abundantly clear, that the fact there has been an apparent change in the law or, to put it more precisely, the previous misconceptions about the meaning of a statute have been put right, does not afford a proper ground for allowing an extension of time in which to appeal against conviction”.

That rule has been reiterated many times since.  See, for example, the comment, “alarming consequences would flow from permitting the general re-opening of old cases on the ground that a decision of a court of authority had removed a widely held misconception as to the prior state of the law” from the case of Ramsden [1972] Crim LR 547 and repeated, with approval, in the case of R v Ramzan & Others [2006] EWCA Crim 197 at paragraph [30].

In the case of R v Cottrell [2007] EWCA Crim 2016 it was said, at paragraph [42], “there is a continuing public imperative that so far as possible there should be finality and certainty in the administration of criminal justice.  In reality, society can only operate on the basis that the courts administering the criminal justice system apply the law as it is.  The law as it may later be declared or perceived to be is irrelevant”.

But there have been exceptions made to the general rule.

 

Substantial injustice

It does appear to be the case that where the Court of Appeal can be satisfied that a defendant has suffered a substantial injustice then it can be persuaded to hear an appeal out of time. In the case of Hawkins [1997] 1 Cr.App.R 234 the Court of Appeal commented that “the practice of the Court has in the past, in this and comparable situations, been to eschew undue technicality and ask whether any substantial injustice has been done”.
So, for example, where a defendant has been convicted of an offence of which, under a new understanding of the law, he could not now be found guilty – but the evidence shows that he must have been guilty of another similar offence (of which he had not been charged), then the Court of Appeal will generally not allow an appeal to be heard out of time. This was the position of a Mr Malik who had been convicted of conspiracy to launder money prior to the ruling in R v Saik [2006] UKHL 18 (which changed the law regarding the conspiracy offence where there was merely a suspicion that monies were proceeds of crime). The Court of Appeal considered that there was ample evidence of the substantive offence of money laundering in Mr Malik’s case and refused him leave to appeal his conviction out of time.

In R v Charles [2001] EWCA Crim 1755 the Court of Appeal said, at paragraph [41], “In practice judges and courts are probably not as reluctant to grant extensions of time as the authorities may suggest. It has been the experience of the members of this Court that consideration will usually be given to the merits before declining to grant an extension of time. Both in Jones (No. 2) and Asraf, the merits were considered notwithstanding the absence of any proper explanation for the delay. There are some cases, such as those where the applicant wishes to rely on fresh evidence unavailable at trial, where the extension of time will be readily granted. There are cases such as those envisaged in Hawkins where it will not be”.

 

Failure to address a key issue

Perhaps slightly different are cases where, because the law was not properly understood at the time, a key issue in the proceedings was not recognised and addressed in the Crown Court. This is illustrated by the case of Bell & Others v R [2011] EWCA Crim 6.

Mr Bell was subject to a confiscation order made in 2007 after he had been convicted of being knowingly concerned in the fraudulent evasion of the duty chargeable on cigarettes contrary to section 170(2)(a) Customs and Excise Management Act 1979. The confiscation order was based on the amount of duty evaded when the cigarettes in question had been smuggled into the UK. But in fact it does not follow that a person committing this offence is himself liable for the duty and thus has ‘obtained’ a pecuniary advantage which would form the basis for a confiscation order. That had not been appreciated by the Crown Court at the time the confiscation order was made. In consequence the Crown Court had not addressed the question of whether Mr Bell was himself liable for the evaded duty and evidence relevant to that issue had not been obtained.

Subsequently the Court of Appeal had decided the case of White & Others v The Crown [2010] EWCA Crim 978 which highlighted this issue. Mr Bell then lodged an appeal against the confiscation order made against him three years earlier.

Before the Court of Appeal it was accepted that, in fact, Mr Bell had not been personally liable for the evaded duty. The Court of Appeal granted leave to appeal the confiscation order out of time because “it would be a grave injustice not to grant leave”.

In place of a benefit of £157,775 based on the evaded duty, Mr Bell was made subject to a confiscation order of just £950 based on the payment he had received for his role in the smuggling offence.

 

The impact of R v Waya

We have yet to see whether the Court of Appeal will grant leave to appeal confiscation orders out of time following the decision of the UK Supreme Court in the case of R v Waya [2012] UKSC 51.

The Waya case decided two points of principle: (1) confiscation orders should not be ‘disproportionate’ because that would infringe Article 1 of the First Protocol to the European Convention on Human Rights and (2) a mortgage applicant does not ‘obtain’ a mortgage advance (for confiscation purposes) if that advance is simply paid to a solicitor, acting on behalf of both the applicant and the lender, and then remitted to the vendor of the property being purchased (or his solicitor) – because the mortgage applicant does not at any stage gain ‘control’ of the monies advanced.
It may be that defendants who have been subject to a confiscation order which they consider is more severe than the Crown Court would have made had the decision in Waya been available at the time will now seek to appeal their orders. It will be very interesting to see how such appeals are dealt with by the Court of Appeal.

David

EDIT: A further article on the subject updates the position: Appealing a confiscation order out of time.

(Note: This article applies to confiscation orders under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation order in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

17 year sentence for VAT carousel fraud

Recently Dilawar Ravjani was sentenced to 17 years imprisonment following conviction for conspiracy to cheat the public revenue.  He was said to be the ring-leader in a complex missing trader intra community (MTIC) VAT fraud – sometimes known as carousel fraud.  But was that sentence – reportedly the longest ever given to an individual in the UK for this type of fraud – too harsh?

 

The offending

It is said that Mr Ravjani was at the head of a conspiracy involving purported trading in mobile phones of a total value of £1.7 billion.  But some of the phones did not even exist and a total of 5,700 fake transactions had been created to give the appearance of legitimate trading.  HM Revenue & Customs started their investigation in 2006.  It culminated in five trials and the conviction of 15 conspirators.  Only recently has the final trial been concluded.  The total VAT loss to HMRC was £107 million.

Undoubtedly the offending was serious.

 

The criminal charges

Mr Ravjani was charged and convicted of a single offence of ‘Conspiracy to Cheat the Public Revenue’.  He was sentenced to 17 years imprisonment and banned from acting in the management of a company for 15 years.  He is also to be subject to confiscation proceedings.

The offence of ‘Conspiracy to Cheat the Public Revenue’ is a common law offence in England & Wales with a history going back hundreds of years

The offence of ‘Conspiracy to Cheat the Public Revenue’ is a common law offence in England & Wales with a history going back hundreds of years.  The common law offence of ‘Cheat’ had applied more widely but was abolished by s32(1)(a) Theft Act 1968 except in relation to the public revenue.  The logic of that abolition was that the statutory offences set out in the Theft Act 1968 replaced the old common law.

One of the consequences of this was that, except in relation to offending concerning the public revenue, the statute introduced maximum sentences for offending formerly prosecuted as ‘Cheat’.  The maximum sentence for theft was originally set at 10 years imprisonment.  For some offences a lower maximum was set, for example ‘false accounting’ carried a maximum sentence of 7 years.

In relation to VAT a criminal offence was enacted by s72(1) Value Added Tax Act 1994 where “any person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person”.  Subsection (2) provides that “the evasion of VAT includes a reference to the obtaining of . . . the payment of a VAT credit”.  A ‘VAT credit’ is defined in s25(3) to include a VAT refund paid following the submission of a trader’s VAT return.

So it seems that Mr Ravjani could have been prosecuted under s72 VAT Act 1994.  But the maximum sentence for an offence under that section is 7 years imprisonment.

It appears to be the case that the offending occurred prior to the coming into effect of the Fraud Act 2006, which provides a maximum sentence of 10 years for fraud by false representation and similar offences.

However had the victim of this fraud been a wealthy individual, rather than the public purse, the maximum penalty (for the common law offence of conspiracy to defraud) would have been 10 years.

Mr Ravjani was not charged with any money laundering offence under Part VII, Proceeds of Crime Act 2002.  Such offences carry a maximum sentence of 14 years imprisonment.

the prosecutors may have had an option to charge Mr Ravjani either under the specific statutory offence or with the common law offence

So it seems that the prosecutors may have had an option to charge Mr Ravjani either under the specific statutory offence of s72 VAT Act 1994 (with a maximum sentence of 7 years) or with the common law offence of ‘Cheating the Public Revenue’ (which has no statutory maximum sentence).

It is perhaps not surprising that they chose to charge Mr Ravjani with the common law offence.  But were they entitled to do so?

 

Common law v statutory offences

It might be argued that Mr Ravjani ought to have been charged with the statutory offence under s72 VAT Act 1994 because his alleged criminal conduct fell within the scope of that statutory offence.

good practice and respect for the primacy of statute do in my judgment require that conduct falling within the terms of a specific statutory provision should be prosecuted under that provision unless there is good reason for doing otherwise

In the case of R v. Rimmington [2005] UKHL 63 Lord Bingham said this at paragraph [30]:
“Where Parliament has defined the ingredients of an offence, perhaps stipulating what shall and shall not be a defence, and has prescribed a mode of trial and a maximum penalty, it must ordinarily be proper that conduct falling within that definition should be prosecuted for the statutory offence and not for a common law offence which may or may not provide the same defences and for which the potential penalty is unlimited.  . . .    It cannot in the ordinary way be a reason for resorting to the common law offence that the prosecutor is freed from mandatory time limits or restrictions on penalty.  It must rather be assumed that Parliament imposed the restrictions which it did having considered and weighed up what the protection of the public reasonably demanded.  I would not go to the length of holding that conduct may never be lawfully prosecuted as a generally-expressed common law crime where it falls within the terms of a specific statutory provision, but good practice and respect for the primacy of statute do in my judgment require that conduct falling within the terms of a specific statutory provision should be prosecuted under that provision unless there is good reason for doing otherwise”.

It is clear that Mr Ravjani was regarded as the organiser and ring-leader in this conspiracy.  It is also clear that other members of the conspiracy were convicted of money laundering and sentenced to prison terms in excess of 7 years.  It follows that, had Mr Ravjani been prosecuted only under s72 VAT Act 1994, he would have received a lighter sentence than other conspirators who were considered less culpable.

But is that, in the words of Lord Bingham, “good reason for doing otherwise”?

It has to be said that appropriate sentencing in this area remains open to debate.  In the Court of Appeal judgment R v Meehan [2006] All ER (D) 105 it was indicated that organisers of such frauds should expect sentences well into double figures – clearly in excess of those envisaged in VAT Act 1994.  That appears to leave a tension between the views of the Court of Appeal and those of Lord Bingham in the House of Lords.

Perhaps that should be resolved by Parliament looking again at the 7 year maximum sentence under s72 VAT Act 1994?

But can it be right that a person who defrauds the public purse faces a higher sentence on conviction than a person who defrauds wealthy individuals or businesses?

David

P.S.  Mr Ravjani might, on the other hand, consider himself fortunate to have been prosecuted in England rather than in another jurisdiction.  At least he did not have to face a very, very long sentence such as that meted out in the US courts in the case of Bernie Madoff – 150 years!

UPDATE
On 29 November 2012 the Court of Appeal refused Mr Ravjani’s application for leave to appeal against his 17 year sentence R v Ravjani [2012] EWCA Crim 2519.

SECOND UPDATE
The Court of Appeal on 17 December 2013 in the case of Dosanjh & Others v R. [2013] EWCA Crim 2366 commented upon the use of common law charges in circumstances where the offending could be covered by a statutory offence. They said, at paragraph [33], “we are entirely confident that as far as Parliament is concerned, the offence of conspiracy to cheat the public revenue retains its established and clearly understood role in the prosecution of revenue cases. It is used to supplement the statutory framework and is recognised as the appropriate charge for the small number of the most serious revenue frauds, where the statutory offences will not adequately reflect the criminality involved and where a sentence at large is more appropriate than one subject to statutory restrictions”.
In practice however I see the common law offence being charged apparently routinely in cases which could not be described as “the most serious revenue frauds”. Will that no longer be the case in future?

The Court of Appeal decision in Ahmad & Ahmed v R

Last month the Court of Appeal slashed the largest confiscation orders ever made in England & Wales.  The Crown Court had made orders of over £92 million each against Shakeel Ahmad and Syed Ahmed.  The Court of Appeal cut each order to just over £16 million, Ahmad & Ahmed v R [2012] EWCA Crim 391.  But in doing so did the Court of Appeal properly apply the wording of the legislation or did it allow itself to be excessively influenced by what it believed to be the underlying objective of confiscation?

The confiscation orders were made under the confiscation provisions of the Criminal Justice Act 1988, which are in many respects very similar to the confiscation provisions of the Proceeds of Crime Act 2002.  The statutory ‘criminal lifestyle’ assumptions did not apply to these defendants, who had each been convicted of a single count of ‘conspiracy to cheat the public revenue’ in relation to a massive VAT ‘carousel’ fraud (more correctly a Missing Trader Intra Community VAT fraud, or MTIC fraud).  The fraud had involved transactions, and movements of monies, between various companies under the control of the appellants.

The key to the fraud is that the exporting company, under normal VAT rules, is eligible to obtain a refund from HM Revenue & Customs of the VAT it has paid on its purchase of the goods which it exports

Essentially the fraud operated in this way.  High value goods were imported into the UK by one company, then sold to another, and another, and ultimately re-exported to the overseas company which had supplied them in the first place.  Sometimes the entire chain of transactions were completed in a single day.  The intermediate companies are known as ‘buffer companies’.  The key to the fraud is that the exporting company, under normal VAT rules, is eligible to obtain a refund from HM Revenue & Customs of the VAT it has paid on its purchase of the goods which it exports.  But if the company from which it has purchased those goods dishonestly fails to make payment to HMRC of the VAT it charged when selling the goods to the exporter, then HMRC will be out of pocket and the fraudsters will reap the benefit.

The appellants had been involved in 32 very large transactions in a period of less than 3 weeks.  These had resulted in VAT refunds of over £12 million.

In the confiscation proceedings it was accepted that the court was entitled to ‘pierce the veil’ of incorporation of a company used by the fraudsters.  It was held that they each had jointly obtained what the company had obtained.

 

The difficulty

Where the difficulty arises is that this company received monies which reflected the value of the goods plus the VAT on them.  The Crown Court judge made a finding that it was “a necessary part of the deception on HMRC that an amount representing the value of the goods and the VAT thereon should pass through the [bank] accounts of the buffer companies”.

The judge made a confiscation order reflecting not just the VAT lost to HMRC, but the £72 million value of the bank transactions

The Crown Court judge therefore made a confiscation order reflecting not just the £12 million VAT lost to HMRC, but reflecting the £72 million value of the bank transactions – in other words based on the value of the goods plus the VAT on them.  The issue on appeal was whether the Crown Court judge had been right to do that.

The relevant legislation, s71(4) Criminal Justice Act 1988 provides that “a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained”.  The Crown Court judge held that the full amount passing through the bank account was ‘obtained as a result of or in connection with’ the offence.

The Court of Appeal disagreed and found that only the VAT was ‘obtained as a result of or in connection with’ the offence.  The remaining monies were the costs incurred in committing the offence rather than benefit obtained from the offence.

 

Which court was right?

I am bound to say that I think both courts came to an incorrect figure of benefit.

I would have looked at the issue from a different perspective

I would have looked at the issue from a different perspective.  It seems to me that the bank transactions were a necessary and integral ingredient of the fraud.  The bank transactions, in my view, were made as a result of or in connection with the offence.

I have considered what is meant by ‘as a result of or in connection with’ in an earlier article on this blog HERE.

But I do not believe the appellants can properly be said to have ‘obtained’ monies which they already had.  Neither the Crown Court nor the Court of Appeal appears to have found it necessary to consider where the monies needed to conduct the fraud came from.  Furthermore, there is a suggestion in the judgment of the Court of Appeal that monies were recycled and used repeatedly in the course of the 32 transactions.  So the monies actually ‘obtained’ by the appellants could be very considerably less than the £72 million figure used by the Crown Court judge.

The Court of Appeal did not find it necessary to consider those aspects further – which was unfortunate in my view.  The consequence is, I would suggest, that the aggregate amount ‘obtained’ by the appellants as a result of or in connection with the offence remains unknown.  It will not be less than the loss incurred by HMRC but may be greater than that figure depending upon the amounts and sources of the other monies employed in the fraud.

David

UPDATE : This case was the subject of an appeal to the UK Supreme Court.  Comments on the Supreme Court judgment can now be found in my newer blog articles “UK Supreme Court rules on benefit obtained jointly” and “Supreme Court caps confiscation enforcement“.

Confiscation, conspirators, couriers and money launderers

What benefit, for confiscation purposes under PoCA 2002, is obtained by conspirators, couriers of money or drugs, or by money launderers?  The question has been considered by the appeal courts since the landmark ruling in R v May [2008] UKHL 28 left some unfinished business with its closing words, “it may be otherwise with money launderers”.

The judgment of the House of Lords in May, and in the case of CPS v Jennings [2008] UKHL 29 delivered at the same time, set out the importance in confiscation proceedings of establishing what the defendant had ‘obtained’.  The judgments noted that a defendant “ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control”.  From these judgments sprang issues concerning what it was, in particular circumstances, that a defendant had ‘obtained’.

To some degree these issues have been resolved but, in the author’s view at least, there may still be some loose ends

To some degree these issues have been resolved in the judgments of the Court of Appeal in R v Sivaraman [2008] EWCA Crim 1736 (in relation to conspirators) and Allpress & others v R [2009] EWCA Crim 8 (in relation to couriers and money launderers).  But, in the author’s view at least, there may still be some loose ends to be addressed.

 

Conspirators

The issue in Sivaraman can be simply stated.  The defendant was employed as a manager of a filling station.  In that capacity he accepted between 8 and 10 deliveries each of approximately 30,000 litres of diesel fuel on which excise duty said to amount to £128,520 should have been paid.  To the defendant’s knowledge that duty had not been paid and on that basis he pleaded guilty to conspiracy to fraudulently evade excise duty.  He admitted being paid £15,000 for his role in the conspiracy.  For the purposes of confiscation was his benefit limited to the £15,000 he was paid or was it the £128,520 duty evaded by the conspiracy in which he had played a part?

The Court of Appeal held that Mr Sivaraman had himself ‘obtained’ only £15,000 from his criminal conduct and accordingly his benefit was £15,000.  Whilst May had demonstrated there where ‘property’ (meaning an asset of any description) was obtained jointly by more than one person then each person obtained the whole of it (and so each had a benefit of the whole of it), it did not follow that in a conspiracy each conspirator obtained everything which had been obtained as a result of the criminal conspiracy.

A conspiracy is not a legal entity,  in confiscation proceedings the court is concerned with the benefit obtained by the individual conspirator

A conspiracy is not a legal entity but an agreement or arrangement which people may join or leave. In confiscation proceedings the court is concerned not with the aggregate benefit obtained by all parties to the conspiracy but with the benefit obtained, whether singly or jointly, by the individual conspirator before the court.

So in confiscation proceedings following a conviction for conspiracy it is necessary to consider the role played by the individual conspirator and the benefit obtained by him (including any benefit which he has obtained jointly with one or more other members of the conspiracy).

The Court of Appeal summarised the position in the case of R v Rooney [2010] EWCA Crim 2 as follows: “(a) if a benefit is shown to be obtained jointly by conspirators, then all are liable for the whole of the benefit jointly obtained. (b) If, however, it is not established that the total benefit was jointly received, but it is established that there was a certain sum by way of benefit which was divided between conspirators, yet there is no evidence on how it was divided, then the court making the confiscation order is entitled to make an equal division as to benefit obtained between all conspirators. (c) However, if the court is satisfied on the evidence that a particular conspirator did not benefit at all or only to a specific amount, then it should find that is the benefit that he has obtained.”

 

Couriers

The Court of Appeal judgment in Allpress dealt with several otherwise unconnected cases in which similar issues arose.

the courier’s benefit for confiscation purposes should not include the cash or assets which he was merely conveying

With regard to the benefit arising to a person who acted merely as a courier of cash or assets belonging to others, the court held that the mere physical possession of the money or assets was not sufficient to amount to the ‘obtaining’ of them by the courier.  It follows that the courier’s benefit for confiscation purposes should not include the cash or assets which he was merely conveying.

It may be therefore that a courier has been convicted of possessing criminal property (which is a money laundering offence contrary to s329 PoCA 2002) but have obtained no benefit from the offence for the purposes of confiscation.

 

Money launderers through the banking system

However, in the same judgment, the court also considered the case of a Mr Paul Morris who was a Staffordshire solicitor who had laundered the proceeds of a VAT fraud committed by a Mr Raymond Woolley. Not only had Mr Morris passed the monies through his firm’s client bank account but he had arranged the transfer of over £4.5 million to a company called Thornbush Entertainment Inc (USA).  The evidence showed that Mr Morris had a connection with this company but Mr Woolley did not. It seems that these transfers were part and parcel of the laundering by Mr Morris of the proceeds of the VAT fraud.

Mr Morris was not acting as a bare trustee of funds belonging to Mr Woolley but Mr Morris’s connection with the funds was “far more than that”

Mr Morris had been convicted of money laundering in relation to those funds.  In the confiscation proceedings which followed the Crown Court judge had held, on the evidence, that Mr Morris was not acting as a bare trustee of funds belonging to Mr Woolley but Mr Morris’s connection with the funds was “far more than that”.  The Court of Appeal held that the Crown Court judge had been entitled to make that finding and also noted that Mr Morris had sole operational control of his firm’s client account through which the monies had passed.

In these circumstances Mr Morris had ‘obtained’ the monies and his benefit for confiscation purposes was the amount which had passed through the bank account under his control.

But the judgment in Allpress concludes with these words: “The laundering of money or other criminal property can take many forms. This judgment does not attempt to address all of them, but only the types of case which we have been directly considering.”

 

The value of that which has been ‘obtained’

One issue which did not arise in Allpress was the situation in which a defendant obtains property but has only a limited interest in it.  In that event s79(3) PoCA 2002 provides that if “another person holds an interest in the property its value . . . is the market value of [the defendant’s] interest”.

The defendant would in effect be acting as a nominee or bare trustee for the beneficial owner of the monies

I would suggest that a defendant who launders monies through a bank account on behalf of another may find himself in a position of having ‘obtained’ the monies laundered (when he deposits them in a bank account in his name and under his control) but that his own interest in those monies may have no value (since the monies belong to someone else).  The defendant would in effect be acting as a nominee or bare trustee for the beneficial owner of the monies.  In that event it would appear that the market value of that which he has obtained is nil and so his benefit for confiscation purposes in relation to those monies will also be nil.

However as far as I am aware that point has not, to date, been successfully argued in court.

David

UPDATE: The value of property “obtained” and the implications of s79(3) in that connection were considered by the UK Supreme Court in their June 2014 judgment in the cases of R v Ahmad & Ahmed and R v Fields & Others [2014] UKSC 36 and are now discussed in my blog article “UK Supreme Court rules on benefit obtained jointly“.