POCA Confiscation proceedings

POCA Confiscation proceedings

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Hypothetical circumstances similar to real case:

An unqualified accountant pleaded guilty to four counts under the Forgery Act in relation to false trade references provided for a long standing client. The references enabled the client to continue in business and as a direct result was able to perputrate a fraud worth hundreds of £1000's. The accountant new nothing of the wider fraud and provided the references in view of their long standing relationship and merely 'went along' with the clients request. He received no direct payment for the references but, although unconnected continued to work for the client and charge legimate fees.The client pleaded guilty to six counts of fraud and both men received suspended sentences.

I am concerned with confiscation proceedings to be brought against the accountant under the proceeds of crime act and whether an argument may be successfully mounted that the accountant had no benefit at all as a result his criminal actions and as such their should be zero in confiscation. I am thinking a long the lines that the accountant acted for the client for years both before and after his acts of dishonesty (which covered only a short period in 2007). He received no direct payment for his actions and there is no specific evidence to suggest that the accountant would not have been able to continue to act (and charge fees) if he had not provided the false references. The alternative argument is of course that the accountants gross fees were his benefit as he was able to maintain the client relationship.

Thoughts, guidance and reference to any case material would be welcome.

Replies (8)

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David Winch
By David Winch
27th Jan 2012 00:14

Question of law

I think this is a question of law rather than an accountancy question.  So you should be guided by the solicitor and counsel engaged by the client.

Under s76 PoCA 2002 (in England and Wales) "A person benefits from conduct if he obtains property as a result of or in connection with the conduct" and "If a person benefits from conduct his benefit is the value of the property obtained".

In considering similar wording in an earlier statute the House of Lords held in the case of Jennings v CPS [2008] UKHL 29 at para [14] that that means "property obtained by him".

But note that s76 also provides that "References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other".

In relation to what is meant by "in connection with" the Court of Appeal held in R v James & Blackburn [2011] EWCA Crim 2991 at para [65] that "since this is a criminal statute and the confiscation process is not to be applied so as to operate as a fine (see Jennings, at paragraph 13), we consider that the words "in connection with" must be given a narrow construction provided, of course, that such a construction is consistent with the ordinary use of the statutory language".

So it is a moot point whether the accountant obtained any benefit from the forgeries.

If he did obtain a benefit "as a result of or in connection with" his criminal conduct and if the aggregate benefit was at least £5,000 (and you may wish to consider gross fees plus VAT in that connection) then he will have a 'criminal lifestyle' (see s75) which will, amongst other things, trigger the statutory assumptions of s10.

Seek legal advice.

David

P.S. Are you a member of the Money Laundering & Crime Discussion Group?

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Stepurhan
By stepurhan
27th Jan 2012 00:51

Chain of actions

If I'm understanding you correctly David, the accountant "benefited" from the fraud by the continuing receipt of normal fees. Had he not assisted the client by foolishly providing references without basis in fact, he would not have been able to obtain the fees charged (since the business was only able to continue due to the ongoing fraud) The fact that the fees in themselves were legal is irrelevant. His getting paid the fees was dependent on the fraud and hence criminal property.

Guess we all need to be more careful about providing references then.

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David Winch
By David Winch
27th Jan 2012 08:10

The prosecution assertion

Stephen

I think it is entirely possible that the prosecution will assert that fees were obtained "as a result of or in connection with" the false references provided by the accountant (for which he has already been convicted of forgery).

The defence may well argue that no fees were obtained "as a result of or in connection with" the false references.

But the fact that the accountant performed legitimate work for the fees is not, of itself, decisive in my opinion.

If the sides cannot agree on this the judge will decide after hearing evidence.

David

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By ShirleyM
27th Jan 2012 08:58

Disclaimers

Would disclaimers have a bearing on the outcome?

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David Winch
By David Winch
27th Jan 2012 12:13

Forgery

Shirley

My reading of the query is that - perhaps with the aid of a photocopier and some correcting fluid (!) - the convicted accountant had created (fictional) references for his client which purported to come from others who had been the client's suppliers or customers.

I don't think this was a case of him having given an over-enthusiastic accountant's reference.

David

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By ShirleyM
27th Jan 2012 12:53

Ahhh ... I misunderstood.

Thanks for putting me right, David :)

In that case, the accountant must have known there was something dodgy afoot when he did it.

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avatar
By Saintly
27th Jan 2012 13:16

clarification

In response to Stepurhan's comments above.....in foolishing providing the forged references the accountant was unaware of the extent of their importance - the business could indeed have continued without the references, but the references did put the client in a position to carry out his fraud.

If I understand the position correctly the accountant may well therefore be able to argue that he received no 'benefit' or 'pecunary advantage' 'in connection with' providing the references?

 

 

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David Winch
By David Winch
27th Jan 2012 14:05

Pecuniary advantage (not)

This does not appear to be a 'pecuniary advantage' case.  A 'pecuniary advantage' arises where a liability is side-stepped, for example where an income tax liability is removed or reduced by dishonestly entering incorrect figures on a tax return. In such a case nothing is received but a 'pecuniary advantage' is nevertheless obtained (which is a benefit).

I think the defence forensic accountants are likely to want to put forward information on (i) the 'benefit' if the subsequent fees were not obtained as a result of or in connection with the forgeries (probably a figure of zero), (ii) the subsequent fees received from the client, to date (both inclusive & exclusive of VAT), and (iii) the 'benefit' if subsequent fees were obtained as a result of or in connection with the forgeries (which might involve the 'criminal lifestyle' assumptions).

Then leave it to the lawyers to argue which set of numbers is relevant.

My own view is that if the client would have left this accountant if he had not done the forgeries then subsequent fees were received as a result of the forgeries.

If the client would have stayed with this accountant even if he had refused to do the forgeries then you have the (much more difficult in my view) question of whether the subsequent fees were received in connection with the forgeries.

I think there is certainly a potential defence argument to be made that there was no benefit.  Whether that view will prevail remains to be seen.

David

P.S.  Although this may not be relevant, I am asking myself why the accountant would take the risk to his reputation, livelihood and even liberty of creating forged references if he believed that there was nothing to be gained by doing them / lost by refusing to do them.  Was the co-defendant a relative / friend / lover of the accountant?

I am also asking myself what proportion of the accountant's gross fees were derived from this client?

If the answers to these questions might be helpful to the defendant then the defence may want to put that information forward too.

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