2010 - a good year for financial crime?

Picking over the turkey carcass, this seems like the moment to look back over 2010.  Has it been a good year for financial crime?

One would have to say that it has.  SOCA has received a record number of Suspicious Activity Reports, over 240,000 of them, in the year to 30 September 2010.  In the courts some very big cases have come to light.  One alleged mortgage fraud case involves nearly £50 million (and will come fully to trial next year).  But in some respects these developments are merely 'more of the same'.

There have been some departures from the past however.  Notably there have been a couple of major prosecutions against commercial organisations which have taken place simultaneously in UK and US courts. 

The first, in March, involved a company known as Innospec Ltd.  That company was convicted in relation to the bribery of officials in Indonesia regarding the sale of lead based anti-knocking fuel additives (which were banned long ago in the UK and many other countries on health and environmental grounds).  The bribes were intended to block any moves to ban the additive in Indonesia, and so to preserve a lucrative market for the company's product. (Innospec Ltd is a subsidiary of Innospec Inc, a company incorporated in Delaware, which was being simultaneously prosecuted by the US authorities.)

The second case in the UK courts, in December, involved BAE Systems PLC and the sale of a radar system to Tanzania.  The company was convicted of failing to keep accounting records sufficient to show and explain the company's transactions.  The suggestion was that large payments made to a marketing adviser acting for the company had been used in part to unfairly ensure that the company would win the Tanzanian contract.  The monies were recorded as having been spent on 'technical services'.  In the US courts BAE was prosecuted in relation to its activities in countries other than Tanzania.

Because each case involved investigations and activities inside and outside the UK and each case was being prosecuted in both the UK and US courts there was a difficulty to overcome arising from the difference in legal cultures.  In particular, 'plea bargains' are well recognised in the US but there is no exact equivalent in the UK.  The nearest thing we have (officially at least) are the 'Attorney-General's Guidelines on Plea Discussions in Cases of Serious or Complex Fraud'.

A cornerstone of UK jurisprudence is that it is the court, and only the court, acting in public view, which can determine the appropriate sentence for a crime of which the defendant is convicted.  So the UK prosecutors cannot offer a binding 'deal' as to what the punishment will be on a guilty plea. However the prosecution and the defence are permitted, in certain types of case and in accordance with procedural safeguards, to make a joint submission to the court highlighting an appropriate sentencing range for the offence.  This is not binding upon the court when sentencing.

In US federal courts however the prosecutor may make a recommendation to the court specifying the sentence to be handed down on the guilty plea.  The court may reject that recommendation but, if it does so, the defendant then has the opportunity to change to a 'not guilty' plea - necessitating a full trial.

So a US prosecutor can say to a defendant, "If you plead guilty the sentence will be 'X'" - but a UK prosecutor can only say, "If you plead guilty we will submit to the court that the sentence should be in the region of 'A' to 'B' but the actual sentence may be higher".

In a major investigation the defendant knows that the prosecutor finds a guilty plea very attractive in terms of saving work and expense for the prosecution, as well as providing the certainty of a 'result'.  So the offer of a guilty plea is a major bargaining chip.  But the prosecutor in the UK is restricted in what he can offer in return to seal the deal.

What we have seen is UK prosecutors going to some lengths to offer as attractive a 'package' as they can to get that guilty plea.  In the BAE case the 'deal' was that BAE make available £30 million for the benefit of the people of Tanzania and to pay any penalty imposed by the UK court.  So the total cost to BAE was, in effect, capped.  The court's role was limited to deciding how much of that £30 million was to be paid to the UK authorities and how much was left to go to Tanzania.

In the Innospec case the UK court was virtually presented with a fait accompli and it fell in with the arrangements negotiated covering both the UK and US jurisdictions.

In each case the UK judges grumbled - but there was not a lot they could do without wrecking years of work by prosecutors.  We may see more such innovative deals in 2011.

Closer to home, my own firm has had a record year in 2010.  We have dealt with a range of cases from benefit frauds, to thefts by employees, to financial aspects of road haulage offences, to organised thefts of high value cars, to multi-million pound confiscation cases.  A real mixed bag - and very interesting too.  And there are some tasty cases brewing up for 2011.

So, onward and upward!

David

www.AccountingEvidence.com

Comments
cymraeg_draig's picture

Cant say I totally agree

cymraeg_draig | | Permalink

Is it a "good year" when one of the most pernicious pieces of legislation ever to reach the statute book continues to gain a foothold? The number of reports is more to do with people afraid of not reporting than it has to do with actual crimes being disclosed.  

Do we really think it's a good idea to hamstring business by making them compete on a playing field that is no longer level - other countries not only allow but encourage their industries to gain overseas contracts by ANY means possible. In many 3rd world countries no bribe equals no business - its simple. 

And I hate to admit it, but plea bargaining is one area where the Yanks are way ahead of us. We moan about the number of cases clogging our courts, but until there is absoloute certainty in plea bargains, no sensible defendant is going to risk it - they might as well go for a not guilty plea and gamble. 

 

davidwinch's picture

Some ambiguity

davidwinch | | Permalink

C_D

There was deliberately some ambiguity in my use of a "good year" for financial crime. Does that mean a good year for criminals, or for the authorities and the courts, or for expert witnesses such as myself?

The vast majority of reports to SOCA come from the banks and building societies and presumably relate to monies deposited or transferred by their customers.  In many cases the grounds for the suspicion which is reported may be relatively flimsy because the reporting bank will not have sufficient information about its customer's financial affairs to make an informed and rounded judgement.

With regard to plea bargains there is rather more subtlety in the UK system than I have indicated in the main piece.  The prosecutor decides what offence the defendant is to face and that clearly has a bearing upon the sentence.  In practice in police stations and courts up and down the country deals are done on a daily basis whereby 'Jimmy' pleads guilty to a lesser offence and the prosecutor does not pursue a more serious one.  (I note in passing that BAE was charged with a failure to keep sufficient accounting records, not with any offence involving corruption of foreign government officers.  Perhaps I should also have mentioned in the main piece the enactment of the Bribery Act 2010 - most of which is to come into force in April 2011.)

Also in relation to confiscation proceedings it is, in my experience, very common for the prosecution and defence to come to a compromise agreement on the figures and present that to the court for approval, leaving the judge (if he agrees) to deal only with the length of the default sentence.  Judges are, in the main, very happy to accept such 'deals'.

So, arguably, there is a 'drift' in the UK towards more power for prosecutors and less power for judges.  We shall have to wait and see what the future brings!

David

cymraeg_draig's picture

As always the "state" is the winner

cymraeg_draig | | Permalink

 

There was deliberately some ambiguity in my use of a "good year" for financial crime. Does that mean a good year for criminals, or for the authorities and the courts, or for expert witnesses such as myself?

 

Posted by davidwinch on Fri, 31/12/2010 - 08:13

 

With the increased use of MLR I would say it was a good year for the "state" as more and more confiscations add to it's coffers.

As regards plea bargaining - this does often happen in civil cases where the courts actively encourage out of court settlements, however, in the criminal courts there is no set procedure. Yes occasionally the CPS will accept a plea to common assault instead of pursuing a charge say of GBH, however, this is usually because they don't believe they can actually prove the more serious charge. My own advice in these situations is to tell them to get lost, and then obtain a full acquittal on the more serious charge leaving them with nothing. 

 

 

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