The surge in electronic communication over the past decade in particular has had an effect on the way in which criminal trials are conducted – comments on cases are ‘Tweeted’, blogs appear online about a judgment before the decision itself and the occasional juror takes it upon themselves to conduct a little extraneous research on Facebook.  This increasing reliance upon the World Wide Web is particularly pertinent in serious fraud cases: the sheer volume of electronic information of relevance (countless numbers of emails between those involved, for example, spanning many years) can be an incredible burden when it comes to disclosure.  Little wonder, then, that the September review highlighted serious fraud cases as at the heart of the disclosure question, and the Lord Chancellor cited the “exponential growth” of material in criminal investigations, particularly electronic material, as “a matter of increasing concern”.

So what sanctions exist at the moment for failure on the part of the prosecution to disclose material within a reasonable timeframe?  The Criminal Procedure and Investigations Act 1996 (CPIA) states at section 10(2) that failure of the prosecution to disclose material within the relevant period does not constitute grounds for staying the proceedings for abuse of process unless, under section 10(3), the accused is denied a fair trial.   The court’s case management powers arise from part 3 of the Criminal Procedure Rules, where under part 3.5, it may address non-compliance with its directions by varying the date of a hearing, making a costs order or imposing any other sanction it deems appropriate.

It is difficult to see to what extent increased sanctions might assist, indeed they may even be counter-productive.  Whilst the September 2011 review looked for some guidance at the civil system (governed by the Civil Procedure Rules part 31), it rightly notes that the civil system is able to benefit from sanctions that cannot be implemented in the criminal sphere.  The recalcitrant party in a civil case is at risk of having his case struck out, or of summary judgment.  In the criminal system, such an approach could lead to a number of miscarriages of justice.  Furthermore, any review must take into account the practical problems of disclosure, particularly of vast swathes of electronic information.  The September review welcomes the CPS’ suggestion of a “disclosure management document” to pinpoint the prosecution’s intentions with regards to, for example, which search terms it applies.  It is surely equally as important that, at the earliest stage, careful consideration must be undertaken as to the most efficient electronic system for analysing the information, in order to ensure that the systems in place are able to match up to the high standards expected.

The issues surrounding disclosure when confronted with large volumes of material are complex.  Gross LJ admits that there is “no instant solution” and that improvement will be “incremental”.  However, the upcoming review is a welcome next step.  Now that the issues begin to be fully grappled with, there can be hope that more serious fraud cases can be brought to a smooth and just conclusion.

Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types. For more information about the expertise of our fraud and criminal lawyers, call us on 0207 353 6000.

Taylor, 64, the first African head of state to be brought before an international tribunal had pleaded not guilty to all 11 charges. The sentence will be handed down on 16 May this year. Taylor has a right to appeal against the conviction. If he loses this, he is expected to serve his sentence in a British prison, as the Dutch government only agreed to host the trial if any ensuing jail term was served in another country.

Between 1996 and 2002, the rebel Revolutionary United Front (“RUF”), which Taylor supported, was found by the court to have committed crimes involving terrorising civilian populations, murder, rape, sexual slavery and enforced amputations in Sierra Leone. The judge said Taylor told RUF commanders to seize and hold the diamond-producing areas of Sierra Leone so that he could continue trading for arms and ammunition. The court found that despite Taylor’s denials, he knew from August 1997 about the campaign of terror being waged against the civilian population in Sierra Leone, including murder, rape and amputations. Taylor continued fuelling the conflict by providing arms and ammunition to the RUF in Sierra Leone helping to undermine the peace process even when there was a regional arms embargo in force.

But what does this mean for international justice? Is this the just conviction of a war criminal or one of the most costly trials in history realising few benefits?

The defence argued that despite the fact that the atrocities certainly took place, there was no real nexus linking Taylor to them. However, the Tribunal accepted the prosecution case that there was a nexus between Taylor and the conduct of the armed groups. This will be valuable for future prosecutions before different courts that seek to determine the responsibility of high-level officials and Ministers. Tempering this, the Court found that Taylor did not have a position of “command responsibility” over the armed groups, or over Liberian fighters sent to Sierra Leone, and so he was not responsible for their criminal acts by reason of a co-coordinator relationship. Another point raised by the defence was that the prosecution was illegitimate since it was politically motivated and the result of biased selectivity. The Court’s rejection of this point is hugely important. The question of selectivity in the enforcement of international criminal law has been, and remains, a fundamental challenge to the system.

There were serious questions raised at the commencement of the trial about the possibility of charging Taylor with the aforementioned crimes and also about the legitimacy of international criminal law. The verdict could be seen as a vindication of the bringing of this case, even though Mr Taylor has not been found to be criminally responsible to the extent alleged. Even though the case ends with this slightly bitter pill to swallow, it’s important to remember that new, fundamental legal precedents have been established for future international trials and that Sudan’s President Omar al-Bashir and former Ivory Coast leader Laurent Gbagbo, who await trial in the detention centre of the International Criminal Court in The Hague, will be feeling somewhat uncomfortable upon hearing the judgement against the man with whom they once shared a detention centre.

Corker Binning is a law firm specialising in criminal work of all kinds and with significant international experience.  Call now on 0207 353 6000 to see how we can help you or visit www.corkerbinning.com

The reality is that a cartel offence containing a need to prove an accused’s dishonesty was never going to succeed. Including that element, coupled with the stricture that the offence could only be committed by individuals, doomed the offence from the outset. The near-insuperable difficulty encountered when seeking to prove dishonesty is that the benefit of the alleged crime always flowed only to another person who could not be accused as being a co-conspirator, the company or firm. So an accused could always seek to show – no matter how deceptive he/she was – that they were not dishonest because they had no expectation of any significant personal gain. When we think about someone being dishonest with money, we invariably tend to employ a criterion of whether they thought they stood to gain.

In addition, as “dishonesty” is such a vague and fact-specific legal concept, it was always going to be difficult for a trial judge to manage the trial by being unable to rule that particular lines of defence (including the calling of expert evidence) were irrelevant and thus inadmissible. So for example, I admit the facts but I was not dishonest because I wanted to save co-workers from redundancy and my honest belief about that evil is buttressed by a report by Professor X. In most criminal cases, the defendant does not have the ingenuity and resources to dream up such possible defences but the interlocutory arguments in the BA case manifested such a phenomenon. Of course, they were never tested. Interestingly an argument not run by the lawyers in BA was a “consent of principal” one; i.e. could a middle-manager be dishonest if his principal authorised the cartelist action which he took? In the vast majority of cases, such employees would have been so authorised (not just believed they were). When we think about employees being dishonest, we tend to employ a criterion of whether there was a betrayal of trust or breach of duty.

The OFT’s disappointing record as a prosecutor of this offence is not, as the critics argue, the fault of its low quality and resource-starved investigators. Neither is it fair to contend that the change is simply about being seen to lock up some errant directors. Dishonesty has never been a necessary element of analogue offences steeped in the history of English criminal law. Since about 1910, a jury has only been required to be satisfied of whether an alleged bribe was accepted in corrupt circumstances for corruption to be proved. That is an amorphous legal concept but the courts established then that it did not require the agent or principal to have been dishonest; what was needed was secrecy and breach of duty.

So I have sympathy for BIS’ view that the dishonesty element in paradigm cartel cases makes it very difficult to secure convictions.

It is nonetheless essential that a cartel offence (especially one created by statute) contains a discrete mens rea element. It must not be one of virtual strict liability. So what would work instead of dishonesty? Alternatively, what would be likely to satisfy a jury that the conduct was immoral? I suggest that secrecy is not sufficient. This is where I turn into an opponent of BIS’ plan. Criminal offences should begin at a higher threshold than that. People need a better guide to potential criminality than whether or not they act in secret, bearing in mind that so much of legitimate commercial life has this trait. I think deception or an intention to deceive is what is needed. Deception need not always be a matter of inference. If it was, then the distinction between it and secrecy would collapse. Deception should be proven; for example, did the alleged cartelists resort to mask and disguise when communicating or did they purport to their customer that they were in competition whilst they colluded?

Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. Visit our website for more information about our cartel and company investigations practice or call us now on 0207 353 6000.

Gilroy, who was convicted of the murder of Suzanne Pilley in May 2010, was sentenced to life imprisonment with a minimum term of 18 years. Lord Bracadale’s sentencing remarks were broadcast on television only minutes later (they are widely available to stream online http://www.bbc.co.uk/news/uk-scotland-17752209). Lord Bracadale allowed cameras to film proceedings but with strict limitations. They were only allowed to focus on the judge and were not permitted to film the defendant or any other parts of the courtroom. The filming did not include any part of the evidence in the case, the delivery of the jury verdict, or mitigation prior to sentencing, but the unusual concession by Lord Bracadale in Scotland offers a glimpse of the future of media coverage of the criminal courts in England and Wales.

The coalition government has indicated that they plan to bring forward legislation in the Queen’s Speech in May which would introduce provisions which could eventually allow the televised sentencing of offenders and other criminal proceedings in England and Wales. Justice Secretary Ken Clarke has said that the aim of the proposals will be to improve transparency and public understanding of the courts. It is believed that the legislation will initially allow filming of Court of Appeal judgments only but will subsequently be widened to include some criminal trials in the Crown Court. It is understood that coverage is likely to be strictly limited to judges’ summing up and sentencing remarks, not the trials themselves or the verdicts delivered by the jury. Proceedings in the Supreme Court have been available to television broadcasters since its opening in 2009 and Sky News has offered a continuous streaming of Supreme Court hearings since March 2011.

It is impossible to predict at this stage what the substance of the legislation will be in respect of televising criminal proceedings in England and Wales. The government may adopt the well-established test for Scottish judges in deciding whether to allow cameras into their courtrooms, that is “whether the presence of television cameras would be without risk to the administration of justice”. In practice, this means that cameras have rarely been allowed into Scottish courtrooms and generally only for appeal court cases. The fact that Lord Bracadale allowed a television crew to film his sentencing remarks today sets no precedent for future cases, and each application to film proceedings will be assessed on its own merits. The risk to the administration of justice is much lower in allowing filming at appeals or sentencing than it would be during a trial and it seems unlikely that a full trial (either in Scotland or in England and Wales) will be broadcast in the foreseeable future.

Proposals to allow more filming of criminal proceedings have been welcomed by many. Media outlets are actively lobbying for more and more access to the courts.  In a joint letter to the three main party leaders (all of whom support proposals to televise some court proceedings) BBC, ITN and Sky argued in February this year that “the administration of justice is a key part of a democracy. It shapes and defines a civilised society. The ability to witness justice in action, in the public gallery, is a fundamental freedom. Television will make the public gallery open to all.”  Many argue that our criminal justice system needs improvement and the focus of television cameras on inefficiencies and injustices can only be a good thing.  It is arguable that a person’s trust in the criminal justice system is proportionate to their understanding of the process and filming sentencing remarks may well help the public to understand how offenders are being punished.  It may also assist governments who often come in for criticism when a sentence may appear lenient.

But who will actually watch?  Apparently the Supreme Court live streams attract up to 90,000 viewers each day, suggesting that not only lawyers and law students are watching.  But judgments in appeal cases tend to be long and often quite dull unless you’re directly involved.  Filming of the summing up and sentencing remarks in criminal cases will arguably add little more to public understanding (and confidence) than the detailed reporting of trials in the press that we see already, especially if the pictures are of the judge alone as we saw in Scotland today.  Rightly or wrongly, Twitter has already been allowed to broadcast up-to-the-second reporting of some high profile cases and it is unclear what difference live footage of sentencing would make.

Maximum publicity for every court case and every courtroom participant is not a requirement for open justice.  Broadcasters may be keen to see a further widening of the types of proceedings that they can film – attracted to the tantalising prospect of filming the real drama of witness testimony, jury verdicts, and reactions from the dock and public gallery – but while these aspects of proceedings may make for sensational television in the most high-profile trials, edited highlights of the drama of criminal trials won’t necessarily improve the openness of justice and public understanding of our courts system.  The sensationalism and the trivialisation of the legal issues that would follow the broadcast of criminal trials may even damage criminal justice, which must be about a fair hearing of the evidence and not 24 hour rolling news reports.

The Attorney General Dominic Grieve QC said in September that there was a “big question mark” over allowing cameras in courts, and warned: “The issue that then arises is, is this going to help public understanding or might it contribute to the whole thing being turned into a piece of theatre, which might also be undesirable? Clearly filming people actually being sentenced is likely to be undesirable as it would probably encourage theatricals.”

While moves to abolish the anachronistic ban on cameras in our courts is to be welcomed, we shall have to wait and see what the scope of this new legislation will be.  Based on today’s performance in Scotland, it seems many viewers will have to stick with Britain’s Got Talent for real-life drama.

Corker Binning is a law firm specialising in criminal work of all types. To find out more about our services call us now on 0207 353 6000 or visit www.corkerbinning.com.  

Although the FSA has undoubtedly stepped up several gears in respect of its criminal prosecution of insider dealing, this increased effort has yet to be rewarded with the level of convictions that are being enjoyed by prosecutors in the US. Since 2009 the US Attorney’s Offices in New York alone have prosecuted 66 people for insider trading and have obtained 57 convictions and guilty pleas. In contrast, as of February 2012, the FSA had secured only 11 convictions.

The offences

A comparison of the law of insider trading in the US to that of insider dealing in the UK does not offer an obvious explanation for the higher success rate across the Atlantic. In the UK, a person may be guilty of insider dealing if he knows he has inside information from an inside source and he trades in the relevant securities (contrary to section 52 of the Criminal Justice Act 1993 (CJA 1993)).

In the US, insider trading is prohibited by common law and federal securities laws (Securities Act 1933 and Securities Exchange Act 1934). Whilst similar in most respects to the UK offence, a crucial difference is that the Department of Justice (DOJ) must prove that the suspect traded in breach of a fiduciary duty or a duty of trust or confidence owed either to the company shareholders or to the source of the inside information. This is a much more narrow definition of insider dealing than in the UK (there is no such pre-requisite contained in the CJA 1993). Under section 57, the test is much easier as the FSA must only prove that the person had the information directly or indirectly from a company officer, employee or shareholder or from someone who has access to it by virtue of his employment.

Powers of investigation

As the case of Rajaratnam last year highlighted, the US authorities do however have greater investigative powers at their disposal. The prosecution of Raj Rajaratnam attracted an unprecedented amount of publicity not only because it was the largest hedge fund insider trading case in American history but also because it was founded on, and reliant upon, evidence obtained by wire tapping. By the time of his arrest in October 2009, the government had listened in to and recorded thousands of telephone calls between Mr Rajaratnam and others and in May 2011 Mr Rajaratnam was found guilty of 14 counts of insider trading and conspiracy to commit insider trading. Whilst wire tapping has been frequently used by the FBI and US prosecutors in order to gather evidence in other types of fraud, this was the first time it had ever been undertaken in respect of insider trading and it was made possible because the FBI found a co-operating witness early on in the investigation.

In the UK, the power to intercept communications is limited to the police and intelligence services only (pursuant to the Regulations of Investigatory Powers Act 2000). The FSA can conduct covert surveillance, use informants and review calls recorded by regulated companies but it cannot avail itself of wire tapping as the US investigators are able to. Even if the FSA had access to intercept evidence gathered by other investigating bodies, it would not generally be admissible in the actual court proceedings.

Sentencing

The other likely explanation for the proportionately greater number of convictions for insider trading in the US must be the very real threat of a lengthy custodial sentence underpinning all such prosecutions. A conviction for insider trading carries a theoretical maximum sentence of 20 years’ imprisonment which is in stark contrast to the maximum sentence available in the UK of seven years. Whilst it is unlikely that anyone convicted in the US will receive anywhere near the maximum sentence, the US courts are clearly capable of ordering lengthy sentences such as the 11 years Mr Rajaratnam received last year (his co-defendant also received 10 years). Indeed on Friday 13 April the US Sentencing Commission voted for amendments to the federal sentencing guidelines which will recommend that federal judges impose greater criminal penalties on Wall Street professionals convicted of insider trading.

The FSA is clearly alive to the need to strengthen their position as criminal prosecutor and last year it called on the government to increase the maximum sentence available to ten years so that insider dealing would be more akin to other offences of fraud in the UK (offences under the Fraud Act 2006 carry a maximum sentence of ten years). The FSA was also able to obtain its highest sentence yet when Christian Littlewood (a former banker at Dresdner Kleinwort) pleaded guilty to eight counts of insider dealing and received a 40 month custodial sentence. Notwithstanding its efforts, the FSA is likely to remain in the DOJ’s shadow for the foreseeable future – in February 2012 the FBI announced that it is investigating a further 120 individuals suspected of insider trading.

Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types.  For more information about our expertise, visit our FSA page or call us on 0207 353 6000.

The first session concerned the overlap between anti-competitive and corrupt conduct.  Suzanne Rab highlighted how with the introduction of the Bribery Act the overlap between competition and anti corruption laws in the UK may be greater than elsewhere, including the United States, as the UK authorities could now prosecute individuals and corporations under the Bribery Act for making payments to other companies to enter into anticompetitive agreements, such as paying a competitor to exit a business or to fix prices. 

The second session dealt with the highly topical subject of corruption in the Middle East and North Africa and developments since the Arab spring. Osama Al Bitar from the Jordanian firm, International Specialized Lawyers in Amman, spoke about perceptions of corruption in the region and the key importance of bringing corrupt high profile individuals to trial.  He discussed two controversial corruption investigations that are ongoing in Jordan involving a former intelligence chief, a former prime minister and seven ministers. He highlighted how asset recovery is a major practical difficulty, because Jordanian law does not allow prosecutors to recover money that is hidden abroad.

Among the many senior prosecutors present at the conference was the director of the Serious Fraud Office, Richard Alderman.  In a session on asset recovery and repatriation, Mr Alderman was keen to highlight the SFO’s recent success in negotiating a Memorandum of Understanding with the Government of Tanzania, BAE Systems and DFID, enabling the payment of £29.5 million by BAE Systems to educational projects in Tanzania pursuant to the settlement concluded last December.  Mr Alderman disagreed strongly with those in the UK who had been critical of the SFO’s determination to return the money to those who had suffered as a result of the corruption.  However, he acknowledged that there were many practical issues surrounding the distribution of the money and confirmed that one of the SFO’s major concerns was that the money visibly went to the benefit of schools, rather than being swallowed up in administrative fees or simply disappearing. 

In a session on asset recovery and repatriation, a Costa Rican prosecutor, Criss Gonzalez-Ugalde, and US defence attorney, Edward H Davis Jr, spoke about criminal and civil proceedings involving the company Ice Alcatel in their respective countries.  The Costa Rican authorities succeeded in prosecuting the individuals involved, leading to long sentences of imprisonment and a $10million settlement with the company for “social damages” caused by corruption.  The company also signed a deferred prosecution agreement with the US Department of Justice, consisting of a $45 million disgorgement penalty to the Securities & Exchange Commission and a $92 million criminal penalty to the US DOJ.
 
The highlight of the conference was a lively session which brought prosecutors from the UK, Italy, France, Slovenia and Canada together to discuss their experiences.  Both the Italian prosecutor, Fabio de Pasquale and the Slovenian prosecutor, Goran Klemencic, spoke interestingly about the challenges of bringing politicians in office to trial.  In Italy the main hurdles the prosecutor faced resulted from Parliament’s repeated amendments to the law, necessitating proceedings before the Constitutional Court, ultimately leading to the expiry of the limitation period.  In Slovenia Mr Klemenic felt the danger of being drawn into party politics was their greatest challenge.  He believed that a purely domestic corruption investigation would not have survived and it was the transnational nature of the corruption, involving a company in Finland, intermediaries in Austria and Slovenian Ministry of Defence officials and Prime Minister in office, which allowed charges to be brought.

Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types. For more information about our expertise, visit our Corruption and bribery page or call us on 0207 353 6000.

Both reports emerge from curious circumstances, coming so soon after the publication of the independent Sir Scott Baker review in September 2011. That review was the most exhaustive analysis of this country’s extradition laws ever undertaken, devoting no less than 51 pages to the US-UK extradition treaty (the report of the Home Affairs Committee stretches to only 10 pages). Many of those who made representations to Sir Scott’s panel gave similar evidence to the MPs comprising the Home Affairs Committee. So why another report?

The simple answer is that the US-UK extradition treaty continues to provoke huge public disquiet. Every few months a case hits the headlines which fuels the perception that the US authorities are acting in an arrogant fashion, either by claiming exorbitant extraterritorial jurisdiction over matters which could be prosecuted in the UK, or by bullying young or vulnerable suspects into an early plea with the threat of lengthy custodial sentences. The recent and very sad images of UK businessman and suspected arms dealer Christopher Tappin being denied bail in a Texas court, both legs and one arm shackled, have only reinforced these concerns.

Against this background, the Home Affairs Committee makes three recommendations, all of which are aimed at remedying perceived imbalances in the treaty:

1. US prosecutors should be required to establish “probable cause” of the alleged offence in a UK court, which is the same information threshold that UK extradition requests must satisfy in the US.
2. US prosecutors should be required to present an evidential case against defendants so that the evidence can be tested in a UK court.
3. The proposed “forum” bar should be introduced into the Extradition Act 2003, which would allow the decision about whether a matter should be prosecuted in the US or the UK to be taken by a judge in open court after listening to the defendant’s representations.

Of these recommendations, the most important and the one which stands the highest chance of being implemented is the forum bar. Whilst its impact on future cases might not be as dramatic as some claim, it has the potential to benefit a small number of defendants, and if nothing else, it would generate greater transparency (and improve public confidence) about jurisdictional decision-making in cross-border criminal matters. The forum bar would be an important safeguard and would curb the worst excesses of the extraterritorial approach exhibited so aggressively in US prosecution policy.

The Committee’s other recommendations are more problematic. Proposing a “probable cause” test to be applied in the UK’s courts may seem like a simple way of guaranteeing parity, but it overlooks the fact that, before any US extradition request reaches these shores, the US prosecutor will have obtained either a domestic arrest warrant or a grand jury indictment backed by an arrest warrant, both of which require evidence which satisfies an American judge that the probable cause test has been met. Put another way, a US extradition request can only exist and be relied upon if it has already met the probable cause threshold.

Moreover, as the Committee acknowledges, the legal difference between the tests applied on both sides of the Atlantic is more apparent than real. It is therefore difficult to envisage the UK Government implementing this recommendation, particularly as the evidence indicates that, relatively speaking, it is easier to extradite suspects from the US to the UK than vice versa.

It is even more difficult to envisage the Government embarking upon a politically regressive step such as requiring US extradition requests to satisfy an evidential test. Quite apart from alienating the UK’s closest diplomatic ally and placing an even greater burden on our already over-stretched extradition courts, this recommendation, even if implemented, would be unlikely to alter the outcome of any of the headline-grabbing cases which have led to the report. Those cases have caused public disquiet not because there is no evidence on which to prosecute but because the UK appears to be the more appropriate jurisdiction in which to prosecute – a perceived injustice which the introduction of the forum bar could resolve.

That is not to say that introducing a higher evidential test is wrong in principle; only that it is politically unrealistic and its practical impact difficult to discern. In these circumstances the Government may feel that the best compromise – and the one which would go some way to satisfying the critics of the treaty, without alienating the Americans – would be to introduce the forum bar but to go no further.

Whilst problems exist with the UK-US extradition treaty, in particular the question of where cross-border cases should be prosecuted, the most egregious examples of injustice in this country’s extradition laws arise not from the treaty but from the EAW system and the uncritical faith which our courts are required to place in the criminal justice systems of other EU countries. The Committee will give its recommendations on the EAW later this year. It is to be hoped that the Committee’s approach to the EAW is similarly robust.

Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types. Click here for more information about our expertise in extradition work or call us now on 0207 353 6000. 

Simply put, scrap metal is hard to identify and can be sold for cash (at ever-increasing prices), making it an attractive category of stolen merchandise. It may seem like a niche offence but metal theft is estimated to cost the country £1 billion annually, with more than 1,000 offences taking place every week.

The current law
The UK industry is currently regulated by the Scrap Metal Dealers Act 1964. All scrap metal dealers must be registered with their local authority and maintain records of all metal bought, sold or processed, with a particular emphasis on recording the source of scrap metal. Section 5(ii) even makes it an offence to give a false name or address to a scrap metal dealer. Any contravention under the act constitutes a summary offence punishable by a fine. But given the scale of the “epidemic”, is a £1,000 fine enough of a deterrent against the scrap metal menaces?

The reality is that the onus is placed on the sellers of scrap metal to adhere to legislation that is in need of modernisation. At present, thieves and handlers are prosecuted for burglary or criminal damage and the specific deterrent message as regards scrap metal is lost in the legal translation. However, there have been recent ripples of change. In March 2012, scrap metal dealer Michael Storey was sentenced to 12 months in jail by Lancaster Crown Court for the handling of copper piping stolen from a United Utilities pumping station (http://www.nwemail.co.uk/news/man-jailed-over-theft-of-copper-from-pump-site-1.931719?referrerPath=home). The theft had caused localised floods, disrupting 70 homes and costing £174,000 to replace the piping. In sentencing, Judge Paul Batty QC sounded a warning shot on future deterrent sentences, commenting that “theft of scrap and its subsequent utilisation by handlers has become nothing short of a national scandal.”

What’s on the horizon?
The Home Secretary has confirmed that further measures for illegal trading of stolen scrap metal will be introduced. The first significant change is the amendment to the SMDA 1964 via the Legal Aid, Sentencing and Punishment of Offenders Bill (currently in the Report Stage in the House of Lords). The Bill proposes significant increases in fines imposed and a prohibition on cash transactions which lead to “anonymous, low-risk transactions” and “poor record keeping” within the industry. Some commentators have noted that a ban on cash transactions might only serve to force deals underground.

The Government has also allocated £5 million for the creation of a dedicated metal theft taskforce, whilst the Metropolitan Police have already set up such an operation in Bexley, an area plagued by rail network metal thefts.

Metal Theft (Prevention) Bill
Furthermore, the Government has honed in on the prevention of metal theft itself. The Metal Theft (Prevention) Private Member’s Bill, introduced in November 2011, advances a series of measures. These include: a licensing scheme for scrap metal dealers; giving magistrates’ courts the power to impose restrictions on licenses; creating a specific criminal offence for the theft of scrap metal; and restricting the trade to cashless transactions (a requirement already applicable in many European countries). Police officers would also be given powers to search properties owned by scrap metal dealerships. The second reading of the Bill is due at the end of March 2012.

Notably, the Bill also proposes the classification of scrap metal proven to have been obtained by theft as a criminal asset, thus engaging the Proceeds of Crime Act 2002 and enabling police forces to recover monies obtained by selling stolen metal for scrap.

Advice for scrap metal dealers
In addition to adhering to the licensing and record keeping requirements of the 1964 Act, scrap metal dealers are encouraged to be proactive in preparing for any legislative changes. Self-regulation and the introduction of voluntary codes of practice, comprehensive records, more robust methods of verifying metal sources, and enhanced scrutiny of cash deals will all help to ensure that a dealer is operating within the legal framework.

Corker Binning is a law firm specialising in general criminal work of all kinds. Visit our website for more information about how we can help you or call us on 0207 353 6000.

Credit Suisse was acting on behalf of Liberty, an American telecoms company targeting the acquisition of Unitymedia, a German television company. In preparation for the deal, Mr Kyprios was wall-crossed with regard to a proposed £2.5 billion bond issue by Unitymedia. He was instructed that this was inside information, which he should not share with anyone outside of Credit Suisse except for five pre-approved investors who he was also permitted to wall-cross.

However, Mr Kyprios indirectly but deliberately (for example, by inviting guesses and indicating their accuracy) revealed information about the deals to two fund managers, who were not part of the pre-approved five and had not agreed to be wall-crossed. In fact he invited them to engage in a guessing game of charades.

In its Final Notice, the FSA found that this breached Principles 2 (skill, care and diligence) and 3 (market conduct) of the Statements of Principles for Approved Persons [see Notice para 7]. In addition to the specific misuse of the information, the FSA noted that Mr Kyprios was responsible for ‘setting the tone’ for his department. He had also acted in direct breach of Credit Suisse’s own policies [see Notice paras 23 – 29].

The FSA regarded the appropriate penalty for the breaches as £300,000, with a 30% discount to £210,000 for early settlement [see Notice paras 36 – 47]. Mr Kyprios is also reported to have been docked 50% of his 2011 bonus by Credit Suisse, where he remains employed.

The penalty is considerably less than the £7.2 million fine issued to David Einhorn and Greenlight Capital, following a finding of market abuse for use of inside information in January 2012 (see http://www.fsa.gov.uk/library/communication/pr/2012/005.shtml)

Mr Kyprios’ actions were not considered market abuse because:

• The majority of Unitymedia-related instruments were being traded on the Republic of Ireland market. As such, they were not ‘qualifying investments’ for the purposes of s118 Financial Services & Markets Act 2002. [see Notice para 20].

• The Unitymedia bonds which did qualify as s188 qualifying investments were being traded ‘at or close to their call levels’. This meant that the announcement of the Unitymedia bond issue ‘could not and did not significantly impact the price of those instruments’. As such, it could not be considered ‘inside information’ constituting market abuse [see Notice para 21]. However, it should be noted that the information (once announced) did in fact significantly affect the price of the Unitymedia bonds which were not qualifying investments [see Notice para 22].

All in all, in this case, the consequences could have been much more serious and an insider dealing or market abuse allegation could easily be made in very similar situations.

Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all kinds. Visit our website for more information about how we can help you with FSA investigations or fraud matters or call us on 0207 353 6000.   

The CPS and HMRC had been reluctant to publish details of their enforcement but the Director of Public Prosecutions, Keir Starmer QC, agreed they should be released.  He went on to defend their enforcement record by explaining that orders over £1 million were challenging to enforce because assets are often hidden. Mr Starmer fails to mention that the enforcement record looked significantly worse just a few days before as it included two of the largest confiscation orders in history. In fact, the timing of the release may well have been orchestrated to follow the appeals of two convicted fraudsters [R v Ahmad and another [2012] EWCA Crim 391] which saw their confiscation orders of over £92 million, quashed and replaced with Orders of £16 million each.

Messers Ahmed and Ahmad were convicted of involvement in a carousel or MTIC fraud in which HMRC paid out £12.6 million as a result of bogus VAT reclaims.  Mr Justice Flaux, who made the confiscation orders against them, determined that the full amount of the monies cycled through their company’s bank account were ‘obtained in connection with the commission of an offence’ and that section 71(4) of Proceeds of Crime Act 2002 (POCA) allowed for no discretion in a finding that that very large amount of money was their “benefit” from their criminal conduct.  Ahmed and Ahmad claimed that they were penniless but Judge Flaux found them to be “complete liars” and made orders in the figure of £72 million each (uplifted to £93 million after accounting for inflation) and ten years imprisonment in default.

The point on which their appeal succeeded was the meaning of the phrase ‘obtained in connection with the commission of an offence’. The Court of Appeal held that the money flowing through the company’s account was not obtained in connection with the offence, it was expended on the offence. Therefore they quashed the original order and replaced it with the sum of the VAT fraudulently obtained, £12.6 million before uplift for inflation.

While the original decision may have seemed startlingly unfair because nobody could sensibly contend that either defendant could ever pay £72 million, practitioners will not be surprised that POCA was interpreted in such a way as to produce an inequitable result. The language of the statute has led to some confiscation orders which defy common sense. In this case, the confiscation order would have been higher and possibly as much as the original £72 million if the case had triggered the “criminal lifestyle” provisions of POCA.  It did not do so but, in another case, if there were convictions for two fraud or money laundering offences, the judge would still be forced by the legislation to consider making an order for an impossibly high amount which the defendants would never be able to pay.

To use a further example, one given in the judgement in Ahmad, ‘pecuniary advantage’, avoidance of a debt, will be included in the calculation of the Confiscation Order. In the case of a person convicted of smuggling cigarettes into the UK, selling those cigarettes on the black market and thereby evading duty and VAT, the benefit figure will be made up of the value of the duty and VAT on the cigarettes (the pecuniary advantage) and the sale proceeds.  So far this may appear to be sensible.  However, if the cigarettes were confiscated prior to their sale, the benefit figure will still include the duty and VAT payable on those cigarettes, even though they have been seized.
 
The plight of a convicted criminal is not a sympathetic cause and although there is no political will to amend this legislation in the near future, the appellate Courts have started to curb the more extreme effects of what is probably the most draconian proceeds of crime legislation anywhere in the world.

Corker Binning is a law firm specialising in fraud, business crime and general criminal work of all types. For more information about our expertise call us on 0207 353 6000.