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Thinking the Unthinkable
New Law Journal
01 June 2007
At a recent conference at which the Attorney General set out the Government strategy to combat fraud he said:-
"Fraud harms us all. Recent research shows that in monetary terms the harm it causes is on par with class A drugs - around £330 per man, woman and child in the country. Fraud is a serious threat to the UK and tackling it requires partnership - prosecutors, police and other investigators, the private sector, local authorities and Government working together."
Lord Goldsmith omitted to state that the prosecution and accomplices in fraud cases may now form a partnership of sorts in order to tackle crime.
It is now envisaged by those investigating fraud cases that accomplices will increasingly be used to provide evidence against their co-defendants and to assist from the early stages of the investigation to point the investigators towards evidence that may be helpful to the investigating team. Immunity from prosecution for accomplices was placed on a statutory footing on the 1 April 2006 when Section 71 of the Serious Organised Crime and Police Act (SOCPA 2005) came into force.
Before 1 April 2006 accomplices had rarely avoided prosecution by turning "Queen's Evidence" and providing evidence as Prosecution witnesses in return for immunity from prosecution.
In the majority of cases it has been appropriate for the defence to keep their case "under wraps" until the trial and to attack the Prosecution case as hard as possible throughout the proceedings. The idea of assisting the investigating team with their investigation when the suspect had committed an offence would be alien to most fraud defence lawyers. Indeed the refining of a defendant's case, and decisions on plea, could quite properly be left in many instances until they had seen all the relevant evidence.
Section 71 however represents a significant change in the way in which investigations are approached.
The introduction of Section 71 requires alternative strategies to be considered and in the right case, for delicate negotiations to be pursued with the Crown at a very early stage and in a way which previously would have been unthinkable.
The only statutory recognition of criminal immunity prior to SOCPA can be found in the Enterprise Act Section 190 (4) which came into force on the 20th June 2003 and which has yet to be tested by prosecution under that Act.
I will address three specific issues which I hope will assist in understanding the recent legislation and the impact the legislation is likely to have in fraud investigations. The three issues are as follows:-
1. A brief Guide to the New Law - Section 71 of SOCPA.
2. An outline of the steps to be taken to secure an agreement of immunity.
3. Consideration of the effect that the new statutory powers are likely to have on fraud prosecuting authorities and defence teams.
A Brief Guide to Section 71
If a specified prosecution agency such as the SFO, CPS, Customs or SOCA considers it is appropriate to offer suspects immunity from prosecution it must give them a written notice (referred to as an "Immunity Notice") which is essentially a contract drawn up between the prosecuting authorities and the person offered immunity, confirming the conditions that must be adhered to in return for that immunity.
It is implied by the terms used in Section 71 that an admission of an offence must be made if immunity is to be forthcoming.
If a person is given an immunity notice, no proceedings for an offence of a description specified in the notice may be brought against that person in England and Wales or Northern Ireland except if the conditions in the notice are not met. (Section 71(2) & Section 71(3)).
The conditions that are likely to be included in the notice are :-
- X must provide the investigator with all facts, statements , documents, evidence or any other items available to him/ her relating to the offences under investigation and the existence and activities of all involved
- X must give truthful evidence in any court proceedings arising from the investigation of the offences under investigation
- X must not have taken steps to coerce or incite another person to take part in the said offences
Once the notice has been served and agreed the recipient is entirely reliant on the prosecution acting in good faith in determining whether the conditions have been met. If the prosecution consider they have not done so the accomplice may find themselves in the dock alongside those same individuals the accomplice provided evidence against and in relation to offences they have admitted.
How to secure immunity
In short, the practical steps that have to be taken are the investigating team needs to be approached by the defence (or vice versa) and a negotiating process entered into whereby the defence provide an outline of their account and the prosecution indicate whether they would be willing to grant immunity were the suspect to maintain his account throughout proceedings and in accordance with the conditions of his notice.
In a recent high profile fraud case correspondence was entered into by some of the defence teams and accounts were provided to the investigating teams alongside the interview process as a method of ‘’testing the waters’’ as to whether immunity might be granted.
From a defence perspective it is worth ensuring all negotiations are on a "without prejudice" basis as there is an obvious risk is that if immunity is declined the prosecution may still seek to rely upon the contents of the ''without prejudice'' exchanges and it remains to be seen how that will be dealt with by the Courts. However in my view the Trial Judge is likely to exclude that evidence as unfair/prejudicial under Section 76/78 of PACE.
It is also highly likely that the correspondence will be disclosed to all defendants if immunity is granted . Likewise the witness may also be asked to waive legal professional privilege so that their early accounts are provided to all parties.
Further published procedural guidance is keenly awaited as to how initial negotiations should be conducted.
The significance of the conditions is plain and must be flagged up to the suspect from the outset. It is vital that the defendant is well aware that if that if they do not meet the conditions of the contract they will face proceedings in the same trial as other co-defendants and the evidence that they have provided previously is very likely to be used against them.
Effect of New Powers
In light of the new powers afforded to them under SOCPA the prosecuting authorities are likely to significantly alter their approach to investigations over the next two to three years. It is envisaged that rather than digging through mountains of evidence the prosecuting authorities will seek to utilise the immunity provisions for suspects in conjunction with the disclosure notices for witnesses so that they are guided through the evidence.
It is beyond the scope of this paper to go into real detail but it is important to note section 62 and section 63 of SOCPA has provided authority for a far wider range of prosecuting authorities to serve disclosure notices on witnesses. Those notices compell witnesses to provide oral or documentary evidence in certain instances. Failure to produce the evidence in compliance with the notice may constitute a criminal offence and could lead to a custodial sentence for those who fail to co operate.
In the main the procedures follow the same format as the Section 2 SFO powers, namely that witnesses who provide evidence under compulsion will not have that evidence used against them in criminal proceedings.
The prosecuting authorities by utilising their new powers effectively will no longer be met with a deafening silence when approaching suspects and witnesses but instead will receive assistance from those who they identify as reliable witnesses and suspects.
Risk of Injustice
The obvious risk of injustice leading from that investigative strategy is that there is a danger that investigations are led in a direction by a witness or accomplice at an early stage which solely serves the ends of those providing the evidence. Critics of this system would state that it is likely to lead to investigators being pointed towards evidence which is helpful to the individual witnesses but not necessarily to all relevant disclosure.
The point is well made by Matthew Hale in his book, ‘Pleas of The Crown’ volume two. This passage was endorsed by Lord Justice Lawton in the case of Turner (1975) 61 CR App R 67, at 79.
"More mischief hath come to good men, by these kinds of improvements by false accusations of desperate villains, than benefit to the public by the discovery and convicting of real offenders."
New Tactical Skills
Whatever the merits of this process it is clear new tactical skills will have to be learnt and applied by lawyers to protect their clients when faced with Section 62 and Section 63 notices and likewise they must develop new skills for identifying the right case and the right time to seek immunity under the Section 71 immunity provisions.
When acting for companies or directors who are under investigation for fraud it will be vital that early informed decisions are made as to whether immunity might be attractive. Those who act swiftly whilst their evidence is still of value to the investigation and those on the periphery of offences are likely to be particularly interested in considering applying for immunity.
However it is unlikely that immunity will be applicable in the majority of cases as it is of no relevance to those who deny committing criminal offences or if the prosecution cannot prove their case. Even if immunity may be applicable a careful balance must be struck between acting swiftly, to ensure that those who wish to seek immunity provide the investigating team with their account at an early stage so that their account is of value to the prosecuting authority, and guarding against immunity being refused or revoked.
The US System
The UK Government appear to have been inspired by the criminal justice process in the United States. The prosecuting authorities in the US have increasingly relied upon accomplice evidence and that strategy is believed to have resulted in an increase in convictions. It is the desire for both an increase in convictions and shorter trials in corporate crime cases that may appeal to prosecution authorities and the Government alike.
It remains to be seen how far immunity is used in this country and whether a fair trial process is provided for those who face allegations from an ‘’accomplice turned witness‘'
A Precarious Position
What is abundantly clear is that all who operate in the financial services market must be aware of the way in which investigations are likely to effect their business. It is most likely that those working within the financial market will sooner or later be served with disclosure notices as prosecuting authorities become increasingly reliant on witnesses to produce evidence under compulsion.
Those who apply for immunity are in an extremely precarious position. If their evidence is not accepted during the initial negotiations they are likely to provide directly or indirectly incriminating evidence that may be used against them. If the prosecution (rightly or wrongly) determine that the conditions of the contract have not been met they will lose immunity and their evidence could be used against them.