The Bank Transactions of Yardley - Case Study Example

Equity: Follow the Cash A perusal of the facts of the case would show that the money embezzled by Yardley was split into four banks and correspondingly can be found in four jurisdictions. According to the report of the fraud-consultant, Yardley initially opened an account at the Chatham and Dover Building Society (CDBS) but every two months he would draw a cheque worth £1 million pounds payable to an account in an offshore branch of the CDBS in Jersey. However, in two instances, Yardley drew from the said accounts and transferred them to a Cayman Island bank account and to a Cook Island bank account worth £8 million and £7 million. On the verge of bankruptcy, the Bloomsbury Academy of Law in Overseas Lands (BALIOL, in brief) now seeks to recover the bulk of the money stolen by Yardley. An analysis of the bank transactions of Yardley relative to his embezzlement of the BALIOL money would show that the bulk of the money is stashed in the Jersey branch of the CDBS. This may be gleaned from the report of the fraud-investigator. A scrutiny of the report submitted by the aforesaid fraud-investigator will show that the said bank account has the highest deposit among the four bank accounts because the report said that Yardley used to draw from the CDBS account in Tottenham Court Road every two months the amount of £1 million. Since he started this transaction in December of 1999 (the second month of his transaction in VDBS Tottenham), and he went missing on June 2007, he would have made a total deposit in the Jersey account of the amount of £46 million. However, since on two occasions he drew the amounts of £8 million and £7 million, respectively, the Jersey account would be left with a £31 million deposit. Then there is the local bank of CDBS which however, there is no basis to believe that it had still a considerable amount of deposit left in the name of Yardley because it is quite implausible that he has not depleted its content considering that he drew £1 million from it every two months. If BALIOL will undertake the normal process of recovery, it will have to go to each jurisdiction and file appropriate cases of recovery in every place. This will invariably take so much time, effort and money and the results may not be as good or positive as it would have liked. Cook Islands, for example, is located in the Pacific and the Cayman Islands in the Caribbean although Jersey is just nearby. Nevertheless, time is of the essence because Yardley may device a way to get to his bank accounts and transfer them to other offshore banks in other remote places. The best legal strategy for BALIOL therefore is a legal action that will consolidate recovery of all bank accounts in one single measure. Under the United Kingdom jurisdiction, there is such one law. The Proceeds of Crime Act of 2002 or PoCA, for brevity, allows such a move. The PoCA is a piece of legislation that seeks to deprive criminals the pleasure of reaping the fruits of his criminal labor. There are two ways by which BALIOL can approach PoCA and use it to its advantage. It may either make use of Section 1 under Part 1 where the Crown Court issues a confiscatory order or it can opt to bring a recovery proceeding under Section 243 of Part 5 where the High Court undertakes the service and the issuance of a recovery order against Yardley and the several banks where he stashed the stolen money from BALIOL.. The POCA is the easiest and most convenient means with which BALIOL can work for the recovery of its money. The advantages for using the POCA as a tool to recover the deposits in the different bank accounts of Yardley are: it is a civil case and therefore the quantum of evidence required is not as stringent vis-à-vis a criminal case which requires proof beyond reasonable doubt; there is no need to prove that the bank accounts of Yardley are the monies he embezzled from BALIOL but mere conviction may allow the Court to make assumptions that all the assets gained by the defendant beginning six years from the commencement of the action are proceeds of the crime; it is the State which takes the lead in the case prosecution notwithstanding that the nature if the proceeding is civil and that therefore the full force of the State machinery serves at the behest of the complainant, and; since the State has as much interest in the prosecution of the case, it is easier to reach and deal with properties stashed overseas because the State uses international diplomacy and clout to deal on a state to state basis with foreign entities holding the property or money for the defendant. The last reason is most true in the case of BALIOL considering that the bulk of the money stolen is located abroad in jurisdictions in which the UK government has very close political and historical links. Under Section 243 of part 5, it is the High Court who will serve to the defendant as well as any person or entity which may be holding any kind of property for the defendant. Since BALIOL declared its preference for a civil action, an action under the Proceeds of Crime Act 2002 (POCA, for short) should meet that particular requirement. Several court cases, some of which were instituted and decided in the International Court of Human Rights have declared that the proceedings under the PoCA are civil nature despite its confiscatory asoect.. The case of Walsh v. United Kingdom 43384/05 [2006] ECHR 1154 (21 November 2006) which was elevated to the European Court of Human Rights has enunciated that the nature of a proceeding under the POCA is civil in nature. In the said case, Stephen Walsh was served with summons by the Assets Recovery Agency (ARA), a body created by the POCA to recover proceeds of crimes of criminal organizations referred to it by police authorities. Walsh’s record showed that he is a recidivist and during the last time he was charged with “offenses of obtaining services and property through deception” together with several other persons. They were however released eventually and the restraining hold on his property was likewise discharged. ARA moved to seize and recover the amounts of GBP 70, 250 and GBP 5, 969.10 under the provisions of the PoCA, which amounts represented the sum of money which he gave to his solicitor in the past for the purpose of purchasing a house for his use and the content of his bank account, respectively. ARA contended that all these amounts and property were the proceeds of the an unlawful acts under POCA. Also considered in this case was the fact that the defendant led a criminal life. Walsh went to court claiming that ARA’s action was violative of his right to be presumed innocent until adjudged guilty by a court of law. The action of ARA in moving to recover, according to Walsh would have the effect of prejudging his guilt since, the confiscation would imply that he has committed the unlawful acts complained of under which the confiscation order relies upon. In addition, the hearing for the recovery of his assets required a lesser quantum of proof than that required in a criminal action which is proof beyond reasonable doubt. Since both the High Court and the Court of Appeals of Northern Ireland denied his appeal he elevated the case to the International Court of Human Rights. There, the Court held that the proceedings for the recovery of assets under POCA are civil in nature. In this determination the Court was guided by the following criteria, to wit: the classification of POCA in the country of origin; “the nature of the charge,” and; and the penalty adjudged to the party under POCA. On the first criteria, the Court determined that the United Kingdom classifies recovery under POCA as civil in nature. And although it could be resorted to on post-acquittal of a party, the proceeding is nevertheless “separate and distinct in timing, procedure and content.” As the second criteria, the Court, citing the case of Butler v. the United Kingdom (Dec.), no. 41661/98, ECHR 2002 VII, decided that the proceeding is not punitive in nature but its objective is to recover property or assets that do not belong to the party. On the third criteria, that although the proceeding and the decision may involve sums of money taken from the party, it does not prescribe any deprivation of liberty or life. The case of Director of the Assets Recovery Agency v. Belton [2005] NIQB 58 (26 August 2005), likewise sustains the civil nature of the proceedings under the PoCA 2002 particularly the recovery proceedings under Section 240. In that case, Belton questioned the propriety of interrogatories served upon him by the director of the ARA on the ground that it is violative of his absolute right against self-incrimination. The said interrogatories, if answered, would make him liable to penalty for unlawful acts. The basis of the contention of Belton is the existence of a law, the Civil Evidence Act 1971 which provides, to the effect, that it is the right of any person in any proceedings, except in criminal proceedings, to refuse to answer questions or produce any document if his answer or production will tend to expose him to liability. The Court held that “the threshold or gateway by which it is triggered is of importance in determining whether a measure is in substance a penalty.” Albeit that confiscation orders are most of the times dependent on a prior criminal conviction, citing Welch v. United Kingdom, the nature of confiscation orders “was not confined to the sphere of criminal law but that forfeiture of property obtained by unlawful conduct as a preventive measure in the absence of a conviction of any specific offence did not constitute penalty” (M v. Italy Application Number 12386/86 17 DR 59). The recovery proceedings under Section 243 are civil in nature because the decision is based on a “balance of probabilities” and the court does not exercise its prerogative to ascertain the degree of guilt of a defendant and limits recovery to property deemed to have been the proceeds of an unlawful act. There is an effort to distinguish property acquired unlawfully from those which are not. . In the case at bar, BALIOL is entitled to a confiscation order under Section 6 of the Act since there was already a conviction of Yardley for a criminal act. A confiscation order is one that is “made against a defendant ordering him to pay the amount of his benefit from crime. Unlike a forfeiture order, a confiscation order is not directed towards a particular asset” (CPS). Before the Crown Court issues a confiscation order he must first determine if certain conditions exist that will place the case within the ambit of the PoCA 2002 and to which therefore a confiscation order is proper. There are two conditions for such inclusion: one, he was convicted of an offence by the Crown Court, or he is committed for sentencing by the Crown Court or he is committed to the Crown Court by the Magistrate’s court precisely for confiscation orders under POCA, and; second, the case was referred for confiscation by the Director or prosecutor or the Court, motu proprio, determines that the case is proper for confiscation orders. The case of Yardley falls squarely with the contemplation of Section 6 of Part 1. His case meets the first requirement although the narration of facts was not explicit as to which court had sentenced for the crime of criminal deception although it can be fairly assumed that he was sentenced by the Crown Court considering that the Magistrate’s Court’s jurisdiction refers only to summary cases where there are no confinements. Anent the second requirement, the BALIOL must make an application in writing with the prosecutor or directly to the Crown Court for a confiscation order. In addition to the aforecited conditions, the defendant must be shown to have a criminal lifestyle and if he has, whether he benefited from his general criminal conduct or even if he was not shown to have been living a criminal lifestyle, so long as he has benefited from his particular criminal conduct, his case merits a confiscatory order. A criminal lifestyle, according to Section 76, if his offence “constitutes conduct forming part of a course of a criminal activity or if his offence was committed within the last six months and he has been shown to have benefited from the crime or offence he has committed or it is so declared under schedule 2. In Yardley’s case, albeit that that he is not a recidivist or a habitual criminal offender considering that the criminal deception was probably his first criminal act, he nevertheless fits into the just mentioned requirement. It must be remembered that at the time of his trial he was heard to have said that he spent the money he embezzled leading a wild life profligately spending the cash all over London which means that he has benefited from the proceeds of his fraudulent acts but most of all is the evidence that he has accumulated considerable amount of assets stashed in several bank accounts in different parts of the world. The recoverable amount, which the Court will decide next, corresponds to the amount benefited by the defendant. In connection, with the determination of the recoverable amount, the Court is allowed to make assumptions that all assets gained by the defendant within the last six years prior to the commencement of the action against him are proceeds of the crime. Upon determination of the recoverable amount, the Court now issues his confiscation order. Section 41 empowers the Court to issue a restraint order on all realisable property of the defendant. A relevant provision under the POCA 2002 is Sections 41. Under Section 41, the Court is empowered to issue restraining orders against all realisable property of the defendant. In the case of Yardley it is implied by the tenor of the narration of the facts that the knowledge of the existence of his bank accounts came only after his conviction and only after the fraud-investigator made use of the Nordich-Pharmacal order. The implication is that the said bank accounts, the local bank account as well as its Jersey offshore branch and the bank accounts in Cayman Island and in the Cook Island, have not yet been made the subject of prior restraint, confiscation, and seizure in the previous trial of the criminal action for criminal deception where Yardley was finally convicted. These bank accounts therefore are still available as subjects of a restraint order under the POCA 2002 proceeding. Another relevant provision that makes POCA a very attractive proceeding to BALIOL is Section 74. A too-good-to-be-true provision of law, it allows the confiscation order to be enforced abroad through diplomatic dealings on a state to state basis. Under this provision, the Director of the ARA or the prosecutor may make a request directly to the Secretary of State for the government to act as a courier of the confiscatory order of the Court, including the restraint order, by requesting its counterpart abroad to enforce the Court orders. This is a welcome development in legislation because a lot of stolen money in the past have eluded recovery because of the very stringent bank laws of other states. The much dreaded bank secrecy laws have served in the past to protect criminals and even famous but notorious political figures who used their power and position to corrupt and bankrupt their own countries and stash the stolen money in Swiss banks and the like. In the case at bar, all the foreign jurisdictions involved have strong historical and political links to the United Kingdom which would make it easier for a diplomatic representation by the Secretary of State to request for cooperation with its diplomatic counterpart, in the enforcement of the confiscation order. This is important because the implication is that in one fell swoop, it is very possible that BALIOL can recover stolen money without making representations and filing actions for the enforcement of a British decision or initiate a civil action for recovery in each and every jurisdiction which will take time, money and effort. Notwithstanding that these jurisdictions are dependent in one way or another to UK, they are independently administered and have their own legal system. Jersey, for example, where the bulk of the deposits of Yardley can be found, is a crown dependency. Its legal system consists of UK laws, where applicable. Although it is independent in that it has its own set of leaders, it is not a sovereign on its own and its laws are ultimately decided by UK. Great Britain is responsible for its defence and international representation (CIA 2008). On the other hand, Cayman Islands is a UK dependency or a British territory and its legal system consists of British Common law and local statutes (CIA 2008), whilst Cook Islands was once a British protectorate, and now in free association with New Zealand. It follows New Zealand laws and English common law. It duplicates the UK flag on the upper right quadrant of its flag (CIA 2008). Another, option under the same Act is Section 245 under Part 5 of the Act explicitly entitled “Civil Recovery of the Proceeds, etc. of Unlawful Conduct.” Under 243 thereof the procedures for the application of recovery orders in England and Wales or Northern Ireland and in Section 244, proceedings of recovery orders in Scotland. In this cluster of provisions, the High Court, upon application, serves the defendant and any person it deems to be in possession of properties which are the proceeds of an unlawful act or acts by the defendant, wherever that defendant, person or entity is residing, living or domiciled. The application under this Part must indicate in a list, the properties that are subject to recovery and if a property cannot be specifically named it must be described in general terms. This simply implies that not only will the High Court serve notice upon Yardley of the recovery proceedings being undertaken against him by BALIOL for the recovery of personal property held for him as bank deposits in the UK, in Jersey in Cayman Island and the Cook Islands. References: Cayman Islands. The World Factbook. CIA. https://www.cia.gov/library/publications/the-world-factbook/geos/cj.html Confiscation & Ancillary orders - pre POCA. The Crown Prosecution Service. http://www.cps.gov.uk/legal/section21/chapter_d.html#05 Cook Islands. World Factbook. CIA. https://www.cia.gov/library/publications/the-world-Factbook/geos/cw.html Jersey. The World Factbook. CIA. https://www.cia.gov/library/publications/the-world-factbook/geos/je.html Proceeds of Crime Act 2002. Office of Public Sector Information. http://www.opsi.gov.uk/acts/acts2002/ukpga_20020029_en_1 Walsh v. United Kingdom 43384/05 [2006] ECHR 1154 (21 November 2006). European Courts of Human Rights. http://www.bailii.org/cgi-bin/markup.cgi?doc=/eu/cases/ECHR/2006/1154.html&query=proceeds+and+crime+and+recovery+and+procedure&method=boolean Read More