On the 13th January 2016, an Old Bailey Judge made one of the largest confiscation and compensation orders made this decade against what he described as an ‘Olympian scale’ fraudster, dubbed ‘King Con’. In this remarkable landmark case, the proceedings were conducted by a private prosecutor resulting in the defendant, Mr Somaia, being convicted of 9 counts of obtaining a money transfer by deception to the value of £13.5 million. At the conclusion of the confiscation proceedings, the confiscation and compensation orders that were made totalled £38 million; the defendant will serve a 16 year default prison sentence if he fails to pay those orders.

In giving his judgment, the judge considered the recent case of R v Davenport [2015] EWCA Crim 173, decided in November 2015 where the Court of Appeal, Criminal Division, gave guidance to Crown Court judges in cases where the Crown (or, as in Somaia’s case, the private prosecutor) sought both compensation and confiscation orders against a defendant.

The purpose of the confiscation regime is to deny the defendant the financial benefit that he has received from his criminal conduct. Once the court has determined the amount of benefit obtained (the benefit figure), the defendant will be ordered to pay that amount unless they can show they have an available amount which is less than that figure. Once the Order is made, the defendant is given a period within which to pay the sum or face a sentence in default. The purpose of the default sentence is coercive; to induce compliance with the Order made. Once the court has determined the defendant’s available amount and that he can therefore comply with the Order, he ‘carries the keys of his prison in his own pockets.’

Davenport

Like most fraudsters, Davenport was described by the Trial Judge as “a very, very dishonest man and a very competent, skilful and determined fraudster.”

During the proceedings in this case, which was brought by the Serious Fraud Office (“SFO”), the defendant’s benefit from general criminal conduct was agreed at £12 million, and before the final hearing, the parties undertook a lengthy negotiation in which they thought they had reached an agreement as to the orders to be imposed. Davenport’s legal team thought the agreement entailed that the Confiscation Order would be £12 million, out of which the compensation, equating to £1,943,620, would be paid from the £12 million. The SFO believed that the agreement reached was that the Confiscation Order would be £12 million (the value of the defendant’s benefit from crime) and in addition to that, he would pay the sum of £1,943,620 in compensation. The Judge found in favour of the SFO, leaving the defendant incensed over the issue of double counting – effectively the Order required him to pay back more than he had benefited from his crimes.

“Is this fair?”

This was a simple but cutting question posed by the Court of Appeal to counsel for the prosecution. The answer to which, “[w]ell, not unfair”- failed to persuade them. Whilst seemingly accepting the finding of the Trial Judge that Davenport was ‘an egregious and manipulative fraudster’, it was not enough to dissuade them from allowing the appeal. Consequently, the compensation order in sum of £1,943,620.56 survived, but the Confiscation Order was reduced from £12 million to £10,056,379.44, effectively bringing the total to be paid to the value of the defendant’s benefit from crime (£12 million).

The question arises; can judges ever order a defendant to pay back more than the benefit he receives from his criminal conduct? The simple answer is yes, but only where restitution to the victims can not be assessed to be ‘assured’ – i.e. where it is clear to the court that the defendant has no intention of paying the compensation order immediately, or within 28 days, the judge can make a Confiscation Order (to be paid to the state) to the value of the benefit figure, and in addition, a compensation order (to be paid to the victims) (Jawad [2013] 1 WLR 3861). This is to induce the defendant to satisfy the orders immediately.

The Court of Appeal in Davenport were of the opinion that the Trial Judge had applied these principles too restrictively; although not able to pay the compensation order immediately or within 28 days, Davenport had more than sufficient assets to pay the Order and was likely to do so within a few months. Davis LJ emphasised at paragraphs 66 and 67,

“[t]he essential point of Jawad…. is that restitution to the victims must be ‘assured’ or ‘certain’. The making of a compensation order does not in itself ensure restitution. Moreover, the availability of (ostensibly) sufficient assets may not necessarily give such assurance: for example, those (not infrequent) cases where the defendant is adjudged to have hidden assets but where their whereabouts are unknown and their nature nebulous. Further, Micawberish promises of ‘money tomorrow’ will, as Jawad makes clear, be likely to be disregarded. But that is not this case.”

His Lordship then proceeded to make an assessment that the appellant had “tangible, valuable and identified assets” [notably a property worth £14 million] which were subject to a Restraint Order. Counsel, on Davenport’s behalf, also submitted that he had every incentive to sell the property as the failure to achieve a sale would have exposed him to a 10 year default sentence; such is the coercive nature of the confiscation regime.

Importantly and for all future cases, the fact that the victims were not going to be paid immediately or within 28 days (as in Jawad) was not a point that persuaded the Court of Appeal to allow double counting. They held that whilst restitution in full would take more than 28 days, it could properly be assessed as ‘assured’. Although this flexible approach stepped beyond the boundaries of the 28 day rule, it was considered consistent with Hughes LJ in Jawad.

You take 10 – the state may take 20?

The important message to be taken away from Davenport is that if the defendant fails to show any willingness to pay the compensation order immediately, the judge is likely to make a confiscation order in the value of the benefit figure, and a compensation order on top. This is what occurred in Mr Somaia’s case, where the Judge found that it was not a case where the compensation order was likely to be paid forthwith and therefore it was not appropriate to reduce the Confiscation Order by the amount of the compensation order.

The Court of Appeal in Davenport laid down interesting and helpful guidelines for all future cases where a confiscation order and a compensation order is being sought, set out below:

  • Ordinarily the court shouldn’t make both a compensation order and a confiscation order representing the full amount of the benefit where there has been actual restitution to the victims prior to the date of the confiscation hearing: Waya; Jawad.
  • Where it is asserted by a defendant that there will be restitution made after the date of the hearing then the court should scrutinise very carefully and critically the evidence and arguments raised in support of such assertion.
  • If the court remains uncertain whether the victims will be repaid under the compensation order then a confiscation order which includes that amount will not ordinarily be disproportionate: Jawad.
  • However, mathematical certainty of restitution isn’t required. The court should approach matters in a practical and realistic way in deciding whether restitution is assured.
  • Restitution to the victims in the future is capable of being properly assessed as assured, depending on the particular circumstances, notwithstanding that such restitution will not be immediate, or almost immediate, at the time of the confiscation hearing. Obviously the longer the time frame the greater force there will be to an argument that restitution isn’t assured: but a prospective period of delay in realisation isn’t of itself necessarily a conclusive reason for proceeding to make a combination of such orders without adjusting the amount of the confiscation order.
  • Whilst a defendant who is truly intent on making restitution in full to his victims ordinarily should be expected to have arranged such restitution prior to the date of the confiscation hearing there may sometimes be cases where that isn’t possible. If, in such a case, the court has firm and evidence-based grounds for believing that restitution may nevertheless be forthcoming, albeit that cannot be taken as “assured” at the time of the hearing, the court has power in its discretion to order an adjournment to enable matters to be ascertained.

The simple message to be taken from this by offenders is pay back your victims, or suffer the consequences.