This article considers the impact of sections 71 and 73 of the Serious Organised Crime and Police Act 2005 (SOCPA) on the sentencing of offenders in respect of criminal fraud offences. Based on a series of first instance and appellate sentencing judgments delivered during 2013-2015, it surveys the extent to which fraudsters who have assisted the prosecution of their former accomplices have in consequence been rewarded with leniency from the courts. It also discerns from these judgments the jurisprudential factors which are regarded by the courts as relevant to their determination of the amount of any sentence reduction.
In April 2006 sections 71 and 73 of SOCPA were implemented. These provisions added a statutory framework to the pre-existing common law. This previous regime is not abolished but continues in parallel. For example, in relation to s73 – the provisions of which are not operable by the Competition and Markets Authority – the CMA is able to conclude a comparable non-statutory deal with a defendant concerning the criminal cartel offence. There is no reason to suppose that the degree of leniency which a sentencing court would award would be any different as between these two regimes. Perhaps the only important difference between them for an offender is that with a common law agreement they have no means of having their sentence re-assessed pursuant to s74 of SOCPA.
S71 grants to the Crown Prosecution Service (CPS), Financial Conduct Authority (FCA), and Serious Fraud Office (SFO), a power to confer criminal immunity upon an individual. S73 is an alternative to s71 in that, if the prosecutor elects not to offer immunity in return for assistance but wishes nonetheless to provide an incentive in order to elicit assistance, then a deal pursuant to s73 can be offered. As with the common law regime, s73 creates a presumption that if an offender pleads guilty to offence(s) and also offers assistance to an investigator and/or prosecutor, then the sentencing court may impose a sentence substantially less than what would otherwise have been imposed but for their co-operation.
S73 does not confer on an offender a right to receive leniency in return for their assistance. Sub-section (2) states that “In determining what sentence to pass on the defendant the court may take into account the extent and nature of the assistance given or offered.” Notwithstanding this permissive wording, it is submitted that a co-operating offender is entitled to expect a substantial sentence discount. Sub-section (5) enables a court to reduce a sentence even where that reduction results in a sentence below any minimum imposed by statute. An expectation, but not a right to leniency is a reflection of Parliament’s wish not to disturb the unwritten constitutional convention that responsibility for sentencing remains exclusively vested in the courts, and that agreements between the prosecution and defence about a sentence to be imposed are not permitted. That s73 has not altered this convention was affirmed by the then Lord Chief Justice (LCJ) in R v Dougall where, in construing its meaning he held “in our criminal justice structure, agreements between the prosecution and the defence about the sentence to be imposed on a defendant are not countenanced… Responsibility for the sentencing decision in cases of fraud or corruption is vested exclusively in the sentencing court (or on appeal, from that court, to the Court of Appeal Criminal Division). There are no circumstances in which it may be displaced.”
To summarise, whereas section 71 provides that an offender can escape sentence altogether, the criminal law being disapplied and the courts being bypassed by a prosecutor, section 73 envisages a criminal court deciding the degree of leniency which should be awarded for co-operation.
How often in fraud cases, has either of these sections been activated?
Whilst s71 states that a decision to grant immunity is vested in a prosecutor, it nonetheless appears that the common law convention endures in that the consent of the Attorney General must also be obtained. It is unknown how many applications to invoke this section have been made by prosecutors to the Law Officers and refused. Moreover, there is no published policy about their role in this regard. It is unknown how many immunities have been granted since 2006 in relation to either this section or the parallel common law regime. So, despite the advent of section 71, with its impression that this extraordinary power is reserved to a designated public prosecutor acting in the interests of justice, it may still be that decisions concerning the granting of an immunity are made in a secret and extra-legal context.
The most one can say is that it appears that prosecutors have exercised s71 rarely. In relation to both the CPS and the SFO during the period May 2011 – April 2013 (the latest figures available) no immunity was conferred. Between 2006-2011, the SFO revealed this happened once but it has refused to divulge any details of this because, despite having granted the putative offender immunity, the SFO never sought their testimony in court proceedings. This curious outcome suggests that having done this deal, the SFO decided that the offender’s account was not truthful and either allowed the offender to escape justice or exercised its right to terminate it and then prosecuted him/her without mention of this history.
S71 has not therefore made any discernible impact in relation to the investigation, prosecution and sentencing of fraud. The SFO has not changed its stance as a result of its implementation. Prior to 2006 it relied on immunised witnesses on only two occasions. First Mr Roux the star SFO witness in the 1990 trial of the quartet of Guinness accused. Second a Swiss-based fiduciary in the late 1990s case of R v Regan and others.
Why has s71 almost never been used? The SFO’s explanation is that successive SFO directors have held that the granting of an immunity would only be justified if a co-operating witness’s life is endangered by their erstwhile associates, and this scenario has never arisen in any of its recent prosecutions. Interestingly this is not a rationale shared by the CMA, which is similarly able to grant immunities, albeit under a regime created by the Enterprise Act 2002 which applies only to the cartel offence. In all of its contested criminal cartel prosecutions the CMA has been willing to grant no-action letters (i.e. immunities) to potential co-operative cartelists as a means to obtain their assistance. As all of its prosecutions have failed soto voce, the SFO presumably contends that the CMA’s miserable experience of relying upon immunised witnesses is not an encouragement.
During May 2011 – April 2013, the CPS concluded 38 s73 agreements. During 2006-14, the SFO has entered into 11 such agreements.
In relation to this CPS figure, research done by, for example, the Bureau of Investigative Journalism, suggests that virtually all of these agreements relate to non-fraud offences. The Bureau also contends that the CPS figure is an inaccurate under-reporting of the true number. CPS usage of s73 therefore seems irrelevant to fraud.
The SFO has refused to disclose any information about the circumstances of its 11 deals. This embargo makes it difficult to extrapolate. It is, however contended, based on the author’s experience that during 2006-2010 the SFO was reluctant to experiment with s73, and so these 11 agreements are relatively recent. As there is no reason to suppose that the SFO has sought to use the common law in order to reach a quasi s73 deal, it appears that s73 is increasingly having an impact on how the SFO conducts its investigations and prosecutions. The corpus of sentencing decisions concerned with this section, which is also predominantly post-2010, is likely to illuminate the extent to which some of these deals have resulted in actual leniency.
The sentencing case-law concerning s73
A. The landmark cases; Blackburn and Dougall
The Court of Appeal’s judgment in R v Blackburn was the first occasion the Court considered the sentencing of an offender whom had fulfilled their obligations as set out in their s73 agreement. The Court immediately recognised that s73 gave statutory effect to the longstanding pragmatic convention that criminals should receive lesser sentences than they deserved because they had assisted in the investigation and/or prosecution of other criminals. It held, however, that nothing in s73 suggested that an offender should escape punishment altogether and so, as the statute was silent as to what levels or amounts of discount were appropriate, it needed to promulgate a guideline.
Whilst unsurprisingly the Court began by emphasising that every sentencing decision should be fact-specific, thus preserving the sentencing judge’s discretion, it held that the discount should normally be between 50-66% compared with what would otherwise have been awarded. Only in a “most exceptional case” could it exceed 75%. Although it refrained from providing guidance as to what was envisaged here, it is submitted that the Court was contemplating a criminal whose betrayal of his associates meant that he/she would be liable to reprisal amounting to torture and/or execution. Furthermore, the Court held that this discount should be applied to the notional sentence and therefore before the standard one third discount for an early plea of guilt is applied. The Court accepted, albeit without any enthusiasm, that these huge degrees of leniency were necessary in order to give effect to the intention which underlies s73.
Applying this scale of discount to the homicide and drug trafficking offending which B had admitted, the Court awarded him a sentence of 2 ½ years. Whilst frustratingly the judgment does not reveal what his notional sentence was prior to the discount, presumably it was within the range the Court had just articulated. In the conjoined appeal of a defendant called P who was seeking pursuant to s74 a sentence review, his original seventeen-year sentence was reduced by 66% to five years.
Blackburn therefore legitimised a judicial sentencing reduction scheme which is intended to create a huge disparity between sentences imposed on those who cooperate with the authorities and those who opt instead not to, either because they contest their prosecution or simply plead guilty. Henceforth the discounts which this scheme prescribes will be called a “Blackburn discount”.
Blackburn’s offending was not fraud-related. The sentencing guidelines in respect of fraud offences envisage sentences which are far less severe than those which apply to the offences committed by him or by the co-appellant P. Additonally, a fraudster who betrays their associates may be perceived more as a whistle-blower than a criminal and is therefore unlikely to have a rational fear of consequent reprisals. Accordingly, it would not be irrational or impossible for the Court in a subsequent fraud case to regard these differences as a justification for holding that the appropriate discount should be significantly less. An opportunity would therefore be needed to test the application of the Blackburn discount to white collar crimes.
The first case in which the Court could so apply the Blackburn discount was R v Dougall. Here D contended that a 50% discount awarded him by the sentencing judge for his s73-reated assistance to the SFO was insufficient because it resulted in him being sentenced to a year’s immediate imprisonment. So, unlike in Blackburn where the focus was on the amount of the discount, here D contended that it should instead be on the final outcome. D contended that his sentence should be wholly suspended, thereby ensuring that he spent not a single day in prison; This outcome should be the start-point rather than where on the permissible range the Blackburn discount ought to be set. That outcome or end justified the means. Assuming that a suspended sentence for a one-time offender like D is extremely unlikely to be activated, D’s submission was therefore that his discount should be 100%. This is far greater than what was permitted by the Court in Blackburn, assuming that in that case, white collar criminals subject to comparatively light sentences and no reprisals were anticipated as falling within its “most exceptional” category.
To justify this bold submission, D contended that the rationale of the Blackburn discount is that it should be sufficiently substantial so as to ensure that it is attractive to the type of criminal whose co-operation is sought. For a white collar offender, it should be such that he/she avoided imprisonment altogether. If anything, the SFO’s submission on this issue went even further than D’s. It contended that in international bribery investigations such as the one in which D had assisted, its effectiveness depended significantly on it being able to make deals with defendants which they would find attractive. Accordingly, the SFO contended that it was erroneous to have imposed a custodial sentence on D.
The Court unsurprisingly found these joint submissions galling. Judge CJ recognised that, to accept them would result in the establishment of a sentencing principle that, for co-operating white collar criminals there should be a discount exceeding what Blackburn had prescribed. This would have the consequence of the Court appearing to condone a situation whereby typical SFO offenders can leverage their co-operation so that prison becomes reserved only for a less respectable type. Such a situation would be impossible to reconcile with a sentencing policy recently and forcefully expressed by Thomas LJ (now LCJ) in 2010 when sentencing the company Innospec Ltd for its complicity in corruption. He had held that people who commit economic crimes are ordinary criminals; “those who commit such serious crimes as corruption of senior government officials must not be viewed or treated in any different way to other criminals.” This was reiterated by the Court itself; see para 18.
Notwithstanding its reluctance, the Court largely accepted what had been submitted to it. Judge CJ held that it would “normally follow” that suspension of a sentence of imprisonment where the period of incarceration was 12 months or less would be appropriate. Having castigated the SFO for making the submissions it because, in his opinion the SFO had infringed upon the separation of powers convention already mentioned, Lord Judge admitted that he found the joint submission to be “very powerful”. As the sentence which had been imposed on D by the trial judge was one year, the Court wholly suspended it, and he walked free.
Dougall therefore created a sentencing dichotomy as between co-operating “ordinary” and white collar offenders. For the latter group, albeit tiny in comparison to the former, a super Blackburn discount of 100%, could be awarded to such an offender who, after the application of the standard Blackburn discount was otherwise subject to be sentenced to a period of imprisonment of twelve months or less.
B. The first attempt to extend the application of the super-Blackburn discount, Ford
A year after its judgment in Dougall the Court in R v Ford was asked to extend the scope of this sentencing principle. The trial judge had held that F, but for his s73 assistance would have been sentenced to four years’ imprisonment. The appropriate Blackburn discount was 50% and thus F was sentenced to two years’ imprisonment. On appeal F, submitted that his sentence ought to have been suspended. F contended that as he was like D a co-operating white collar criminal whose assistance was vital, then he should not be incarcerated.
The Court held firstly that the sentencing judge’s discount “was slightly less than it should have been” (para 23) and it reduced his sentence to 18 months’ imprisonment. So a Blackburn discount of 65%. It then considered the issue of suspension and whether the applicability of the super discount should be extended to cover a sentence of imprisonment of this duration. Citing factual, rather than principled differences between F’s case and D’s, in particular that F’s co-operation was in its view less valuable than what D’s had been, the Court declined to do so.
C. Recent s73-related judgments
A review of these cases provides an up-to-date assessment as to the impact of s73 agreements upon the sentencing of fraudsters or other comparable offenders.
R v Shelley, sentenced March 2014
Shelley pleaded guilty to insider dealing. In an earlier related case, R v Milsom, where the defendant had also admitted guilt but in contrast to S otherwise not co-operated, M had been awarded two years’ imprisonment. S’s sentence was wholly suspended. Unfortunately, as the FCA refuses to confirm whether this is due to the fact that S had entered into a s73 deal with it, the details of this matter remain unknown.
R v Evans, sentenced July 2014
Evans was a former journalist at the News of the World. Having sought and failed to persuade the CPS to grant him immunity, he eventually entered into an s73 agreement and gave evidence against a number of his erstwhile journalistic colleagues, including Messrs Brookes and Coulson.
In sentencing him, Saunders J held that the amount of the Blackburn discount to award was, in this instance, largely determined by the difficulty the prosecution encountered in obtaining similar assistance from anyone else. Whilst hacking had been conducted, in his view, on “an industrial scale” at the newspaper, only E had been willing to admit complicity. E’s exceptionalism in this context meant that he was entitled to (rather than simply deserved) a substantial discount. So as in Dougall, the cost and difficulty of proving the offences was pivotal.
The Judge seemingly regarded as irrelevant to his sentencing exercise E’s motivation for assisting. For the Judge, the fact that he was entirely selfishly motivated and only assisted in order “to eliminate or reduce any penalty imposed on him” was immaterial as “that is why most people enter into such agreements.” Submissions of contrition or remorse for the offending so typical in sentencing hearings was superfluous. Offenders such as E could play the system without penalty, so long as they complied with it in the end. Additionally, the fact that whilst, giving evidence against the accused E has not been entirely truthful was unimportant. It sufficed that “the general thrust of his account” was so that his occasional lie or embellishment could be overlooked.
Helpfully, the judge then carefully explained how he calculated the Blackburn discount. Firstly, he stated that had E fought counts 1-4 and been convicted, he would have been sentenced to two years’ imprisonment. Secondly, had he pleaded guilty at an early stage, but not cooperated, then his sentence, reduced by a third, would have been 16 months. Thirdly, in the light of his s73 assistance this should be discounted to 10 months. So a 66% discount overall. Finally, the Judge considered whether to invoke the super discount; “the issue then arises as to whether I should suspend that sentence”. He held that it should; “in the circumstances of this case and in particular the cooperation Mr Evans has given and has agreed to give the police and the prosecution in the future, as opposed with the lack of cooperation from others, I do feel able to suspend the sentence for a period of twelve months.” E’s only punishment was the Judge ordering, seemingly as an afterthought (recalling perhaps that in Blackburn it had been held that some punishment was necessary) that E perform 200 hours of unpaid work in the community.
R v Hall, sentenced July 2014
Mr Hall was sentenced for complicity in overseas corruption. He had entered into a s73 agreement with the SFO pursuant to which he testified as a prosecution witness against his co-accused Mr Dahdaleh. Subsequent to his testimony the SFO’s case against D collapsed. The SFO in part blamed H for its situation and accused him of testifying in a manner inconsistent with his witness statements. The imputation was that H had double-crossed the SFO, and at the trial of D instead allied himself with him. H, however, vehemently denied being unfaithful and claimed he was entitled to a Blackburn discount.
The SFO plainly wanted the Judge to punish H for his alleged betrayal by only awarding him a parsimonious Blackburn discount. Having been drawn into this dispute, the judge held in favour of H; “there were indeed changes but almost everything you said in evidence you had set out in your numerous interviews and I did not see those differences as being as marked as the SFO did.”
Having dismissed the SFO’s attempt to award H only a small Blackburn discount, the Judge considered what it should be. He stated “had you contested this case in front of a jury with no pleas of guilty or admissions the sentence… would have been something around six years’ imprisonment… I think that in all the circumstances you deserve a 66% discount for your cooperation. That reduces the sentence to two years.” The Judge then held that as Hall had pleaded guilty at an early stage he was entitled to an additional 1/3 discount and so ultimately he received a sentence of 16 months’ imprisonment. The Judge declined to suspend it, holding that H’s offending was too egregious; he had, for instance, received £3.5 million in bribes.
R v Kerrison, Jennings, Papachristos and Turner, sentenced August 2014
All four accused were directors of a company called Innospec and the SFO alleged that they were each party to a conspiracy to corrupt public officials in Indonesia. Turner had entered into a s73 agreement and complied with its terms. Jennings decided only to cooperate with the American authorities but never with the SFO. He only pleaded guilty. Kerrison and Papachristos contested the allegations but were convicted. This case therefore presented for sentencing purposes, defendants in three different positions; two who had fought the case and lost, one who had only pleaded guilty and one who has both pleaded guilty and provided assistance to the SFO. Such a situation therefore provides a valuable insight into s73 sentencing.
Stage one was the sentencing of K and P. K received 4 years imprisonment. P got 18 months.
Stage two was J. The Judge held “I would impose a sentence of 4 years imprisonment after a trial [so his offending must have been similar to K’s] I reduce this starting point due to his cooperation [with the US authorities] to 3 years.” The Judge then applied the one third discount for J’s early plea of guilty and so reduced his sentence to two years. So for his non s73 assistance to the foreign authority, Jennings was awarded a 25%, or a one-year discount.
Stage three was T. The Judge held that the Blackburn discount applied; “a defendant who enters into a cooperation agreement is entitled to more than a third discount… there is a public interest in providing an inducement for defendants to cooperate…”. He considered that T had given truthful evidence during the trial of K and P. The Judge held that “The starting point is four years if convicted by trial. He is entitled to having a third discount and then half to a two thirds discount. The result either way is the same, a 16-month sentence.” Then the Judge turned to the issue of suspension; “Should this 16-month sentence be suspended? The important factors are: the quality of his evidence, the delay/lapse of time which was not his fault and that he made a voluntary repayment of $40,000 to the US authorities… It is a combination of these factors which persuades me to suspend this 16 month sentence for two years.”
T therefore first received a Blackburn discount of about 66%. Then he received the super-discount which topped it up to 100%. In contrast to Ford’s appeal (considered above) here the super-discount was applied to a notional sentence of imprisonment in excess of a year. The line drawn by the Court in Dougall was crossed. Despite this and his “prolonged, cynical and serious corruption of public officials” resulting in many suffering from lead poisoning, the sentence was not appealed as being unduly lenient. T’s spectacular success was only obscured by the Judge’s insistence that “there must be a punishment” and so he was ordered to perform 300 hours of unpaid work.
R v Cano-Uribe, September 2015
This was a conjoined seven appellant case where each sought to have their sentences reduced by the Court of Appeal. All had defrauded the Department for Work and Pensions. One of them, Lloyd, had rendered s73 assistance and received a Blackburn discount of 63% but had been sentenced nonetheless to 15 months’ imprisonment. He submitted that it ought to have been suspended, and so should have received a super discount. The Court granted him some relief in that it reduced the term to a year but declined to suspend it.
R v Snee, sentenced September 2015
Snee had assisted the CMA in its failed cartel prosecution of other alleged cartelists. As already explained, the CMA operates under the common law leniency regime. The Judge held that this was unimportant and Blackburn applied equally to this regime. He held that, had S been convicted following a trial, his sentence would have been two years’ imprisonment. His assistance entitled him to receive a Blackburn discount and the only issue was its degree. Having been reminded that in Blackburn the Court had said the range should be 50-66% save in a “most exceptional case”, the Judge attaching most importance to S’s giving of what he considered to be truthful evidence in support of the CMA’s failed prosecution, held that this was such an exception and awarded a 75% discount. That meant a notional sentence of six months imprisonment. The Judge then peremptorily held that it should be suspended and thereby increased S’s discount to 100%. The CMA did not seek a confiscation order or invite the court to disqualify S from being a director.
R v Clay and Clark, sentenced October 2015
Both were prosecuted by the SFO for a “pernicious fraud”. Both pleaded guilty to count 1 of their indictment, Clark in October 2014 and Clay the following December. Clark’s plea was part of her s73 agreement and her assistance pursuant to it apparently caused Clay to plead just two months later. On Count 1 Clay received a sentence of eight years whereas Clark received two. Clark’s sentence was wholly suspended.
The SFO press release does not explain the extent to which this difference of length, and the decision to suspend is explicable by reference to Clark’s s73 assistance, as opposed to her respective offending. The case therefore may or may not be important to the subject of this article. A difference of this magnitude, however, strongly indicates that Clark was a substantial recipient of a Blackburn discount and may also, despite the two-year period of her sentence, have received a super discount. If she did as regards the latter then as in Snee, the availability of this discount has been widened significantly beyond that countenanced in Dougall.
In Blackburn the Court of Appeal promulgated a sentence reduction regime in order to incentivise offenders to assist the prosecution. In setting the range, however, it held that the maximum discount should be 66%, save in the most exceptional cases. It is submitted that by ‘exceptional’ it meant where the offender’s life was put in jeopardy.
Within two years this supposedly guideline case was discarded in Dougall, where the Court was persuaded that Blackburn’s permitted scale of discount was inadequate for white collar offenders. The Court was persuaded that for them, subject to their offending being at the lower end of culpability (distinguish Dougall from Hall), so that their notional ultimate sentence would be a year’s imprisonment or less, carrot-and-stick or “pragmatic” considerations justified suspension. Despite the restraint which Blackburn had supposedly imposed, the available discount was increased to 100%. Dougall supplanted Blackburn as the guideline case for s73 offenders in fraud cases.
Recent sentencing decisions show that the restriction or concession imposed in Dougall is coming under strain, and that sentencing judges swayed by the same considerations as the Court of Appeal was in Dougall are widening the application of the super discount. This shift, however, has not yet been considered by the Court.
The willingness of the courts to activate the super-discount in fraud cases must largely explain the lack of recourse by the SFO to s71 of SOCPA. If sufficient incentive by way of 100% sentence discount has been made available by the courts, the SFO must, it is submitted, have asked itself then what need is there of s71?
Finally, and standing-back from this jurisprudence, it is important to consider whether a suspect apprehending their prosecution, and believing that they have useful information to trade should seek to reach a s73 deal with a prosecutor. The litany of sentencing decisions considered in this article provides detail as to the potential benefit, but it would be foolish to overlook or dismiss the potential disadvantages and burdens which such a deal inevitably attracts. Firstly, as the cases of Hall and Snee demonstrate, not contesting the prosecution can result in a conviction which otherwise would probably never have been incurred. Mr Hall received a custodial sentence and a significant confiscation order, both of which would have been avoided had he instead fought alongside his co-accused. Mr Snee’s sentencing outcome may be viewed by him as disastrous bearing in mind the victory won by his two co-accused. Hindsight may show that the forfeiting of an opportunity to secure an acquittal or at least the avoidance of a conviction and penalty was a poor choice.
Secondly, the burden of co-operation may be both substantial and prolonged. Betraying others in an attempt to save oneself is unlikely to be comfortable. This discomfort may be intensified by, as the case of Dougall shows, an ongoing indefinite obligation to assist teams of UK and foreign prosecutors including having to repeatedly testify in criminal trials before different foreign courts. Rehabilitation in such a circumstance may be considerably delayed and prospects of future employment ruined.
Thirdly, the ordeal of testifying against co-accused even if it is only once is onerous. The prosecution will expect an assisting offender to publicly affirm that they are guilty and to incriminate those in the dock. This is likely to result in hostile cross-examination by possibly multiple defence counsel. After having endured all this pressure, the prosecution may as with Mr Hall then seek to persuade the judge not to award a full measure of leniency for a perceived lack of candour.
Finally, there is no guarantee that the suspect or defendant who approaches the prosecutor with an offer of assistance will be the one to whom a s73 deal is offered. Mr Evans was fortunate in that no one else assisted but he might not when he made his approach have been the only candidate in play for a deal. The CPS or police in his case could have extracted sufficiently incriminatory admissions from him before announcing that his assistance was not needed. What discount would he have received later?
These possible costs should be assessed in line with the potential advantage. Those fearing a prosecution should hesitate before stampeding to the prosecutor’s door.