The Court of Appeal have handed down judgment in the appeal brought by Ketan Somaia upholding the largest confiscation order obtained in proceedings brought by a private prosecutor. On 12 January 2016, following a private prosecution for offences of obtaining money transfers by deception, Ketan Somaia, a Kenyan born banker dubbed “King con”, was ordered to pay a £20+million confiscation order and two compensation orders to his victims totalling £18.2million. In passing sentence, HH Judge Hone QC stated that Ketan Somaia “has to be described as a formidable and serial fraudsman on a truly Olympian scale”.

This latest judgment affirms the ability of a private prosecutor to pursue confiscation proceedings under the Proceeds of Crime Act 2002 and the Criminal Justice Act 1988. This article will consider the various issues considered by the Court of Appeal and its judgment.

Background

The Court of Appeal explained that Ketan Somaia was shown to have never have held assets in his own name, but rather to have used family members, staff and advisers as a front or as nominees to evade tax, conceal his personal beneficial interests and allowing him to recycle funds from his own criminal conduct. In making the confiscation order, HH Judge Hone QC had held that whilst Somaia agreed that he benefited to the tune of around £18.5million, this was only the starting point. It was found that Somaia had hidden his assets but their true extent was totally unknown. Ketan Somaia was ordered to pay the confiscation order within 6 months, but he refused to make any payments toward the £20+million order or the compensation orders. Consequently, the default sentence was activated and Ketan Somaia was sentenced to 16 years imprisonment, to be served consecutively to the sentence of 8 years imprisonment imposed for the original offence.

Appeal – Ground 1

Ketan Somaia appealed the confiscation order to the Court of Appeal on the basis that, among other things, his victim, Murli Mirchandani, was irremediably conflicted to carry out the ‘quasi-judicial’ role that applies to confiscation proceedings commenced under the Criminal Justice Act 1988.

The Court of Appeal referred to the case of R v Zinga [2014] EWCA Crim 52, in which the Lord Chief Justice ruled that there may be cases where the defence will raise concern about the interrelationship between the prosecution in the public interest and private prosecutor’s interest, however “…. [i]n such cases the court can in part rely on the professional duties of the advocates and solicitors under their professional codes and on the duties owed to the Court”. In Zinga, the Lord Chief Justice also cited an article by Sir Richard Buxton, which concluded that “[a]dvocates and solicitors who have conduct of private prosecutions must observe the highest standards of integrity, of regard for the public interest and duty to act as a Minister for Justice”.

In addressing the argument raised by Ketan Somaia, Mr Talbot QC, for the private prosecutor, submitted that private interests are, to some degree, almost invariably inherent in the bringing and conduct of a private prosecution, quoting Sir Richard Buxton, who opined “[a] private prosecutor will almost by definition have a personal interest in the outcome of a case”.

The Court of Appeal did not agree that the Private Prosecutor was ‘irremediably conflicted’ and dismissed this first ground of his appeal. The Court held that a private prosecutor is still a prosecutor and is subject to the same obligations as a minister of justice. The Court of Appeal agreed with HH Judge Hone QC that those acting on behalf of the private prosecutor had in place sufficient safeguards to ensure those obligations were complied with.

The Court of Appeal recalled the dicta of Lord Neuberger in R(Gujra) v Crown Prosecution Service [2012] UKSC 52 confirming the value of private prosecutions, “[t]here is no doubt that the right to bring a private prosecution is still firmly part of English Law, and that the right can fairly be seen as a valuable protection against an oversight (or worse) on the part of the public prosecution authorities…”

Appeal Ground 2

Ketan Somaia received a multi-million pound payment from what was known as the “Pattni Settlement” as well as substantial sums of monies from other sources. The prosecution contended that Ketan Somaia was liable to pay 20% tax to HMRC as he was resident in the UK when he received these monies. Somaia failed to pay the tax due, and this sum was included in the benefit figure of the confiscation order.

Ketan Somaia challenged this finding on the basis that the judge was not entitled to take this into account because he had not been convicted of this offence. The Court of Appeal dismissed these submissions, citing R v Dinsey and Allen (2000) 1 Cr App R (s) 497 as clear authority for the proposition that when a fraudulent scheme to cheat the revenue leads to the evasion of tax, the unpaid tax was a “pecuniary advantage” within s71(5) of the Criminal Justice Act. Accordingly, the court was entitled to include these sums when assessing Ketan Somaia’s benefit from criminal conduct.

Appeal Ground 3 & 4

The third and fourth grounds of appeal centred on Ketan Somaia’s submission that the judge had made four fatal errors of law, including by making a ‘hidden assets’ finding. The Court of Appeal considered that HH Judge Hone QC was entitled to make this finding based upon his conclusion that:

  1. Very significant amounts had been received from unknown and unidentifiable sources and these were likely to be indicative of the defendant having yet further assets that had been hidden and which were undeclared.
  2. Somaia had been “…responsible for serious, acquisitive crime over a significant period and he was well positioned to conceal his assets.”
  3. Somaia had a “[n]atural tendency of a dishonest businessman with a criminal and lavish lifestyle to hide “slush Funds” as a precaution should his business empire collapse”.
  4. Ketan Somaia lied during his evidence; for example by stating he was “broke” but on enquiry being shown to receive significant funds from alleged consultancy work; and
  5. There was a “startling” paucity of documentary evidence as to the final destination of money received by Ketan Somaia.

Accordingly, the Court of Appeal dismissed Ketan Somaia’s appeal on this ground, finding that HHJ Hone QC had been uniquely placed to assess Somaia’s evidence and was entitled to reach the conclusions that he did, particularly given that he had presided over the case for two years.

Following the failure of Ketan Somaia to pay the confiscation order, HHJ Hone QC imposed a default sentence of 10 years imprisonment. A consecutive sentence of 6 years imprisonment was imposed in default of payment of the two compensation orders totalling £18.2 million. The prosecution accepted that the compensation orders should not operate as an additional liability, given the judge’s findings that “there are hidden assets which represent the balance of the benefit figure” and the fact that the compensation orders would be paid out of the money obtained and paid towards the confiscation orders. Accordingly, the Court of Appeal ruled that the 6-year term ordered for failure to pay the compensation orders should be served concurrently to the 10-year default sentence imposed in respect of the confiscation order.

Appeal Ground 5 & 6

Ketan Somaia also sought to argue that the default sentence of 10 years imprisonment, to be served consecutively to the 8 year sentence imposed for the original offending was manifestly excessive. The Court of Appeal cited the dicta Laws LJ in R v German Castillo (2011) EWCA Crim 3173, who stated

“The purpose of the default term is not punishment for the achievement of retributive justice. It is rather to secure satisfaction of the confiscation order and so deprive the criminal of the fruits of his crime. In that endeavour, the demands of proportionality are much weaker than where the court is punishing the offender.”

Given that the default term of 10 years’ imprisonment applies to any amount of confiscation order over £1million, the Court of Appeal ruled that it was impossible sustainably to argue that applying the maximum default term was unjustified given the confiscation order in this case was twenty times greater.

Accordingly, the Court of Appeal also dismissed this ground of appeal.

Conclusion

The Court of Appeal have used the opportunity to affirm that a private prosecutor is not irremediably conflicted in pursuing confiscation proceedings against a convicted defendant, as well as highlighting the importance of the use of private prosecutions as a valuable protection against oversight (or worse) on the part of the public prosecution authorities. Cases such as these highlight the extensive powers of the criminal courts in dealing with sophisticated frauds and depriving serious criminals of the proceeds of their criminal offending.