BENEFIT – USE OF MIXED FUNDS
This case concerns Mr Waya who purchased a property using £310,000 of his own legitimate funds and £465,000 obtained as a loan. As he made false representations in order to obtain the loan – the loan funds were considered to be criminal proceeds.
After a conviction for obtaining a money transfer by deception contrary to S15A of the Theft Act 1968 he was sentenced to a community punishment order for 80 hours. In the subsequent confiscation proceedings an order was made against him in the sum of £1,540,000, at a time when the value of the property in question had risen to £1,850,000. The Court had seen fit to deduct the amount of legitimate contribution of £310,000 from the current value when making the order.
On appeal it was decided that the benefit must be fixed pro rata at the proportion of illegitimate funds originally invested in the property. At the time of purchase, the fraudulent loan represented some 60% of the purchase price. The benefit therefore was determined as 60% of the current value – at £1,110,000, somewhat lower than decided by the Crown Court.
A similar principal is seen where somebody obtains property using criminal proceeds alongside a mortgage that is deemed to have been obtained legitimately. In R – v – Nadarajah for example which was a confiscation decided under POCA 2002, the benefit was deemed to be the Defendant’s equity in the property purchased after deducting the value of the outstanding mortgage (which had been obtained legitimately).
The case law surrounding the tracing of mixed funds (which include funds tainted by criminal proceeds) used to obtain property is substantial, but appears to be heading mostly towards an equitable (or common sense) position. The application of common sense when conducting a forensic accounting review of a S16 Statement on behalf of a defendant is crucial. More often than not one or more properties are considered when estimating the level of benefit from criminal lifestyle. Generally the whole value of the acquisition is included as property held, though where the property has been sold it may be included as both expenditure and funds received. Such double counting by the prosecuting authorities is commonplace and quantifying and excluding it is a routine part of a forensic accounting review of many cases.
When Mark Jenner & Co Limited assists the defence team in a confiscation matter there is always an attempt to introduce the common sense interpretation even where legislation and case law say otherwise. This is generally done acknowledging the legal position but presenting specific facts in a reasonable fashion. For example, in a recent case we were faced with a benefit strand of around £300,000 being expenditure on drugs. The Prosecution had seized a couple of pieces of paper from the Defendant’s house when they originally arrested him. The papers contained nothing but numbers, that when they were all added up totaled 300,000.
Being conscious of the decision in R – v – Mark Whittington, where a forensic examination of similar sparse documents resulted in £millions of benefit estimate being ordered, the scraps of paper were examined alongside the Prosecution’s interpretation. It could be seen that the numbers on the documents could quite easily represent amounts of drugs – or they could be amounts of wages paid out. Furthermore, by adding up every number, the Prosecution were including numbers that were totals of other numbers or carry forward figures – i.e. double and triple counting each entry.
Fortunately, in this recent case, a settlement in terms of benefit was agreed that did not include the massive and rather speculative sum relating to drugs expenditure. The Prosecution and the Defendant both obtained a reasonable result!