Face-to-face
Mark Spragg, fraud and white-collar crime specialist at JGR Law
Has the economic downturn been good for business?
It’s been pretty bad for anyone in property and finance but the economic downturn has been good for my business, as litigation is on the up. Commercial litigation is increasing because people now think it’s worthwhile fighting over contracts, whereas before they may have been so busy going on to the next deal that they didn’t bother tying up loose ends of the previous deal. On the fraud side, more and more frauds are being discovered and are going to be discovered.
What are you currently working on?
The one thing that crops up time and time again is police search warrants. Every time you see one there’s something wrong and it’s normally pretty major. The police apply to the magistrates or circuit judge at the crown court for a warrant but they don’t get the basics right. It’s quite frightening the way the police are able to go into people’s houses and remove paper work. It’s something that needs to be tested in the courts.
Life is made very easy for the police, as magistrates will just sign on the dotted line and that’s the real problem. A magistrate is there to test out whether there’s a risk that the material will go or whether there’s a real belief that the person who’s a target will not cooperate. It seems that the magistrates simply sign on the line because there is a policeman standing there. Magistrates have to be trained and take their role on this much more seriously, it shouldn’t be a foregone conclusion in the way that it is now. They are a weak link.
If you want to revisit an old contract, how far back can you go?
On a straightforward contract you can go back six years but on anything that’s been done under seal, which includes most land transactions you can go back twelve years, and if there’s any fraud you can go back forever. There’s no time limit at all. In places like the US, where we seem to be brushing up against on criminal cases, you can go back only five years. HMRC can go back forever if they can prove neglect. The US and a lot of European countries have a limit on going backwards as such.
Do the US have a better system for dealing with fraud?
It’s not that its any better in the US than in the UK, but they have so many more draconian powers that they are seemingly more successful. It doesn’t stem from the abilities of the individuals.
In Europe there are different legal systems. At the start of a case of a criminal case a magistrate is put in place not necessarily to prosecute but to find out the truth. But in our system the truth doesn’t really matter – it’s a question of who wins on the day and who the jury believes. The UK system is pretty good, there are plenty of protections in place throughout the legal process.
For example, we don’t have the pressures put on defendants that they put on defendants in the US. In America they will investigate individuals and then the Department of Justice will go to the company and say, “we want your cooperation to prosecute these individuals.” The company might say, “no we don’t want to”, but the Department of Justice will say, “no, it’s not an option. You have to cooperate or we’ll close you down.” So there’s enormous pressure on companies to just get rid of individuals and just throw them to the wolves.
The UK public may want those who they believe to be responsible for the recent banking crisis to be put through a legal process. It’s what people like – they want some retribution. Whereas in America, that would happen in any event. If a banker were to be convicted of a criminal act, he might in the UK be facing a possible sentence of eight to 10 years. In America it would be 108-110 years.
So there’s a much bigger incentive to plead guilty to something even if you’re not guilty in the American system. It seems to gratify the American people.
If you could change one thing with the UK system?
For the most part the UK legal system gets it mostly right, most of the time. There has been a lot of talk about the complexity of fraud cases with questions asked of the abilities of juries. However, I believe juries are terrific, they do understand things, they can see through a witness, they know when someone’s lying, or has over complicated a deal that doesn’t need to be so complex.
One interesting proposition is plea bargaining. The Attorney General has said that she wants plea bargaining to come to the UK system. When the last director of the Serious Fraud Office (SFO), Robert Warden left, he was asked what additional powers the SFO would want. He said we must have the power to arrange plea bargains. My issue is that, yes, if you bully people into pleading guilty to something they hadn’t necessarily done, the conviction rate will increase but is that good for justice?
So you’re left with the enormity of the state on one hand and an individual who doesn’t even qualify for legal aid. If you add to that the proposal to get rid of jury trials, you’re going to be left with a very easy run for the state. But is that good for justice?
What lessons can we learn from this recession?
I think there are going to be some huge multi-million pound frauds that are going to be uncovered. Of course, the villains will have long gone, but on a multi-million pound property fraud you’re going to have a lot of professionals involved. What did the professionals know? What checks did they go through? Did they go through money laundering checks? And simple things: if you’re taking a 90% loan where did the 10% loan come from?
For the future people need to be careful about who they get involved with. You can’t develop a property on the back of a suitcase full of cash. The problem is that a lot of the rewards are so very big that professionals can be easily tempted and brought into the gang.
We’re in for some very interesting times. Whether the prosecution bodies are up to it will be interesting to see. The SFO have been gearing up but whether they’ll be up to the task is another issue altogether, some of these frauds are just going to be enormous.
