Our criminal justice system has grown up over centuries as our society has progressed and is thought to be fair. Others criticise us, saying perhaps we are too soft on criminals. However, being magnanimous is probably better than being ruled by autocrats and tyrants. Better than having a hand chopped off for stealing. Better than being shot in the back of the head for actively opposing a regime.

The criminal justice system provides a balanced approach to dealing with crime. We believe in someone being innocent until proven guilty – the right to be heard by your peer – these are the mainstay of our whole modern way of thinking and has served us well on more occasions than it has failed. A very important element of this system is the right of criminals to present a case to defend themselves – the right to be heard. This is fundamental.

Criminal defence in the UK (or criminal defense in the USA) does mean that the whole judicial system is somewhat adversarial. We feel that the actions of the regulators and prosecutors must be tempered by a criminal defense system to ensure that they do not ride roughshod unfairly over the criminals, some who may well not be guilty, or as guilty, as their accusers say.  We must make sure that the system is properly managed, adequately funded and reaches the results that everybody wants – to punish and deter the criminals and to recognize when a person is not guilty or perhaps not as guilty as the indictments suggest.

The application of the Proceeds of Crime Act 2002 in the UK can provide an example of potential problems arising if the criminal defence team is not able to challenge the prosecution’s position. If somebody has been convicted of a crime they will have to serve a sentence proportionate to that crime – maybe in jail. But with POCA it is necessary to make sure that crime does not pay – so no longer can a person rob a bank, do time in jail only to be released a rich man! The conviction is now followed by confiscation proceedings. This is intended to stop crime paying – to take away the wealth of the lifestyle criminals.

However, the provisions within POCA allow for the possibility that somebody who steals only a modest amount may still be presumed to have a criminal life style. The Crown will apply for confiscation of everything the criminal owns – plus what he has assumed to have received – for several years previously. Obviously this needs to be challenged as the assumptions can be sweeping and need not be underpinned by evidence. It is up to the criminal defense team to show assets have been paid for with legitimate funds and that are receipts over the preceeding years are not from crime.

Sometime it is difficult to find adequate accounting evidence to show this, even by using forensic accountants, and a person is ordered to pay back more than he stole, more than even he possesses. If he is unable to do this he is in default and may be given substantial additional custodial time! This is why sufficient funding for the criminal defence team, including for a forensic accountant to do a full and detailed response to the Prosecution’s case, is essential if justice is to be done.

It is possible to divide asset recovery into a number of different camps depending on the circumstances giving rise to the need for claiming back money or goods that rightfully belong elsewhere. 

The first of these areas include criminal asset recovery or confiscation, from fraudsters and other criminals who benefit from their crime such as drug dealers or those that deal in human trafficking.  Such asset recovery is carried out through the criminal justice system but can also involve civil asset recovery using both the civil and the criminal courts depending on the circumstances.

The next area is the asset tracing and recovery from fraudsters or persons or organisations involved in sharp business practice through the civil courts.  This involves civil litigation through the civil courts.

Last but not least is the recovery of assets from insolvent individuals and organisations.  This is recovery of assets after the fact, attempting to trace assets that should be available to creditors of the insolvent entity.  A fraud investigator investigating such losses must need to be aware of both criminal and civil considerations when dealing with bankruptcies, receiverships and liquidations.  An insolvency will normally be investigated under the provisions contained within the Insolvency Act 1986 which details of numerous criminal offences.

Whatever powers and provisions used to investigate and recover assets, there can be no better outcome to asset recovery than when negotiated settlemement and recovery is achieved.  This means that costly litigation is avoided and a fraudster may well avoid the most serious sanctions if he pays the money back. 

When deciding to investigate a loss due to fraudulent activity with a view to recovering assets an understanding of the likelihood of recovery must be obtained before substantial resources are expended on protracted analysis, interviews and other research.  This is to reduce the risk of the gamble taken as to whether or not an asset recovery action will be successeful.  It is quite easy for legal fees to reach six figures and more when asset freezing injunctions, search orders, financial investigations and legal counsel are employed by lawyers progressing a case.  This is why it is always a good idea to have a fraud response plan in place within any organisation (in addition to a fraud policy) which sets out how to act if a fraud or loss is suspected.  Provisions can be made for an immediate and totally confidential appraisal by a fraud expert in order that the correct decisions can be made at the start and costly mistakes avoided.

Responses are beginning to be drafted to the Legal Service Commission’s consultation paper on expert witness fees.  Bodies representing experts are busy collating what are probably replies that are so obvious that it would be foolish to think that the LSC had not already thought about them - but stranger things do happen all the time!

The general feeling is that if the fees are capped in an effort to shave 20% from the £100 million plus that is paid annually to publicly funded expert witnesses, the supply of expert witnesses willing to undertake publicly funded cases will reduce.  This would in turn reduce access to justice for defendants.

I do not understand why the expert witnesses must lose 20% – the lions share of funding cuts (when £100 million is only 0.5% of the Legal Aid annual budget).

Speaking as a forensic accountant we are always considered to be expensive.  Our hourly rates are around £40 to £250 (I am exlcuding the top tier of 10 largest firms of accountants) which includes all levels of staff.  A composite rate of around £150 would not be remarkable.  The proposals indicate that this composite rate will be more than halved, with a maximum hourly rate for a senior expert witness being £100.  I have examined these rates in detail (carrying out a year of part time academic research in 2006) and in my dissertation for my Masters Degree in Fraud Management concluded that forensic accountant’s rates were similar or less than the average cost of putting police officers on the beat or employing Criminal Prosecution Services case workers.

The LSC enjoys a discount of some 20% on average of the rates paid to expert witnesses undertaking privately funded work – because the LSC holds a monopoly and is able to reduce market rates.

There are many ways that the LSC could reduce its spend without impacting on the essential service provided by experts to the criminal justice system (I will save for a future post the reasons why the spend on experts should be increased!).  A couple of these are:

1. Introduce an initial outline “investigative” report that is used by parties to negotiate – reduce the need for full blown forensic reports.  (My Masters research indicated that this could be an independant “joint” report though this would not be received well by criminal defence lawyers).

2. Early involvement of the expert can save money in the long run – this is one of my hobby horses.  Very often I am instructed at the last minute by a desperate party clutching at straws and not really needed.

3. Better instructions to experts – very often the lawyers are just going through the motions – dotting the “i”s.  They do not know what they want and are hoping for a silver bullet (smoking gun?).  In these cases an early joint report would assist.

For my part the funding situation is one set to cause changes in the criminal fraud defence market place and therefor will be revisited in my diary blog many more times in the future!

Mark Jenner