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Civil Forfeiture: Can the Outcome of SOCA v Turrall be Applied to Deprive Corrupt Foreign Public Officials of their Illicit Wealth?




by:
James Maton
Antonio Suarez-Martinez
Edwards Wildman Palmer LLP - London Office

 
November 25, 2013

Previously published on November 18, 2013

Introduction

Would it be possible to forfeit the assets of a foreign public official on the basis that they represent the proceeds of corruption, without being able to prove any precise corrupt transactions, and instead simply relying on an inexplicable disparity between the assets that have been located and known legitimate sources of wealth?

Some countries have the criminal offence of illicit enrichment[1] which might be applied to foreign public officials. However, this offence does not exist in England.  Instead, in England, criminal proceedings against foreign public officials could, and have been brought, for money laundering the proceeds of corrupt activities overseas.  A recent example of this was the prosecution of James Ibori, a Nigerian state governor, who pleaded guilty to ten counts of money laundering arising from corruption in Nigeria and was sentenced to serve thirteen years in prison by Southwark Crown Court.   Confiscation proceedings against his assets are ongoing.

The somewhat controversial decision of R v Anwoir may provide the legal basis for pursuing a money laundering prosecution where there is little direct evidence of the underlying corruption. The argument would be that the evidence of the circumstances in which property was handled or assets obtained “are such as to give rise to the irresistible inference that it can only be derived from crime (corruption)”. But the prosecution would have to meet the criminal standard of proving the case beyond all reasonable doubt, which would be difficult in the circumstances. That inference would be vulnerable to attack.

Alternatively, where the criminal route is not viable, civil mechanisms might provide a solution with better prospects of success. That might be a purely civil case brought by the victim state[2]. It might also be brought as a claim under forfeiture legislation (variously known as non-conviction based asset forfeiture, civil forfeiture or civil recovery). Many countries have given law enforcement agencies the power, in the absence of a criminal conviction, to bring such proceedings to forfeit the proceeds of crime. Those cases are usually determined in the civil not criminal courts, and on the balance of probabilities. In England, such cases are brought by law enforcement agencies under Part V of the Proceeds of Crime Act 2002 (“POCA”). The task of law enforcement is to prove that the assets claimed have been obtained by unlawful conduct. That is not confined to the assets which are the immediate consequence of the unlawful conduct, but also to assets which can be traced back to such assets, provided they have not been legitimately acquired by an innocent third party or where there is some other lawful break in the chain. 

The civil forfeiture case of the Serious Organised Crime Agency v Turrall was decided on 9 July 2013[3] and potentially provides greater scope and perhaps even appetite to rely on the Part V POCA regime to pursue corrupt assets. Mr Turrall was not represented by lawyers and did not appear, and cases decided on this basis should always be treated with particular caution. But some interesting points arise.

SOCA v Turrall

Mr Turrall was a man with a serious criminal history. He had 13 convictions for 30 offences over 3 decades.  His last conviction was in 1997.  However, SOCA put forward substantial evidence alleging that his offending had continued.

SOCA sought to forfeit various assets. These included properties, a BMW car, a personalised number plate, antique clocks and rugs, a series of watches and the proceeds of sale of a caravan. The Court accepted that it could infer all these assets were the proceeds of unlawful conduct from a number of matters:

  • Mr Turrall's longstanding and wide-ranging commitment to offending, particularly in relation to drugs and other offending designed to return illegal profits.
  • Direct links to cash seized that had subsequently been forfeited as the proceeds of crime, and the degree of drug contamination of those notes.
  • The use of a “land banking business” (itself unlawful) to launder funds.
  • The use of third parties, including family, to hide assets: this was consistent with money laundering methodologies.
  • A lack of known legitimate income from which the assets could have been purchased.
  • Real properties had been obtained fraudulently with inaccurate information about income, and that information did not match known declarations to the tax authorities.
  • Assets had been purchased with untraceable cash, the preferred tool for those who did not want an audit trail leading back to unlawful conduct.
  • Mr Turrall mounted no defence to the proceedings despite the fact that he must have been aware of the proceedings.

Here, the Court understandably put much weight on Mr Turrall's history of criminal behaviour and forfeitures. But ground (e), the lack of known legitimate income to account for the assets, is very interesting, albeit advanced in the context of the other matters that were listed. Here, Mr Turrall could point to little honest income.

Applicability of Turrall to corrupt public officials

Some senior public officials have or have had, quite legitimately, successful business careers before taking office (others, of course, have had successful ‘business careers‘ only after appointment or election victory). But a huge mismatch between earnings and assets, particularly foreign assets, is a regular feature of corruption cases. Often, an official with assets worthy of multi-millionaire business owners has been in public positions throughout their career.

As a firm, we have spent many thousands of hours fighting asset recovery cases. Whether we would advise bringing a case, whether a purely civil case or a civil forfeiture case, where the only evidence was an unexplained material mismatch between assets and income, depends on the particular factual matrix. It might be possible based on a general plea of corruption in public office or even on the basis of money laundering (as the predicate offence). After all, just how can a public official earning £x per year have assets that would take centuries to amass on that salary? But the context would be critical, and we would expect that context usually to include other circumstantial matters of significance. Foremost, perhaps, might be a failure to have declared the assets on mandatory asset declarations required of public officials.  That is most suspicious in itself (and often a criminal offence where such requirements exist), and particularly in conjunction with a meaningful mismatch between known income and assets. Conflicting explanations for the source of assets and wealth may also exist. For example, differing accounts may have been given to financial intermediaries or advisers, investigators and the media. Honest people can fully and consistently explain and evidence where substantial assets come from. Dishonest public officials have much more difficulty doing so.

There are relevant precedents in England in the context of private civil proceedings. For example, Edwards Wildman acted for the Government of Nigeria in civil proceedings against Deprieye Alamieyesegha, former Governor of Bayelsa State in Nigeria, alleging various properties acquired by him in the UK represented the proceeds of corruption. Summary judgment was eventually obtained against him.  By then, Mr Alamieyesegha had pleaded guilty to certain money laundering offences in Nigeria, and no longer had a credible defence to the English proceedings. There was also more direct evidence that some assets had been obtained through corruption, and that was an important part of the context.  Nevertheless, various circumstantial evidence was relied on in relation to some of the claims that were advanced by the Nigerian Government, including the following matters:

  • the persistent breaches by Mr Alamieyeseigha of the constitutional prohibition against Nigerian state governors maintaining or operating bank accounts in any country outside Nigeria;
  • the fact those breaches continued even after steps had been taken to bring disciplinary proceedings against Mr Alamieyeseigha for contravention of that prohibition;
  • the scale of the discrepancy between Mr Alamieyeseigha’s declared assets and income and his undeclared assets;
  • his use of offshore companies and bank accounts in Cyprus and trusts in the Bahamas;
  • the receipt of funds from third parties for the purchases of properties in London;
  • the pattern of receipts in bank accounts which was entirely consistent with the proceeds of theft or corruption and very difficult to reconcile with any ordinary business operation;
  • the lack of any legitimate explanation for  Mr Alamieyeseigha to hold £920,000 in cash at one of his properties
  • the absence of any plausible, legitimate means for Mr. Alamieyeseigha to acquire assets outside Nigeria on such a scale whilst properly discharging his duties as Governor and complying with his constitutional obligation not to hold any other executive office or paid employment in any capacity whatsoever.

Mr Alamieyeseigha was not represented in Court at the successful summary judgment hearing. But he had earlier sought to defend the proceedings, and those defences were considered by the Court. Chief Alamieyeseigha asserted, for example, that the source of the bulk of the funds in one of the bank accounts was from his re-election campaign fund in 2003 which had an unused surplus, that a substantial property was bought for him by a friend and that other assets derived from undocumented property dealings. The Judge rejected his account, and other defence arguments. It would be fair to say Mr Alamieyeseigha’s guilty plea in the Nigerian criminal proceedings weighed heavily against him. But Mr Justice Morgan did nevertheless carry out his own analysis of Mr Alamieyeseigha’s various defences as to the legitimacy of the funds and found his explanations were “implausible”.

The Alamieyeseigha case raises a further interesting point. A Government or its law enforcement agency would have to decide whether unexplained wealth justifies an asset recovery case against a public official, whether brought as a purely civil case or brought as a civil forfeiture case. The public official would then have to decide whether and how to defend that case.  He or she would also have obligations to disclose documents relevant to how the assets have been obtained.  Documents might also be obtained from third parties. The inference that assets have a corrupt origin will strengthen if the public official is unable to give a credible explanation for assets, or if he or she fails without credible justification to provide supporting documents. But getting to the disclosure stage of a case might mean having first to survive a strike-out application made on the basis that a claim has no reasonable prospect of success, although one would expect any such application to contain some evidence by the defendant of the source of his/her wealth. These factors need to be considered before launching any proceedings.

Final thoughts

The Turrall case is potentially helpful as a precedent for recovering corrupt assets through civil mechanisms. However, the case should probably be treated with caution as a precedent, particularly as it was undefended. It is of interest because the prosecution did not specify the underlying criminality from which all of the assets were said to derive. The inability to prove a link is often perceived as a barrier to civil forfeiture (although there are due process reasons why that is the case). Turrall is quite fact specific because of the reliance placed on the historic criminal conduct of the defendant, a factor unlikely to exist in relation to a public official. 

In terms of civil forfeiture, the present regime in England under POCA requires a prosecutor to show that the property was obtained through unlawful conduct and by broadly specifying the particular type of unlawful conduct, a position upheld in the case of R v Jeffrey David Green[4]. So it is debatable whether a significant discrepancy between the actual assets of a public official and declared assets is sufficient alone to get home on civil forfeiture[5], or to launch civil proceedings. The UK Attorney-General’s Guidance on prosecutors’ asset recovery powers emphasises this point (with regard to civil forfeiture):

“To prove that property was obtained through unlawful conduct, it is not necessary to prove the commission of a particular criminal offence by a particular person on a particular occasion. It is sufficient to prove that the property was obtained through offending of a particular type (drug trafficking, fraud etc). This cannot be done solely on the basis that the person holding the property has no identifiable lawful income to warrant their lifestyle. However, the absence of any evidence from the person to explain their lifestyle, or the giving of a false explanation, allows the court to infer that the source of the income was unlawful.”

Against this statement, it would be necessary to couple the absence of or lack of cogent evidence of the accused to explain their lifestyle with other evidence. That could include evidence, for example, as to how the assets were handled to support an allegation of money laundering i.e. through the use of intermediaries, corporate vehicles and trusts with no real function other than to hide the real owner; inconsistent explanations about wealth to financial institutions and domestic constituencies; and false asset and income declarations. Together that could provide sufficient evidence to support a civil forfeiture claim. But it will certainly be far more difficult if the assets cannot be linked to a particular episode of corrupt behaviour, although in theory a general allegation of corruption might be sufficient. Civil proceedings may have greater scope to avoid that difficulty. 

Using civil recovery mechanisms is by no means straightforward where evidence is circumstantial.   But in circumstances where criminal mechanisms are deemed too difficult to utilise to punish corrupt public officials it is time for those civil mechanisms that are available to be considered as tools to deprive wrongdoers of their illicit gains.



[1] Illicit enrichment being defined as the accumulation of unexplained wealth by a public official. This offence penalises public officials for possessing or accumulating wealth disproportionate to their known lawful income if they cannot provide a satisfactory explanation.
[2] See, for example, our Guidance Notes “Civil and criminal mechanisms to recover the proceeds of corruption laundered to foreign states” available at http://www.anticorruptionlaw.com/blog.aspx?entry=4757 and “Recovering corruptly acquired assets laundered to or through the United Kingdom” available at http://www.anticorruptionlaw.com/blog.aspx?entry=4756 
[3] [2013] EWHC 2256.
[4] [2005] EWHC 3168 (Admin) where the Court rejected the now obsolete Asset Recovery Agency’s position that a claim for civil recovery can be determined on the basis of conduct in relation to property without the identification of any particular unlawful conduct.
[5] Not unless or until the UK introduces an offence of illicit enrichment.

 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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