|EWCA Rules: Non-criminal Property Cannot be Laundered (I)|
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In the England and Wales Court of Appeal (Criminal Division) on appeal from the Crown Court at Leeds
LORD JUSTICE MOORE-BICK
Respondent: THE QUEEN
Appellant: MICHAEL GEARY
Mr. Dafydd Enoch Q.C. (instructed by Clarion Solicitors Ltd) for the appellant
Mr. Andrew Robertson Q.C. and Mr. Andrew West (instructed by Her Majesty's Revenue and Customs) for the respondent
Lord Justice Moore-Bick:
1. On 7th October 2009 in the Crown Court at Leeds before the Recorder of Leeds the appellant pleaded guilty on re-arraignment to entering into or becoming concerned in an arrangement which facilitated the acquisition, retention, use or control of criminal property for or on behalf of another contrary to section 328(1) of the Proceeds of Crime Act 2002 ("the Act"). On 20th November 2009 he was sentenced by the Recorder to 22 months' imprisonment.
2. He now appeals against conviction and sentence by leave of the single judge.
3. The conviction arises out of the part played by the appellant in an extensive fraud perpetrated by an Operations Manager of the Norwich Union Bank in York, John Taylor. There were two limbs to the fraud. Under the first Taylor used computer identities and passwords issued to himself and other employees of the bank to reactivate dormant accounts and steal the funds in them. He transferred the money to a friend of his, a serving police officer, Stephen Spellacy, who, using the false name "Hamilton", laundered it by buying high quality watches and gold coins which could easily be converted into cash and which he later sold.
4. Taylor's fraudulent activity came to light as a result of the second limb, which involved the diversion of £1,130,369 from one of Norwich Union's trading accounts to accounts operated or controlled by his Taylor's accomplices. One of the co-accused, Keith Swift, took charge of finding willing recipients who would help to launder the proceeds. After an attempt to transfer the funds into the account of his girlfriend failed, the money was transferred to the account of another of the co-defendants, Peter Harrington, who in turn passed various amounts to others, including the appellant. Each of the final recipients retained part of the money as payment for his services. The appellant received a total of over £123,000, of which he retained a little over £5,000.
5. The appellant was charged on count of the indictment with an offence contrary to section 328(1) of the Act. The particulars of offence were that he had "entered into or become concerned in an arrangement which [he] knew or suspected facilitated . . . the acquisition, retention, use or control of criminal property, namely a credit balance of £123,600 belonging to Aviva plc/Norwich Union, by or on behalf of another person".
6. In his defence case statement the appellant said that he had been approached by Harrington, who had told him that he was about to become involved in divorce proceedings and had asked him to help him hide money from Mrs. Harrington. The appellant said that he had agreed to help Harrington by accepting the money into his account, spending some of it and then within a short period of time returning the balance together with the goods he had purchased. The purpose, obviously, was to reduce the amount Harrington would have to pay his wife in connection with the divorce. However, he said Harrington had misled him about the reason for wanting to transfer the funds because in reality there had been no divorce proceedings, either pending or in contemplation. He maintained that he was not guilty of the offence charged.
7. There was some discussion between the Crown and the defence about whether the case put forward by the appellant amounted to a defence in law. The Crown was willing to accept a plea to the count as charged because it took the view that the appellant was guilty of the offence even on the facts as he said he had believed them to be. However, the defence took the view that if the appellant's account were accepted, he was not guilty. In the end on the second day of the trial the defence asked the judge to indicate how he would direct the jury and in response the judge said that in his view the facts as alleged by the appellant did not provide him with a defence. The appellant thereupon pleaded guilty on the following basis:
"I am Michael Geary. I plead guilty to the charges against me on the following basis.
I know Peter Harrington as a friend and as a property developer. In December 2007 Peter Harrington explained that he had matrimonial problems and wished to ensure that his wife did not acquire his assets. Harrington paid me £71,300 on 14th December 2007. Harrington had the majority of the money returned in cash but certain amounts were used to purchase gifts for Harrington, e.g. a mobile phone, a Play Station 3 etc.
On January 2nd a further £52,300 was paid by Harrington and £45,000 cash returned the next day.
In total I received £123,600 from Harrington and paid back £118,278.94
At no time did I believe the monies were the result of criminal activity, but accept that by hiding monies when court proceedings were, as I was told, and believed due to commence, I am guilty of the offence as charged."
8. The grounds of appeal are that the appellant's conviction is unsafe because, on the facts as he alleged them to be and as they were set out in his basis of plea, he was not guilty of the offence with which he was charged.
9. Before turning to consider the arguments it may be helpful to refer briefly to the provisions of the Act which are of most relevance to this appeal. Section 328(1), under which the appellant was charged, provides as follows:
"A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person."
10. "Criminal property" is defined for these purposes in section 340, the material parts of which provide as follows:
". . .
(2) Criminal conduct is conduct which—
(a) Constitutes an offence in any part of the United Kingdom. . .
(3) Property is criminal property if—
(a) It constitutes a person's benefit from criminal conduct . . . and
(b) The alleged offender knows or suspects that it constitutes or represents such a benefit.. . .
(5) A person benefits from conduct if he obtains property as a result of or in connection with the conduct.. . .
(10) . . .
(a) Property is obtained by a person if he obtains an interest in it."
11. It follows from these provisions that property becomes criminal property only when a person obtains an interest in it as a result of, or in connection with, criminal conduct, that is, conduct which constitutes a criminal offence.
12. Mr. Enoch Q.C., who did not appear on behalf of the appellant at trial, submitted that on a natural reading, section 328(1) is concerned with arrangements which facilitate the acquisition, retention, use or control of property which has already acquired a criminal characteristic as a result of someone's having obtained an interest in it as a result of, or in connection with, criminal conduct. To put it in more colloquial terms, the section is directed at arrangements which make it easier for someone else to acquire, retain, use or control the fruits of crime. However, if the facts had been as the appellant believed them to be, the money Harrington asked him to look after would not have represented the fruits of crime. It would not have been criminal property because Harrington would not have obtained it as a result of, or in connection with, criminal conduct. The appellant would have had no reason to think or suspect that he had, and did not in fact do so. Accordingly, the mental element necessary for an offence contrary to section 328(1) was not present.
13. However, on behalf of the Crown Mr. Robertson Q.C. submitted that, on the facts as the appellant understood them to be, the money in question was or became criminal property when it reached his hands, because it was transferred to him pursuant to an agreement whose object was to defraud Mrs. Harrington and mislead the court. That involved a conspiracy to pervert the course of justice and the appellant obtained an interest in the money, and therefore a benefit, as a result of, or in connection with, criminal conduct. Alternatively, he submitted that the appellant committed the offence when he repaid the money to Harrington.
14. It was common ground that the actus reus of the offence was established in this case. The money which Harrington transferred to the appellant was criminal property, having been stolen by Taylor from the bank and transferred to Harrington, and the arrangement which the appellant entered into with Harrington facilitated its retention, use or control by Harrington. The only question is whether the appellant had the necessary mens rea to render him guilty. It is important to keep that firmly in mind because much of the argument was directed to a different question, namely, whether the facts set out in the appellant's basis of plea constituted the actus reus of an offence (though not the offence described in the indictment) under section 328(1). As it turned out, that became an important part of the Crown's argument.
15. There are two aspects to the mental element of the offence created by section 328(1): first, the defendant must intentionally or recklessly enter into an arrangement which facilitates the acquisition, retention etc. of criminal property by or on behalf of another person; second, he must know or suspect that the arrangement will have that effect. It follows that he must know or suspect that the property to which the arrangement relates is criminal property, that is, property that has been obtained as a result of, or in connection with, crime.
16. On the face of it the latter requirement is not satisfied in this case, not least because one of the facts set out in the basis of plea was that at no time did the appellant believe that the money he received from Harrington was the result of criminal activity. The arrangement was that the appellant would accept the money, hold it for a time and then return it to Harrington. That arrangement applied to money which, as far as the appellant was aware, was money which Harrington had obtained lawfully. The object of the arrangement, as understood by the appellant, may have been unlawful, but the arrangement was to use lawfully acquired money in an unlawful way; it was not to deal with money that had been acquired unlawfully.
17. Mr. Robertson sought to overcome that objection in two ways. He submitted that if the money had been transferred by Harrington to the appellant pursuant to a conspiracy to pervert the course of justice it would have become criminal property as soon as, or even before, it reached the appellant and that therefore the arrangement, viewed as a whole, was one that facilitated the retention, use or control of criminal property by Harrington. Alternatively, he submitted that the fact that the money had been transferred pursuant to a conspiracy to pervert the course of justice would have meant that it became criminal property in the hands of the appellant (having been acquired by him in connection with criminal conduct), that the appellant knew that, and that by retaining it and later returning it the appellant would have entered into or became concerned in an arrangement to facilitate its use or control by Harrington.
18. Mr. Robertson's submissions raise two important questions, each of which concerns one aspect of the actus reus of the offence created by section 328(1): first, whether it is necessary for the property which is the subject of the arrangement to be criminal property at the time when the arrangement attaches to it; second, whether it is permissible for these purposes to separate out different aspects of the arrangement so that its implementation can be treated as both criminalising the property and then as facilitating its retention, use or control in its newly acquired criminal character, thus constituting the offence. In due course it will be necessary to consider how these questions impinge on the question of mens rea, but since they are both of some importance and were fundamental to Mr. Robertson's argument we must first address them.
19. In our view the natural and ordinary meaning of section 328(1) is that the arrangement to which it refers must be one which relates to property which is criminal property at the time when the arrangement begins to operate on it. To say that it extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits. An arrangement relating to property which has an independent criminal object may, when carried out, render the subject matter criminal property, but it cannot properly be said that the arrangement applied to property that was already criminal property at the time it began to operate on it. Moreover, we do not accept that an arrangement of the kind under consideration in the present case can be separated into its component parts, each of which is then to be viewed as a separate arrangement. In this case there was but one arrangement, namely, that the appellant would receive money, hold it for a period and return it. To treat the holding and return as separate arrangements relating to property that had previously been received is artificial.
To be continue----
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Published on our website on Sept.10, 2010