Treasure hunt

With the Assets Recovery Agency planning to take litigation work in-house and closer to the investigators, some fear it may be repeating the errors of Customs & Excise. Mark Smulian reports

The consequences of a miscarriage of justice are always serious, and one of the bulwarks against it is the standard of proof ‘beyond reasonable doubt’ in criminal cases. In civil cases, the standard is lower and so, usually, are the likely consequences.

But in cases such as those brought by government bodies including Customs & Excise and the Assets Recovery Agency (ARA), there is the dangerous combination of a civil standard of proof, but drastic consequences for those on the losing end.

Customs is still grappling with the consequences of last year’s Butterfield report, which included a string of recommendations that followed the debacle of the abandoned London City Bond trials (see [2003] Gazette, 24 July, 5).

This called for the separation of the investigation and prosecution arms on the grounds that an over-cosy relationship had grown up that blurred the boundaries of the two.

Press advertisements last month sought a director for the new independent Customs prosecuting authority, who will work under the Attorney-General, Lord Goldsmith.

He said: ‘It is essential for our system of justice that prosecutors are visibly independent of investigating authorities, building strong cases and delivering robust prosecutions in co-operation with investigators but not under the direction of those investigators.’

‘Up to a point, Lord Goldsmith,’ say some of the fraud solicitors whose work brings them into contact with Customs and the ARA, the body set up to retrieve the proceeds of crime.

Customs is undergoing this split in its legal service and the whole organisation is about to be merged with the Inland Revenue, and so might best be described as in a state of flux.

It will also lose some legal staff to the Serious Organised Crime Agency, the establishment of which was announced in February by Home Secretary David Blunkett. This will deal with drug trafficking, people smuggling, major fraud and money laundering.

Meanwhile, the ARA is erecting a structure which less charitably inclined solicitors fear could replicate the problems that led in Customs to the London City Bond affair.

The ARA has since its inception last year used the Treasury Solicitors Department for its legal work, but now thinks it can save a large chunk of the £300,000 annual legal bill by taking this in-house (see [2004] Gazette, 10 June, 4). Indeed, the agency boasts of the benefits to come from co-locating its lawyers with its investigators.

This alarms Matthew Frankland, a partner at London-based fraud specialist firm Byrne & Partners, although he notes it is early days for the ARA and that the new structure at Customs is still bedding in.

‘It would be nice to think that the ARA will continue to run smoothly and that those who staff the legal department do so in the way you would expect from a responsible regulator,’ he says.

‘However, I am concerned about some of the bad habits from Customs & Excise finding their way into the ARA. If that old culture appears there, it would be disastrous.’

This is because of the question of the burden of proof being civil but the penalties in ARA cases being quasi-criminal, such as asset confiscation.

Mr Frankland says: ‘It is bad enough in criminal cases where the Crown faces a heavy burden of proof, but worse in civil procedures where the ARA only has to establish its case on the balance of probabilities.

‘If you have a criminal prosecutor who is not following the appropriate rules, then at least they still have to prove their case beyond reasonable doubt. You would therefore hope that the criminal justice system would provide some protection and that injustice would be avoided.

‘However, if the same failures are applied in a system where a regulator only has to meet the balance of probabilities, then the potential for injustice is enormous.’

He has considerable confidence in the Treasury Solicitors Department, with its ethos and working methods different from those of either the ARA or Customs.

In particular, he feels that the Treasury Solicitors is not possessed by the ‘end justifying the means’ culture, which Mr Frankland thinks was present in the unreformed Customs & Excise service.

‘There was an attitude of “He’s obviously guilty, so let’s not bother following all the disclosure rules”,’ he says.

The fraud specialist community was ‘pleased to see Customs get a good shake-up, but the initial satisfaction would be wiped away if we discovered that the same culture is imported into the ARA’, Mr Frankland adds.

‘I think there is more danger of that where you have a body that mixes investigation and prosecution as the ARA will do.’

However, he draws some optimism from the way that the senior management of the ARA has so far conducted itself, with an emphasis on efficient administration.

Stephen Parkinson: ARA should make greater use of private law firms Stephen Parkinson, a senior government barrister on a two-year secondment to London-based Kingsley Napley, sees less cause for alarm in the new ARA arrangement about the internal relationships involved, but wonders whether it can employ a litigation department of sufficient size to give it the expertise it will need. He also thinks the ARA has missed a trick in not making greater use of private law firms to advise it, since it could buy in the expertise needed as and when required rather than try to cover every eventuality from its own staff. ‘There is certainly a great advantage in using the Treasury Solicitors Department, as it brings independent judgement to an issue and enables the ARA to access the wider expertise of a large litigation department,’ he says. ‘I would sound a note of caution if they were going to a small litigation team in-house instead of the using the Treasury Solicitors Department.’ Mr Parkinson thinks the past problems at Customs & Excise were ones of internal culture and says he has ‘no reason to believe that that culture has become part of the ARA’. However, more open support for the ARA’s change comes from Keith Oliver, a senior partner at another London specialist fraud firm, Peters & Peters. ‘Anything that increases the efficiency and effectiveness of the quality of their work is to be encouraged,’ he says. ‘Why should a legal team employed internally necessarily be less efficient than the Treasury Solicitors Department? If it is a small team and colleagues are in close proximity [to investigators] and able to consult, it should work better.’ His firm does a great deal of work related to Customs and he believes ‘the lessons have been learnt’ from London City Bond and its consequences. ‘The ARA was set up to recover proceeds of crime and there need not be any blurring of boundaries so long as people observe proper professional standards,’ he says. This, it seems, the ARA is pledged to do. A spokeswoman says it had used the Treasury Solicitors Department in its early days but ‘it was always our plan that, as ARA’s experience grew, the role of Treasury Solicitors would lessen and it would be for ARA to deal with the litigation work. ‘The time has come to move away from the arrangements which are becoming less necessary now that the agency has been running for over a year.’ The Treasury Solicitors will still handle legal work where the ARA lacks expertise. Being new, the ARA has been able to develop from scratch ‘an open, accountable and new culture’, she says, ‘always acting with high standards of integrity, honesty and professionalism’. The agency says its investigators and lawyers clearly understand their different roles but work to a set of common values, while ‘co-location can help to ensure that the case is properly prepared from the start because the case investigator has access to their lawyers’. Depending on whether lawyers have an optimistic or pessimistic view based on their past experience, this will sound either like a solution or a problem. Mark Smulian is a freelance journalist