England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT READING
HER HONOUR JUDGE SMITH

		Royal Courts of Justice Strand, London, WC2A 2LL
		2 March 2007

Lord Justice Pill:

1. On 8 December 2005 in the Crown Court at Reading before Her Honour Judge Smith and a jury, Anthony Frederick Welcher, Barry Alexander Simpson and Roger Harper were each convicted of an offence of conspiracy to corrupt (Count 1) and an offence of conspiracy to defraud (Count 2). Other counts were ordered to remain on the file.
2. On 9 December 2005, Welcher was sentenced to three years imprisonment on Count 1 and four years six months imprisonment concurrent on Count 2, Simpson to four years imprisonment on Count 1 and six years six months imprisonment concurrent on Count 2 and Harper to four years imprisonment on Count 1 and six years and six months imprisonment concurrent on Count 2. A confiscation hearing with respect to all three men has been fixed for 7 July 2007.
3. A co-accused Georgina Maria Welcher, the wife of Anthony Welcher, was convicted on Count 1 and sentenced to fifteen months imprisonment. She was acquitted on Count 2. With respect to another co-defendant, Philip Ronald Gray, the jury could not agree either on Count 1 or Count 2 and were discharged from giving verdicts.
4. Welcher appeals against conviction and Simpson and Harper appeal against sentence, each with leave of the single judge.
5. Count 1 alleged that the accused had from January 1991 until June 2001 conspired together that Simpson and Harper should corruptly give, and Gray, Welcher and Mrs Welcher should corruptly accept, or obtain, gifts or consideration, by way of cash, items of value and services, as inducements or rewards for showing favour to Ironfirm Ltd, trading as Excel Engineering ("Excel"), Simpson and Harper in relation to the business of Mars UK Limited ("Mars"). Count 2 (originally Count 3) alleged that during the same period the accused conspired together to defraud Mars.
6. In each count, particulars were given. Those on Count 1 were:

(i) The placing of orders by Mars with Excel;

(ii) The authorising of payments to Excel for work done;

(iii) The authorising of payments to Excel for work not done;

(iv) The authorising of overpayments to Excel.

The particulars on Count 2 were:

(i) Issuing purchase orders on behalf of Mars to Excel for work which was not required and/or was not done and/or provided for excessive charges to Mars;

(ii) Submitting invoices for such work;

(iii) Authorising payments on account of such invoices;

(iv) Procuring that Mars through payments of inflated invoices, provided funds for such payments and such gifts [that is payments and gifts to Welcher and Gray].

7. Simpson and Harper were the sole directors of Excel, a limited company which specialised in precision engineering work and had been set up by Harper's father. It had enjoyed a good reputation in the engineering world. In general terms, Simpson was the engineer and Harper the accountant. Welcher and Gray were employed by Mars at premises on Slough Trading Estate, Welcher since 1974. He became an engineering technician with responsibility for running the company's confectionary lines. The confectionary lines were in constant use and required both regular maintenance and urgent repairs either by internal staff or by external contractors such as Excel. He also set up a consultancy business, called GW Designs, which he operated from his home with the help of his wife. Mrs Welcher was also wrongly recorded in the books of Excel as an employee of that company.
8. Thus the two conspiracies overlapped in the identity of the alleged conspirators, the dates and, to a large extent, the conduct alleged. Welcher received bribes from Simpson and Harper in return for placing Mars' works orders with Excel, and authorising excessive or bogus payments from Mars to Excel. The corruption was in the issue of purchase orders, excessive payments for work done and payments for work not done. A stage was reached when bribes were marked as extras on the documentation so that Mars were paying for the sums paid to its own employees as bribes. It was also alleged that GW Designs was a ghost sub-contractor whose false invoices were also used to defraud Mars.
9. We have considered the gain to the appellants only insofar as it is necessary to decide the issues before this court at this time. Confiscation proceedings are to follow and there is also a civil action against them arising out of the sale of the business. It is accepted on behalf of Harper and Simpson that the gain to them was, on any view, and taking them together, £3,000,000. (We have not heard the prosecution on the subject.) In addition to cash, (alleged to be in the region of £½million) Welcher received a conservatory and summer house for his home, power tools, electrical parts and a go-kart for his son on which Excel had done engineering work.
10. In January and February 2002, Mr M Carabok, Chief Engineer at Mars, conducted disciplinary interviews with Welcher concerning allegations of fraudulent receipt of goods and services from Excel and theft from Mars. Welcher denied the allegations and gave explanations. The prosecution sought to call evidence of the interviews at the trial. On 28 February 2002, Welcher was dismissed by Mars for gross misconduct. The homes of the accused were searched on 4 December 2002 and computers and documents were seized.
11. Welcher was interviewed by the police in 2003 and 2004 and denied the offences. His explanations at interview were substantially consistent with those he gave in evidence at the trial but inconsistent with those he gave when interviewed by Mr Carabok.
12. Detailed explanation for his receipt of cash and other benefits were given by Welcher in the course of his evidence. He claimed that work orders to Excel had all been approved by his managers. He could only authorise orders himself for short periods in 1997 and 2001. GW Designs worked largely for Excel but was used for legitimate purposes. The need to keep the confectionary lines running meant that there was a cross use of Mars funds between budgets. He signed off work only if he was satisfied that it was done. He had ordered tools through Excel when it was necessary because his budget had run out. His managers approved of his behaviour. Some of what purported to be his signatures writing-off work had been forged. Some benefits he had received from Excel were in lieu of money owed by Excel for work done by GW Designs. He did not know why Excel's records showed receipt of sales commissions by him.
13. The trial lasted for about two and a half months and the records put in evidence were analysed in detail. It was alleged that there was a bogus code series known as the 70000 series. Other witnesses involved in similar corrupt arrangements involving Mars were called. It was also alleged that invoices on the 9000 series were from ghost contractors linked to Mars employees.
14. Harper and Simpson also gave evidence. They differed from each other in important respects. Simpson denied knowledge of the alleged payments and said he was not involved with the accounts. Harper said that both Welcher and Mrs Welcher had worked for Excel, she as a typist and he as GW Designs. The 70000 separate series was introduced at the request of Simpson. It was not designed to disguise dishonesty and corruption. The reason parts of the record were expunged from the computer was to make more space. What appeared to be ghost invoices, he said, were payments to sub-contractors in cash. He accepted that sales commissions were paid by Excel to Welcher and Gray, and tax on their behalf. They were paid consultants.
15. On behalf of Welcher, Mr Cameron QC submits that the judge was wrong to admit in evidence disciplinary interviews conducted by Mr Carabok of Mars, his senior line manager, on the ground that he was acting under a duty to investigate offences within the meaning of Section 67(9) of the Police and Criminal Evidence Act 1984 ("the 1984 Act"). Section 67(9) provides:

"Persons other than police officers who are charged with the duty of investigating offences or charging offenders shall in the discharge of that duty have regard to any relevant provisions of … a code ".

Reliance is also placed on Section 67 (11):

"In all criminal and civil proceedings any … code shall be admissible in evidence and if any provision of … a code appears to the court or tribunal conducting the proceedings to be relevant to any question arising in the proceedings it shall be taken into account in determining that question".

16. The interviews were not conducted in accordance with code C: the appellant was not cautioned and was not offered or allowed legal advice. Further, there was an absence of disclosure of documents before and during the interview: there was no mention of interviews being used in criminal proceedings. At the fourth interview, a threat which is alleged to have gone unsaid earlier was made expressly: "It affects your pension how you leave the business so it is important to offer you the opportunity to explain."
17. The investigation was made in accordance with Mars disciplinary policy. Mr Carabok was seeking to determine what recommendations to make to the company's disciplinary panel. The appellant was told of the nature of the allegations that had been made and they later appeared in counts of the indictment. The prosecution made use of the contents of the interviews at the trial. The appellant was cross-examined at length about them with a view to underlining their inconsistency with the contents of police interviews and evidence at the hearing and thereby discrediting him.
18. In her ruling on 28 September 2005, the judge stated that Mr Carabok was not charged with the duty of investigating offences within the meaning of 67(9). Further, the judge held that admission of the evidence would not have such an adverse affect on the fairness of proceedings that it ought not be admitted. The appellant was not cajoled into giving the answers he gave.
19. Mr Cameron relies on the case of Twaites [1991] 92 Cr App R 106 which establishes that "commercial" investigators may be covered by 67(9) if and insofar as they were charged with the duty to investigate offences. Reference is also made to Smith [1994] Cr App R 233 where the managing director of a bank was interviewed by R acting on behalf of the Bank of England who had statutory powers to supervise the bank. It was held in this court that R's duties "fell well short of a duty to investigate offences". However, the interview was excluded under Section 78(1) of the 1984 Act on the ground that whereas the interview had been set up to enable R to assess the impact on the market of a liquidity problem the bank had, R questioned the defendant and put it to him that he had knowingly entered into fraudulent transactions.
20. For the prosecution, Mr Farrer QC submits that Mr Carabok's duty was limited to reporting to a Mars disciplinary panel as to whether the appellant should be dismissed from his employment. Unlike the case of Twaites, there had been no earlier police interviews under caution. Mr Carabok's duty was not to investigate offences; it was, on behalf of the company, to investigate the appellant's conduct as an employee. That was a necessary part of the employer/employee relationship. If matters did proceed to a criminal trial, it was not unfair for the jury to know what was said at such interviews.
21. In my judgment, in the circumstances of this case, the judge was entitled to admit the evidence. Mr Carabok was not under a duty of investigating offences and fairness did not require the exclusion of the interviews. The reason given for the falsity of the explanations in interview was that the appellant was trying to protect his pension. That reason can be, and was, advanced before the jury for their consideration but, true or false, it does not require the exclusion of the evidence. Clarke LJ in Gill [2004] 1 Cr App R 20, when considering the safeguards provided by a Code stated, at paragraph 46, that their principal purpose is to ensure, as far as possible, that interviewees do not make admissions unless they wish to do so and are aware of the consequences. Clarke LJ added:

"We do not think that the principal purpose of the code is to prevent interviewees from telling lies".

Those interviews were properly admitted.

22. The second ground of appeal is that the jury were insufficiently directed in the summing-up upon the status, relevance and effect of the Excel records. They were claimed to have recorded illicit payments by Excel to Mars employees. Two former Mars employees, Mr Brench and Mr Soroko, admitted in evidence that they had received illicit money from Excel. They did nevertheless strongly dispute that the Excel records accurately recorded what they had received. These records had not been seen at the material times by the appellant.
23. The submission is that such lack of accuracy weakened the case against the appellant and the issue needed to be identified and highlighted in the context of his case. It is accepted that the issue was drawn to the attention of the jury but that was in the context of the case of the co-defendant Gray and not of the appellant. The point was expressly put, on the appellant's behalf, to the judge when further submissions were permitted in the course of summing-up. The jury's disagreement in Gray's case further demonstrated the relevance of the accuracy of the records.
24. The court was invited to consider the spreadsheets, prepared for the use of the jury, showing invoices and payments made. There was scope for argument as to the accuracy of some of the records. That issue was important to the case of Gray. However, in the case of the appellant the issue was of limited significance. He admitted a high proportion of the receipts recorded under the 9060 code, both cheques and benefits in kind. His defence was that payments were made for work and services rendered for the sums received. We see no merit in this ground.
25. The third ground of appeal is that there was such lack of structure in the summing-up that the verdicts are unsafe. The trial had commenced on 27 September 2005. Summing-up commenced in late November. The judge produced for counsel a draft of the directions she proposed to give at the beginning of the summing-up and no complaint is made about those initial directions. Then over several days, the judge summarised the evidence in great detail.
26. The submission is that the summing-up was fatally flawed in that the issues concerning each defendant needed to be identified and the cases for the prosecution and the defence put into the context of the relevant evidence. A "drawing together of the strings" was necessary, it is submitted. This should have happened in the course of the summing-up but was capable of remedy at the end had a thorough rescue attempt been launched.
27. Late on 1 December 2005, the judge told the jury that they would commence their deliberations on the following morning. For the prosecution, Mr Farrer requested the opportunity for counsel to meet the following morning to discuss matters. When asked why, Mr Farrer stated:

"Yes, we are for the Crown gravely concerned that Your Honour's summing-up has not enabled the jury to focus on the issues in this case, with great respect. I was going to put the matter I hope slightly more gracefully, but I am asked to put it shortly and I do."

28. In addition to submissions on behalf of the prosecution, the judge received detailed written submissions from Mr Cameron, on behalf of the appellant, under the headings "Facts" and "Issues in the Case", the second subject being divided into sub-sections. The judge considered the submissions over the weekend and on Monday 5 December gave a further series of directions in relation to each of the defendants, which cover about 8 pages of transcript.
29. Mr Cameron submits that rescue was not achieved. Its achievement would have required a further day's summing-up devoting about an hour to the case of each defendant and including an analysis of the relevant evidence in the context of issues raised and submissions made. What happened was not enough.
30. For the prosecution, Mr Farrer accepts that the summing-up was much too long in its recitation of the evidence. It needed a clear concise statement of the questions which the jury had to consider. These were essentially simple and the jury needed to be reminded of that. The critical point in the appellant's case was whether his explanations as to the circumstance in which cash and benefits were received by him were or may have been true.
31. Mr Farrer does not concede that, without the further 5 December directions, verdicts would have been susceptible to challenge but he submits that in the appellant's case, as in the other cases, the issues were accurately and sufficiently stated in the further direction of 5 December. A further day's summing-up would not have been appropriate or helpful.
32. The case against the appellant was a strong one. It included evidence of large, frequent and admitted payments by Excel to GW Designs, the appellant's consultancy, payments to the appellant over several years purportedly as salary or sales commission, though the appellant had acted in neither role for Excel. There were payments to the appellant's wife and his elderly mother, purportedly as salary as wages and treated by Excel as payments to the appellant. It was admitted that goods were delivered and facilities installed at the appellant's home at Excel's expense. The appellant lied about his conduct when interviewed for disciplinary purposes. This evidence was fully presented and thoroughly challenged. The jury were reminded of it in great detail in the summing-up.
33. Having considered the directions given at the beginning and the end of the summing-up, we accept the submissions of Mr Farrer. The further directions on 5 December stated the essential features of the appellant's case and posed the questions which arose. The jury were in a position to give proper consideration to the issues which arose in the appellant's case and there is no reason to doubt that they did so. Doubt has not been cast on the safety of the verdicts.
34. We have considered the grounds of appeal separately and cumulatively. They have not created doubt about the safety of the verdicts. The appeals must be dismissed.

SENTENCE

35. Simpson, now 64 years old, and Harper, now 60 years old, appeal against sentence. As already stated, it is accepted that the benefits they together received were worth at least £3million. Surprise was expressed by defence counsel that, having regard to the way the case had been run, the longer sentence was on the conspiracy to defraud. However, it is not claimed that the judge's approach was erroneous in this respect; clearly the fraud itself was aggravated by its association with corruption.
36. When sentencing the appellants, the judge referred to the very considerable sums corruptly given and received and to the persistence of the corruption for over a decade. The sheer scale of the operation, the judge said, was motivated by greed. The Judge acknowledged that both Appellants were of good character and that the corruption was commercial and not administrative, by which we assume the judge meant that it did not concern public servants or public funds. In the present context, we do not need to analyse whether that distinction is a significant one. The judge referred to the considerable personal mitigation available to both appellants and Mr Forster QC for Simpson and Mr Bright QC for Harper have addressed the court about it.
37. The judge added that the appellants were able to inflate the value of their company by the fraud. In the event, the company has been sold and Harper retired to Guernsey. The civil action arises out of the sale of the company. Counsel referred to evidence of a pre-existing culture of corruption in Mars' engineering department and the judge appears to have acknowledged its existence.
38. It is submitted that the sentences were manifestly excessive. Both men are now in their 60's. Each has had a long and successful marriage and was of positive good character. Having regard to the confiscation proceedings, they would come out of prison without assets and were likely to spend the rest of their lives in poverty, or at least in what the Judge described as "very reduced circumstances". Simpson was described as a broken man. Prison reports are very favourable, those in relation to Simpson being particularly glowing.
39. Mr Bright refers to the maximum sentence for theft now being one of only seven years, having been reduced from ten years. He submits that the substantial personal mitigation requires a sentence lower than six and a half years in this case. We do not consider the reduction from ten to seven years to be material in present circumstances. The maximum sentence for conspiracy to defraud is ten years (Criminal Justice Act 1987, Section 12(3)). Moreover, in Clark [1998] 2 Crim App R 137, decided after that reduction, the need for sentences of ten years or more for theft, by use of consecutive sentences if appropriate, was acknowledged, in cases involving theft of over £1million.
40. We acknowledge, as did the Judge, the substantial personal mitigation available to both Appellants. However, the Judge appropriately referred to the size of the sums obtained, the serious corruption involved, the duration of the fraud and the motivation for it. In our judgment, the sentences cannot be faulted and the appeals are dismissed.