QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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THE SERIOUS ORGANISED CRIME AGENCY |
Claimant |
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- and - HAKKI YAMAN NAMLI TOPINVEST HOLDING INTERNATIONAL LIMITED (a company incorporated in the BVI) |
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Mr A Trollope QC and Mr K Talbot (instructed by Mackrell Turner Garrett) for the Defendants
Hearing dates: 11th 24th April 2013
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Crown Copyright ©
Mr Justice Males :
Introduction
(1) Mr Namli has at all material times been involved in serious financial crime on a large scale in several jurisdictions, making use of First Merchant Bank OSH Limited ("FMB"), a bank which he owned and controlled which was incorporated in that part of Cyprus known as the Turkish Republic of Northern Cyprus ("TRNC"), the criminal activity in question consisting of the issuing of fraudulent banking instruments, together with money-laundering of the proceeds of crime; and that(2) funds consisting of six credits to Topinvest's account at Coutts made between 12 March 1999 and 4 February 2005 ("Credits 1 to 6"), together with subsequent profits thereon, were obtained through Mr Namli's unlawful conduct. This conclusion is said to be justified on two bases: first, that the unlawful nature of the business conducted by FMB, together with Mr Namli's failure to identify a legitimate source for the funds, justifies the conclusion that they represent the fruits of such unlawful conduct; and second, that any rate five out of the six credits can be shown to be specifically referable to particular criminal activities in which Mr Namli was involved.
(1) Credit 1: US $1 million received on 12 March 1999 from an account held by FMB at ABN-AMRO Bank in New York;(2) Credit 2: US $1 million received on 14 December 2001 from Deutsche Bank, Frankfurt, by order of Libra Bank, Bucharest, another bank owned and controlled by Mr Namli;
(3) Credit 3: US$1.2 million received on 6 March 2002 from an account at Libra Bank in the name of United Systems Limited, a BVI company owned and controlled by Mr Namli;
(4) Credit 4: US $550,000 received on 16 September 2002 from an unspecified account at Libra Bank;
(5) Credit 5: US $697,500 received on 13 April 2004 from an investment account held at Deutsche Bank, Geneva in the name of Mr Namli; and
(6) Credit 6: US $1.41 million received on 4 February 2005 from an investment account at Banque Ferrier Lullin (Luxembourg) SA (now UBS Luxembourg) held in the name of Stuart & Associates Corp, another entity owned and controlled by Mr Namli.
(1) The German fraud: In October 1987, using a false identity, Mr Namli fraudulently obtained the sum of DM 411,500 from ten different German branches of Dresdner Bank AG on the strength of false letters of credit purportedly issued by the Central Bank of the Republic of Turkey. A civil judgment in default was entered against Mr Namli in Germany. That judgment was subsequently registered in Turkey and was satisfied by Mr Namli.(2) The English frauds: Between at least 1996 and 1998, Mr Namli was involved in a series of frauds in England whereby FMB issued what are said to have been fraudulent banking instruments to clients of three English firms of solicitors. An investigation by the Serious Fraud Office led to the prosecution of the solicitors involved and others, but the prosecution collapsed due to the inadvertent disclosure of sensitive material by the prosecution to the defence. However, there were disciplinary proceedings before the Solicitors Disciplinary Tribunal, which included the making of findings of fraud on the part of the solicitors. SOCA contends that part of Credit 6 represents the proceeds of these English frauds.
(3) The Lepkanich fraud: In 1997, for a fee of US $1 million, FMB issued what was described as a standby letter of credit to (or for the benefit of) a would-be investor, Gerry Lepkanich, who had been introduced to Mr Namli by a Mr Ralph Jarson, who had in turn been introduced to Mr Lepkanich by an individual named Carolyn Joan Patrick. SOCA's case is that the standby letter of credit had no legitimate purpose or value, and was sold to Mr Lepkanich pursuant to a fraud by Mr Jarson and Mr Namli. In criminal proceedings in the United States against Mr Jarson, Mr Jarson was acquitted of the charges relating to the Lepkanich fraud, but was convicted in relation to a different fraud, the Laconia fraud referred to below. He was also one of those involved in the English frauds already referred to, or at any rate was closely associated with the fraudsters.
(4) The Turkish loan-backs: In 1996 and 1997, Mr Namli and his family engaged in a series of "loan-back" transactions which involved BVI companies owned and controlled by Mr Namli lending money to Mr Namli and members of his family in Turkey. Mr Namli and his family were charged by the Turkish authorities with money laundering and, following a trial in January 2000, were convicted, but their convictions were overturned on appeal. At a fresh trial they were then acquitted for lack of evidence of criminal conduct.
(5) The Bank House fraud: In May 1998, three different investors were persuaded to transfer sums totalling US $24 million to bank accounts held in Brussels by an entity known as the Corporation of the BankHouse Inc. ("CoB"). US $19 million of this was transferred on by CoB to an account in New York controlled by a Mr Henry Pearlberg, who on 4 February 1999 transferred about US $16.7 million to FMB's account at ABN AMRO in New York, to be used for the purchase of what were described as "Revolving Underwriting Facilities" issued by FMB, it seems at the instigation of Ms Patrick, again in return for substantial fees. The Bank House fraud has resulted in extensive and complicated litigation in the United States. SOCA contends that Credit 1 is specifically referable to this fraud.
(6) The Laconia fraud: Between May 2001 and April 2002 Mr Jarson and Mr Namli attempted to sell to an individual in New York, who called himself "Michael Shannon", an FMB banking document (to be issued for a fee of US $2 million) which, it was proposed, would misrepresent the financial position of a company named Laconia Capital to potential investors. In fact, "Michael Shannon" was a Special Agent of the United States Federal Bureau of Investigation named Keeley. Mr Jarson was arrested and charged (together with Mr Namli) with counts of wire fraud and conspiracy to commit wire fraud. Mr Jarson was convicted, including on one count of conspiracy with Mr Namli. As indicated above, Mr Jarson was at the same time charged in connection with the Lepkanich fraud, but was acquitted on that count. Mr Jarson appealed against his conviction but died before the appeal could be heard.
The legislation
"If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order."
"241. 'Unlawful conduct'
(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.
(2) Conduct which
(a) occurs in a country or territory outside the United Kingdom and is unlawful under the criminal law applying in that country or territory, and
(b) if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,
is also unlawful conduct.
(3) The court must decide on a balance of probabilities whether it is proved
(a) that any matters alleged to constitute unlawful conduct have occurred
242. 'Property obtained through unlawful conduct'
(1) A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct.
(2) In deciding whether any property was obtained through unlawful conduct
(a) it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct,
(b) it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct."
"it is sufficient, in my view, for the Director to prove that a criminal offence was committed, even if it is impossible to identify precisely when or by whom or in what circumstances, and that the property was obtained by or in return for it in order to succeed the Director need not prove the commission of any specific criminal offence, in the sense of proving that a particular person committed a particular offence on a particular occasion. Nonetheless, I think it is necessary for her to prove that specific property was obtained by or in return for a criminal offence of an identifiable kind (robbery, theft, fraud or whatever) or, if she relies on section 242(2), by or in return for one or other of a number of offences of an identifiable kind."
"304 Property obtained through unlawful conduct
(2) if property obtained through unlawful conduct has been disposed of (since it was so obtained), it is recoverable property only if it is held by a person into whose hands it may be followed.
(3) Recoverable property obtained through unlawful conduct may be followed into the hands of a person obtaining it on a disposal by
(a) the person who through the conduct obtained the property, or
(b) a person into whose hands it may (by virtue of this subsection) be followed.
305 Tracing property, etc.
(1) Where property obtained through unlawful conduct ("the original property") is or has been recoverable, property which represents the original property is also recoverable property.
(2) If a person enters into a transaction by which
(a) he disposes of recoverable property, whether the original property or property which (by virtue of this Chapter) represents the original property, and
(b) he obtains other property in place of it,
the other property represents the original property.
(3) If a person disposes of recoverable property which represents the original property, the property may be followed into the hands of the person who obtains it (and it continues to represent the original property).
306 Mixing property
(1) Subsection (2) applies if a person's recoverable property is mixed with other property (whether his property or another's).
(2) The portion of the mixed property which is attributable to the recoverable property represents the property obtained through unlawful conduct.
(3) Recoverable property is mixed with other property if (for example) it is used
to increase funds held in a bank account ...
307 Recoverable property: accruing profits
(1) This section applies where a person who has recoverable property obtains further property consisting of profits accruing in respect of the recoverable property.
(2) The further property is to be treated as representing the property obtained through unlawful conduct."
The effect of an acquittal in criminal proceedings
"If confiscation proceedings do not involve a criminal charge, but are subject to the civil standard of proof, I see no reason in principle why confiscation should not be based on evidence that satisfies the civil standard, notwithstanding that it has proved insufficiently compelling to found a conviction on application of the criminal standard. At all events, in so far as other Strasbourg jurisprudence supports the first proposition [i.e. that where a defendant has been tried and acquitted of an offence no claim can be based upon an assertion that he committed that offence], it is only in circumstances where there is a procedural link between the criminal prosecution and the subsequent confiscation proceedings. There was no such link in the present case. The acquittal was in Portugal and the confiscation proceedings here in England. Furthermore, the evidence in the latter ranged much wider than the evidence that was relied on in the Portuguese prosecution."
"On no view does this jurisprudence support Mr Mitchell's submission that the appellant's acquittal in Portugal precludes the English court in proceedings under POCA from considering the evidence that formed the basis of the charges in Portugal. The link between the Portuguese criminal proceedings and the English civil proceedings, which Strasbourg would appear to consider so critical, is not there."
" I note that in the recent case of R (Adams) v. Secretary of State for Justice (JUSTICE intervening) [2011] 2 WLR 1180, where some of these issues were touched on, Lord Hope of Craighead DPSC, said at para 111, that the principle that is applied in Strasbourg is that it is not open to a state to undermine the effect of an acquittal. It appears to me that that is indeed the underlying principle and that if, as here and indeed in Adams, the effect of the acquittal is not undermined there should be no question of holding that there is any conflict with the presumption of innocence enshrined in article 6.2 of the European Convention on Human Rights."
"Obviously, in all proceedings following an acquittal the court should be astute to ensure that nothing that it says or decides is calculated to cast the least doubt upon the correctness of the acquittal. But the point to be emphasised, is that the acquittal is correct because, and only because, the prosecution failed in the criminal proceedings to establish beyond reasonable doubt that the defendant was guilty. Not having been proved guilty to the criminal standard, the defendant is not thereafter to be branded a criminal and no criminal penalty can properly be exacted from him. But, contrary to widespread popular misconception, acquittal does not prove the defendant innocent."
"It seems, therefore, that the necessary link can be created by this route only if the court in the civil proceedings bases its decision adverse to the defendant using language which casts doubt on the correctness of an acquittal. The rationale must be that in such a case, the court has chosen to reach its decision by explicitly finding that a criminal charge has been committed. If it chooses to reach its decision in that way, then the protections afforded by article 6.2 should be available as if the civil proceedings were criminal proceedings. But if the decision in the civil proceedings is based on reasoning and language which goes no further than is necessary for the purpose of determining the issue before that court and without making implications of criminal liability, then the necessary link will not have been created. The fact that the findings of fact in the compensation proceedings may implicitly cast doubt on the acquittal is not enough to import article 6.2. What is required is that the decision in the compensation proceedings contains a 'statement imputing criminal liability' (emphasis added) (Y v. Norway, para 42) for article 6.2 to be imported."
" a court should not decide a civil case using language which casts doubt on the correctness of an acquittal. This will not happen if the court's language and reasoning goes no further than is necessary for the purpose of determining the issue before the court and without making implications of criminal liability. The fact that the findings may implicitly cast doubt on the acquittal is not sufficient to bring Article 6(2) into play. It is clear that a finding to the civil standard that unlawful conduct has been committed by a respondent who was acquitted of the very same conduct in criminal proceedings, will not undermine the effect of that acquittal."
(1) An acquittal whether here or abroad is not conclusive as to the defendant's innocence. To hold that it was would be contrary to the binding authority of Gale.(2) In civil recovery proceedings the court must reach a conclusion on the balance of probabilities. That will generally require cogent evidence, and if appropriate a conclusion may be stated in strong terms, but the finding remains a finding on the balance of probabilities.
(3) An acquittal is evidence on which the defendant can rely. As with all evidence, its weight is a matter to be determined, taking account of the circumstances and of the evidence as a whole. The acquittal does not have the status of a formal presumption, but this does not matter as the burden remains on SOCA to prove its case.
(4) The weight to be given to an acquittal may be affected by the reason for the acquittal in question. If the defendant was acquitted for reasons not directly related to the merits of the case against him, for example because of shortcomings in prosecution disclosure, the acquittal itself may carry very little weight. Conversely, if the foreign court were to find that the facts alleged against the defendant were proved but that they did not amount to an offence under the relevant foreign law, the acquittal would be likely to demonstrate without more ado that SOCA could not satisfy the "dual criminality" test.
(5) In general, however, it is not appropriate for the English court to attempt to scrutinise or find fault with the reasoning of the foreign court, or to criticise the conclusions which it reached on the evidence before it, in assessing the weight to be given to the foreign acquittal. Rather, the approach of the English court in civil recovery proceedings should be to consider all of the evidence adduced before it, including the fact of the foreign acquittal, in order to determine whether SOCA is able to establish on the balance of probabilities the unlawful conduct which it alleges. That evidence may and often will be different from the evidence which was before the foreign court. The fact that the defendant was acquitted in criminal proceedings may cause the court to pause and think again before concluding that the defendant's conduct was criminal, but should not ultimately deter it from doing so, if that is the right conclusion on the evidence.
Inferences in the context of money-laundering
"34. In order to demonstrate that property derives from crime for the purposes of proving money laundering it is legitimate to rely upon inferences drawn from the way in which the money was handled.
35. In ARA v Olupitan [2007] EWHC 162 (QB) Langley J summarized the position as follows [at paragraphs 65- 66]:
'65 A substantive offence of money laundering can be proved by inference from the way in which cash is dealt with and it is not necessary to prove the underlying offence which generated the cash: R v El Kurd [2001] Crim. L.R. 234 ; and R v L,G,Q and M [2004] EWCA Crim 1579 . As Mr Eadie submitted, if money is handled in a manner consistent only with money laundering, "the inference is that it must be criminal property because no one launders clean money". Mr Krolick submitted that it was a condition precedent to any allegation of money laundering that the property should be the proceeds of a criminal offence. He referred to the decision of the House of Lords in R v Montila [2005] 1 Cr App R 26. But what is required in law to establish money laundering and how that may be proved raise different issues. El Kurd was cited in Montila and referred to in the Opinion of the Committee with apparent approval and certainly without adverse comment on the question material to this case.
66 In this case, the evidence is, as the Director alleges, that around £195,000 cash (and £24,000 in unidentified credits) were credited to the accounts of Olupitan and Makinde in a period of some five and a half years. They remain unexplained and without any supporting documentation. Such explanations as have been offered have been rejected as untruthful. I accept Mr Eadie's submission that in the circumstances of this case as I find them to be it is a proper inference that money laundering has occurred.'
36. The judgment of King J in Jackson is to similar effect [at paragraphs 118-119]:
'118 I also consider that the court is entitled to take a commonsense approach to the inferences to be drawn from the manner in which the Respondent chose to store his accumulated cash and from the failure of the respondent to keep any business records in the context of the evidence as a whole.
119 Equally, as the Receiver said in evidence, one would expect any successful law abiding businessman to keep some sort of record no matter how simple, of what he was buying, what he was selling and the amounts of his overheads if only to work out the sort of profit he was making and which were his most profitable items. The criminal dealer in, for example, illicit drugs will of course eschew any record by which his activities might be detectable.
37. This approach was endorsed by Griffith Williams J in Gale [at paragraph 17]:
'17 I respectfully agree with and adopt the above cited observations of Sullivan J, Langley J and King J and if support is needed it is to be found in the decision of the Court of Appeal, Criminal Division in Rv- Anwoir & Others [2008] 2 Cr App R 36 at para 21 at page 539 that there are two ways in which the Crown can prove in money laundering offences that property was derived from crime - either by proving it derived from unlawful conduct of a specific kind or kinds or by evidence of the circumstances in which the property was handled, such as to give rise to the irresistible inference that it could only have been derived from crime (although in criminal proceedings the higher standard of proof is required).'"
The evidence
SOCA's factual evidence
Mr Namli
(1) In his Defence, both as originally served and as amended, in both cases verified by a statement of truth by Mr Namli, Mr Namli denied having used the name Dr Hakki Yaman. This was very puzzling, as the documents are replete with references to him by that name. That is how Coutts knew him, and is also how he is referred to in some corporate registration documents where it might be thought important to record his name accurately. Dr H.N. Yaman is also the name in which he signed the banking instruments in issue in this case. Equally puzzling are Mr Namli's conflicting dates of birth. His explanation for these different dates is that he was given a passport with a false date of birth for the purpose of work on behalf of the Turkish intelligence service. I find Mr Namli's explanation unconvincing and his denial of using the name Dr Hakki Yaman was certainly untrue. SOCA attaches significance to the use of different names and dates of birth as being intended to deceive and confuse. If this point stood alone I would be inclined to doubt whether it would fairly bear this weight, but when considered in the light of his evidence as a whole it does represent a cause for concern.(2) Although Mr Namli has never obtained a doctorate from a Californian university (he does apparently have an honorary doctorate from the University of Kinshasa in Zaire as a result of an early connection with the son of the late President Mobuto, perhaps not the ideal start to a business career of unblemished integrity), a Coutts note of a meeting with him records him as saying that he had studied for a business and economics doctorate in Europe and California, while Mr Jarson is recorded as telling Agent Keeley that Mr Namli had a doctorate in economics from the University of California in Los Angeles. Although he denied it, such false information from two unrelated sources can only have originated from Mr Namli himself.
(3) In the Defence as originally served it was asserted that not only did Mr Namli have no convictions, but also that there had never been any civil judgment against him. That was not true, as was subsequently admitted by way of amendment, as there had been a civil default judgment against Mr Namli in connection with the German fraud. Mr Namli's attempt to explain this discrepancy by saying that he had understood the original Defence to refer to criminal proceedings only was unconvincing.
(4) Mr Namli has made conflicting statements about the extent of his property interests in Turkey, sometimes claiming (to Coutts) to have a portfolio of several properties and on other occasions (to MASAK) to have owned only one apartment. I do not accept his attempt to reconcile these statements on the basis that the reference to a portfolio described not only his personal ownership but properties owned by his family. Rather they demonstrate his willingness to bend the truth to support his interests of the moment -- to present himself to Coutts as a wealthy man, but to minimise his income and assets when dealing with the Turkish tax authorities.
(5) He sought in his witness statement to explain an early source of his wealth on the basis that he had returned from Germany to Turkey in the early 1990s with funds totalling TL 670 million which (he said) was equivalent to about US $2 million. That evidence was highly misleading. In fact TL 670 million was equivalent at the time to no more than about US $50,000.
(6) In his original Defence, Mr Namli denied that he had ever been the beneficial owner of FMB. That was at least consistent with his answers to MASAK, where he had said that he was managing the bank for a Luxembourg citizen called Charles Ewert who was the actual owner (as he explained to MASAK, "in English they express it as a beneficial owner"). However, an amendment to the Defence subsequently said the opposite, and his evidence in these proceedings (which on this point I accept) has been that he personally is and always has been the ultimate beneficial owner of FMB. Mr Namli's witness statement effectively admitted that his answer to MASAK had been a lie, albeit not in so many words ("if a contrary impression was given then that was wrong"), the excuse being that it was illegal for a TRNC citizen to own an offshore bank. If true, that hardly makes the position better and detracts somewhat from Mr Namli's claim to be a man of good character.
(7) When asked by MASAK about his annual income and its source, Mr Namli's response was that he was reimbursed his travel expenses, about US $100,000 to US $150,000 annually, but did not receive any fees from FMB for his services. His evidence in these proceedings, however, was that although he received no fees from FMB he did receive substantial dividends, a point which he had not made to MASAK and which in any event would have been hard to reconcile with his denial to MASAK of beneficial ownership of FMB. His response to MASAK was at best disingenuous.
(8) Mr Namli's witness statement insisted on the rigour with which FMB had been audited, claiming that "every single transaction that FMB ever did" had been scrutinised by independent auditors and that "every incoming payment and outgoing payment was analysed to make sure that it had been carried out properly". However, the auditors' own reports made clear that they had relied on the information provided to them by the bank's management and (as would be normal) had carried out for themselves no more than limited tests of such information.
The banking experts
Foreign law
United States law
Turkish/TRNC law
"it may be that in cases where it would be wholly artificial to apply the rules of English law to a claim by a foreign law, a court may simply regard a party who has pleaded but failed to prove foreign law as having failed to establish his case without regard to the corresponding principle of English domestic law."
Conclusion on foreign law
First Merchant Bank
(1) First, the notes to the accounts, which plainly exist or existed and are necessary for a proper understanding of them, have not been produced, but there is no satisfactory explanation why not.(2) Second, there has been no independent support for the figures in these accounts, for example in the form of evidence or documents from FMB's auditors, despite Mr Namli's insistence referred to above on the rigour and independence of the audit. There is a very brief "To whom it may concern" letter from the auditor, Mr Gόven Tanrikul, dated 28 July 2004, in which he declares that he carried out the audit in accordance with the GAAP, that FMB had always kept its books properly, and that its financial statements were consistent with those books, but that falls well short of the evidence which would be expected from an auditor who was genuinely in a position to confirm that a rigorous and proper audit had been carried out.
(3) Third, although in a sense it is only a typing error, for several of the years in question the figure for net profit before taxation is the same as the net income figure -- in other words, FMB's operating expenses were not deducted in order to arrive at the net profit before taxation. It is only fair to add that the eventual figure for net profit after taxation does include a deduction of operating expenses -- in other words it represents, as it should, net income less operating expense less tax -- but even so the repetition of such an obvious error over several years in what are supposed to be rigorously audited accounts suggests a certain sloppiness on the part of both FMB and its auditors.
(4) Fourth, the figure for annual staff costs, which was sometimes as low as US $3,000, was inexplicably low in view of the number of staff said to have been employed.
(5) Fifth, the account documents in evidence are difficult or impossible to reconcile with figures published in the Bankers' Almanac (a well respected industry publication) for the relevant years, which themselves purport to be taken from FMB's accounts. Sometimes the discrepancy is significant, and sometimes perhaps not, but it is not apparent to me why the figures should differ at all.
(6) Sixth and importantly, the investigations recorded in the MASAK report show grounds for considerable scepticism as to the value of assets recorded in FMB's accounts. These assets appear to include Tajikistan and Kazakhstan government bonds and bonds issued by banks in the former Soviet Union which had either expired or were of disputed validity or were believed to be recorded at an overstated value. The concern expressed was not merely the result of a reasonable difference of opinion between accountants as to the extent to which the value of such bonds should be written down in FMB's accounts, but rather that the value of the assets shown in the accounts was deliberately overstated. In this regard it is striking that in May 2001 Mr Jarson boasted to Agent Keeley that FMB deliberately maintained what he described as "defaulted Soviet notes" on its books at the stated asset value of forty cents on the dollar when their true value was only five cents. The strong inference is that this is what Mr Namli had told him. Such a policy of deliberate exaggeration of the strength of FMB's financial position chimes uncomfortably with FMB's practice of offering "balance sheet enhancement" to customers (see [159] below) and means that these documents cannot be relied on.
"I admit that the vast majority of the CRL's taken out by Clients were not ever called upon by the Client as the Client did not meet the terms of the CFA [Credit Facility Agreement]. However, this was not the fault of FMB. The Clients were all sophisticated clients with knowledge of financial markets and knew what they were doing. The fact that the majority of Clients who were provided with a CRL (and I believe that in % terms this could be as high as 90%) did not call upon them was of no concern to FMB.
FMB complied with its obligations in full and there were a number of reasons why the CRL may not have been called upon. These include the fact that the Counterparty or Financial Institution did not provide in the agreed time (or within an acceptable delayed period which would have to be in the operating quarter on the basis that a further fee would be payable and that FMB was in a position to offer the facility); did not provide the collateral; the Financial Institution which was presented to FMB did not meet the terms of the CFA; and FMB may have been used by the Client to initiate the transaction but did the closing at another institution."
The German fraud
The English frauds
Summary
Vogel
"We confirm that Mr Rainer Vogel, account number 49-1-10-533 has immediately available the sum of USD 10,000,000 (IW Ten Million US Dollars) in good, clean, clear funds.
The above amount will be transferred in exchange for a 1 (one) year irrevocable, unconditional and assignable bank guarantee (s) securing 108% (One Hundred Eight Percent) of the transferred amount and issued by a Western European Bank rated A1/P1 or better by Standard & Poors and/or Moodys acceptable to us.
Communication regarding this letter can be made directly to the undersigned bank officers in writing.
This document is valid for 15 (fifteen) banking days and will expire at the close of business on August 7, 1997."
Jacobson
"We hereby confirm that our account holder, Tidal Services Inc account number 1-3-10-628 has available with us the amount of USD 150,000,000 (IW One hundred Fifty Million US Dollars) of good, clean, cleared funds of non-criminal origin, as per above reference code.
We also confirm that upon our account holder's instruction, we are prepared to transfer the above referenced amount, by Swift or tested telex transfer, against receipt by us of a bank responsible commitment and/or certified bank invoice for delivery of an acceptable 1 (one) year term demand guarantee for equal value, plus eight percent (8%) interest payable annually in arrears, and to be issued by a major international bank rated "AA" or better by Moody's and/or Standard & Poors into our correspondent banking coordinates as follows. [Details of FMB's corresponding account with ABN Amro Bank in New York were then given.].
This document is valid for 15 (fifteen) international banking days after the date of issue and is an operative, assignable and transferable instrument and may be verified by a responsible bank enquiry."
Conclusions on the English frauds
The Lepkanich fraud
"Invoice with bank certification, containing all the pertinent information for full verification, authentication, including 'screening codes', CUSIP numbers, registration numbers, collateral release codes, for the contractually agreed upon invoice price of USD 87,500,000 (IW eighty five million seven hundred fifty thousand US dollars) of 10 years (ten) bank medium term notes with a face value of USD 100,000,000 (IW one hundred million US dollars) bearing interest at the rate of (7.5%) seven point five percent payable annually in arrears, issued by a "AA" or better rated bank by Moody's on a asset base, and being a major European bank."
The Bank House fraud
The Turkish loan-backs
"Essentially, suspected criminals lend themselves money, creating the appearance that the funds are legitimate and thus are derived from a real business activity. The purpose of the loan is to give the source of the money an appearance of legitimacy and to hide the true identity of the parties in the transaction or the real nature of the financial transactions associated with it. The lack of information caused by the internationalisation of these structures and their specific morphology make it difficult to understand the true relationship between the various corporate vehicles involved in the loan structure and to be sure of the real origin of the funds, and thus determine whether they are linked to criminal activities or not. In several cases, offshore company loans were used."
"The money was borrowed by my family from United Systems and Citi Finance Limited, which in turn either entered into loan agreements with foreign banks ... to borrow money or used its own money (which would have come from a variety of sources, including stocks, shares, bonds, the fees it received from FMB for my services to FMB, commissions it received as a result of my other business activities etc."
The Laconia fraud
"The purpose is to pretend they've got twenty million dollars so they can conduct their brokerage business. If they had twenty million dollars they wouldn't need to pay two million dollars to get the twenty million dollars account statement."
"We the undersigned bank officers of First Merchant Bank, hereby confirmed that the above referenced account has an immediately available account position of US $20,000,000 (IW twenty million dollars).
We further confirm that these funds of the available for other account holder, and as per ref. and verifiable on a bank to bank basis.
Account statement as of close of business (date)."
"MK (Keeley) I'm just saying if, if, if ah let's say I was I was a caller and I'm calling First Merchants as I am like now and I say, listen, my name is you know Michael Shannon. I've been given a copy of an account statement.
HYN (Namli) We would not do it over the phone anyway to any non, uh third party we would get it in writing and then we'll get your ah explicit authorisation to reveal what to be revealed and what not to be revealed what not to be revealed.
MK Okay.
HYN That simple. Okay?
MK But if they were if they were to call and say I wanna verify this you, you would say the account statement is verified.
HYN Of course, of course.
MK That Laconia has twenty million dollars available and um if they asked you what the, what that per reference means, I'm told by ah Ralph that you'd basically say that's just ah a reference on every account.
HYN Mm hmm.
MK And if they wanted more detail about um.
HYN Then it goes into details of disclosing, of disclosing ah do you want it, do you authorise it or do we want it to be authorised, very simple.
MK Right, you would tell the caller that you would have to get authorisation from the account holder.
HYN Yes, yes, of course.
MK That would be perfect."
"We hereby would like to inform you that we are not in a position to proceed with your transaction due to non-plausible explanation of the intended transaction, which has been refused therefore by the due diligence and legal department."
Conclusions on unlawful conduct
Recoverable property
SOCA's case
The defendants' case mixing of funds
Credits 1 to 4
Credit 6
Credit 5
Conclusion on the six credits
Accruing profits
"The Act requires a more specific causal connection: that the property was obtained 'by or in return for' the unlawful conduct."
"In such a case it could no doubt still be said that the £100,000 house would not have been acquired 'but for' the theft, and possibly, in ordinary language, that it was 'obtained' by theft. However, the Act seems to me to require a more precise analysis. The original recoverable property is the stolen £75,000, which is then 'mixed' with the lawful £25,000. Under section 306, the recovery order can only bite on the 'portion' of the mixed property which is attributable to the unlawful £75,000."
"if a property is acquired in part with untainted money and in part with the proceeds of a mortgage fraud, it was not Parliament's intention that the purchaser should be deprived of the portion of the value of the property derived from untainted money. The object of s 306 (mixing property) is the opposite."
"True it is that the building society did not hand any cash directly over to either appellant personally to enable the purchase of the property to proceed. Instead Mr Olupitan's dishonesty led the building society to make contractual arrangements by which the necessary funds for the purpose were transferred to the solicitors for the appellants to hold on trust for the building society, but in due course on completion, for their transfer to the vendor of the property. This is what the solicitors did. Neither appellant ever touched a single penny of the money held by their solicitors, but, as a matter of reality, the property in which they obtained their registered interest (and which is the subject of these recovery proceedings) was purchased in its entirety as a direct result of Mr Olupitan's unlawful conduct. It would be most surprising if the proceeds of this particular form of dishonesty (purchasing an interest in a house as a result of obtaining a mortgage by deception) were excluded from the ambit of the 2002 Act. In my judgment, as a matter of fact, the property registered in the name of the appellants and their entire interest in it was obtained by unlawful, dishonest conduct."
"Coutts's lending decision was accordingly based (unwittingly so far as Coutts was concerned) upon the fact that the defendants had acquired substantial property through unlawful conduct, and without that unlawfully obtained property Coutts would not have advanced the loan to the defendants."
Conclusion