Jersey Unreported Judgments

Court of Appeal

9 July 1998

AG

-v-

Robert John Young

Appeal against a TOTAL SENTENCE OF 4½ YEARS IMPRISONMENT passed by the Superior Number of the Royal Court, [1998.094] to which the Appellant was remanded on 26 March 1998, by the Inferior Number, following his conviction on not guilty pleas to the following charges:

4 counts of inducement to take part in arrangements with respect to the management of property by statements known to be misleading, false or deceptive, contrary to Article 12(c) of the Investors (Prevention of Fraud)(Jersey) Law, 1967: counts 1A, 2C, 3A, 5A., on each of which counts concurrent sentences of 4½ years imprisonment were passed.

Leave to appeal was granted by the Bailiff on 25 June 1998

(The following two co-accused were also sentenced by the Superior Number as follows on 8 May 1998, the first on a guilty plea entered on 14 January 1998, before the Inferior Number; and the second following his conviction by the Inferior Number on 26 March 1998 on not guilty pleas to the following charges:

4 counts ofinducement to take part in arrangements with respect to the management of property by the reckless making of misleading, false, or deceptive statements, contrary to Article 12(c) of the Investors (Prevention of Fraud)(Jersey) Law, 1967: counts 1B, 2B, 3B, 4B, on each of which counts a fine of £750,000, making a total of £3,000,000, with £300,000 costs was imposed.

4 counts ofinducement to take part in arrangements with respect to the management of property by statements known to be misleading, false or deceptive, contrary to Article 12(c) of the Investors (Prevention of Fraud)(Jersey) Law, 1967: counts 1A, 2A, 3A, 5A, on each of which counts concurrent sentences of 1½ years imprisonment were passed.

Advocate DF Le Quesne for the Appellant

CE Whelan Esq., Crown Advocate

JUDGMENT

SOUTHWELL J.A.: An investment scheme was marketed in Jersey and elsewhere by a company referred to as Troy. The scheme was managed by Mayo Associates Ltd, controlled by Mr Miles Stott, a chartered accountant, in Switzerland as the trustee. Mayo agreed with Dr Young and his company, Anagram, that Dr Young would trade in the foreign exchange markets, using the investors money as collateral. The investors money was placed with Cantrade Private Bank Switzerland (CI) Limited, a subsidiary of Union des Banques Suisses, one of the largest banks in Switzerland, who provided money to the scheme so that the investors money could be geared up, and thereby larger sums ventured in the foreign exchange markets.

Initially, Dr Young was only one of the foreign exchange traders for the scheme. But after about six months he and his company Anagram became the sole foreign exchange traders for the Troy scheme. The trading by Dr Young and Anagram took place between about 1988 and 1993. For the most part the trading was unsuccessful, with the result that the balances remaining with Cantrade as bankers as the residue of the investors’ funds invested in the scheme steadily diminished.

Monthly Dr Young provided to Mayo, and through Mayo to the investors, statements showing the financial position of the scheme. In these statements Dr Young presented a false picture of success, whereas the true position was one of continuing failure, and decline in the value of the remaining portion of the invested funds.

The fraud perpetrated by Dr Young was simple, but effective. The false picture which he gave in his monthly reports persuaded existing investors to leave their money with him for the purposes of trading in foreign exchange, since they were prevented from knowing that their money was diminishing in his care. The same false picture persuaded new investors to put their money into the scheme.

The fraud continued from 1988 until 1993. It could have been detected by a comparison of the monthly statements given by Dr Young with the bank statements provided by Cantrade. Initially Mr Stott received both sets of statements and could have made the comparison. Unfortunately thereafter Mr Stott declined to receive the Cantrade bank statements, pleading an excess of paperwork. Mr Stott, like the investors, relied on the honesty of Dr Young.

The scheme came to an end in 1993. But some investors, not yet having learned of the full extent of Dr Youngs conduct, were persuaded to place money, either new money or money to be transferred from the scheme, directly in the hands of Dr Young for the purpose of foreign exchange trading.

The indictment brought against Dr Young contained a considerable number of counts. Many were not proceeded with because they were held to be barred by the lapse of time pursuant to Article 2 of the Law Reform (Miscellaneous Provisions) (Jersey) Law 1978. The appropriate authorities and the States may wish to consider whether the time limit of three years laid down in that Law is still appropriate, having regard to the nature of frauds such as those which Dr Young committed and the length of time not infrequently taken to discover the fraud and then to prosecute the fraudster.

Ultimately Dr Young was convicted on four counts, counts 1A, 2C, 3A and 5A, relating to inducements to investors to take part in arrangements with respect to the management of property, namely the investors money, by statements known by Dr Young to be misleading, false or deceptive, contrary to Article 12(c) of the Investors (Prevention of Fraud) (Jersey) Law 1967 (the 1967 Law). The purpose of the 1967 Law is to penalise fraudulent inducements to invest money, whether the inducements are made in the knowledge of their falsity, or recklessly. Cantrade was convicted on four counts of reckless conduct contrary to the 1967 Law, and an accountant, Mr Williams, was convicted on the same counts as Dr Young.

Having regard to the submissions ably presented to this Court by Advocate David Le Quesne on behalf of Dr Young, it is necessary to look a little further at the four counts on which Dr Young was convicted.

Count 1A concerned an investor, Mr Steven Cerny, who had invested in the scheme, and who had thereby lost a substantial amount. Not knowing of his losses Mr Cerny, in November 1993, placed some US$1.2 million directly with Dr Young, being induced to do so by Dr Youngs dishonest statements. Count 1A related to this inducement in November 1993. In fact thereafter Dr Young traded with some success on behalf of Mr Cerny and increased the amount of this investment. But after account is taken of the gains made in the direct investment and the losses previously made in the scheme Mr Cerny remained out of pocket in the amount of about US$350,000.

Count 2C concerned Mr Arthur Lee who was induced in December 1993 to arrange to transfer US$1.2 million from the scheme to Dr Youngs direct control. In fact funds in that amount no longer existed in the scheme because of the losses already made. Mr Lee had in fact lost about US$400,000.

Count 3A concerned Mr Francis Bradley who was, in November 1993, persuaded to participate in certain new arrangements (mainly concerning increases in the declared commissions) which were then applied to the investment scheme still being traded by Dr Young. In fact by that time the whole of Mr Bradleys investment in the scheme, US$100,000, had been lost and nothing remained to which the new arrangements could be applied.

Count 5A concerned Colonel Robert Wallace in a manner similar to Mr Bradley.

Having been convicted by the Royal Court on these four counts, Dr Young was on 8 May 1998 sentenced by six Jurats, pursuant to Article 13(3) of the Royal Court (Jersey) Law 1948, to four concurrent sentences of 4½ years imprisonment on each count. Dr Young has appealed to this Court against these sentences with leave granted by the Bailiff.

Mr Le Quesne submitted (inter alia) that:

With regard to the commissions, investors apparently knew that they were being charged by Troy a commission of 10% of the profits reported by Dr Young. Investors did not know that Dr Young was secretly taking a further 15% of the reported profits, of which he passed 5% to others. In addition, Dr Young, unknown to investors, received from Cantrade Bank a commission of half the profit taken by that Bank on every trade placed by Dr Young with Cantrade Bank. Because of these commission arrangements Dr Young had an inducement to maximise the number of trades and to report profits falsely.

In the view of this Court it is right that Dr Young is to be sentenced only on the four counts on which he was convicted: compare the decision of the English Court of Appeal in R -v- Kidd [1998] 1 WLR 604.

But that does not mean that the sentencing Court has to look at these counts in limbo and without reference to the background of the fraudulent scheme, the substantial losses which investors suffered, and the substantial commissions (in particular the secret commissions) which Dr Young gained from investors. The Court has to weigh the appropriate sentences on the convictions taking this background into account, for a number of reasons including (inter alia) the following:-

Mr Le Quesne asked this Court to take account of a comparison with the sentences imposed in a number of earlier Jersey cases. In this connection he stressed the absence of any loss to investors through the conduct covered by the four convictions, a matter which it is right for this Court to take into account.

Mr Le Quesne also submitted that, in cases of fraud, breach of trust is a significant aggravating factor, and that Dr Young was not guilty of any breach of trust. In the judgment of this Court Dr Young was clearly guilty of a serious breach of trust. In the course of the scheme investors funds were placed in Dr Youngs control as either agent or sub-agent. Dr Young owed in law the duties of a fiduciary to the investors. Furthermore, the funds were placed in his control as a practical matter in complete trust in his honesty and integrity. Once the scheme was ended, funds were or were agreed to be placed with him directly. In our judgment Dr Young was both in law and in practice in a position of trust, which he seriously abused, and he was correctly sentenced on that basis.

The sentences of imprisonment in the Jersey fraud cases to which this Court was referred ranged from about 8 years down to 2 years. It is clear to this Court that the nature of the fraud perpetrated by Dr Young was at the upper end of this range. The maximum sentence on the four counts is 7 years imprisonment. The Attorney General in his conclusions proposed sentences of six years’ imprisonment on each count.

The factors to be taken into account include those stated in the decision of the English Court of Appeal in R -v- Barrick [1985] 7 Cr.App.R.(S) 142 (see the decision of the Jersey Court of Appeal in AG -v- Delaney (13 May 1993) Jersey Unreported), and more recently in the decision of the English Court of Appeal in R -v- Feld (6 April 1998) Unreported Judgment. Those factors which are of particular significance in the present appeal are the following:

• This was a calculated fraud carried out over a five year period culminating in the fraudulent conduct which is the basis of the four convictions.
• Dr Young was in control of the foreign exchange trading and especially of the reports of the trading by which the frauds were perpetrated.
• There was a serious and flagrant breach of trust by Dr Young, as already described.
• Dr Youngs persistence in the fraudulent conduct, down to the time when the conduct which is the basis of the four convictions occurred, yielded him and his wife substantial funds for high living at the expense of the investors. This is essential background to the convictions, though the conduct which is the basis of the convictions did not, in itself, result in loss to the investors.
• The effect on public confidence in Jersey as a financial centre was undoubtedly damaging, however much the exaggerated media reports are discounted.
• Dr Young pleaded not guilty and accordingly the discount for a plea of guilty does not arise.
• Dr Young is of previous good character.
• Dr Young is of middle-age. His eyesight is poor; he suffers from diabetes, arthritis and some degree of tinnitus.
• There was a lapse of four years between the first police interview in 1994 and the trial in 1998, though given the nature of the frauds and his not guilty plea such a lapse of time is hardly unusual or not to be anticipated.

Mr Le Quesne submitted that the sentencing Court, composed of six Jurats, had wrongly taken into account the money totalling £2 - £2.5 million received by Dr Young in disclosed and undisclosed commissions. This was a somewhat puzzling submission, since before the sentencing Court Mr Le Quesne had proposed as the correct sentence a community service order and/or a fine, and in relation to the size of such a fine had strongly emphasised Dr Youngs present alleged impecuniosity.

This Court asked Mr Le Quesne for further help as to what had happened to so large a total amount of money (£2 - £2.5 million) received over the five year period, and adjourned the hearing overnight to enable him to take full instructions from Dr Young. The information subsequently provided was sparse. Apparently Dr Young lost about £120,000 on the house bought for him by Cantrade and subsequently sold. Apart from this sum, there was no proper explanation of what had happened to the money, except for the suggestion that it was largely spent on lavish living. The view of this Court is that though the present position of Dr Young and his wife is indicative of impecuniosity, this Court is not satisfied that moneys or other assets have not been put on one side by Dr Young.

Nevertheless, as I have already indicated, Dr Young had to be sentenced on the convictions and not on the basis of any other counts.

Mr Le Quesne placed considerable reliance on the English case of Secretary of State for Trade -v- Markus [1976] AC 35. There the maximum sentence was seven years imprisonment (as in the present case). The sentencing Court imposed a seven year sentence ignoring certain mitigating factors. The Court of Appeal held that imposing the maximum sentence could not be correct, because of the mitigating factors which had been ignored and reduced the sentence to five years. But this provides no yardstick for present purposes. It is clear from the report that if the maximum sentence had been ten or fifteen years and the maximum had been imposed, the appellate court would have made some -reduction; but it does not follow that it would have reduced the sentence to five years or indeed to seven years. Markus provides no assistance in the present case.

In our judgment the frauds committed by Dr Young of which he was convicted were towards the upper end of the frauds which have resulted in convictions in Jersey. The sentencing Court could have adopted the Attorney Generals conclusions and imposed sentences of six years. If it had done so, it is unlikely that an appeal would have succeeded. Dr Young was fortunate to receive sentences of only 4½ years. There is no basis for reducing these sentences. The appeal is accordingly dismissed.

Authorities

R -v- Barrick [1985] 7 Cr.App.R.(S) 142

R. -v- Feld (6 April 1998) Unreported Judgment of the Court of Appeal of England

AG -v- Kirch & Lapidus (5 May 1987) Jersey Unreported

Lapidus -v- AG (23 September 1987) Jersey Unreported

AG -v- Delaney (13 May 1993) Jersey Unreported

Whelan: Aspects of Sentencing in the Superior Courts of Jersey pp.79-81.

Ibid: May 1995-96: Noter up: pp.24-25

Secretary of State for Trade -v- Markus [1976] AC 35

R -v- Kidd [1998] 1 WLR 604