Jersey Unreported Judgments

[2006]JRC176

ROYAL COURT

(Samedi Division)

1st December 2006

The Attorney General

-v-

Christopher David St. Clair Morgan

Sentencing by the Inferior Number of the Royal Court, following a guilty plea to the following charges:

Age:  44

Plea: Guilty

Details of Offence:

Over a period of 3½ years Morgan misappropriated £215,282.49 from clients of his then employer, C.I. Law Trust Group Limited.  Morgan held the position of Director and Senior Trust and Company Administrator and for a period of time he was also the Acting Compliance Officer.  Morgan had purchased a house for £430,000 and had anticipated, in consequence of re-structuring of his employer's business, that his financial circumstances would significantly improve.  This did not materialise and when his wife was taken ill and, therefore, unable to work as much as had been planned or anticipated, the family income dropped.  He was, therefore, unable to meet his normal liabilities such as his income tax liability and his mortgage payments.  He decided, therefore, to utilise funds from client accounts held by his employer.  He provided false documentation to his co-directors who were co-signatories of the purposes of any cheques or transfers and in so acting he clearly abused the trust of his co-directors.  There was no evidence that Morgan had forged the signatures.  Morgan, however, concealed his deceit by retaining the cheque books that he used together with the documentation that he had falsely created to justify the payments.  Morgan was hoping that his financial difficulties would be eased when the funds from the Estate of his deceased parents would be made available to him through the Family Trust.  He misappropriated the funds in two ways:

1.      He transferred funds into a designated account by wire transfer from other accounts and then wrote cheques on that account;

2.      He wrote personal cheques using the company cheque of another client company.

To avoid detection he ensured that the cheques were relatively nominal amounts and he utilised a dormant company as he was aware that the company would not be subject to review.  A fellow employee became suspicious when she noted a payment request for Morgan on an account that she knew was dormant.  She raised her concerns with Morgan's brother who was the Managing Director of the C.I. Trust.  When confronted by his brother, Morgan acknowledged that he was responsible for the discrepancies which had been found on the account and he agreed to fully co-operate with the investigation.  Morgan did fully co-operate with the internal investigation conducted by his employer and provided them with the cheque books which he had used to justify the payments etcetera.  It was further agreed that the matter would be reported to the Police and Morgan presented himself to the Police providing them with a written statement setting out details of how he removed the funds from the client accounts and the reasons behind his actions.  He was subsequently interviewed under caution and made full and frank admissions to the effect that he had no permission from his employer or from the underlying clients to carry out the transfer payments which he had done and which he had used for his personal benefit.  Morgan maintained that it had always been his intention to return the funds, not discreetly, but rather to make a full admission when returning the funds and to then accept whatever consequences followed.

Prior to charging, Morgan had repaid to his employer all of the funds that he had misappropriated together with an agreed element by way of interest.  He had repaid the total amount of £229,211.55.

The Crown's view was that such offences were not susceptible to the "starting point" approach and that furthermore the Court's consistent policy was to impose an immediate custodial sentence in the absence of any exceptional circumstances.  It was the Crown's view that no such exceptional circumstances existed in the case of Morgan.

Details of Mitigation:

The Crown contended that Morgan had the benefit of substantial mitigation.  He had pleaded guilty from the outset and had been fully co-operative with the investigation undertaken firstly, by his employers and then secondly, by the Police.  The full sum of monies misappropriated had been reimbursed with interest.  He was a first offender and had lost his good character.  The monies misappropriated had not been spent on the "high life" or extravagant items.  His offending had a significant impact upon his immediate family and in particular his wife and children.  He was at low risk of re-offending and had expressed remorse and produced character references.  There was also the personal mitigation available to him, full details of which were provided within the Reports.  The Crown's view was that this mitigation, either individually or in totality, did not give rise to "exceptional circumstances".  The Crown relied upon Crown Advocate Whelan's construction of "exceptional circumstances" as set out at paragraph 481 of his Text.

The Defence submitted that "exceptional circumstances" did exist, justifying the widening of the Court sentencing options and in particular justifying the imposition of a non-custodial sentence.  He had good character and had been fully co-operative with compliance, employers and Police.  The misappropriation was not an especially sophisticated modus operandi.  He had always had the intention to make a restoration.  He had pleaded guilty and had surrendered himself to custody.  He was experiencing personality inadequacies.  He had suffered the loss of job and status.  He had suffered the loss of his home and acute domestic distress.  He was genuinely remorseful.  It was contended that the following matters gave rise to exceptional circumstances:

1.      The plan to make restoration monies.

2.      Personality problems.

3.      The context of the breach of his employers' trust.

4.      The indirect nature of the gain of Morgan.

5.      The absence of loss to the victim and the attitude of the affected parties.

6.      Limited prejudice to the finance industry in this particular case.

7.      This was essentially a family affair with an unwanted, if necessary, regulatory dimension.

Previous Convictions:

None.

Conclusions:

The Crown also sought an Order pursuant to Article 78 of the Companies (Jersey) Law, 1991 for the disqualification of Morgan for a period of 5 years from holding the office of Director.

Sentence and Observations of Court:

This case started in desperation when Morgan in the capacity as Director, Senior Trust and Company Administrator and nominal Compliance Officer of a local Trust Company had purchased a property and had borrowed heavily to fund it.  The borrowing had been on the basis of him receiving benefit from a reorganisation of his employer but in the event this did not occur and subsequently his wife became ill and thus the joint income suffered.  He was unable to pay his income tax.  However, he did not go to his brother for help but rather used client companies' funds to pay his income tax bill.  The Crown Advocate had described what then followed and the two routes used by Morgan to misappropriate funds.  Morgan misappropriated over £215,000 over a 3½ year period.  All the monies were taken from clients of his employers.  Morgan had to deceive his co-directors who had to co-sign documents.  He had repaid £229,000 including an element of interest out of funds received from the Family Trust.  He is a first offender and made a full statement and was full and frank in interview.  The fraud was well thought out and complex e.g. he accessed small amounts.  Eventually it was discovered and it was reported to his brother, Nicholas Morgan.  Once discovered he made full admissions to the Board and was fully co-operative with the Police.  This was a serious breach of trust.  The Court once again cited with approval the English case of R-v-Barrick and the 9 matters which the Court may wish to have regard to when determining the proper level of sentencing for such cases.

Advocate Scholefield had urged the Court to find exceptional circumstances.  The Court quoted paragraph 481 from the Text of Crown Advocate Whelan.  The Court had carefully considered all the points made by Defence Counsel and all the contents of the documents and reports.  Morgan did not use the funds for the high life.  It could be said that there had been a generous view by the Crown.  This was a substantial fraud over a long period of time involving a quarter of a million pounds.  The Court could not take the view that there were exceptional circumstances.  It notes that perhaps it was fortunate that the company was not closed sooner.  The Court proposed to follow the Crown's conclusions.   

J. C. Gollop Esq., Crown Advocate.

Advocate C. J. Scholefield for the Defendant.

JUDGMENT

COMMISSIONER:

1.        This case started in desperation.  Morgan was the director and senior trust and company administrator and the apparent compliance officer, or the nominal compliance officer according to Advocate Scholefield, of a local trust company.  He purchased a property to live in, in Jersey and borrowed heavily to fund it.  This was done in anticipation of a reorganisation and a consequent increase in salary.  His wife became ill and their joint income suffered as a result.  Morgan found himself unable to pay his income tax bill.  He did not go to his brother who was the managing director of the company but he used client companies' funds to pay the bill off.

2.        The Crown Advocate has outlined in some detail the deception that followed and the two routes that Morgan used to misappropriate funds.  Matters came to a head, and it appears that Morgan had misappropriated some £215,282.49 over a period of three and a half years.  All of this money was taken from clients of his then employers and he had to deceive his co-director who had to countersign the cheques.

3.        He has repaid £229,211.55, which includes the interest lost on the money, out of the funds that he eventually received from his family trust. 

4.        He is a first offender and he made a full written statement, giving a full and frank admission of everything that he had done.

5.        The fraudulent conversion was well thought out and complex.  For instance, he kept the payments out to relatively small amounts as large amounts would have been checked.  Eventually, the fraudulent conversion was discovered by an administrator who reported the matter to Morgan's brother, the managing director of the company.  As I've said once the crime had been discovered Morgan made a full admission to the board and more importantly to the police.

6.        This was a serious breach of trust and in the English case of Barrick Cr App R [1985] this was said:

"the following are some of the matters to which the Court will no doubt wish to pay regard in determining what the proper level of sentence should be: (i) the quality and degree of trust reposed in  the offender including his rank; (ii) the period over which the fraud or the thefts have been perpetuated; (iii) the use to which the money or property dishonestly taken was put; (iv) the effect upon the victim; (v) the impact of the offences on the public and public confidence; (vi) the effect on fellow-employees or partners; (vii) the effect on the offender himself; (viii) his own history; (ix) those matters of mitigation special to himself such as illness; being placed under great strain by excessive responsibility or the like; where, as sometimes happens, there has been a long delay, say over two years, between his being confronted with his dishonesty by his professional body or the police and the start of his trial; finally any help given by him to the police".

7.        Now Advocate Scholefield has urged upon us what he terms the exceptional circumstances but you must cite from the passage from Crown Advocate Whelan in his text on this matter at paragraph 481 which says just that:

" 'The cases' ", that is cases of fraud, " 'seem invariably to involve offenders of excellent previous character, who cooperate fully with the police, who employ a not especially sophisticated modes operandi, who intend to make a restoration (and sometimes do so wholly or in part), who plead guilty, who evince a more or less inadequate personality, either generally or in response to the configuration of problems which have led to the offence, who have lost employment, professional status and prospects as a result of the offence, who have suffered severe damage to family life, suffered genuine remorse and, who as often as not, suffer in some particular personal way that makes a genuine emotional appeal.  Unsurprisingly the Courts has felt unable to treat these circumstances as exceptional; they are, in the context of these cases, in fact commonplace.' "

8.         We have carefully considered the points made so carefully and eloquently by Advocate Scholefield and we have studied in detail the reports that have been presented and the letters that have been received.  It must be said that Morgan did not use the funds in order to live a high lifestyle but we feel that the Crown has taken what can only be described as a generous view.  This was a sustained fraud over a long period of time.  It cannot be that a fraud of approximately one quarter of a million pounds takes on a special character because it will eventually be repaid.  It is perhaps (we say this as a passing thought) fortunate that the company was not sold before the administrator discovered the fraud.

9.        We are going to follow the Crown's conclusions.  For the fraudulent conversion count 1 you are sentenced to two years and nine months' imprisonment.  You are also barred, as has been agreed, to serving as a director for a period of 5 years.

Authorities

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

Whelan: Aspects of Sentencing in the Royal Courts of Jersey (2^nd Edit'n): pp189-190.