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29 May 2013

Corker Binning Partner interviewed by Lexis Nexis about the changes to fraud sentencing

Corker Binning partner Nicola Finnerty is interviewed by Lexis Nexis about sentencing for the common law offence of conspiracy to defraud.

A toughening of judicial stance when sentencing for common law fraud


Crime analysis: What should be taken into account when sentencing for common law fraud? Nicola Finnerty, partner at Corker Binning, who acted for Kallakis, says the Court of Appeal’s judgment may result in a toughening of the judicial stance when sentencing for common law fraud.

Original news

R v Kallakis and another; R v Levene [2013] EWCA Crim 709, [2013] All ER (D) 201 (May)

In appeals against sentence in a number of conspiracy to defraud and fraud cases dealt together, the Court of Appeal, Criminal Division provided guidance on: (i) whether and to what extent the sentencing guidelines council’s guideline upon sentencing for statutory offences of fraud were relevant to the task of sentencing for an offence of conspiracy to defraud; (ii) to what extent the absence of loss might constitute mitigation of the seriousness of the offence; and (iii) the appropriate use of the power to impose consecutive sentences for
substantive offences of fraud and for conspiracy to defraud.

What is the significance of this judgment? What problems did it seek to address?

Nicholas Levene, a former city financier convicted of orchestrating a high yield Ponzi scheme, appealed against his sentence of thirteen years as being manifestly excessive in light of his guilty pleas to fourteen of nineteen substantive counts under the Theft Act 1968 and Fraud Act 2006. His appeal was joined by a reference from the Attorney General who referred the seven-year sentence of former property magnate Achilleas Kallakis, for common law conspiracy to defraud, on the grounds that it was unduly lenient.

The two cases raised common issues about sentencing in fraud case and the court determined:

  • whether and to what extent the Sentencing Guidelines Council’s (SGC) guideline on sentencing for statutory offences of fraud is relevant to the task of sentencing for an offence of common law conspiracy to defraud
  • to what extent the absence of loss may constitute mitigation of the seriousness of the offence
  • the appropriate use of the power to impose consecutive sentence for substantive offences of fraud and conspiracy to defraud

Significantly, the Attorney General also asked the Court of Appeal, as part of the reference, to consider afresh whether guidelines for the sentencing of the most serious cases of conspiracy to defraud should apply. The court concluded, however, that no such review of sentencing principles was required.

What are the difficulties when considering sentence in cases of conspiracy to de-fraud?

When sentencing for such offences, judges currently rely on previous Court of Appeal authorities. This allows them greater sentencing discretion on the basis that conspiracy to defraud is saved for the most serious and unusual cases of fraud. A prescriptive set of sentencing guidelines for such cases is not therefore considered appropriate or indeed possible; whereas, sentencing for substantive fraud offences is governed by the SGC guidance on sentencing for statutory fraud (published in 2009). Some critics, however, say that this discretion is causing a disparity in sentencing practice and so there should be guidelines. Coincidentally, the SGC will launch a consultation in July in which the potential benefit of producing separate guidelines for conspiracy offences will be considered. The SGC’s consultation paper will be published in autumn 2013.

How applicable are the Sentencing Guidelines for statutory fraud on a conspiracy to defraud and what is the relevance of the loss caused?

The Court of Appeal ruled that when sentencing for conspiracy to defraud, whilst the SGC guidelines do not apply judges can seek guidance on general principles from the statutory guidelines. This is on the basis that the underlying principles of sentencing apply to the substantive offence and to conspiracy to defraud but that sentencers must not be inhibited in the exercise of their discretion by slavishly following the guidance. In terms of the relevance of loss, the court clarified the definition of ‘most serious offence’ when assessing the seriousness of an offence (and thus the starting point in the sentencing range). The court relied on dicta in R v Bright [2008] All ER (D) 83 (Mar), which states that to justify sentences in excess of statutory maximums, a judge need not deem a case as the worst offence of its kind but should assess whether the offence is, within the relevant category, one of the utmost gravity. Seriousness includes harm and culpability and harm includes harm which was intended or caused or might reasonably have been foreseen. Hence there does not need to be a financial loss for a case to be within the category of ‘most serious’. However, within this category, the court referred to the SGC guidelines which recognise that a fraud which results in substantial financial loss
particularly if the loss was suffered by vulnerable victims deliberately targeted was more serious than a fraud
that had not.

What does this tell us about the totality principle and concurrent/consecutive sentencing?

This was perhaps the most important clarification by the Court of Appeal in that it provided renewed emphasis on the principle of totality. The court sought to remind sentencers that the SGC’s guideline on totality applies to all sentences passed after 11 June 2012 and judges have a positive obligation to review the aggregate and ensure that it is proportionate to the level of criminality. Furthermore, there is no inflexible rule governing whether sentences should be structured as concurrent or consecutive and when sentencing on multiple counts, a judge should first consider the sentence for each individual offence and then determine whether the circumstances call for concurrent or consecutive sentence and whether the sentence as an aggregate is ultimately a fair one.

What are the practical implications of this decision? Are there any grey areas?

The Court of Appeal has preserved the flexibility and discretion given to judges sentencing for conspiracy to defraud whilst attempting to resolve any confusion caused by the unguided use of judicial discretion, especially in respect of the totality principle. As the SGC is due to launch a consultation to discuss the potential benefit of producing separate guidelines for conspiracy offences it may be that guidelines are imminent. However, for the time being, this new judgment may result in a toughening of the judicial stance when sentencing for common law fraud offences.

Nicola Finnerty is a leading criminal defence expert in both crime and fraud. She is highly ranked by Chambers and Partners, the Legal 500, the International Who’s Who of Business Crime Defence Lawyers, the Guide to the World’s White Collar Crime Lawyers and the Guide to the World’s Leading Women in Business Law 2012. Nicola represented the respondents (Kallakis).

Interviewed by Kate Beaumont.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor