Reflecting on Changes to Fraud Sentencing

Sentencing for the common law offence of conspiracy to defraud is back in the spotlight following the Court of Appeal’s judgment in Levene v R and R v Kallakis and Williams [2013] EWCA 709.

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 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. 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 Sentencing Guidelines Council’s (SGC) guidance on sentencing for statutory fraud (published in 2009).

The court concluded that no such review of sentencing principles was required. However it did seek to clarify a number of areas of sentencing policy.

Firstly, 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.

Secondly, 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 Bright [2008] EWCA Crim 462 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.

Finally and perhaps the most important clarification is the 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.

Thus, 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. Coincidentally, the Sentencing Guidelines Council will launch an official consultation into fraud sentencing in July in which the potential benefit of producing separate guidelines for conspiracy offences will be considered. The Council’s consultation paper will be published in Autumn 2013. For the time being, however, this new judgement may result in a toughening of the judicial stance when sentencing for common law fraud offences.