FINANCIAL CRIME UPDATE
23 Essex Street is a set of barristers’ chambers specialising in criminal litigation and noted in the financial field for its
work in white-collar crime cases, including money laundering, confiscation and asset recovery, revenue and customs,
business and market-related and intellectual property crime. In addition, it is noted for its expertise in the associated
fields of professional regulatory and disciplinary proceedings.
Financial Crime Update
Victoria Gainza and Hannah Evans of 23 Essex Street review the latest financial crime developments
EVER INCREASING SENTENCES IN FINANCIAL CRIME?
The Court of Appeal upholds sentence of 10 years’
imprisonment following guilty pleas in R v Boakes, a
fraudulent trading prosecution brought by the FCA.
FACTS
n
Between 2002 and 2012 the appellant, Phillip Boakes, obtained
£3.5m from investors with sham promises of guaranteed returns
from foreign exchange trading. He was not authorised by the Financial
Conduct Authority (FCA) to receive this money, as is required under
the Financial Services and Markets Act 2000 (FSMA).
£2.1m was invested while £1.3m was spent on the appellant’s lavish
lifestyle. Nearly £1m of the amount invested was lost. Any returns paid
to investors came either from their own deposits or those of others, in
classic “Ponzi” fashion.
Prior to his offending, Mr Boakes had been an Independent
Financial Advisor and a number of his victims first came to know him
in that capacity.
Court, indicated that after trial the appropriate sentence would have
been 13–14 years’ imprisonment.
After awarding full credit for the FSMA offence and 25% credit for
all other pleas (which were entered later in the proceedings) he imposed
the following custodial sentences:
one year for accepting deposits without authorisation or
––
exemption;
four years (concurrent) for using a false instrument;
––
four
–– years (concurrent) for fraudulent trading contrary to the
1985 Act;
six years for fraudulent trading contrary to the 2006 Act (to be
––
served consecutively to the other fraudulent trading offence).
Mr Boakes was also disqualified from being a company director for
10 years.
On appeal, the broad thrust of the defence submissions was that,
while individual sentences were not excessive, considerations of totality
ought to have prevented the Judge from imposing a sentence exceeding
a total of eight years.
On 23 November 2015, the sentence was upheld by the Court
of Appeal, with Jackson LJ concluding that 10 years was ‘not a day
too long’. 3
SENTENCE AND APPEAL
Mr Boakes pleaded Guilty to the following offences:
One count of accepting deposits without authorisation or exemp––
tion, contrary to ss 19 and 23 of FSMA (for which the maximum
sentence is two years);
Three counts of using a false instrument, contrary to s 3 of the
––
Forgery and Counterfeiting Act 1981 (for which the maximum
sentence is 10 years);
One count of fraudulent trading, contrary to s 458 of the Com––
panies Act 1985 (for which the maximum sentence was seven
years); and
One count of fraudulent trading, contrary to s 993 of the Compa––
nies Act 2006 (for which the maximum sentence is 10 years).1
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COMMENT
Total length of sentence
It was common ground between the parties that the appropriate
Sentencing Guideline when dealing with the fraudulent trading
counts was the Fraud, Bribery and Money Laundering Offences
Guideline. It was likewise agreed that the case fell into the highest
bracket, which has a starting point of seven years’ custody and a
category range of 5–8 years.2
His Honour Judge Loraine-Smith, sitting at Southwark Crown
Given the stated range of 5–8 years’ custody, at first blush a sentence
of 13–14 years after trial may seem a significant departure from the
Guideline. It is immediately apparent that it exceeds the maximum
available for either of the fraudulent trading offences. Moreover, while
sentences rounding the 10 year mark are not unheard of in the context of
fraudulent trading, they have generally been imposed in cases featuring
conspiracies, greater cumulative losses, or in the absence of guilty pleas.4
In addition, as HHJ Loraine-Smith duly recognised, the appellant
was entitled to significant credit. He also had no previous convictions
for dishonesty (though he was not a man of good character).
Nevertheless, the number of aggravating factors present in this case
cannot fairly be overlooked. The Judge at first instance was mindful of
the following:
the offending took place over a ten year period;
––
there were a large number of victims – some of them Mr Boakes’s
––
friends and acquaintances – to whom real hardship was caused;
much of the money obtained was spent on maintaining a lavish
––
lifestyle for Mr Boakes and his family, with Mr Boakes buying
January 2016
Butterworths Journal of International Banking and Financial Law
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himself top-of-the-range sports cars and trips to the Caribbean,
and withdrawing nearly £200,000 in cash;
for a period of eight years from 2004, Mr Boakes was not entitled
––
to take deposits from investors (as he accepted by his plea to the
FSMA offence);
he
–– continued to do so despite an investigation by the FCA in
2009; and
after he was arrested, he sought to persuade investors not to
––
co-operate with the criminal investigation by promising to repay
them their lost money. (The Judge noted that this almost amounted to an attempt to pervert the course of justice.)
In upholding the sentence, the Court of Appeal placed particular
weight on the impact of the offences on the large number of elderly and
vulnerable victims, who had been conned out of their life savings in
what was described as a “gross” breach of trust.
The court would also undoubtedly have borne in mind further
relevant facts in the case:
the enterprise had been fraudulent from the outset;
––
despite claims that he was an extremely successful and skilful
––
trader, the appellant was inept, making a loss in 87 of the 106
months during which he traded;
one
–– elderly victim was encouraged to withdraw from a safe, legitimate investment in order to invest in his scheme;
the appellant lied to the FCA when they investigated him in
––
2009, telling them that he did not handle monies or give investment advice when in fact he was doing both (without the requisite
authorisation);
he tried to induce more people to invest even after he was charged; and
––
throughout
his offending, he forged documents to avoid detec––
tion and suspicion, including accounting documentation, trading
statements, and even an advice shown to investors purporting to
be from PriceWaterhouseCoopers.
The maximum term and the use of consecutive
sentences
As was expressly recognised by the Court of Appeal, the total
sentence passed amounted to the maximum term available for
fraudulent trading under the 2006 Act (and exceeded that prescribed
by the 1985 Act).
It is inarguable that, had Mr Boakes pleaded guilty to a single count
of fraudulent trading, he would have been entitled to a reduction in
sentence even if the maximum term of 10 years had been considered
appropriate. It was only the presence of two counts of fraudulent
trading, and the use of consecutive sentences for said counts, that
enabled HHJ Loraine-Smith to pass a sentence of 10 years even after
credit had been awarded.
This was done in a context where the only reason the indictment
contained two counts of fraudulent trading was that the law changed
during the offending period (with the 2006 Act superseding the 1985
Act). It might be argued that the imposition of consecutive sentences
in these circumstances amounts to a circumvention of the maximum
Butterworths Journal of International Banking and Financial Law
sentence for the offence laid down by Parliament.
However, whilst this may be a particularly stark illustration of
the general approach, the Court of Appeal has consistently held5 that
consecutive sentences can properly result in a sentence which exceeds
the maximum for each count, provided that the total sentence reflects
the overall level of criminality.
As was made clear in Attorney General’s Reference (Nos 7 and 8 of
2013)6 the correct approach is not to fixate on the question of whether
sentences imposed ought to be consecutive or concurrent. Rather, it is to
assess the overall seriousness of the appellant’s conduct in the round and
identify an appropriate starting point on that basis (which may or may
not be higher than the maximum sentence for any individual offence).
This appears to have been the approach followed by HHJ LoraineSmith and it would seem that, even in the circumstances outlined above,
the Court of Appeal is not concerned about the use of consecutive
sentences if it considers the total term to be justified on the facts.
FINANCIAL CRIME UPDATE
Financial Crime Update
Biog box
Victoria Gainza and Hannah Evans are barristers practising from
23 Essex Street, London
CONCLUSION
It is dangerous to extrapolate from individual cases in this area of
law. As was noted by Pitchford LJ in Attorney General’s Reference
(Nos 7 and 8 of 2013),7 ‘[p]revious decisions of the Court of Appeal
demonstrate that the assessment of offences of fraud is an intensely
fact-sensitive exercise’.
It might be argued that the Court of Appeal’s willingness to
uphold this sentence signals a hardening approach to financial offences
committed against vulnerable investors; particularly given the context in
which the consecutive sentences were used. It remains to be seen whether
this is so, or whether R v Boakes will be distinguished from other cases
given the large number of aggravating features present.
n
1 Six other counts were ordered to lie on the file. Some of the offences were
committed in breach of a Suspended Sentence Order for an unrelated
offence. The Registrar noted that the court at first instance appeared to
have fallen into error by taking no action on the breach but this element of
the sentence was left untouched by the court and will not be dealt with in
this article.
2 According to the Guideline, cases having a “high impact” on victims
should move up a category. If a case is in category 1, it should be moved
up within the range.
3 The official transcript has not yet been published and the information
contained within this article is based on a contemporaneous note of the
proceedings taken by a party who was present.
4 See the discussion of sentencing authorities at paras 59-71 of Attorney
General’s Reference (Nos 7 and 8 of 2013) (R v Kallakis & Williams; R v
Levene) [2014] 1 Cr App R (S) 26.
5 For example, consider the case of R v Hibberd and Allen [2009] EWCA
Crim. 652, discussed by the Court of Appeal in Attorney General’s
Reference (Nos 7 and 8 of 2013) at para 66.
6 See para 78, and also para 69, where the court quoted from the
case of Attorney General’s Reference (No 136 of 2006)
(R v Johnson) [2007] EWCA Crim. 2837.
7 Supra.
January 2016
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