Mehta & Ors v R

On 19 & 20 June we heard applications for leave to appeal against both conviction and sentence by all four defendants. We gave judgment on 20 June in relation to each of the conviction applications, but were obliged by want of time to reserve our decisions as to sentence. Those we now give.

It is unnecessary to repeat the circumstances of these offences. A summary of them can be found in our judgment relating to the conviction applications. Mehta was convicted of cheating the revenue by way of a substantial ‘carousel’ VAT fraud (count 1). All four defendants were convicted of conspiracy to launder the proceeds (count 2). The indictment had contained substantive counts of money laundering to cater for the possibility that the jury might be satisfied, in the case of one or more defendants, that he was party to laundering specific sums which passed through his own hands but not to the wider conspiracy charged in count 2. The jury’s verdicts of guilty on count 2 made it unnecessary to take verdicts on those substantive counts, and justifies the conclusion, reached by the trial Judge, that each of the last three defendants had been party to the laundering of all the proceeds except about £1m which was or may have been handled outside the loop of which they were part. Thus the sums involved were, for Mehta, about £7.1m, and for the other defendants approximately £6m. Like many MTIC or ‘carousel’ frauds and their associated money-laundering, this was a highly sophisticated operation, with the essential simplicity of the fraud being disguised by what the Judge described as ‘thousands of false invoices and documents, faxes and bank statements’, as well as a false bank account. The circulation of the money by way of disguise took in the continent as well as activity in this country.

The Judge sentenced Mehta to 10 years for the cheat, with a concurrent term of 8 years for his part in the laundering, thus 10 years in all. She sentenced each of the remaining defendants to 8 years for the money laundering in count 2.

The first submission made to us was that the Judge had been wrong to proceed to sentence after it had become known at the end of the trial that Reardon and Ratcliffe had been arrested on suspicion not only of tampering with the jury (the Kilshaw tampering) but also of uttering a threat to kill the Judge. It is said that she should have declined herself to pass sentence because there would be a perceived Medicaments ‘bias’, used in the sense of lack of independent objectivity, because she had unavoidably become personally involved. That, it is submitted, might lead to the adoption of a raised starting point, which might (a) be unappealable in the sense of falling within an acceptable bracket, but nevertheless be wrongly affected by the allegations made, and (b) affect not only the two defendants arrested but also, by parity, others. We sympathise with the difficult position in which the Judge found herself. But there is real importance in sentence being passed by the Judge who has heard the trial, in this case over several weeks. We do not doubt that the Judge was able to discount for the purposes of sentencing the allegations made against Reardon and Ratcliffe, especially when she had no means of knowing whether they were to be substantiated or not. In the end, no charge was brought against either man.

There was at one time a further argument based upon the fact that in passing sentence the Judge inadvertently explained the sentence in terms of the early release provisions of the new Criminal Justice Act 2003, rather than those of the 1991 Act, which applied to this case because of the date of the offences. That has rightly not been advanced in the light of the enactment of section 26 Criminal Justice and Immigration Act 2008, which brings the early release provisions for these defendants, and most 1991 Act prisoners, into line with those applicable to 2003 Act prisoners. We are not to be taken to be saying that even without the new statutory provision this complaint would have had any force; it does not seem to us that it had.

The principal ground of appeal is that the sentences are simply too long. Each defendant has contended that by comparison between his own case and that of one or more others his responsibility ought to have been recognised to be smaller. We see no error in the Judge’s approach. She had an unrivalled opportunity to judge the roles of each defendant. On the material which we have examined we have no doubt that she was entitled to conclude that Mehta had had more than a formal ‘front-man’ role and was deeply involved in the organisation and execution of the cheat. Given the convictions on count 2, the different but complementary activities of the other three defendants, and the contacts between them, and between them and other essential persons, we are equally sure that she was entitled to treat them all the same. As she said, they acted ‘as a team’.

Were the sentences nevertheless too long ? We have considered a number of cases of sentencing in carousel frauds, to which we have helpfully been referred. Insofar as reliance is placed upon May [2005] 2 Cr App Rep (S) 67 at 408 two things are to be noted. First, the amount involved for the defendant in question was £4.4m, rather than the £12m figure to which we were referred, which was the total for all defendants. Secondly, the reduction in sentence there made, from 5 years to 4 years, was made because the sentence had been passed on a factual basis subsequently found by the sentencing Judge during the confiscation proceedings to have been erroneous (see page 429). This court did not need to address the question of whether 5 years would have been appropriate upon late plea of guilty, for a fraud involving £4.4m.

This court recognised in AG reference 88 of 2006 (Meehan and others) [2007] 2 Cr App Rep (S) 155 that earlier sentences for this form of fraud had not always been as long as its prevalence has shown to be necessary. It is with this case and the judgment of the Vice President, Latham LJ, that it is now necessary to begin. There, the sums of duty evaded for the principal three defendants had been £24m or £38m. This court indicated that for those engaged on that scale as organisers of the fraud sentences well into double figures could now be expected after trial. However, different considerations applied to those sentenced in that case who were the operators of genuine companies with legitimate trade, and who lent themselves to the fraud as ‘buffer companies’, that is to say those through whose hands the actual or notional commodities passed, but who were neither the missing traders who withheld the VAT nor the eventual reclaimers of VAT upon ‘export’. After trial, sentence for such buffer operators should, it was held, be of the order of 6-8 years; that was assuming an overall loss to the Revenue of the order of £24-38m. [Note that the penultimate sentence of paragraph 19 of the judgment as reported contains a misprint in speaking of such a sentence being appropriate to a plea of guilty.] In the subsequent case of Takkar [2008] EWCA Crim 646 this court, presided over by Sir Igor Judge P, upheld a sentence of 7 years after trial where the defendant was not running a buffer company but was held to be an organiser of the fraud, in that case as the missing trader. There, the loss to the Revenue involved was about £5m.

We have also looked at a number of cases of more general money-laundering. We say no more about them than that we take the view that the Judge in this case was entitled to treat the money laundering as having been very close to the fraud. What it was not, however, was an example of the general money-laundering service offered to numerous criminals, of the kind exemplified by a number of bureau de change or hawala banking operators. Whilst each case will depend on its own facts, it may often be true that such general launderers are not merely as culpable as the criminals generating the money but not infrequently more so, and often more culpable than are those who engage in the handling of the proceeds of a particular fraud, as here. In a case of this present type, it seems to us that there is relatively little difference in culpability between the architects of the fraud and the architects of the specific money laundering which was essential to its success. We think, however, that in this case we should respect the difference made by the Judge who heard the trial between Mehta and the other three defendants, which was no doubt intended to reflect both the difference in amounts for which they bore responsibility and a limited distinction between fraudsman and launderer. It is to be observed that in the case of Sharman he had been indicted for the cheat, but was acquitted on that count by the jury.

We bear in mind that all these defendants were of previous good character, or effectively so. That is by no means always the case in instances of carousel fraud.

Mehta was an organiser of the fraud which involved a loss of just over £7m. Applying the cases and the principles which we have set out, we are satisfied that a 10 year sentence is too long, not by a great deal, but by sufficient to make it necessary for us to adjust it. In our view the proper sentence after trial for a person in his position would ordinarily have been about 8 – 9 years. In his particular case the personal material available, not all of which was available to the trial Judge, merits a modest adjustment in that tariff. We give leave to appeal, quash the sentence of 10 years and substitute one of seven and a half years. To that extent his appeal against sentence is allowed.

In the case of the other defendants, and respecting the distinction which the Judge made between their case and that of Mehta, it seems to us that the proper sentence for conspiracy to launder about £6m ought to have been six and a half years. In each case, we give leave to appeal, allow the appeals, quash the sentences of eight years and substitute ones of six and a half years.