Greaves & Ors v R

Introduction

These appeals against sentence passed at the Crown Court by His Honour Judge Tester at Southwark on 27 April 2009 have the leave of the full court given on 15 January of this year. They arise from a scheme to sell to private investors in the United Kingdom shares which were wholly unsuitable to them and unsaleable once purchased. The first shares were sold in an unquoted company named Pantera Oil & Gas PLC. Later shares were sold in companies quoted solely on AIM, the alternative investment market. That is a highly specialist field. There were 580 investors who paid a total of some £2.4 million. Of that £238,000 was located and restrained in this country and £310,000 in Hong Kong. The scheme involved cold calling investors from call centres outside the United Kingdom. The principal one was in Barcelona. About half the investors received share certificates.

The three appellants and others initially faced a single count of conspiracy to defraud. At an early stage in the proceedings in the Crown Court, a count of money laundering contrary to section 238 of the Proceeds of Crime Act 2002 was added. A short period before the trial there were negotiations between counsel. The outcome was the addition to the indictment of a count of conspiracy to contravene sections 19 and 21 of the Financial Services and Markets Act 2000. Botcher and Jenkins both then pleaded guilty to that count and to the money laundering count.

Section 19 of the Financial Services and Markets Act 2000 provides that only authorised persons may carry on a regulated activity in the United Kingdom. The sale of the shares was a regulated activity and was not being carried on by authorised persons. Section 21 of the Act provides that persons who are not authorised must not in the course of a business communicate an invitation to engage in investment activity unless the invitation has been approved by an authorised person. The salesmen were not authorised and their communications were not approved by an authorised person. Sections 23 and 25 make breach of sections 19 and 21 punishable with up to two years imprisonment. Applying section 3 of the Criminal Law Act 1977 the maximum sentence for conspiracy to contravene these sections is the maximum provided by the sections themselves. In contrast section 328 of the Proceeds of Crime Act 2003 carries 14 years.

Botcher and Jenkins had both pleaded not guilty to the original count of conspiracy to defraud contrary to common law. Their pleas were accepted by the Crown. Botcher was sentenced to 12 months on the conspiracy to contravene sections 19 and 21, and Jenkins to 7 months. On the section 328 offence – the laundering offence – Botcher was given 33 months and Jenkins 14 months. Those sentences were consecutive to the conspiracy sentences, making a total for Botcher of 45 months, and for Jenkins of 21 months.

Greaves stood trial. He was convicted following trial on two conspiracy counts, one being a conspiracy to breach section 19 and one being a conspiracy to breach section 21. The original single count covering both sections had been divided in to two separate counts for the purpose of his trial. He was also convicted on the count relating to section 328 – the money laundering. He was sentenced to 18 months on each of the conspiracy counts relating to sections 19 and 21, and to 4 years on the section 328 count. The two 18 months sentences were concurrent to each other but consecutive to the 4 years making a total of 5 years 6 months. Greaves was acquitted on the count of conspiracy to defraud contrary to common law. So it was not established against any defendant that the scheme was a fraudulent scheme.

The primary submission made on behalf of the appellants is that the conduct which constituted the money laundering offences was part of the conduct encompassed within the conspiracy offences and as such should not have attracted any sentences which added to the sentences on the conspiracy offences. In short, the conduct which constituted the money laundering had been punished by the sentences on the conspiracies. Therefore, it was submitted, there should have been either no separate penalties for the money laundering offences, or concurrent sentences which did not exceed those on the conspiracies. So the maximum sentences for the section 21 and section 22 conspiracies set the maximum for concurrent sentences on the money laundering.

The authorities

We were referred to a number of authorities which touch on the relationship between what we can call the primary offence and subsequent money laundering. One situation in which this commonly arises is where the primary offence is drug dealing. The equivalent there to the situation here is where the drug dealer is also convicted of laundering the proceeds of his own drug dealing. The position is simpler where the drug dealer and the launderer are two different persons.

In Greenwood [1995] 16 Cars 614 the court reduced a sentence on a launderer because it was higher than that given to the drug dealer, saying that the former was nearly as bad but not quite as bad as the latter.

In Everson [2002] 1 Cr App R(S) 132 the appellants were concerned in a money laundering scheme centred on a bureau de change. They pleaded guilty to conspiracy to convert property and remove it from the jurisdiction knowing or inspecting that it represented the proceeds of criminal conduct. They exchanged used sterling notes for foreign currency, bank drafts or electronic transfers. The money was the proceeds of cigarette smuggling, which carried a maximum sentence of 7 years. As to that, this court drew attention to the possibility of a charge of conspiracy to cheat to ensure that a sufficient sentencing option was available, as had been suggested in Dosanjh [1999] 1 Cr App R(S) 107. As to the sentences for laundering with which it was concerned the court stated :

“We do not consider to be impressive, in the circumstances of this case, the argument of counsel that the effective maximum available here in the case of a principal was that of seven years and that should, as it were, operate to govern the appropriate sentence available in the case of these appellants. We say that because here the charge was that of conspiracy. It was a conspiracy which was alleged to have lasted for a considerable period of time. Moreover, the conspiracy was in the context of money laundering and did not relate to just one particular incident of evasion of duty.”

In Basra [2002] 2 Cars 100 it was said that money laundering was a stand alone offence where the constituents might be many and varied. It depended in part on the launderer’s knowledge. The court stated that the offences of drug dealing and money laundering were different and could attract different sentences depending on the different facts of each individual case.

In Brown [2006] EWCA Crim 1996, [2007] 1 Cr. App. R.(S) 77, this court was asked to give general guidance as to the relationship between drug dealing offences and laundering offences. It declined. The defendant had faced charges of conspiracy to supply cocaine and heroin but they were not proceeded with. The sentence was reduced on the ground that the money laundering offences to which the defendant had pleaded guilty were qualitatively different at least in part from the drug offences that underlay them.

In Bell [2008] EWCA Crim 3211 the appellant had received 4½ years for conspiracy to produce cannabis and 30 months consecutive for conspiracy to possess criminal property. He had used his family to assist in laundering his cannabis proceeds. This court said:

“Mr Cooke, representing the Crown, puts forward this proposition: that where the gravamen of the money laundering charge is different and adds to the conspiracy counts related to the production and supply of drugs, there is nothing wrong in principle in having consecutive sentences. He accepts, of courts that the sentences on counts 1 and 2 are properly concurrent but, he submits, count 4 extends the criminality and justifies the judge in passing the consecutive sentence.

Two matters he refers to in particular which constitute the different gravamen, as he put it, are: first, the ostentatious use of the wealth that the appellant demonstrated in his use of funds and the attitude demonstrated in the letter he wrote which sought to glamorise the nature of the criminal activity that he was taking part in; and secondly, counsel says (and this we think is a more significant argument) there is the defendant’s cynical use of other people. He used close members of his own family and involved them in his activities, and in particular in the use he made of them in benefiting from the money that he was making from his drug related activities. He used his father in this way, the Lilley brothers, who had a legitimate business to begin with, and also his own sister who was used for the purpose of obtaining finance agreements in relation to the cars which distanced the appellant from the contracts involved.

We have concluded that such activity did entitle the judge to pass a consecutive sentence on count 4. Each case depends upon it own facts and there will be cases where a money laundering charge may well not add to the overall criminality disclosed in drug related offences, whether conspiracies or specific charges. However on the facts of this particular case, we have concluded that the judge was entitled to pass a consecutive sentence on count 4. In our judgment, the length of the sentence is not manifestly excessive, or indeed wrong in principle, and in those circumstances the appeal fails and the original sentence will stand.

We agree with the comment in the second paragraph quoted that the more cogent justification for a consecutive sentence was the use of the appellant’s family.

In Linegar [2009] EWCA Crim 648 the appellant had been sentenced to 15 months for engaging in the provision of unlicensed personal credit agreements contrary to section 39 of the Consumer Credit Act, which carries a maximum of 2 years. He was also sentenced to 2 years for five money laundering offences, two of them contrary to section 327 of the Proceeds of Crime Act 2002, and three contrary section 329. Section 327 is concerned with converting criminal property. Section 329 is concerned with possession of criminal property. The Proceeds of Crime Act sentences were concurrent between themselves but consecutive to the section 39 offence. So the total was 3 years and 3 months. The particulars of the section 39 offence were that the appellant provided personal credit agreements without a licence, an offence aimed at the failure to have a licence. Two counts of converting criminal property contrary to section 327 of the Proceeds of Crime Act related to monies to buy a car and real property. Three counts contrary to section 329 of that Act related to cash recovered from the car, the property and the appellant’s mother-in-law. These five counts related to the proceeds of the unlicensed money lending. The appellant’s conduct in recovering the loans involving threats and racist abuse was referred to in paragraph 8 and may be important to the decision that a consecutive sentence was appropriate

Aikens LJ referred to the definition of the offences and set out the appellant’s argument that the criminal property was simply the proceeds of the principle offence, namely the section 39 offence, and so the sentences should be concurrent and no greater than that passed on the section 39 offence – 2 years. He then stated:

“15.

However, none of this detracts, in our view, from the fact that the Proceeds of Crime Act offences are entirely independent of the Consumer Credit Act offence. As a result of the Consumer Credit Act offence, the appellant was able to obtain from his victims (because that is what they were) both repayment of the principal sum that he had lent and interest on that personal credit that he had advanced to them without a licence. That interest was doubtless charted at “commercial rates”, at the very lowest. The returned principal sum and the interest thereon constitutes the criminal property that the appellant obtained as a result of the crime of providing personal credit agreements without a licence. The principal and interest is the criminal property which, by virtue of his guilty pleas to counts 1, 2, 4 and 5, he has admitted that he possessed and converted. Mr Hynes accepted before us that the returned principal sums capital and the interest thereon that was obtained by the appellant constituted the relevant “criminal property” for the purposes of the Proceeds of Crime Act offences.

16.

On this analysis, it would have been possible to have constructed the indictment without having on it count 9 at all; in other words, without having on it the antecedent offence of providing without a licence personal credit agreements. Mr Hynes accepted, as we understood it, that this was so.

17.

However, in our view this concession entirely undermines his argument. By section 329 of the Proceeds of Crime Act 2002, the simple possession of criminal property is, by itself, a crime. That is quite independent of any anterior offence, in this case of engaging in unlicensed activities concerning the provision of personal credit agreements. The mischief in possessing criminal property is that it enable the criminal to engage further in his criminal activities, whatever they might be. As Cooke J put it in the case of Basra [2002] EWCA Crim 541, it “encourages and nourishes crime in general”.

18.

By section 327 of the Proceeds of Crime Act 2002, the converting of criminal property is itself a crime. That again is quite independent of any anterior offence, in this case that of engaging in unlicensed provision of personal criminal agreement. “Converting” involves some kind of action: doing something to something else. Here the appellant converted the cash that he had obtained from his victims into a car and property. These actions were, in common language, laundering the money which was the proceeds of his criminal activity. That process hides those criminal activities. It enables the criminal more easily to escape detection. It provides an apparently innocent cover for the criminal activity. In our view, the acts of possessing and converting criminal property are pernicious. That is why those crimes have a maximum sentence of 14 years.

19.

Accordingly, despite the somewhat charged of language of the judge, he was entirely justified in imposing consecutive sentences for what were, on our analysis, entirely independent offences. Moreover, we consider that the sentences of 2 years for the Proceeds of Crime Act offences were themselves entirely justified. Nor can it be said, on the facts, that they are out of proportion to the sentence imposed for the Consumer Credit Act offence. They are consistent with the guilty pleas and the other mitigation advanced on behalf of the appellant. The total of the sentences was not manifestly excessive.”

It does not appear that Bell was cited to the court, but as we read the case it is consistent with Bell, that is to say that the court in Linegar considered that the conduct relating to the proceeds of the lending merited additional sentences.

The statutory provisions in this case.

We turn now to the definitions of the offences which are involved here. Section 19 of the Financial Services & Markets Act 2000 provides :

“19.-(1) No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is –

(a)

an authorised person; or

(b)

an exempt person.

(2)

The prohibition is referred to in this Act as the general prohibition”

By section 23 a person who contravenes the general prohibition is made guilty of an offence carrying a sentence of up to 2 years imprisonment. It is called an authorisation offence.

Section 21 provides in part :

“21 (1) A person (“A”) must not, in the course of business; communicate an invitation or inducement to engage in investment activity.

(2)

But subsection (1) does not apply if –

(a)

A is an authorised person; or

(b)

due content of the communication is approved for the purposes of this section by an authorised person.

(3)

In the case of a communication originating outside the United Kingdom, subsection (1) applies only if the communication is capable of having an effect in the United Kingdom.”

By section 25 a person who contravenes section 21 (1) is guilty of the offence and liable to imprisonment for up to 2 years.

Section 327 of the Proceeds of Crime Act 2002 provides in part :

“327 (1) A person commits an offence if he-

(a)

conceals criminal property;

(b)

disguises criminal property;

(c)

converts criminal property;

(d)

transfers criminal property;

(e)

removes criminal property from England and Wales or from Scotland or from Northern Ireland.

(3)

Concealing or disguising criminal property includes concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it.”

The relevant section here is section 328. Subsection (1) provides :

“328 (1) A person commits an offence if he enters into or becomes concerned in any arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.”

Section 329 (1) provides :

“329 (1) A person commits an offence if he-

(a)

acquires criminal property;

(b)

uses criminal property;

(c)

has possession of criminal property”

Section 340 is titled ‘interpretation’. It provides in part :

“340 (1) This section applies for the purposes of this Part.

(2)

Criminal conduct is conduct which-

(a)

constitutes an offence in any part of the United Kingdom, or

(b)

would constitute an offence in any part of the United Kingdom if it occurred there.

(3)

Property is criminal property if-

(a)

it constitutes a person’s benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and

(b)

the alleged offender knows or suspects that it constitutes or represents such a benefit.

(4)

It is immaterial-

(a)

who carried out the conduce;

(b)

who benefited from it;

(c)

whether the conduct occurred before or after the passing of this Act.

(5)

A person benefits from conduct if he obtains property as a result of or in connection with the conduct.”

We have quoted the sections to show how very wide ranging the offences are. Section 340 (3) (b) contains the crucial requirement that the alleged launderer must know or suspect that the property constitutes a person’s benefit from criminal conduct. It follows from section 340 (4) that the launderer’s own criminal conduct is covered.

The offences.

Botcher and Jenkins pleaded guilty to conspiracy to contravene sections 19 and 21 – count 3 as the indictment then stood. The particulars of offence were:

“Henrik Botcher Fraser Jenkins and Roozbeh Yazdanian between the 10/10/2005 and 15/12/2006 conspired together with Claud Greaves Phillipa Greaves Paula Jno-Baptiste and with other persons unknown to contravene Sections 19 and 21 of the Financial Services and Markets Act 2000 by causing unauthorised persons who were not exempt persons in the course of business

1/ to communicate invitations or inducements to engage in investment activity to UK investors or prospective investors.

2/ to advise on, offer to sell, and sell shares to UK investors or prospective investors or to agree to do so.”

They also pleaded guilty to arranging to facilitate the control of criminal property contrary to section 328 of the 2002 Act. The particulars of offence

As we have said the single conspiracy count pleaded to by Botcher and Jenkins was divided into two for Greaves trial. The relevant part of the section 19 conspiracy count was “by causing unauthorised persons who were not exempt persons to carry on regulated activity in the UK.” That of the section 21 conspiracy was “by causing unauthorised persons who were not exempt persons in the course of business to communicate invitations or inducements to engage in investment activity to UK investors or prospective investors”. The particulars of the section 328 charge were less specific than those to which Botcher and Jenkins pleaded. They were :

“Claude Greaves Phillipa Greaves and Paula Jno-Baptiste between the 10/10/2005 and 15/12/2006 entered into or became concerned in an arrangement which they each knew or suspected facilitated (by whatever means) the acquisition retention use or control of criminal property by or on behalf of another person.”

There was no reference to an earlier count.

It is also relevant to see the particulars of the charge of conspiracy to defraud contrary to common law, of which Greaves was acquitted, and to which Botcher and Jenkins made pleas of not guilty which stood.

“Henrik Botcher Claude Greaves Phillipa Greaves Fraser Jenkins Paula Jno-Baptiste and Roozbeh Yazdanian between the 10/10/2005 and 15/12/2006 conspired together and with other persons unknown to dishonestly defraud such persons as could be induced to part with money by way of cheque and credit transfers in reliance on false representations that :

1/ they acting in the course of business, were lawfully allowed to communicate invitations or inducements to engage in investment activity to UK investors or prospective investors.

2/ they were lawfully allowed to offer, to sell and advise on shares to UK investors or prospective investors or to agree to do so

3/ they genuinely believed what they told prospective UK investors about the nature value and prospects of the shares they advised on, offered and sold to those investors.

4/ Pantera Oil and Gas PLC, had applied for its shares to be listed on a UK investment exchange.

5/ Pantera Oil and Gas PLC and its officers expected it shares to be imminently listed on a UK investment exchange.

6/ the shares in

Pantera Oil and Gas Plc.

Northern Lynx Plc.

ParOs Plc.

ValiRX Plc

they advised upon, offered and sold to UK investors were reasonable value and suitable for investments for the people to whom they were sold.”

On the indictment for Greaves’ trial particulars of the unsuitability of the investments were also given.

Both Botcher and Jenkins advanced bases of plea which were accepted by the Crown as part of the negotiations which resulted in the new counts and the pleas to them. Before we come to these we need to say rather more than has so far been necessary as to the scheme of the operation. It was set up by Greaves shortly before he was sentenced to 3 years imprisonment on 23 June 2006 for false accounting and fraudulent funding. It operated from June to November 2006. It involved the cold-calling of investors in the United Kingdom, often elderly and retired persons, from call centres. Because of the nature of the investments they had no investor compensation protection. The principal centre was in Barcelona where Botcher and Jenkins had an office down the corridor from the open plan sales room. The salesmen had no financial qualifications and read a prepared pitch. The selling operation was run through a company called Blackwell. Botcher oversaw the selling assisted by Jenkins. Greaves was in prison but remained in touch with the running of the scheme nonetheless. When a sale was agreed paperwork was produced in an office set up by Greaves in Mayfair. It was sent to the investor and purported to come from a broking company called Damak. The investor would send the completed documents back with his cheque. The cheque would be banked in Damak’s bank account in London. Botcher and Jenkins were notified when the money had been received. Greaves made disbursements and took his own “commission” amounting to about £64,000 over the period. The total paid in to Damak’s account was £2.47 million. £1.6 million went to a bank account in Blackwell’s name set up in Hong Kong where Blackwell was registered. There was no commercial reason for Blackwell to be registered in Hong Kong or to have a bank account there. Botcher was a signatory on the account. We were told that Jenkins received £58,000 as his remuneration. Botcher received about £60,000. The judge stated during the course of sentencing :

“The result of this international element, both as far as the paperwork and the money was concerned, was that it was very difficult either for the regulators or indeed for the customers themselves to get their hands on the people who were operating the scheme.”

The scheme was effectively stopped by police intervention and the freezing of Damak’s account in London on 20 November 2006.

Botchers’ basis of plea can be summarised as follows. He agreed to assist to raise funding for Pantera and was introduced to Greaves. Greaves suggested a scheme involving a company called Damak. It soon became apparent to Botcher that the scheme did not satisfy the regulatory requirements. Shares in Pantera were sold. Subsequently shares in three companies quoted on AIM – Northern Lynx, Paros and Valirx, were sold. Monies which went to companies called Velmon Trading and Conway Bond from the Hong Kong account represented the sale of shares in those three companies among others.

Jenkins’ basis of plea was that he was asked by Botcher in April or May 2006 to make a website for Blackwell Group, which was to sell shares. His role was later to man the website, respond to emails, maintain spread sheets of investors. It was not until the end of September that he discovered that there was no regulatory authority for the operation.

Conclusions.

It is in accordance with principle and the authorities which we have cited that :

The question is therefore whether the conviction and pleas to the section 328 offence by being concerned in an arrangement which facilitated the use or control of criminal property added to the culpability of the conspiracies to contravene sections 19 and 21 by running an authorised share selling business. The Crown’s case is that the two were separate and that the banking of the proceeds and their transfer in large part to Hong Kong has a culpability (and criminality) of its own. The appellants’ cases are that the section 19 and 21 conspiracies necessarily involved the receipt and banking of the proceeds, and it is all covered by the conspiracy counts.

There was no good commercial reason for the greater part of the monies to be transferred from London to Hong Kong. The conclusion must be that it was done as the judge said to defeat the authorities and the investors if the unauthorised selling was discovered. We conclude that this is something which went beyond the sections 19 and 21 conspiracies, and should attract separate and additional, that is consecutive, sentences.

We think however that the judge approached the sentencing process without taking sufficient account of the acquittal of Greaves on the count of conspiracy to defraud, and the pleas of not guilty by Botcher and Jenkins to it. We consider that the sentences passed on the section 328 count were more appropriate to the disposal of the proceeds of a fraudulent scheme. The sentences should take account of the nature of the primary offences and the sentences passed on them.

It was a serious aggravating feature of Greaves’ conduct that he set up this scheme while awaiting the sentence passed on 26 June 2006. It is also relevant that on 23 October 2004 he received a community punishment order for contravening a company directors disqualification order. Botcher and Jenkins had been of good character.

Complaint is made that Botcher and Jenkins should have received a full discount for pleas of one third, because they had had no opportunity to plead to the sections 19 and 21 conspiracy earlier. The judge dealt with the history at the start of his sentencing remarks, and reverted to the question of the appropriate discount on pages 17 and 18. His view was that in the circumstances 20 percent discounts were appropriate. Botcher and Greaves had not offered any pleas earlier but had kept silent and then negotiations were opened on their behalves shortly before trial. The judge’s conclusion is wholly supportable.

We have concluded that the appropriate sentences on the section 328 count to meet the particular circumstances of the case and of the defendants are for Greaves 18 months, for Botcher 10 months and for Jenkins 5 months. Those will be consecutive to the sentences on the conspiracy offences, making a total for Greaves of 3 years, for Botcher of 1 year 10 months, and for Jenkins of 12 months. The appeals will be allowed accordingly.