22.05.09
EXPENSES CLAIMS AND THE CRIMINAL LAW
Following the revelations of the previous few weeks and the announcement that the Metropolitan Police together with the Crown Prosecution Service are looking into expense claims made by certain Members of Parliament, it might be useful to understand the criminal law under which such investigation might take place.
THE FRAUD ACT 2006
Firstly, a line has to be drawn between expense claims made before and after 15 January 2007. This is the date at which the Fraud Act 2006 came into force. The Fraud Act defines and provides penalties for three types of fraud (frauds are many and varied and have been the subject of criminal prosecutions for a long time – but this is the first time fraud has been defined by statute), namely,
The Act provides penalties for other fraud type behaviour, such as being in possession of articles for use in fraud (section 6) and obtaining services dishonestly (section 11) but section 1 of the Act provides that a person is guilty of fraud if he is guilty of one or more of the offences set out at sections 2, 3 and 4. The maximum sentence for section 2, 3 and 4 offences is 10 years imprisonment. All three offences require dishonesty and the leading authority for the test of dishonesty is still the case of R. v. Ghosh: a 1982 judgment of the Court of Appeal. This provides for two considerations of the notion of dishonesty, one objective and one subjective. The objective test is whether the behaviour complained of is honest or dishonest having regard to ordinary reasonable standards of honesty as understood by reasonable and honest people. If a jury decides that the behaviour in question is honest by those standards, then they must acquit. If a jury decides that the behaviour does not meet those ordinary standards they must then go on to ask themselves whether the accused himself must have realised that what he was doing was dishonest by those same objective standards. This is the subjective part of the test. In essence this means that it is dishonest for a Defendant to act in a way which he or she knows ordinary people would consider to be dishonest even if he or she asserts or genuinely believes that he or she is morally justified in acting as he did. Juries will of course be directed to have regard to all the relevant surrounding circumstances when considering the state of a person’s mind in this regard.
The offences defined by Sections 2 to 4 of the Fraud Act are in each case the doing of the prohibited act and in each case the prosecution must prove that the claim was made with the intention of causing gain or loss. The gain is usually for oneself but can be for another and the gain or loss need only be temporary. This means that the offence is the dishonest making of the claim with intent to gain or cause loss, so that the consequences of the claim are largely immaterial for the purposes of determining guilt or innocence. It follows therefore that an unsuccessful claim stands to be considered just as much as a successful claim and if a claim is dishonestly submitted at the outset, the fact that monies are repaid should be immaterial, save perhaps in deciding whether it is in the public interest to prosecute.
FALSE ACCOUNTING
Most expense claims are supported by documentation, for example, a bank or building society statement and of course a claim expense form itself is a document. Such documents are invariably documents made or to be used for an accounting purpose. Section 17 of the Theft Act 1968 defines the offence of false accounting and provides for a maximum sentence of seven years imprisonment. In essence, the offence is making use of, destroying, defacing, concealing or falsifying any record or document which is made or required for an accounting purpose or furnishing information for such a purpose knowing that the same is or may be misleading, false or deceptive in some material regard. As with fraud, dishonesty is a key ingredient in the offence, as is the intention to gain for oneself or another or the intent to cause loss to another.
In both sets of cases (false accounting and fraud) the gain or loss must relate to money or other property. So, for behaviour occurring before 15 January 2007, investigators and prosecutors will have regard to section 17 of the Theft Act and will also consider the old law of obtaining property or financial advantage by deception, offences that have been replaced by the Fraud Act but which can still be used by prosecutors for such behaviour.
The Crown Prosecution Service (CPS) has the responsibility of deciding whether criminal charges should be brought. They follow guidelines, the most important of which is the Code for Crown Prosecutors, a copy which can be found at the CPS website. Generally speaking the CPS will examine all the evidence gathered by the police and then apply a two part test. Firstly, they will ask themselves whether, having regard to all the admissible evidence, there is a reasonable prospect of the accused being convicted: and then they will ask themselves whether it is in the public interest to bring a prosecution. It has never been the law that all crimes must or should be prosecuted and in this regard the Crown Prosecution Service is the custodian of the public interest.
A note of caution to all employers: Investigating suspected fraud in the work place is difficult and fraught with danger and specialist advice should be sought form one of our Employment team before embarking upon any disciplinary investigation or procedure.
For more information contact: Steven Barker on steven@barkergillette.com
Department: Employment > Serious Fraud and Business Crime
