FUTURE FOR FRAUD. The conman, the crime and the costs

Fraudsters using false financial instruments are stealing more than £6 million a day from businesses, individuals and even governments, according to a report by the International Chamber of Commerce. (The Times 1 March).

That bland but startling report conceals much more than it reveals. The cost of fraud to society runs into billions and affects us all, no matter what our own financial status. It is frequently, in criminal terms, interwoven with the distribution of drugs and the laundering of illegal money.

But the investigation of fraud is very often complex, international and expensive. It is time-consuming and a strain on limited human resources. In many police areas, where results must be matched against cost, statistics are paramount. The conviction of one fraudster after perhaps a six-month or longer investigation does nothing for the figures. So fraud investigation, understandably in those terms, is not necessarily given the highest priority. But fraud against any government, financial institution, company or individual affects us as borrowers, lenders, suppliers and customers. It costs us money.

There is little difference between the conman roofer who charges the elderly widow an exorbitant price for a few slates and the dishonest investment broker who deprives elderly pensioners of millions. The former is probably easier to prosecute because his crime is more identifiable, but often his victim is too frail to give evidence.

The latter will usually shroud his crime in complex dealings. But the fact that a crime is complex should never be a reason for not thoroughly investigating it and, where appropriate, prosecuting. Yet many complain that complex fraud is too difficult to understand.

That, however, is the hallmark of the complex fraudster: to make his crime difficult for his victims and for those who seek to bring him to justice to understand. To shy away from the investigation and prosecution of complex fraud would be an injustice and a green light to fraudsters that they can proceed without retribution.

So what of the cost, and of the jury system? Cost, in itself, should never be a reason for not prosecuting – that is carte blanche to commit crime. Some crimes could be taken out of the criminal system – the insider dealer could probably be more successfully investigated by an independent tribunal (provided there is trust in the system), for example, than prosecuted. He could be deprived of his ill-gotten gains with an additional financial penalty. But the majority of complex frauds involve the manipulation or removal of substantial sums of money, and such cases are only suitable for a criminal trial. Why should the dishonest director escape prosecution, when the ordinary thief must face the full majesty of the law?

And what of the jury? The innuendo behind the immediate media reaction to the acquittals in the Maxwell trial was that the jury had got it wrong. Having heard the evidence, they decided that it had not been proved that the defendants were dishonest parties to what had happened. That is the type of issue that juries across the country are daily asked to decide. On the whole, provided the jury is allowed to get on with it, they tend to reach sensible and understandable decisions. Juries ask if they do not understand a piece of evidence. To suggest that a jury for a long case is necessarily drawn from a group that has nothing better to do is incorrect.

It is arguable whether the evidence can be outside their experience, but then that does not apply only to fraud. What of DNA, forensic, pathological and psychiatric evidence? The adversarial system, where evidence is presented and tested in cross-examination, works.

The alternative suggested is some form of tribunal, presumably made up of a judge and one or more relevant experts or assessors. Leaving aside the huge constitutional changes that that would involve, the idea that an expert or assessor, however distinguished, should impose his opinion upon the decision when that opinion is untested by evidence is a total denial of open justice. Moreover, it does not require an expert to answer what is usually the fundamental question in a fraud trial: is this man's behaviour dishonest by the standard of right-thinking people? Just as it is right that the system of jury trial for serious fraud cases should not be changed, so it is right that that system must be made to work efficiently and in the interests of justice.

A case must be manageable in terms of size, shape and presentation. That does not mean excessively rigid timetables, or restrictions on the number of charges or prosecution procedures. Ultimately the trial process must be fair to all parties and at all of its stages:

The investigation

The shape and presentation of a case can often be determined from this initial stage. There is no doubt that the primary responsibility for the investigation of crime must rest with the police. Early advice from lawyers, accountants and experts in the field under investigation should be taken to ensure necessary evidence is obtained, inessential or unviable lines of enquiry are abandoned early, and that the potentially serious crimes are identified and resources concentrated upon whether such crimes have prima facie been committed. And an essential tool in the investigation and combating of fraud is speedy international co-operation.

Transfer to the Crown Court

The transfer document should be a detailed account of the evidence to be relied upon by the prosecution, cross-referenced to all relevant exhibits. It should be possible for the prosecution case to be understood without the need to go to the prime documents. The Crown should formulate within this document the way it wishes to present its case, if necessary dividing the case into separate trials, discarding unnecessary evidence and marginal defendants, and pruning the case into a manageable whole.

The preparatory hearing

Experience is showing that this is the most crucial part of the process in achieving a manageable trial. It is essential that ample time is given to all defendants, and especially to the judge, to read and absorb the Crown's case before a preparatory hearing begins.

A judge is able to keep tight control over the Crown in the service of its case statement and evidence. The defence may simply be required to give a statement in writing, setting out in general terms the nature of the defence, indicating the principal matters on which the defendant takes issue with the prosecution, and giving notice of any objections, points of law, and agreement or otherwise on documents. The quality of this defence statement will vary; many simply traverse the Crown's case, giving little hint of the defence's case. There is clearly room for tightening the provisions and requiring greater disclosure of the defence case and documents.

Much can be achieved outside court in identifying areas of agreement or otherwise, provided time is allowed, accommodation provided, and less emphasis placed on judge time.

This requires a fundamental change in the approach of courts to such cases. Some have suggested, with considerable force, that fraud centres be set up across the country where the necessary back-up facilities for the conduct of serious fraud trials are readily available. With the ever-increasing volume of such cases it would be money well spent.

The trial

A full article could be written on this one topic, but a few ideas: the ready availability of computers for documents, alongside a core working bundle for the jury; a change in the working day (as occurred in the Maxwell trial) so a jury has a full working day and matters of law are handled outside those hours; the availability of television links at court centres to avoid the need for witnesses to travel long distances; back-up facilities for the judge who usually lacks even basic secretarial services; a hands-on approach by the judge to ensure that the trial is brought to as speedy a conclusion as possible and is consistent with justice.

It is probably true to say that the conduct of serious fraud trials requires a radical re appraisal of approach for most if not all of those involved. It also requires that the facilities for the conduct of such trials should be made generally available before the 21st century.