Protection against corporate crime
14 August 2000
Commercial litigators frequently have to advise corporate clients on what to do about an employee suspected of criminal conduct.
Employees who are placed in positions of trust and responsibility sometimes give in to temptation and, putting their own interests ahead of their employer's, accept backhanders or resort to skimming.
In these situations the commercial litigator advising the company has to look at the problem from the perspective of protecting the company's commercial interests.
What sort of investigation should be conducted for disciplinary purposes? Should a freezing order be obtained to stop the employee dissipating assets while the matter is under investigation? Should the order require the employee to give information about the source of money allegedly in their possession? Should the case simply be turned over to the police to investigate? If not, will the actions of the company prejudice a subsequent prosecution? Will the company lose control of the problem if the police are informed? How much damage could publicity do?
These are all good questions. The answers differ from case to case but until recently the interplay between disciplinary proceedings and civil litigation on the one hand and criminal prosecution on the other had to be considered without the assistance of the prosecuting authorities. The commercial and employment litigators have therefore had to develop some expertise not only in criminal law but in criminal procedure and evidence.
A good example of this was seen in a recent unreported case in which an employer was faced with incomplete but fairly cogent evidence that an employee had been accepting bribes in return for awarding contracts. The facts were so serious that the investigation was conducted without regard to questions of procedural fairness in any subsequent disciplinary proceedings except where those considerations would not hinder the investigation.
A freezing order was obtained for the company at short notice with various related orders including an injunction compelling the return of a laptop computer. The employee complied with the order but, in doing so, inadvertently left a floppy disk in the computer case which contained even more compelling evidence of criminality.
While proceeding in the civil courts for summary judgment in relation to money held by the employee on constructive trust for the employer (which was eventually obtained for well over £1m), the employee argued that his privilege against self incrimination had been breached by the use of compulsory powers to obtain some of the evidence.
The argument, heard in the High Court and subsequently in the Court of Appeal, was unsuccessful and by paying careful regard to the rules of criminal evidence throughout the proceedings a subsequent successful prosecution for corruption was not impeded.
A new scheme makes it that much easier than before for employers to be sure that actions they take to protect the company will not damage the prosecution case.
The Partners against Crime scheme seeks to engender greater cooperation between the police and corporate victims of fraud. In practice this has come to mean that employers in this type of situation can consult in confidence with officers from the Metropolitan Police and City of London Fraud Squad.
I was recently involved in the first case to be referred to the Metropolitan Police Fraud Squad under this new scheme and am pleased to report that it works extremely well.
The officers fielded by the Fraud Squad were extremely competent and knowledgeable about not only criminal evidence but also the commercial options for corporate victims of fraud. In practice, after this initial consultation the company ultimately decided not to turn the case over to the police.
This initial consultation allowed the company scope to protect its own interests and to do its best to assist the police in mounting a successful prosecution.
Under this scheme the employer and the Fraud Squad are able to work closely together to achieve the best possible outcome.
Mark Humphries is head of advocacy and employment litigation at Linklaters in London and is chairman of the Solicitors' Association of Higher Court Advocates.