In SFO v Saleh, the Court of Appeal ruled in favour of the SFO in an appeal against a property freezing order for £4.4 million. This case illustrates the willingness and ability of the SFO to obtain civil recovery orders against property under Part 5 of the Proceeds of Crime Act 2002, where the only connection to the UK is that the money was held in a UK bank account.
- What was the background?
The £4.4million represented the proceeds of the sale of the defendant’s 800,000 shares in a Canadian natural resources company, GEI. The defendant was a citizen of Chad and Canada. Her husband was the former Chadian deputy ambassador to the US and Canada. The High Court upheld the SFO’s assertion that the original allocation of the shares to the defendant for a nominal sum, $800, was part of a corrupt arrangement to induce officials in Chad to enter into a production-sharing contract for oil with GEI. It is notable that in criminal proceedings for corruption in Canada, it was not part of the prosecution case, leading to an agreed basis of plea from GEI, that the corrupt inducement included the issue of the shares to Mrs Saleh. The SFO also made clear to the High Court that their case did not require any guilty state of mind on the part of the defendant.
In early 2013, following the sentencing of GEI in Calgary, Alberta, the Canadian authorities issued an application for forfeiture of the shares issued to Mrs Saleh and two other people. However, in April 2014 the Canadians withdrew the applications for forfeiture against the three shareholders. The Canadian public prosecutor was unwilling to disclose to the SFO the reasons for the withdrawal without the SFO entering into a non-disclosure agreement which, “properly and understandably” the SFO felt unable to do. Subsequent to the withdrawal, a Swiss company, Glencore, acquired all of GEI’s issued share capital at the price of £5.50 per share. This included the 800,000 shares held by the defendant. The exact basis for the SFO’s decision to proceed against Mrs Saleh is not made clear. However, the SFO obviously considered that the money clearly represented the proceeds of unlawful conduct. It may also be relevant that the US authorities seized the proceeds of another individual’s 3.2million GEI shares.
- What were the issues that the court had to decide?
The High Court had to resolve whether a) the issue of shares by GEI to the defendant constituted unlawful conduct under Canadian law; b) whether GEI’s conduct would have constituted a criminal offence in the UK; and c) whether the defendant was able to rely on a ‘good faith defence’ under section 266(4)(a) of the 2002 Act.
- How did the court resolve those issues?
The Court had little trouble concluding that GEI must have issued such a valuable stake in its business to Mrs Saleh for such a low price in order to induce a Chadian public official to influence decisions in the Republic of Chad. Kerr J stated that, “It cannot sensibly be suggested that it was done for any bona fide commercial reason nor that it was simply a gesture of gratuitous generosity to Mrs Saleh”.
Similarly, the Court was quick to conclude that the dual criminality requirement was easily satisfied in this case. Notwithstanding that the Bribery Act 2010 was not in force at the time of the issue of the shares to the defendant, the Court found that the conduct of GEI would “plainly constitute an offence”under the Prevention of Corruption Act 1906.
As far as the defendant’s assertion that she acquired the shares in good faith is concerned, essentially the Court concluded that her evidence that she bought the shares on the coincidental suggestion of a friend, without the initial knowledge of her husband, was simply not credible.
It may be of interest that even if the Court had accepted Mrs Saleh’s assertion that she bought the shares in good faith, whilst she would have also satisfied the additional requirements in sections 266(4)(b) and (d) to have taken steps which would mean a recovery order would be detrimental to her, the Court would nonetheless have concluded that it would have been just and equitable to make the order (see sections 266(3)(a) and 266(6)).
The Court left unresolved the competing arguments about the meaning of the word ‘detriment’ in section 266.
This article was first published on Lexis®PSL Corporate Crime on 25 May 2018.