Two recent cases in England have highlighted the role that civil recovery can play in assisting in criminal investigations.

In the first case, sentences of 7 and 13 years were handed down to Ian McGarry, a surveyor and Saghir Afzal, a property developer by the Southwark Crown Court on 14 June 2011 for their role in mortgage frauds worth a total of £49m. The scheme involved six counts of fraudulently obtaining mortgages from high profile financial institutions.

Six other individuals, including practicing solicitors, were implicated and charged in relation to the conspiracy but were acquitted after the prosecution decided to focus its investigations on McGarry and Afzal.

In the second case, police have arrested a man on suspicion of fraud of a man. The man claimed to have raised £500,000 for the well-known servicemen's charity Help for Heroes. However, the charity said he had failed to donate this money. (more…)

Read More

Almost £1bn of assets, beneficially owned by Muammer Gaddafi and 5 members of his family, have been frozen by the British government as the UK joins other European countries in taking concerted action against the Libyan leader. Steven Philippsohn, partner and asset recovery expert at PCB Litigation LLP, explains how the source of assets may be identified and, if believed to represent the proceeds of illegitimate activity, how they may be frozen: 'Following the passing of the resolutions by the United Nations and then by the European Commission various member countries have directed banks and other financial institutions that are holding assets belonging to Gaddafi and members of his inner regime to freeze those assets. At the moment it is suggested that the total value of assets frozen would be roughly £1 billion. Therefore, a number of financial institutions worldwide are under an obligation to monitor and report suspicious transactions, and to perform due diligence on assets. What has happened is that banks and financial institutions have been issued with lists identifying Gadaffi and 26 members of his regime and various other related organisations and they've been told "you must identify and disclose any assets which are controlled by these various parties." So hopefully if the financial organisations have done their job it shouldn't be much of a problem.' It was also reported that a boat which was bound for Tripoli was seized by the UK border agency along with its cargo of £100 million worth of Libyan bank notes. Steven said that 'it is not surprising that this amount has been seized. This was currency that was printed in the UK, which was bound for Libya and it could well have been used in part for legitimate purposes. So it's not necessarily the case that it would have all been unlawful.' 'Once assets have been frozen', Steven explained, 'the source and legitimacy of those assets will be investigated. If Gaddafi is able to demonstrate that they were obtained legally, then he will be entitled to recover them, just like anyone else. If this is not possible, then eventually these assets will be returned to a new government of Libya or a recognised institution in that country.' Read More

A US district judge has rejected a request from the former Goldman Sachs vice president Fabrice Tourre to dismiss U.S. Securities and Exchange Commission (SEC) claims accusing him of violating a federal law designed to stop the fraudulent sale of securities. It was decided that the top securities watchdog and regulator may pursue its high-profile civil fraud lawsuit against the securities trader following accusations that he misled investors in relation to the Abacus collateralised debt obligation. After reaching a $550 million settlement with Goldman Sachs, who did not admit responsibility, the SEC launched claims against the London-based trader in April 2010, saying he defrauded investors by not disclosing that hedge fund Paulson & Co. had helped pick the underlying securities for Abacus and then planned to take positions against them. However, some of the claims brought by the SEC were thrown out. Citing last year's U.S. Supreme Court ruling in Morrison v. National Australia Bank, in which it was decided that US securities laws do not protect foreign investors who buy securities on overseas exchanges, the judge dismissed claims involving Duesseldorf, Germany-based IKB Deutsche Industriebank AG, which allegedly lost almost all of its $150 million investment, and ABN Amro Bank NV, which assumed the credit risk associated with a portion of Abacus. Tourre remains confident that he will successfully defend those claims that remain. In another high profile fraud investigation, Bernard Madoff's payroll manager, Eric Lipkin, has pleaded guilty before a court in New York admitting the part he played in deceiving and defrauding investors and regulators in the multi-million dollar Ponzi scheme which was discovered in 2008. It comes as the latest development in the line of criminal investigations into the investment frauds masterminded by the Wall Street trader who is currently serving a 150 year sentence in a North Carolina prison. So far eight others have been arrested and charged with various financial crimes in relation to the scheme. It is understood that Lipkin's guilty plea was given as part of a deal to co-operate with the prosecuting authorities in the US. He has admitted to doctoring documents, adding fake employees to the payroll and giving false information in order to obtain a loan, all as part of his efforts "to deceive auditors." He also helped Madoff deceive regulators by preparing fake Depository Trust Clearing Corporation reports showing sham investments for clients. Mr. Lipkin received annual bonuses from the firm, including for his work to mislead auditors and examiners, and he received $720,000 from Madoff to purchase a house which he never paid back. Lipkin has been told by a US district judge that he faces up to 75 years in jail. He has been released on a $2.5 million bail. A separate complaint was filed on 6 June by the SEC. If the complaint is upheld, he could be required to disgorge any ill-gotten gains and pay a fine to be determined by the court. Read More

Following the recent popular uprisings in Tunisia, Egypt and Libya, the international community took swift and decisive action in freezing the assets of former potentates which are suspected to have been obtained illegitimately in an effort to prevent these former (or in the case of Muammar Gaddafi, current) dictators from siphoning wealth from those countries attempting to depose them. Reports have suggested that billions of dollars worldwide have fallen within the scope of such sanctions, although it is difficult to place a precise figure on the amounts which have been seized under such sanctions until formal investigations are concluded.. However, recent announcements from the Swiss foreign minister, Micheline Calmy-Rey, have revealed the scale of wealth that is the subject of these proceedings in Switzerland. During a conference which was held in Tunisia, it was announced that the Swiss authorities in Bern have frozen approximately $880 million of funds belonging to former heads of state in North Africa. The single biggest source of funds was linked to the ousted Egyptian president, Hosni Mubarak. A spokesman for the foreign ministry stated that some $430 million could be traced back to him and his associates. A further £1380 million is believed to have been misappropriated by the Gaddafi regime, and $63 million by Tunisian Zine El Abadine Ben Ali and his associates. The funds have been frozen under the provisions of a pioneering piece of legislation, the Restitution of Illegal Assets Act, which came into force in February 2011. Originally designed to provide a legal basis for returning to the Haitian state the disputed assets of Jean-Claude "Baby Doc" Duvalier, which had been the subject of a freezing order since he had been removed from power there, the law has proved to be an effective measure in these unforeseen circumstances arising from the Arab spring. The law allows the Swiss authorities to confiscate assets and return them to the country of origin without requiring legal assistance from that country, whereas the previous regime required extensive assistance from the victim state which was often difficult to obtain due to the power vacuum that had been left by fleeing dictators. It is reported that the new administrations in both Egypt and Tunisia have been in contact with the Swiss authorities regarding the return of these assets, which will provide a further test as to the effectiveness of this new legislation. Read More