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CHAPTER 2

THE WEAPONS OF LAW

2.3.6Fraud and the Conman —— U.K. Law and Irish Law
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It all comes down to Trust.

For a ‘confidence man’ (conman) to succeed, he must create a situation where, by employing false pretences, he can take advantage of his victim. He must insinuate himself into a position of trust, where the victim will have full belief in his character and bona fides, and will therefore be induced to place reliance on him with confidence.

This can entail investing a lot of time and effort; it can take years to develop such trust.


But there are those who, both by reason of their accepted positions of status within our society, and by reason of the specialised expertise they possess, require no such investment of time and effort to attain a position of trust: those within our Financial Services Institutions.

The opportunity for those within our Financial Services Institutions to make gain by false pretences, at the expense of their customers, investors and shareholders, presents itself from day one.

There is no arduous process whereby they must first insinuate themselves into a position of trust; the trust is immediate.

The opportunity for Fraud is immediate.


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Our Financial Services Institutions are critical to the functioning of our society.

And the very oxygen, necessary to the survival of our Financial Services Institutions, is trust.


In a 2002 case in Ireland (State v Clarkin and Roche), when passing judgement on two men, who, by the false pretence of lodging fictitious invoices, had defrauded Ulster Bank of over £1m (between January 1996 and October 1998), Judge O'Donnell said:

'One might be tempted to feel sorry for the two defendants, because there is no doubt that they've lost a lot... However, there is a substantial loss to a Financial Institution. Financial Institutions are the bedrock of our society. If they collapsed, everything else would collapse.'



BUT, as will become evident in Section 2.5 (The U.K. Position) and Section 2.6 (The Irish Position), the greatest violations of trust to threaten these Financial Institutions, so critical to the functioning of our society, would come from those within the Financial Institutions themselves.






Fraud and the Conman —— U.K. Law
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For many years the Larceny Act 1916 was the primary statutory legislation, applicable both in the U.K. and in Ireland, on which judgements relating to the criminal offence of obtaining goods by false pretences were based. (These false pretences provisions, which remained Irish Law until August 2002, are discussed in detail below.)

In the U.K., this legislation was completely updated within the Theft Act 1968, the false pretences provisions, as previously existing under the Larceny Act 1916, being superseded by the fraud and blackmail provisions of the Theft Act 1968.

Under Section 15 of the U.K. Theft Act 1968, a person who by any deception dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall on conviction on indictment be liable to imprisonment for a term not exceeding ten years.



In 2006, statutory provisions, wholly specific to addressing the matter of criminal liability for fraud, were enacted by the U.K. Legislature under the Fraud Act 2006. The provisions of this Act came into effect on the 15th January 2007.



Under the U.K. Fraud Act 2006, a person guilty of any of the breaches set down under Section 1, 2 or 3 (cited below) commits an offence, and is liable :

(a)

on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine ... (or to both);

(b)

on conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).



On the matter of 'Fraud  by false representation', Section 2 of the U.K. Fraud Act 2006 states:

A person is in breach of this section if he

(a)

dishonestly makes a false representation, and

(b)

intends, by making the representation (i) to make gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss.



On the matter of 'Fraud  by failing to disclose information', Section 3 of the U.K. Fraud Act 2006 states:

A person is in breach of this section if he —

(a)

dishonestly fails to disclose to another person information which he is under a legal duty to disclose , and

(b)

intends, by failing to disclose the information — (i) to make gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss.


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BUT,
the criminal status of fraudulent misrepresentation, in the context of those engaged in Financial Services activities, had already been specifically set down under statute by the U.K. legislature under Sections 47 and 202 of the Financial Services Act 1986, and under Sections 397 and 400 of its successor, the Financial Services and Markets Act 2000 (this matter will be discussed in detail in Section 2.5.1).


Unfortunately, as we will see in Section 2.5.6, Section 2.5.7 and Section 2.5.8, the Regulatory Regime was such that a whitewash policy was employed, ensuring that fraudulent misrepresentation by those engaged in Financial Services activities was, effectively, concealed.





Fraud and the Conman —— Irish Law
.


While the U.K. legislature completely updated the false pretences provisions of the Larceny Act 1916 on enactment of the Theft Act 1968, the Irish legislature did not enact any defining legislation on the matter of Fraud until December 2001, under the Criminal Justice (Theft and Fraud Offences) Act 2001.


Nor did the Irish legislature see fit to enact provisions, within any of its Financial Services legislation, that would specifically set down the criminal status of fraudulent misrepresentation perpetrated by a person engaged in Financial Services, or by a Financial Institution or its Management Personnel, against a customer, even though the legislature would have been fully aware of the existence of such provisions (as related above) within the U.K. Financial Services Act 1986 and its successor legislation.


Nor, notwithstanding the, now universally evident, presence of systemic fraud within Financial Services Institutions in Ireland, has there been any effort made to enact legislation containing provisions similar to those of the U.K. Fraud Act 2006.


This marked retardation of the evolution of Law in Ireland, particularly in the matter of Fraud perpetrated by those within Financial Services Institutions against their customers, will become even more evident in Section 2.6, THE IRISH POSITION.)

 

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On the matter of 'Making gain or causing loss by deception', Section 6 of the Irish Criminal Justice (Theft and Fraud Offences) Act 2001 states::

(1)

A person who dishonestly, with the intention of making a gain for himself or herself or another, or of causing loss to another, by any deception induces another to do or refrain from doing any act is guilty of an offence.

(2)

A person guilty of an offence under this section is liable on conviction on indictment to a fine or imprisonment for a term not exceeding 5 years or both.



But this provision of the Irish Criminal Justice (Theft and Fraud Offences) Act 2001, whereby a person making gain or causing loss by any deception is guilty of an offence, did not come into effect until August 2002.


An offence in Ireland on the matter of obtaining goods by false pretences, if committed prior to August 2002, is therefore still governed by the Larceny Act 1916.

 


Section 32 of the Larceny Act 1916 states:

Every person who by any false pretence

(1) with intent to defraud, obtains from any other person any chattel, money, or valuable security, or causes or procures any money to be paid, or any chattel or valuable security to be delivered to himself or to any other person for the use or benefit or on account of himself or any other person; or

(2) with intent to defraud or injure any other person, fraudulently causes or induces any other person —

(a)

to execute, make, accept, endorse, or destroy the whole or any part of any valuable security; or

(b)

to write, impress, or affix his name or the name of any other person, or the seal of any body corporate or society, upon any paper or parchment in order that the same may be afterwards made or converted into, or used or dealt with as, a valuable security;

shall be guilty of a misdemeanour and on conviction thereof liable to penal servitude for any term not exceeding five years.



The penalty for such an offence was amended in 1990
(Ireland) to imprisonment for up to ten years, or a fine, or both.

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Over the years the Courts’ interpretation of the Larceny Act 1916 has always taken into consideration both the purposive intent of its provisions and the fact that its wording was limited by the circumstances prevailing at the time of its enactment.

With regard to Section 32 of the Larceny Act 1916 (as cited above), the purposive intent was to punish the actions of ‘conmen’.13


But the modern-day ‘conman’ is a far cry from the post-Victorian archetype envisaged in the 1916 Larceny Act.

The actions of the modern-day ‘conman’ must be judged in the light of present-day circumstances and in conformity with society’s current understanding of what constitutes ‘fraudulent misrepresentation’.

Therefore, in the context of the subject matter of this website-book, three elements of the false pretences provisions of the Larceny Act 1916 require some expansion; (i) ‘intent to defraud’, (ii) ‘fraudulently’, and (iii) ‘valuable security’.


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With reference to the expression ‘intent to defraud’ (in the context of the Larceny Act 1916), the U.K. Court of Criminal Appeal said repeatedly in The Crown v Wright (1960) that this meant ‘dishonestly’.14


In the Irish case of The People v Grey (1944) it was held that it would be impossible to exhaustively define the word ‘fraudulent’, but that it normally referred to ‘something dishonest and morally wrong, particularly the acquisition of pecuniary or material benefits by unfair means’.15


The term ‘valuable security’
must reasonably include ———

(i)

the deeds of the property held by the Mortgager as security against a loan;

(ii)

the Mortgage deed itself, as it is a document transferring lien on the property to the Mortgager;

(iii)

the Endowment Policy or Life Assurance Policy;

(iv)

a mandate, empowering one party to debit the account of another party.


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Other tests of application of the false pretences provisions of the Larceny Act being satisfied, the issue as to whether or not an offence has been committed will come down to the understood meaning of ‘dishonestly’.

It was held in The People v Grey (1944 Ireland) that fraud denotes something dishonest as judged by the prevailing standards of the time.16 Ultimately, those standards will be applied by a jury, and, in that regard, the U.K. case of The Crown v Feely (1973) gave some direction, when Judge Lawton stated:

‘Jurors, when deciding whether an appropriation was dishonest can be reasonably expected to, and should, apply the current standards of ordinary decent people. In their own lives they have to decide what is and what is not dishonest. We can see no reason why, when in a jury box, they should require the help of a judge to tell them what amounts to dishonesty.’ 17


Note!
While there is no express provision to such effect in the Larceny Act 1916, the standards of present day general law and statute law are such that, where an offence committed by a body corporate is proved to have been committed with the consent or connivance of a ‘responsible officer’ of that body corporate, then that officer, as well as the body corporate, is guilty of that offence and liable to be proceeded against and punished accordingly. It must be remembered that an offence can be committed by a body corporate only through one of its ‘responsible officers’.18




NOTE!

Clearly from the above, in Ireland, persons guilty of fraudulent misrepresentation to induce a Mortgage Contract or Life Assurance Contract could IF the Law as it applies to ordinary people was applied to them be prosecuted under the provisions of the Larceny Act 1916 (or the subsequent legislation on the matter of making gain or causing loss, by deception), and find themselves facing a prison sentence of up to ten years. This, notwithstanding the failure of the Irish legislature to SPELL OUT statutory offences and penalties (within the provisions of its Financial Services legislation) for fraudulent misrepresentation perpetrated by a person engaged in Financial Services, or by a Financial Institution or its Management Personnel, against a customer.


In this regard, IF the conduct of a Financial Institution or its Management Personnel is such that it has equivalence to fraudulent misrepresentation (as will be seen to be the case with a breach of the Central Bank’s 1996 or 2000 Code of Conduct Requirements as highlighted in the boxed NOTE! at the end of Section 2.6.3, or with a breach of the core principles of the Regulatory Authority’s Consumer Protection Code as highlighted in Section 2.6.8), or IF there is a suspicion that such conduct may be so categorised, THEN the Central Bank and Financial Services Authority must be duty bound to report such matters to the Fraud Squad, or the DPP, for criminal investigation.


Justice must be seen to be done!





NOTE!


In 1996 the Irish legislature enacted the Criminal Assets Bureau Act 1996. Subject to the provisions of this Act, the Objectives of the Criminal Assets Bureau are:

(a)

the identification of the assets, wherever situated, of persons which derive or are suspected to derive, directly or indirectly, from criminal activity.

(b)

the taking of appropriate action under the law to deprive or to deny those persons of the assets or the benefit of such assets, in whole or in part, as may be appropriate, and

(c)

the pursuit of any investigation or the doing of any other preparatory work in relation to any proceedings arising from the objectives mentioned in paragraphs (a) and (b).



To date the powers of the Criminal Assets Bureau have been solely directed towards the amassed wealth of the ‘unsavoury characters’ from the so-called ‘criminal classes’.

While the power to do so clearly exists, there has, as of yet, been no effort made to pursue the assets of those from the more socially acceptable strata of society, those within the Financial Services Industry, who have amassed much of their wealth by false pretences.

This can be seen to be no fault on the part of the Criminal Assets Bureau itself, but the result the continued policy of the Irish Legislature and its Competent Authority, the Central Bank, to whitewash Fraud, where such Fraud is attributable to, or committed with the consent or connivance of, the Management Personnel of Financial Services Institutions.

For, in Ireland, the Regulatory Regime has consistently contrived that, when Fraud is perpetrated to the benefit of those within the Financial Services Industry, it is never brought to the attention of the Fraud Squad or the Director of Public Prosecutions. (This will become glaringly evident in Section 2.6, THE IRISH POSITION.)

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In the United Kingdom, a similar body, the Assets Recovery Agency, was established under power of the Proceeds of Crime Act 2002 ———

(a)  to disrupt organised criminal enterprises through the recovery of criminal assets, and

(b)  to promote the use of financial investigation as an integral part of criminal investigation.







13 Hanly, An Introduction to Irish Criminal Law, (1st ed.), p. 294.

14 Smith, The Law of Theft, (8th ed.), p. 109.

15 Hanly, An Introduction to Irish Criminal Law, (1st ed.), p. 264.

16 Hanly, An Introduction to Irish Criminal Law, (1st ed.), p. 300.

17 Smith, The Law of Theft, (8th ed.), p. 73.

18 Smith, The Law of Theft, (8th ed.), p. 153, citing Smith and Hogan, Criminal Law (8th ed.), p. 183 - 190.

 

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