View more on these topics

Lawyers warn of ‘lame duck’ FCA in wake of legal aid cuts

Lawyers have warned that the FCA could become a “lame duck” regulator after a land banking fraud case brought by the FCA was thrown out because the defendants failed to get legal representation.

Last week, Southwark Crown Court threw out the case against five defendants on the basis that they would not be given a fair trial because they could not find a barrister to represent them following Government cuts to legal aid. It is the first time a case has been thrown out as a result of the cuts. The FCA is seeking leave to appeal.

In April 2013 the FCA charged eight men with land banking fraud and carrying out a regulated activity without authorisation. The case was due to be heard against Scott Crawley, Dale Walker, Daniel Forsyth, Aaron Petrou and Brendon Daley, with a later trial against the three remaining men. It was classified as a “very high-cost case”, meaning the trial was expected to last over 60 days.

In December, the Government introduced a 30 per cent cut to fees paid to solicitors and barristers for VHCCs as part of plans to cut £220m from the £2bn annual legal aid budget. The changes affect any case heard from the end of April.

Seventy sets of chambers were contacted to represent the defendants in the land banking fraud case but none accepted the instructions.

Alex Cameron QC – the prime minister’s brother, who was working free of charge on the bid to halt the case – said the defendants would not get a fair trial.

In the ruling, Judge Anthony Leonard said: “In a case of this complexity, the defendants could not receive a fair trial without advocates to represent them.”

The offences relate to Plott UK, European Property Investments and Stirling Alexander, which are alleged to have taken over £5m from investors between 2008 and 2011.

Lawyers say the ruling will affect the FCA’s ability to bring high-profile prosecutions, including those relating to insider dealing, boiler room fraud and Libor manipulation.

DWF Fishburns partner Harriet Quiney says: “This is a total failure of Government policy and will be disastrous for the FCA.

“If the FCA cannot prosecute high-profile fraud cases to send out a message to the market, it will become a lame duck regulator. This will put its whole method of operating into question.”

Pinsent Masons senior lawyer and former FCA lawyer Michael Ruck says: “The FCA has based a large part of its ethos on credible deterrence and has gained a reputation as a criminal prosecutor.

“If it loses the ability to prosecute high-profile cases, that deterrent effect will diminish. There is a danger of going back to the time before the financial crisis when some believed they were immune from regulatory intervention.”

It is understood that the regulator has spent at least £1m pursuing the land banking case.

The ruling states the first junior counsel for the prosecution has spent 1,000 hours preparing for the case, which lawyers say would be charged at a minimum of £100 per hour, costing £100,000.

Ruck says: “Added to that will be the cost of a second junior counsel, senior counsel and an investigation team at the FCA, which has been working on this for several years, which would take the total cost to the FCA to around £1m.”

Adviser view

Philip Milton

Managing director

Philip J Milton & Company

“This decision is disgraceful. It should be down to the defendant, not the system, to provide a defence and if they cannot provide a defence then they should lose the case.” 

Adviser view

Martin Bamford

Managing director

Informed Choice

“Hopefully, this is a one-off and the judge’s decision was more about sending a message to the Government about legal aid cuts than about the viability of fraud cases in future.” 

Why the case collapsed

Tessa-Norman-MM-Peach-300.jpg

The charges against the defendants followed Operation Cotton, an FCA investigation into land banking firms. They involve three companies: Plott UK, European Property Investments and Stirling Alexander. Plott UK and EPI faced compulsory winding-up orders in June 2011 and December 2012 respectively after the former FSA pursued civil action.

Land banking companies divide land into smaller plots to sell to investors. The land is often in areas of natural beauty or historical interest, with little chance of being built on.

Lawyers say the case is particularly complex given the nature of the fraud and the number of defendants. The ruling states the evidence is “complex and substantial”, amounting to 46,030 pages and 194 spreadsheets. The trial was expected to last about three months.

The judge said the defendants would not be given a fair trial if they did not have representation. 

The prosecution argued that if representation could not be found now, the case should be adjourned to a future date rather than be thrown out. But the judge ruled there was no reasonable chance of finding representation in future and to adjourn the case would delay other trials and waste court resources.

Tessa Norman is regulation reporter at Money Marketing

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 8th May 2014 at 3:35 pm

    More like an even more dangerous wounded animal than a lame duck, methinks.

  2. goodness gracious 9th May 2014 at 2:17 pm

    Not adjourning the case is a disgrace and the judge is supporting an industrial action. I thought judges were supposed to be neutral.
    He must realise that government policy can be changed and frequently is, according to the likelihood of attracting votes, so the prospect of finding some sort of defence on the public purse is more likely than not. It is not up to a judge to assess if a defence is adequate in advance. If an appeal is bought following conviction that certain pertinent facts were not disclosed then an appeal could take place I believe.
    Lawyers are a trade body that attempt to protect their way of life come what may. Why should the public purse pay more just because lawyers want a high standard of living? Judges come from lawyers so they look after their own.
    What I can’t understand is: Why a case should take this long? It seems to me that the defendants sold plots of agricultural land with an implied promise that values will rise following gaining planning permission. If there was no mention of it in a local authority plan, then the sellers opinion is worthless and it is fraud. Secondly, by splitting the land into small plots a developer would be less likely to develop due to the additional purchase work. Therefore fraud, therefore go directly to jail and do not pass go!
    Most legal argument in court is total nonsense, proving nothing and is really speculation or kite flying. Did these guys sell illegal land bank schemes, yes!
    Secondly, where is the money? I bet the defendants homes are in their spouses names as is all other assets, or are hidden. Get a forensic accountant to trace the money before granting legal aid. I suppose if a defendant had sufficient assets to pay for then it could be seen as an admission of guilt. I am broke is a defensive tactic.
    Simplify fraud cases so they can be dealt with as quickly as theft. Do not increase lawyers fees, in fact reduce them. £100 per hour is ok if all your day is chargeable. That’s £800 per day!

  3. That seems to be sorted then. No FCA fees, no FSCS levy, no chance of FOS finding against you in a complaint that any normal person would realise is fraudulent.

    Become a fraudster yourself with free immunity c/o Messrs Cameron!

  4. As I have said previously – it just shows that justice is for the rich. Philip Milton might think differently if he had to spend his own money on a defence (of any sort).

    Years ago there was legislation to allow solicitors to plead in court. This was supposed to make the law more affordable. What happened to that?

    I happen to have had barristers as clients and in case you don’t know they make fortunes (once established).

  5. Julian Stevens 9th May 2014 at 7:24 pm

    A million quid spent by the FCA on pursuing the case??!! And a thousand hours “preparing the case??!! That’s 125 eight hour days (solid). However can it have possibly taken that long? Still, when it’s all just OPM with no accountability, I guess they just throw it around like confetti. And now, after all that, the case has been thrown out. How many more hundreds of thousands of pounds will be frittered away preparing the FCA’s appeal? Profligacy barely begins to describe such behaviour.

  6. Given that the men concerned made £m’s from the fraud, one wonders how on earth they qualify for legal aid?

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com