This article examines two particular areas of white collar crime practice: extradition and the negotiation of plea agreements, including recent guidance and headline cases involving concurrent US and UK jurisdiction.
Introduction - Problems with extradition and plea agreements
The conviction of Ian Norris, the former chief executive of a major UK public company, by a Philadelphia jury in July 2010 marked the end (subject to appeal of course) of a long battle by US prosecutors to secure his extradition from the UK and put him on trial for obstruction of justice charges relating to cartel offences.
The Norris case is just one in a long line of cases where the extradition arrangements between the UK and the US have been challenged at the highest levels in the UK courts. These include the so called "Nat West Three" who were ultimately extradited and pleaded guilty in the US to offences connected to the Enron scandal and the McKinnon case relating to alleged hacking into a Pentagon computer on which a decision is still awaited by the UK home office. Yet more cases, relating not to white collar crime or computer hacking, but to violent crime and terrorism are held up in the European Court of Human Rights which is examining whether whole life imprisonment terms and the "supermax" detention regime may violate article 3 of the European Convention on Human Rights1.
As if this litany was not enough, another case has just started. Chris Tappin, an English golf club president, who is wanted in El Paso, Texas on charges relating to the export of goods to Iran held a press conference on 17 August 2010 to launch his defence to a US extradition request and to promote his case as the next extradition cause celebre.
The new UK coalition government has promised a review of extradition law, including the arrangements between the US and UK. The government's reaction to the McKinnon and Tappin cases will be closely watched by lawyers advising in business crime cases.
Plea agreements in major cases, particularly those involving concurrent US/UK jurisdiction have caused significant controversy which has come to a head this year. In the landmark case of Innospec, a senior English judge laid down a substantial road block to future attempts by prosecutors to negotiate US style settlements in UK criminal and civil cases. The Innospec decision has caused the sentencing hearing in the UK prosecution of BAE to be delayed until the end of this year whereas the US case against the company has already been disposed of with payment of a US$400 million fine on 1 March 2010. Innospec and another case, Dougall, are required reading for all litigators dealing with US/UK related criminal cases. In some cases, the US may be a better place to negotiate a deal than the UK; particularly if the alternative is a long, uncertain battle against extradition.
The prima facie case controversy and where cases involving concurrent US and UK jurisdiction should be tried
The UK Extradition Act 2003 came into force in January 2004 and, although the new Extradition Treaty between the US and the UK had not at that time been ratified, the new act provided for designated countries, of which the US was only one, to be relieved of the obligation formerly required of them to submit written evidence of a prima facie case in support of an extradition request. There is now a long list of countries designated in the same way as the USA including Australia, Canada and Israel as well as all Council of Europe countries.2 The Council of Europe convention on extradition dating back to 1957 provides for extradition without the need for a prima facie case between all member countries.
One might be forgiven for wondering what the fuss has been about over the last six or seven years if all that has happened is that the UK has given the USA the same status in extradition cases as member states of the Council of Europe. The issue that has caused the greatest controversy is the fact that the new US/UK extradition treaty, eventually ratified on 26 April 2007, three years after the Extradition Act came into force, is not entirely reciprocal. Unlike the Council of Europe convention on extradition which applies the same procedural requirements to each signatory state, the US/UK extradition treaty is one sided. US prosecutors no longer have to provide evidence of a prima facie case but UK prosecutors must still show "probable cause" to support an extradition request to the US. Many have argued that this in practice requires a UK prosecutor to establish much the same evidential basis for a request as was formerly required to show a prima facie case.
The US Embassy press release on ratification put the matter rather differently:
"The treaty, and the Extradition Act 2003, have also redressed the unequal balance that existed under the terms of the 1972 Treaty in which the UK required more from the U.S. than they asked of the UK. The U.S. was required to demonstrate a prima facie evidential case in support of extradition requests made to the UK, whereas the UK merely had to demonstrate 'probable cause'.
The 'probable cause' test is broadly comparable to the requirement for 'information which would justify the issue of a warrant for the arrest of a person' that the UK will now require of the U.S."3
The new UK coalition government has pledged to review Britain's extradition laws, including the arrangements with the USA to ensure that they are "even handed". In its response to the coalition's "Programme for Government" issued in May 2010, JUSTICE, the British section of the International Commission of Jurists, said:
"The current US/UK extradition treaty is not even-handed. Specifically, unlike US courts, there is no requirement on UK courts to consider the equivalent of whether there is 'probable cause' for the extradition of a suspect. We therefore welcome the coalition government's commitment to reviewing the treaty and the Extradition Act generally."
Despite the dispute about the meaning of "probable cause" and whether the treaty is in fact one sided, in many US/UK extradition cases it would be hard to deny that a prima facie case exists. In most of the cases US prosecutors have had little difficulty in providing such evidence and routinely do so even after the relaxation of the prima facie case requirement. It seems very unlikely that the UK government will seek to renegotiate the 2007 extradition treaty with the US and there is little that can be done in practice to water it down. So far none of the recent extradition cases have reached the shocking level of Raissi4, a case shortly after 9/11 in which the US authorities sought to extradite from the UK the holder of a commercial pilot's licence alleged to have been linked to the Al Queda attacks on New York and Washington. In that case, the US ultimately failed to provide any evidence to satisfy the then applicable prima facie case requirement and Mr Raissi was released after spending over four months in custody and much longer awaiting the outcome of the case. It is the absence of the prima facie safeguard in the 2007 treaty which allows for the possibility of another extradition request being made in the complete absence of any evidence.
Challenging forum in US/UK extradition cases
The most likely changes that might emerge relate to forum and prosecutorial practice. In response to vigorous opposition to the Extradition Act, arising in particular from cases such as Norris and the Nat West Three, the last UK government grudgingly conceded an amendment to the Extradition Act contained in the Police and Justice Act 2006 which would allow a UK court to bar extradition if a significant part of the conduct that constituted the alleged offence took part in the UK and that it would not be in the interests of justice for the person to be tried in the other country. This would require a judge to decide on the basis of evidence in each individual case whether it is appropriate to extradite a person in such circumstances. The problem is that this amendment was never brought into force and requires a resolution of both Houses of Parliament before it can become law.
The human rights group Liberty, among others, has been pushing for the introduction of the forum protection:
"Liberty believes that a decision about where a person should face trial should be informed by human rights considerations to ensure recognition of the serious impact extradition has on the person to be extradited and their families. In addition, where the conduct that constitutes the alleged offence takes place in whole or in part in the UK, extradition to a foreign country will inevitably result in difficulties in defending the case given that many witnesses and other evidence will be in the UK. Issuing a subpoena to a UK based witness from another jurisdiction may well prove difficult (or impossible) and seriously affect the defence's ability to mount a proper defence."5
In reality however, the forum provisions, while going some way to providing a procedural protection for defendants, will not help those whose cases have little real evidential connection to the UK and where the impact of the crime alleged was felt in the US or other requesting state, not the UK.
Human rights as a bar to extradition
The recent cases have shown that to succeed in defeating extradition to the US on human rights grounds in white collar crime cases is very hard indeed. The Norris case went to the highest appellate court in the UK twice; once to the House of Lords to successfully defeat the US request for extradition for criminal cartel conduct and the second time to the new Supreme Court which roundly rejected submissions that extradition to the US would infringe Mr Norris' rights under article 8 of the European Convention on Human Rights.6 Lord Phillips, in his judgment with which the other judges agreed, said at paragraph 82:
"In a case such as this it is the exception that proves the rule. One has to consider the effect on the public interest in the prevention of crime if any defendant with family ties and dependencies such as those which bind Mr Norris and his wife was thereby rendered immune from being extradited to be tried for serious wrongdoing. The answer is that the public interest would be seriously damaged. It is for this reason that only the gravest effects of interference with family life will be capable of rendering extradition disproportionate to the public interest that it serves. This is not such a case. Unhappily the delay that has been caused by Mr Norris' efforts to avoid extradition to the United States has increased the severity of the consequences of that extradition for his family life. But those consequences do not undo the justification that exists for that interference."7
While Norris and other white collar defendants have so far failed to convince the UK courts to bar their extradition to the US on human rights grounds relying on article 8, those accused of terrorist offences scored a notable preliminary victory in the European Court of Human Rights in July 2010 when their case before the European Convention on Human Rights was declared partly admissible as a potential violation of Article 3 both in relation to the risk of detention in "supermax" prison facilities and the extremely long prison sentences they would face on conviction.8
A simple solution for all US/UK extradition cases, at least those involving defendants with permanent leave to remain in the UK, is to expedite the transfer of convicted prisoners back to the UK to serve their sentences. It would not require much more than a speedier administration of the existing law.9 The Nat West Three have now been transferred back to UK open prisons to complete their sentences but this process could have been much quicker. Arrangements for defendants to be granted bail in one country on terms which can be enforced in the defendant's home state also ought to be enacted. At present this can in theory be done by agreement of special terms between prosecution and defence but a statutory framework together with speedy prisoner transfer would render nugatory many of the article 8 arguments being raised in US/UK extradition cases.
More aggressive prosecutors?
There may be some scope for change in prosecutorial practice as well as minor law reform. US prosecutors often appear far more aggressive than their UK counterparts in asserting jurisdiction to prosecute. In the McKinnon case and, more starkly in the new case of Tappin where much of the relevant conduct appears to have occurred in the UK, there may be good grounds on which UK prosecutors could bring charges in the UK rather than conceding jurisdiction entirely to the US. In some quite rare cases where there is separate conduct in each state (and double jeopardy can be avoided), there might be a basis for concurrent charges in both jurisdictions and sentence could be served in the defendant's home country.10
Guidance in concurrent jurisdiction cases
In response to pressure from opponents of the US/UK extradition arrangements and to deal with the type of forum challenge brought by the Nat West Three, the last UK government issued guidance agreed by the respective Attorneys General for US and UK prosecutors handling cases with concurrent jurisdiction.11 The guidance is in practice quite limited and gives a general exhortation to prosecutors to co-operate with each other at an early stage. Significantly, the guidance makes it clear that no third party rights are created whereby a defendant could seek to review a decision made by prosecutors. Thus, no additional procedural safeguard is created for those facing transatlantic extradition in either direction.
Problems for prosecutors in negotiating plea deals
Concurrent jurisdiction cases have recently raised other issues aside from extradition. When UK prosecutors have sought to assert themselves using US style methods, the English courts have been less enthusiastic. On the other hand, very recently at least one senior US judge in a case involving Barclays, the British bank, has also questioned the propriety of companies paying their way out of a US conviction12 so there is trouble on both sides of the pond.
In the last few years UK prosecutors have been trying to emulate their American cousins by negotiating criminal and civil settlements, notably in cases involving overseas corruption. Two civil settlements with UK public companies were successful albeit that they involved pitifully small financial penalties by US standards (the highest was only about £4.9 million, less than US$8 million) and related to company books and records offences rather than specific allegations of corruption. Another case, Mabey & Johnson, a non stock exchange listed company, resulted in a plea of guilty to corruption offences but fines, costs and reparations still failed to exceed £7 million or around US$10 million.13
When it came to bigger fish with cross border criminal liability, the courts were not so willing to accede to "settlements" of criminal allegations negotiated between prosecutors and defendant companies on both sides of the Atlantic, particularly where the English court's sentencing powers were being curtailed by private agreement. In the Innospec case14, the SFO and the defence approached the court with a joint statement setting out an agreed sentence for the company for its plea to corruption of Indonesian officials and an agreed civil recovery order. The deal was carefully co-ordinated with a parallel plea in the US to similar conduct involving Iraq and Oil for Food. This was all part of a global settlement designed to ensure that the company did not collapse financially as a result of the criminal case, in recognition of its significant co-operation with prosecutors.
The English court expressed disapproval of the way in which the case was presented which had the effect of curtailing the sentencing functions of the court. The court also expressly disapproved of civil sanctions being imposed where criminal penalties would normally be imposed and the disproportionately lower sentence proposed by the UK prosecutor was also criticised. In the end the company was fined US$12.7 million and the case is now a significant problem for UK prosecutors in similar cases, particularly the BAE case where it is proposed that the defendant company enter a plea to an offence relating to failure to keep adequate books and records rather than a substantive corruption offence and where a markedly lower financial payment is proposed compared to that paid in the parallel US case mentioned above.
The SFO fared no better in a similar case involving a negotiated criminal settlement with an individual defendant in an overseas corruption case who had entered a special statutory co-operation scheme15. In Dougall,16 the court again disapproved of agreed plea bargains or packages jointly presented by the prosecution and defence, where little, if any, room was left for judicial discretion. The court made it clear that white collar criminals should expect no different treatment to ordinary criminals and while prosecutors could agree a basis of plea on agreed facts with the defence, it was for the court to approve a plea on that basis and for the court to decide the appropriate sentence.
Ironically, it may even be the case that some defendants might be able to negotiate a better deal with the Department of Justice in the US than they could with the authorities in the UK. Especially when the UK's draconian confiscation regime is taken into account, the possibility of negotiating with the Department of Justice and not the UK prosecutors should always be considered. If there is a choice of jurisdiction then it is important to choose the right one.
In the US courts, judicial disquiet has been expressed in a number of recent cases where the authorities have sought to agree substantial non criminal penalties for banks. The Barclays settlement mentioned above was approved by Judge Emmet Sullivan but not before he had laid out his reasons for criticising what he saw as a "sweetheart deal" whereby the bank had been allowed to get away with a deferred prosecution agreement in circumstances where other criminal defendants would have to plead guilty. The case followed two others; one involving Bank of America in 2009 in which the bank had to increase its settlement offered to the SEC from US$33 million to US$150 million and in another, Citigroup on 17 August 2010 when a judge required the bank and the SEC to submit further information before a US$75 million deal can be approved.17
Conclusion
So problems persist for prosecutors, whether American or British, striving to ensure that a healthy climate of corporate and individual accountability exists for white collar fraud. Vigorous enforcement must be tempered with meaningful and proportionate mitigated penalties in the right cases, particularly where cases could not have been brought without defendants coming forward. In the UK at least, prosecutors need some help from legislators to ensure that they have the right tools for the job. Importing US practice has not been entirely successful so far and now even the US judges are becoming impatient with too many sweetheart deals in their own system. But anyone who thinks we can go back to the old days of long investigations by well resourced state funded investigators followed by longer trials before tired jurors is wrong: the era of self reporting is here to stay but the question is whether legislators are prepared to permit penalties for white collar fraud to be mitigated as much as defendants would like. The judges are not going to be pushed around when it comes to sentencing white collar fraud but the legislators may see the benefits of taking money from fraudsters in the right cases in exchange for letting them off the hook. This can save on prison costs and the greater harm sometimes done to shareholder value by prosecuting corporate criminals.
In extradition cases, while the treaty is probably not going to be changed, much more needs to be done to safeguard individual rights in order to ensure that everyone can have confidence in the mutual trust inherent in any bilateral extradition treaty. Family rights could easily be better protected by modern arrangements for bail and a swifter prisoner transfer process.
Peter Binning is a partner at Corker Binning, the London law firm which specialises in fraud, regulatory and general criminal litigation.
This article was prepared for a panel discussion to take place at the National Association of Criminal Defence Lawyers and Fordham Law School White Collar Crime Seminar in New York on 30 September – 1 October 2010.
Footnotes
1. Article 3 ECHR protects the right not to be tortured or subjected to cruel and inhuman treatment
2. The member states of the Council of Europe signed up to this lower level of procedural protection in extradition cases as long ago as 1957. The Council of Europe includes all 27 member states of the smaller grouping of the European Union and a further 20 countries ranging from Russia to Switzerland and Serbia to Azerbaijan.
3. http://london.usembassy.gov/ukpapress48.html
4. See Regina (Raissi) v Secretary of State for the Home Department [2008] EWCA Civ 72 for related compensation appeal
6. Article 8 ECHR protects the right to family life and privacy
7. Norris v Government of the USA [2010] UKSA 9
8. Ahmad and others v UK (Admissibility) [2010] 51 EHRR SE6
9. See Council of Europe Convention on the Transfer of Sentenced Persons (Strasbourg, 21 March 1983 : ETS NO.112)
10. See for example the split jurisdiction deal in the Marine Hose cartel case – R v Whittle and others [2008] EWCA Crim 2560
11. Guidance for Handling Criminal Cases with Concurrent Jurisdiction between the United Kingdom and the United States of America signed by the Attorneys General for the US and UK in January 2007
12. See Financial Times Thursday 19 August 2010 "DoJ deal with Barclays 'raises questions of fairness and justice'"
14. R. v Innospec Ltd [2010] EW Misc 7 (EWCC) (Crown Ct (Southwark))
15. See sections 71-73 Serious Organised Crime and Police Act 2005
16. R v Dougall [2010] EWCA 1048
17. See Financial Times Tuesday 17 August 2010 "US judge rejects Citi's $75m deal with SEC"
Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. For further information go to http://www.corkerbinning.com
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