Reap what you sow: Proportionality of confiscation orders assessed in CV fraud case

R v Andrewes has important implications for the confiscation regime laid out under POCA 2002, and particularly the proviso in section 6(5) of POCA 2002 which makes a proportionality analysis obligatory before ordering any confiscation of any defendant’s assets. The Supreme Court re-emphasised the importance of proportionality in cases concerning confiscation of proceeds of crime and decided that, while it was disproportionate to confiscate the full earnings received by the employee over the course of his fraud, it would be proportionate to confiscate a recoverable amount of the difference between the lower earnings the defendant would have received had he not lied on his CV but nonetheless performed the same job roles, and the higher earnings had his CV been true. It is notable that the Courts took a pragmatic approach and considered that there was nonetheless inherent economic value in the services Mr Andrewes provided to his employers, and the fact of the fraud itself did not automatically render those services worthless.

R v Andrewes has important implications for the confiscation regime laid out under POCA 2002, and particularly the proviso in section 6(5) of POCA 2002 which makes a proportionality analysis obligatory before ordering any confiscation of any defendant’s assets. The Supreme Court re-emphasised the importance of proportionality in cases concerning confiscation of proceeds of crime and decided that, while it was disproportionate to confiscate the full earnings received by the employee over the course of his fraud, it would be proportionate to confiscate a recoverable amount of the difference between the lower earnings the defendant would have received had he not lied on his CV but nonetheless performed the same job roles, and the higher earnings had his CV been true. It is notable that the Courts took a pragmatic approach and considered that there was nonetheless inherent economic value in the services Mr Andrewes provided to his employers, and the fact of the fraud itself did not automatically render those services worthless.

The Supreme Court was asked by the Crown to address the following question:

“Where a defendant obtains remuneration as a result of or in connection with an offence of fraud based upon the obtaining of employment by false representations or non-disclosure, in what circumstances (if any) will a confiscation order based on the wages earned be disproportionate within the terms of section 6(5) of the Proceeds of Crime Act 2002, or contrary to Article 1, Protocol 1 of the European Convention on Human Rights?”

Between 2004 and 2015, Mr Andrewes successfully relied on a series of false representations to gain employment in a number of establishments, including a hospice (registered charity) and two NHS Hospital Trusts. The representations comprised falsifying numerous qualifications – Mr Andrewes claimed to have an MBA from Edinburgh University in Management Science, an Advanced Diploma in Management Accounting (CIMA) and, in 2007, said that he had been awarded a PhD from Plymouth University. None of this was true.

Mr Andrewes employment was terminated in March 2015, when the truth started to emerge. He pleaded guilty to one count of obtaining pecuniary advantage by deception contrary to section 16(1) of the Theft Act 1968 (because The Fraud Act 2006 (the Fraud Act 2006) was not yet in effect) and subsequently two counts of fraud by false representation contrary the Fraud Act 2006, for which he was sentenced to two years’ imprisonment.

The Crown subsequently sought a confiscation order under POCA 2002 against Mr Andrewes. The benefit he derived from his CV fraud was assessed at £643,602.91 (which represented the total earnings Mr Andrewes had received (net of income tax and national insurance contributions) in respect of the three positions he held between the years 2004 to 2015). The recoverable amount (based on the available amount that Mr Andrewes had free to pay for a confiscation order) was set at £96,737.24 and a confiscation order in this amount was made.

Mr Andrewes appealed against the confiscation order and the question was referred to the Court of Appeal, which overturned the confiscation order on the basis that it was disproportionate under the proviso in 6(5) of POCA 2002 and would amount to “double recovery” if made. This is because, in the absence of any regulatory requirements such as in the medical or legal professions - where it would be an offence to practice without a licence - the places of Mr Andrewes’ employment had actually benefited from his services, which, as was admitted, were carried out competently, albeit obtained dishonestly. Mr Andrewes had lied about qualifications which were advisable to have in the job posts as advertised, as opposed to qualifications which he was legally required to have. In light of that, any confiscation order would restore the consideration which the places of Mr Andrewes’ employment had already received, and the effect of the confiscation on Mr Andrewes would be punitive rather than restitutionary. The “double-recovery” effect rendered the confiscation order disproportionate in the eyes of the Court of Appeal.

The Supreme Court, however, overturned the Court of Appeal’s judgment and reinstated the confiscation order, albeit to a lesser recoverable amount of £244,568 (which in practice still translated to the available amount of £96,737.24 as this was all that Mr Andrewes had available). The Supreme Court described it as a “middle way” between the prosecution’s “take all” approach, which advocated for a confiscation order of Mr Andrewes full net earnings of £643,602.91 (limited to the available amount in practice) and the defendant’s “take nothing” approach. On the prosecution’s case, the available amount of £96,737.24 represented the equivalent costs of the criminal enterprise, and would not be analogous to restoration. The Supreme Court rejected this approach because it did not take into account the true value of the services actually performed by Mr Andrewes in his dishonest capacity. The “take nothing” approach was also rejected on the basis that “the fraudster would be profiting from his crimes if no confiscation order was made”.

The “middle way” lay in the difference between the lower earnings Mr Andrewes would have obtained for his services had he not lied on his CV, and the higher earnings he would have obtained had his fraudulent statements in fact been true. While the hospice and the two trusts did not legally require that Mr Andrewes have the qualifications they were advertising, they did seek to employ “a person of honesty and integrity”. In answering the Court of Appeal’s question, the Supreme Court ruled that:

“… in cv fraud cases, where, focusing solely on the performance of services, the fraudster has given full value for the earnings received — and putting to one side where the performance of the services constitutes a criminal offence — it will normally be disproportionate under the proviso in section 6(5) to confiscate all the net earnings made. But it will be proportionate to confiscate the difference between the higher earnings made as a result of the cv fraud and the lower earnings that the defendant would have made had he or she not committed the cv fraud”.

The Supreme Court restored the confiscation order in the available amount of £96,737.24, but stated that the proportionate recoverable amount in this case would have been £244,569 (which represented a 38% difference on the basis of the salary that Mr Andrewes was earning prior to his fraud commencing in 2004) and not the total benefit figure of £643,602.91. Such “middle way”, the Supreme Court held, required only “some evidence basis for comparing earnings with and without the CV fraud”, with the legal burden of proof being on the prosecution. No detailed or precise evidential or accounting exercise was needed. That, the Supreme Court said, would be inappropriate for confiscation orders where clear rules and a broad-brush approach are necessary so as to avoid complicating the administration of justice in the Crown Courts. In many and perhaps most situations of CV fraud, the Supreme Court said, it will be appropriate, as a pragmatic approximation of the relevant profit, simply to take the difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job.

The Supreme Court notably distinguished between this case and cases where the performance of the services is illegal (for example, where a person is appointed to a job as a surgeon or an airline pilot because he or she has lied about having the necessary qualifications or licence to be appointed to that job). In that situation, the performance of the services by that person would constitute a criminal offence and it would not be disproportionate to confiscate the full net earnings because the performance of those services has no value that the law should recognise as valid.

It will be proportionate to confiscate the difference between the higher earnings made as a result of the cv fraud and the lower earnings that the defendant would have made had he or she not committed the cv fraud.