EXTRADITION TO THE

1

• EXTRADITION TO THE
• USA FOR FINANCIAL CRIMES
• Jonathan Fisher QC
• 23 Essex Street, London
• YFLA Educational Seminar, 29th April 2009

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Agenda

• The risk of extradition to the US
• Who is at risk?
• How does the risk arise?
• What is the extradition law in the UK?
• What steps can be taken if the risk materialises?
• What steps can be taken to minimize the risk?

3
Route map

• Territorial approach to criminal jurisdiction
• Exceptions historic, recent
• US approach to criminal jurisdiction
• Impact of recent changes in extradition process
• Interaction between three dynamics
• the extension of international criminal
  jurisdiction
• the growth in international mutual recognition
• the increasing deployment of plea bargaining
  techniques in the prosecution of financial crime
• Risk management issues

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The traditional approach to jurisdiction

• The historical basis of English common law
  criminal jurisdiction is territorial, it being
  the function of the English criminal courts to
  maintain the Queen's peace within her realm -
  Board of Trade v. Owen 1957 A.C. 602
• It would be an unjustifiable interference with
  the sovereignty of other nations over the conduct
  of persons in their own territory if we were to
  punish persons for harmful conduct which did not
  take place in the UK Treacy v DPP 1971 AC 537

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Exceptions to the general rule

• Treason plotted abroad
• An Act for the Trial of Murders and Felonies in
  Several Countries, 1548, 2 3 Edw 6, chap 24
  Treason Act 1541 33 Hen 8, chap 23
• Piracy and crimes committed aboard ships
• Crimes committed by Crown servants abroad (slave
  trade abuses etc)

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Recent exception - corruption

• In a significant modern in-road to the
  territorial approach to jurisdiction, the UK
  passed legislation which enables the prosecution
  in the UK of a person for a corruption offence
  where the corrupt acts took place outside of the
  UK
• Anti-Terrorism, Crime and Security Act 2001,
  s.109

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A modern trend the expansion of
extra-territorial criminal jurisdiction

• International crimes
• Domestic crimes (with trans-national elements)

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International crimes (of universal
jurisdiction)

• War crimes torture terrorist crimes hijacking
• The jurisdiction of the English criminal courts
  is usually statutory, but it is supplemented by
  the common law. Customary international law is
  part of the common law, and accordingly I
  consider that the English courts have and always
  have had extraterritorial criminal jurisdiction
  in respect of crimes of universal jurisdiction
  under customary international law R v Bow
  Street Metropolitan Stipendiary Magistrate, ex
  parte Pinochet (No 3) 2000 1 AC 147, per Lord
  Millett at p. 276

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Domestic crimes

• Serious fraud invariably involves cross-border
  transactions but they are not international
  crimes.
• Should the territorial approach be strictly
  applied?
• UK approach where a substantial measure of the
  activities constituting a crime takes place
  within the UK, the UK courts accept jurisdiction.
  It is not necessary for the "final act" or the
  "gist" of the offence to be committed within the
  jurisdiction. R v Smith (Wallace Duncan) (No. 4)
  2004 3 W.L.R. 229, CA

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The US approach is entirely different

• The difference is bound up in the relationship
  between State and Federal criminal
  responsibilities
• The wire fraud offence is deliberately configured
  widely to cover the situation where criminal
  activity occurs in more than one State and
  thereby confer jurisdiction on US federal court.
  It is structured to look outwards, beyond State
  boundaries.
• However, it is sufficiently broadly worded to
  embrace criminal jurisdiction against those
  outside of the US but whose activities impact on
  US interests (sometimes known as the economic
  theory of jurisdiction)

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Wire fraud

• Whoever, having devised or intending to devise
  any scheme or artifice to defraud, or for
  obtaining money or property by means of false or
  fraudulent pretences, representations, or
  promises, transmits or causes to be transmitted
  by means of wire, radio, or television
  communication in interstate or foreign commerce,
  any writings, signs, signals, pictures, or sounds
  for the purpose of executing such scheme or
  artifice, shall be fined under this title or
  imprisoned not more than 20 years, or both. If
  the violation affects a financial institution,
  such person shall be fined not more than
  1,000,000 or imprisoned not more than 30 years,
  or both

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The width of US extra-territoriality

• Any allegedly fraudulent scheme operated in the
  UK or continental Europe in which an e-mail or
  other electronic communication passes through a
  US internet service provider is indictable in the
  US Alun Jones QC, London conference on
  Extradition, reported in The Times, 16th April
  2005

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Cartels The Sherman Anti-Trust Act

• "Every contract, combination in the form of trust
  or otherwise, or conspiracy, in restraint of
  trade or commerce among the several States, or
  with foreign nations, is declared to be illegal
• "Every person who shall monopolize, or attempt to
  monopolize, or combine or conspire with any other
  person or persons, to monopolize any part of the
  trade or commerce among the several States, or
  with foreign nations, shall be deemed guilty of a
  felony . . .
• Agreements made abroad affecting US commerce even
  in minor ways can be prosecuted in the US

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Corruption

• The anti-bribery provisions of the Foreign
  Corrupt Practices Act make it illegal for US
  persons to bribe a foreign government official
  for the purpose of obtaining or retaining
  business
• In 1998 FCPA was expanded to assert territorial
  jurisdiction over foreign companies and nationals
  where it causes, directly or through agents, an
  act in furtherance of the corrupt payment to take
  place within the territory of the US
• There is no requirement that such act make use of
  the US mails or other means or instrumentalities
  of interstate commerce. So clearing a cheque
  through NY is sufficient to trigger jurisdiction

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Aggressive enforcement

• BAE Systems, non-executive chairman and CEO
  detained when entering US (May 2008)
• UBS bankers charged, UBS employees advised to
  avoid entering US (May 2008)
• To date, 27 foreign nationals from 9 different
  countries have been extradited to the US to stand
  trial for cartel offences. The average prison
  sentence for these convicted offences is 21
  months.
• In so far as the UK is concerned, the US has
  successfully extradited 45 UK citizens for a
  variety of different criminal offences.
• Nigel Potters experience (conspiracy to bribe,
  CEO Wembley PLC)
• http//www.justice4nigelpotter.com/

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Financial service vulnerablities

• There will be vulnerability in any case where a
  person working in the financial services sector
  is associated with a client who conducts any
  activity engaging a US interest
• If the funds have been obtained in a manner which
  triggers US criminal jurisdiction, a regulated
  person who facilitates the client will be exposed
  to extradition if there is information which
  leads the US authorities to think that he has
  turned a blind eye to the offending conduct

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The Tollmans very close to home

• The Tollmans received in excess of 35 million
  in income funnelled through secret Guernsey bank
  accounts
• The Tollmans failed to disclose this income on
  their US tax returns
• The US authorities allege that Mrs Tollman had
  extensive dealings with the accountants and
  bankers who managed their secret accounts
• US authorities sought the Tollmans extradition
  from the UK
• After a protracted battle Tollman, aged 78, was
  allowed to stay in the UK to care for his sick
  wife
• But if his personal circumstances had been
  different and/or if an allegation had been made
  that the Guernsey corporate service providers had
  suspected a tax fraud or were in any way
  complicit in the scheme, they would be vulnerable
  to extradition to the US

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An enhanced vulnerability extradition

• Running alongside the growth of exercise of
  extra-territorial jurisdiction, there has been an
  international trend to ease the requirements for
  extradition
• Although the easing of extradition processes has
  been in part a response to 9/11, the US
  authorities have taken advantage of new
  extradition procedures in financial crime cases

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Pre-UK Extradition Act 2003

• A prima facie case (that an extraditable offence
  had been committed Schedule 1, Extradition Act
  1870) had to be established
• The Home Secretary had a general discretion to
  refuse the request (touchstone whether it was
  just and fair to extradite in the circumstances)
• Political offences exemption

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Extradition Act 2003

• Requesting states fall into two categories
• Category 1 territory fast-track procedure
  applying to European Arrest Warrant territories
• Category 2 territory territories with whom
  extradition arrangements have been agreed The
  requirements for the extradition process will
  vary, depending upon the agreement made

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The rationale

• Extradition is an important tool in dealing
  with international crime no one should be able
  to escape justice by simply crossing a border.
  The law should provide a quick and effective
  framework to extradite a person to the country
  where he is accused or has been convicted of a
  serious crime, provided that this does not breach
  his fundamental human rights Explanatory
  Notes, Extradition Act 2003

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UK / USA Extradition Treaty

• Signed 31st March 2003
• Ratified in the UK and USA (April 2007)
• For the US to extradite from the UK, the US
  authorities need adduce no more than a statement
  of
• the particulars of the conduct in question
• the foreign law which applies
• evidence which identifies the defendant
• the warrant

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Relaxation in the double criminality test

• An offence shall be an extraditable offence if
  the conduct on which the offence is based is
  punishable under the laws in both States by
  deprivation of liberty for a period of one year
  or more or by a more severe penalty (Article
  2(1), UK / US Treaty)
• An offence shall also be an extraditable offence
  if it consists of an attempt or a conspiracy to
  commit, participation in the commission of,
  aiding or abetting, counselling or procuring the
  commission of, or being an accessory before or
  after the fact to any offence described in
  paragraph 1 of this Article (Article 2(2)

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Conduct punishable in both States

• The starting point is that extradition statutes
  should be given a broad construction so as to
  enable them to serve their trans-national purpose
  of bringing to justice those accused of serious
  crimes It is not necessary to expect a
  requesting state to satisfy itself that there
  should be exact correspondence between the
  ingredients of the offence alleged in its
  jurisdiction constituted by the conduct of which
  it complains and those of the offence that such
  conduct would constitute in this country if it
  had occurred here per Auld LJ, Norris 2007
  EWHC 71 (Admin) affirmed in the House of Lords,
  2008 2 WLR 673

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Whither a prima facie case?

• No requirement for the US to show a prima facie
  case when extraditing from UK
• Though UK has to show probable cause when seeking
  to extradite from US (Article 8, Treaty)
• Lack of mutuality justified by UK Government
• (a) reciprocity not required as a matter of law
  in extradition cases
• (b) in any event, there is no imbalance because
  before an extradition request is issued in the
  US, a US court will have been satisfied that
  there is a probable cause (arguably, a higher
  threshold than a prima facie case)
• It follows that the UK courts do not make any
  evidential assessment in extradition proceedings
  to or from the US

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Whither the Home Secretarys discretion?

• Broad general discretion abolished
• Present bars to extradition
• (a) double jeopardy where a person has already
  been tried for the same offence or an offence
  substantially relating to the same facts
• (b) extraneous considerations where the person
  to be prosecuted will be prejudiced by virtue of
  his race, religion, nationality, gender, sexual
  orientation or political opinions
• (c) physical or mental condition where a
  persons physical or mental condition would make
  it unjust or oppressive to extradite
• (d) delay

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Passage of time

• Where extradition would be unjust or oppressive
  by reason of the passage of time
• Passage of time applies to the time lapse
  generally prejudice in conduct of the defence
  does not to be shown section 82 Extradition Act
• Decision to be taken by the Court, not the Home
  Secretary
• Delay, like the other bars to extradition, is
  very hard to establish

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Possible defence arguments

• Challenge in the US the validity of the
  indictment / warrant (abuse of process)
• Defendant is not correctly identified
• Dual criminality not satisfied
• The offence is not known to criminal law
• The defendant has already been tried for the same
  crime

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Article 8 ECHR

• Is the right to respect for private and family
  life, home and correspondence engaged?
• Derogation except where it is necessary
  for the prevention of disorder or crime or for
  the protection of the rights and freedoms of
  others
• No ECtHR decision (pre-2004, European countries
  declined to extradite their own nationals, so the
  issue never arose)
• Ripe for forum conveniens argument

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Offence not substantially committed in State
seeking extradition

• The former position - The requested Party may
  refuse to extradite a person claimed for an
  offence which is regarded as having been
  committed in whole or in part in its territory or
  in a place treated as its territory (Article 7,
  European Convention on Extradition, 1957)
• Will this found an Article 8 argument?
• Is it necessary to extradite this person for
  the prevention of disorder or crime or for the
  protection of the rights and freedoms of others?

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Other human rights issues

• Does the lack of consideration of the evidence by
  the domestic court offend basic human rights
  principles?
• Is it possible to get a fair trial in the town in
  which persons affected by the fraud live (Enron,
  Texas)? Eg media exposure leading to prejudice?
• The delay in the trial process
• Pre-trial custody and the problem of a high bail
  bond
• The problem of irrecoverable defence costs
• The plea-bargaining process

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Difficulties with the trial process

• Fighting the Nat West 3 case at trial -
• 32 witnesses for the defence need to flown out to
  the US
• Voluminous documents need to be transported to
  the US
• Issues with disclosure of unused material
• Combined defence costs estimated at 4.5 million

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Sentencing in the US

• Scoring system in the Federal Sentencing
  Guidelines
• Sentence will be increased by aggravating points
• Aggravating points include the commission of a
  substantial part of the conduct abroad
• 20 year plus sentences are common place
• In the UK, no fraud defendant has been sentenced
  to more than 14 years imprisonment
• Due to the impact of the sentencing guidelines
  and the plea-bargaining process, 97.5 of
  defendants in federal courts plead guilty

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Bermingham ors v US 2007 Q.B. 727

• Accused of stealing more than 7 million from
  NatWest in a scheme which helped to bring about
  the collapse of Enron.
• Managing directors of Greenwich NatWest, a
  subsidiary of the Royal Bank of Scotland, a UK
  entity, did not consider themselves victims of
  fraud
• The substance of the criminality was committed in
  the UK
• Court challenge failed - public utility trumps
  privacy for Article 8 ECHR purposes
• Plea bargain deal
• On 28.11.07 they each pleaded guilty to one count
  of wire fraud and on 28.2.08 they were each
  sentenced to 37 months in prison.
• In November, 2008 it was announced they would
  spend the rest of their sentences in the UK.

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AGS Guidance, 18.1.07

• Applies where there are concurrent jurisdiction
  issues
• UK prosecutors should contact US prosecutors
  where there is a real possibility that a
  prosecutor in the US may have an interest in
  prosecuting the case
• The UK and US prosecutors will consult
• The aim of consultation is to reach an agreed
  approach on where and how the investigations will
  be pursued and prosecutions initiated
• Anodyne procedural document not giving any
  details as to the principles to be applied where
  there is a potential conflict
• http//www.attorneygeneral.gov.uk/attachments/AG_G
  uidance_for_Handling_Criminal_Cases_and_the_USA.pd
  f

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Relationship between extradition and plea
negotiation

• Allison, Brammar, Whittle oil-price fixing plea
  bargain agreement, December 2007
• UK company commits crime in the US
• US prosecutes, seeks obtains extradition,
  defendants agree a plea bargain with US
  authorities which includes sentence
• UK authorities agree to prosecute for similar
  offence, D pleads guilty, UK judge imposes
  similar length sentence to the US court, D serves
  sentence in UK
• As part of the agreement, Ds were not to seek a
  shorter sentence of imprisonment from the UK
  court than 2.5 years for D1, 2 years for D2 and
  20 months for D3

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The Whittle sentence

• Two of the defendants subsequently appealed
  against sentences of 3 years' imprisonment
  imposed by the English court. One of the
  defendants appealed against a sentence of 30
  months' imprisonment
• The appeals were allowed to reflect the minimum
  terms in the plea bargain agreement, but the
  Court of Appeal was unhappy
• We have our doubts as to the propriety of a US
  prosecutor seeking to inhibit the way in which
  counsel represent their clients in a UK court,
  but having heard no argument on the subject we
  shall express no concluded view R v Whittle
  2008 EWCA Crim 2560, per Hallett LJ, para 28

38
McKinnon 2008 UKHL 59, 30.7.08

• M, British citizen living in the United Kingdom,
  gained unauthorised access to a large number of
  US Government computers from his home computer.
• US alleged he caused 700,000 of damage to the
  computers by impairing their integrity
• M admitted responsibility but denied that he
  caused damage
• M offered a deal whereby if he pleaded guilty and
  did not contest the extradition it was likely
  that he would receive a sentence of 3 to 4 years'
  imprisonment and, after serving up to 1 year in
  the US he would be repatriated to serve the
  remainder of his sentence in the UK

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Challenging extradition

• Length of imprisonment sentence would be longer
  than an English court might impose
• The High Court regarded with a degree of
  distaste the way in which the American
  authorities are alleged to have approached the
  plea bargain negotiations
• Viewed from the perspective of an English court
  the notion that a prosecutor may seek to induce a
  plea of guilty on the basis that substantial
  benefits will be withdrawn if one is not
  forthcoming is an anathema
• The threat If McKinnon does not plead guilty,
  there is a determination on the part of the New
  Jersey authorities to see McKinnon fry

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Deference to the US trial process

• Whilst we are prepared to accept that evidence
  of conduct on the part of the prosecuting or
  judicial authorities in a requesting state may
  amount to the abuse of extradition proceedings,
  we do not consider that it does so in the present
  case. We do not consider that we should allow our
  cultural reservations about this style of plea
  bargaining to stand in the way of extradition. We
  are entirely satisfied that Mr McKinnon will be
  fairly treated by the American courts per
  Maurice Kay LJ, Judgment, para 60

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McKinnon in the House of Lords

• The Divisional Court expressed their cultural
  reservations about the general American style of
  plea-bargaining and a degree of distaste
  as to the prosecutor's approach towards providing
  or withdrawing support for repatriation These
  comments seem to me somewhat fastidious. Our law
  is replete with statements of the highest
  authority counselling not merely a broad and
  liberal construction of extradition laws (to
  serve the trans-national interest in bringing to
  justice those accused of serious cross-border
  crimes but also the need in the conduct of
  extradition proceedings to accommodate legal and
  cultural differences between the legal systems of
  the many foreign friendly states with whom the UK
  has entered into reciprocal extradition
  arrangements per Lord Browne, para 37

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How to protect the position

• D O insurance cover
• Keep out of trouble regularly review internal
  control procedures, monitoring and testing their
  efficacy

43
D O insurance

• D O policy to reflect risks of trading in a
  legally uncertain environment
• The definition of wrongful act must cover
  exposure to US litigation
• Consider whether policy can be obtained which
  covers the cost of a bail bond
• Insurers should pay defence costs for directors
  up until they are found guilty of fraud. Costs
  will be recovered by insurers if director is
  found guilty
• Danger if a company has no business activity in
  the US, the D O policy may exclude liability
  relating to the US. But as we have seen, the
  absence of trading activity or physical location
  in the US does not exclude the possibility of US
  criminal liability
• Check level of cover and the exclusions

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Minimise the risks

• Ensure CDD processes meet international money
  laundering requirements
• Maintain internal controls and procedures at the
  highest levels
• Review, monitor, test internal controls and
  procedures
• Know the criminal law which applies in the
  territory in which the company is doing business