15 January 2008

Conspiracy to plunder government assets


The Facts of the Case

This is a story of a systematic plunder of government money by individuals entrusted with the highest office, and of the systematic tracking down and bringing to account of those responsible.  The claim is brought by the Attorney General of Zambia against some 17 defendants to recover in excess of $72m transferred by the Ministry of Finance between 1995 and 2001 and diverted to the personal use of the principal defendants. The claim was issued in the High Court in England, because substantial sums of money had passed through bank accounts held in London.

The principal claim was of conspiracy by unlawful means to defraud the claimant by fraudulent misappropriation of its monies in breach of trust and to conceal such fraud.  Against non-Zambian defendants, claims of dishonest assistance were also advanced.

The primary defendants were three former officers of Zambia, including Frederick Chiluba, president from 1991 to 2001. Other Zambian-based defendants were alleged to have been involved in varying degrees with the overarching conspiracy.  UK-based defendants, included partners in the law firms of Meer Care & Desai and Cave Malik; other defendants were based in Belgium and Switzerland. 

A forensic accountant, appointed as a single joint expert, meticulously traced the passage of funds from government bank accounts for which there was no obvious legitimate purpose.  The stolen money was mostly used to fund lavish lifestyles, expensive clothes, cars, motorbikes (described by the judge as ‘boys toys’), payments of private school fees, as well as acquisitions of valuable real estate in both Zambia and England.

Some defendants took no part in the proceedings at all, a few settled and, most notably, the Zambian principal defendants participated up to a point, serving defences and issuing various challenges to the English court’s jurisdiction, and when these failed, refusing to participate in the trial. Only the UK-based defendants and the former Zambian ambassador to the US participated fully at the trial.

The Zambians defendants objected to the English court proceeding with the case in part because they were subject to criminal charges in Zambia and had surrendered their passports as a condition of bail.  The Attorney General was not prepared to allow them out of Zambia in case they absconded.  They also feared that evidence released to the English court would prejudice any future criminal trial in Zambia.  These concerns were addressed robustly by the English court: evidence was ring-fenced; property was released from a freezing order to fund legal fees; video links were installed to relay proceedings from London to Lusaka; and the entire court relocated to Lusaka for 2 weeks so that the judge, Mr Justice Peter Smith, could sit as a special examiner and hear the evidence of the Zambians in person.  This arrangement proceeded even after the Zambian defendants denounced it as illegal and purported to ‘discontinue’ their participation. Chiluba broke the ring-fencing order (imposed for his benefit) by issuing a press statement on the first day of the trial selectively disclosing protected documents.

Even without the main defendants, the trial lasted 51 days, 47 witnesses were cross-examined and the Attorney General’s written submissions exceeded 1,300 pages.  In his lengthy judgment the judge was careful in dealing with the evidence in the absence of the defendants and in view of the seriousness of the allegations of dishonesty made against the professional defendants.

As Mr Justice Smith summarised the position, in order to prove his loss was caused by conspiracy to injure by unlawful means “the Attorney General had to establish matters (1) to (3) taking into account items (4) to (7).

  1. Each conspirator was a party to the alleged combination or common design.
  2. Unlawful means were used.
  3. There was an intention to injure but that need not be the dominant purpose.
  4. It is not necessary to show that there is anything in the nature of an express agreement whether formal or informal. It is sufficient if two or more persons combine with a common intention, albeit tacitly, to achieve a common end.
  5. It is usually quite impossible to establish when or where there was an initial agreement and when or where other conspirators were recruited.
  6. Participation in a conspiracy is infinitely variable:- it can be active or passive. Also consent can be inferred if it is proved that a person knew what was going on and thus the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.
  7. Scrutiny of all acts relied upon in order to see what inference can be drawn is essential.”

The Decision

Mr Justice Smith had little trouble finding that the Zambian defendants were parties to an overarching conspiracy.  Their failure to come to court with an explanation of their conduct weighed heavily against them: the judge was left to infer from the claimant’s evidence that only dishonesty and fraud could explain the course of conduct laid before him.  Likewise, with non-participating defendants such as the Swiss boutique, although there was no concrete evidence of dishonesty in relation to the vast overpayments made, neither was any explanation tendered to dispel the obvious conclusion.

The judge made clear that he would not entertain criticisms of the truth of a witness on matters that had not been put to the witness in cross-examination. He refused to regard oral evidence subjected to cross-examination as of less importance than documents, particularly when the honesty of the parties was in issue.

The Attorney General failed to convince the judge that individual lawyers were parties to the overarching conspiracy (a finding which would have left them liable for the entirety of the loss).  The judge had little doubt, however, that their conduct was dishonest rather than grossly negligent and that they were parties to a sub-conspiracy to launder the misappropriated funds.  Neither lawyer had questioned instructions to take receipt of large amounts of government money and disburse it to private individuals and enterprises.  Neither had reassessed the risks of this behaviour in light of money laundering guidance issued by the Law Society.  They were found liable for conspiring and dishonestly assisting the Zambian defendants to steal government money, in respect of the funds passing through their client accounts.  Having found the individual lawyers liable, the judge also concluded that their respective partners, whilst not dishonest, were also jointly liable under s10 Partnership Act 1890 as the acts in question were done in the ordinary course of each firm’s business

Points of Interest

The complexity of facts, the amounts involved and the number and variety of participants may not be so unusual for a fraud case, but the clear message from this case is that the English High Court is prepared and able to provide an avenue of redress for countries which have suffered corruption at the highest level. 

Category: Article