Laughing all the way from the bank

Joyti De-Laurey is the latest City worker to be jailed for embezzling millions. But in such cases sentences are light and the loot seldom found. Katherine Griffiths reports on a crime that does pay
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When Joyti De-Laurey left Southwark Crown Court on Monday, she did not return to the respectable life she had built for herself and her family in the well-heeled town of Cheam, in Surrey. She will, in fact, be away from her husband and six-year-old son for quite some time - seven years, to be spent in one of Her Majesty's prisons, for stealing £4.4m from her former employer, the investment bank Goldman Sachs.

When Joyti De-Laurey left Southwark Crown Court on Monday, she did not return to the respectable life she had built for herself and her family in the well-heeled town of Cheam, in Surrey. She will, in fact, be away from her husband and six-year-old son for quite some time - seven years, to be spent in one of Her Majesty's prisons, for stealing £4.4m from her former employer, the investment bank Goldman Sachs.

The former secretary, who impressed her bosses with her efficiency and tales of overcoming illness and other difficulties, used the cash she siphoned off to buy a total of nine properties, including a £750,000 villa in Cyprus. She also kitted herself out with diamond-encrusted Cartier jewellery, and had ordered a 36ft Italian luxury boat and an Aston Martin Vanquish car before her fraud was discovered.

The prison sentence was the culmination of an in-depth investigation by the City of London Police, and punishment for fooling some senior individuals in the world of banking. These included her immediate superior, the star deal-maker Scott Mead, who masterminded one of the City's biggest ever coups: Vodafone's £110bn takeover of Germany's mobile phone company Mannesman. Also left with a red face was Goldman Sachs itself, which is among the cream of Wall Street banks, whose reputation with clients rides on the security of assets controlled within its impressive four walls.

In an attempt to mitigate her wrong-doing, De-Laurey's defence barrister, Jeremy Dein, said the money she secretly transferred to her own accounts was from people who "were wealthy to the point that is the stuff of fairytales".

All around De-Laurey - a highly prized personal assistant, who none the less earned less than £40,000 a year - were people who could afford to blow their bonuses on flash cars, vintage champagne and the other accoutrements of City success. Mead, who has now quit Goldman and is trying to break into Republican politics in his native United States, only noticed £3m was gone when he tried to make a donation to Harvard University from one of his accounts.

That fantasy land of the super rich that De-Laurey so wanted to be part of must seem a long way away now, as she prepares to serve her sentence.

Yet, it is quite possible that much of that life of luxury might be waiting for the 35-year-old - who has also worked on a market stall and run a sandwich shop in the course of her eclectic career - when she is freed. That is because tracking down assets gained by illegal means is a hugely difficult task, and the legal hurdles to gain access to suspected criminals' personal financial information are often insurmountable.

There is no doubt that being convicted of any crime takes its toll on the individual. Yet, for those who can look forward to a stash of cash or other goodies they have hidden away until after they have served their time, it would appear that crime pays in the City.

De-Laurey's fraud is dwarfed by another recent example of businessmen making a bonanza, much of which was illegal. The duo behind Versailles, a financing company that lent money to small businesses, were sitting on a fortune of nearly £50m that they had taken out of the business before they were convicted of fraud. Carl Cushnie and Fred Clough were last week sent to prison for six years each. History is full of examples of individuals who have found that the streets of the Square Mile are paved with gold for those who break the law.

In a survey published this week, the accountants BDO Stoy Hayward reported that fraud - like other white-collar crime, which is perceived by many as "victimless" - attracted an average sentence of only two to four years in 2003.

Andrew Durant, a fraud investigation specialist at BDO Stoy Hayward, says: "Given that much of this sentence will be written off for good behaviour and most served in an open prison, even those fraudsters who get caught can end up laughing all the way to the Bahamas on the proceeds they have squirrelled away."

He adds: "Fraud is a crime that companies find hard to detect, and alarm bells usually only ring when the fraudster gets particularly greedy or careless. Even when fraudsters are detected and successfully prosecuted, they often manage to hold on to large sums of their criminal proceeds."

Jane Martin, a policy lawyer at the Serious Fraud Office, says that despite "dogged and determined" attempts by law enforcement agencies, "sometimes money just seems to have gone into a black hole. You are dealing with fraudsters who are not unintelligent. They take great care to hide money all around the world. Tracking it down is not an easy thing to do, but when you do, there is a great sense of satisfaction."

In the case of Versailles, its chief executive was 53-year-old Carl Cushnie, once Britain's most successful black businessman, who appeared on a European election broadcast for the Labour Party with Sir Alex Ferguson and Mick Hucknall. As well as money the SFO deems he made illegally, he also received some £29m from selling shares in Versailles before the business collapsed in 2000.

Cushnie's business partner, Clough, who had previously served a term in prison for fraud, admitted he took about £19m out of Versailles before it went into administration.

How easy the SFO will find the task of getting any money back from them is open to question. Between them, Cushnie and Clough have bought a string of properties, including a mansion in Kingston, Surrey, and two townhouses in London, plus another property in the glamorous setting of the Côte d'Azur. There have also been expensive cars, jewellery and lavish spending on a Harrods gold card.

Central to the investigation will be whether these trappings of the high life the two acquired are still owned by them or - in the five years since the Department of Trade and Industry first opened its investigation - have been given to family and friends. There will also be a hunt for any spare cash left over from the spending spree, which could be in many different types of bank account all around the world.

At this stage there is no suggestion that Cushnie and Clough have resisted handing back the ill-gotten gains. However, those who specialise in tracing criminals' cash say the task is formidable. One expert says: "It is very difficult to get a proper assessment of someone's assets because of client confidentiality and data protection laws. If someone really wants to hide real estate or bank accounts, it is not that difficult to do." Under the law, convicted fraudsters are usually required to return the money they have made illegally, or face a few extra years behind bars. Yet, because the custodial penalties tend to be relatively light, criminals often choose to do the time to safeguard their nest eggs for when they get out.

In 1997, Abbas Gokal was given the biggest ever sentence for fraud when he was imprisoned for 14 years for taking part in an elaborate deception at the Bank of Credit and Commerce International, or BCCI. When ordered to hand over the nearly £3m he was thought to have made personally from the scandal, Gokal refused, receiving a reasonably small extra sentence of three years, not all of which he eventually had to serve.

One financial crimes expert observes that even when the prison sentence is tough, those convicted of financial crime can still feel the temptation to stick it out for later rewards. "Nick Leeson got four years behind bars after he covered up trading losses for Barings of £600m or £700m. Those were very unpleasant bars in Singapore's Changi jail. If he had assets to divulge, would he have done it to reduce his sentence? Probably not."

According to David Sherwin, a partner at the accountancy firm Ernst & Young who heads up special investigations, the threat of a longer sentence is ineffectual. "Good defence lawyers will say the person was very confused. And sometimes people are forgetful about the fact that they have a house in Bermuda or a cottage in the country. The British system is not a huge deterrent. There is merit in the US system of plea bargaining, under which a sentence is reduced to a community service in return for handing over however many millions. And if you have got a large pot of money from plea bargaining, you have the working capital necessary to pursue people," says Sherwin.

Having the necessary financial fire-power is an essential tool, because trying to unravel the complex web of companies and trusts a fraudster might have set up can take massive amounts of time and manpower, especially as the legal process can put investigators months, if not years, behind the individuals they are pursuing.

"There are ways to hide assets within 24 hours. You can have money in and out of at least six different places around the world, possibly coming into the UK and going back out again. It can take literally seconds to do, but a very long time and the co-operation of a lot of people to unwind," one investigator says.

If those trying to bury assets choose to go down the route of putting money offshore in less regulated jurisdictions, there are ever-changing challenges. Some off-shore tax havens, including Jersey and the Isle of Man, were blacklisted just a few years ago by the powerful group of industrialised nations within the OECD for withholding information, because money flooded to them on the basis that they did not open their doors to prying investigators. But most involved with tracking money say that the long-established off-shore centres have improved their record.

However, others in such far flung locations as the Pacific islands and islands off the east African coast are springing up, populated frequently by just one person behind a desk, who will not co-operate with international police authorities such as Interpol, or with Britain's SFO or Crown Prosecution Service.

Even when the SFO and other law enforcement agencies manage to track their targets through a myriad of complex transactions, they are often thwarted by developments in court.

Peter Young, a former fund manager at the investment bank Deutsche Morgan Grenfell, was found by an Old Bailey jury last year to have made £2m from a share swindle. Based on a specimen charge, the jury decided that Young had used a network of Luxemburg shell companies to disguise his activities in the 1990s. However, Young, one of the City's more colorful characters, has not had to stand trial after a judge ruled a few months later that he was unfit, on the basis of his unstable history. The Oxford maths graduate had tried to perform a sex change on himself three times and, on at least one occasion during the trial, turned up to court in a dress.

In what was seen as a particularly crushing defeat for the SFO, it lost its case - and millions of pounds of taxpayers' money - when charges fell through against Andrew Regan, who was accused of stealing £2m from his food company Hobson to bribe directors of the Co-op. After three trials, and accusations of jury nobbling and bribery from an unknown third party, the larger-than-life Regan walked free.

The SFO, which was created in 1988 to combine lawyers, specialist accountants and police under one roof, has had some successes - the most recent and high-profile of which has been Versailles.

The jury found Cushnie innocent on one charge - defrauding the banks that lent more than £70m to the business - but guilty of misleading the individuals who invested their personal funds in the company to provide financing for the bridging loans it claimed it was making to small businesses. Clough was found guilty of both counts of fraud. Overall, the SFO last year boasted a conviction rate of 71 per cent of cases. It has won confiscation orders from the courts to go after £3m of assets in the past 12 months.

David Sherwin of Ernst & Young says: "Crime pays in the City, but not as much as it used to, because of greater corporate governance and the need by companies to investigate matters fully and to report them to regulators."

The Proceeds of Crime Act, introduced in 2002, has boosted the powers of the SFO and other government agencies by making it easier to crack down on common tactics such as putting houses in a wife's name. In what was deemed a controversial move at the time, it has also made it possible to go for money and property through the civil courts, even when lawyers do not think it is possible to win a criminal conviction. The Assets Recovery Agency, which was set up by the legislation, is in the process of recovering £15m in its first year of operation, though it has cost the taxpayer £14m to run.

As for De-Laurey - dubbed the "Picasso of conmen" by her former boss - and Cushnie and Clough, they can expect a call from the asset recovery experts very soon. At least they will know where to find them.