Legal Failures: The £65m fiasco

Customs errors cause collapse of Britain's costliest fraud case
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The Independent Online

The collapse of one of Britain's most expensive criminal prosecutions has left taxpayers footing an estimated bill of £65m.

The collapse of one of Britain's most expensive criminal prosecutions has left taxpayers footing an estimated bill of £65m.

A judge finally called a halt to the complex fraud hearing after defence lawyers accused the prosecution of withholding vital evidence which had denied the defendants the chance of a fair trial.

It is believed to be one of the most expensive cases to collapse in British legal history and is likely to outstrip the £60m cost of the recent Jubilee Line extension trial. The judge's decision to halt proceedings three years after charges were first brought against the Manchester-based businessmen casts serious doubt on the ability of criminal justice agencies to prosecute complex fraud in this country.

The legal aid bill - believed to be more than £6m - will also raise further concerns that the Government has failed to stop some lawyers from making fortunes out of publicly funded work. The massive cost of the failed prosecution could rise.

A further 18 similar prosecutions into complex VAT fraud could also collapse after the judge in the case, Mr Justice Crane, gives his full reasons for halting proceedings at a High Court hearing today.

Earlier this week, the Attorney General, Lord Goldsmith QC, said he was to press ahead with plans to abolish juries in complex fraud trials because of jurors' inability to comprehend complicated financial evidence. However, the decision to halt the prosecution in this latest allegation of major fraud was taken before a jury had been empanelled.

The five defendants, Arif Chandoo, Amjad Baig, Sandeep Golechha, Aqeel Ali and Mohamed Kamal Ali, were freed last month after Mr Justice Crane stayed the prosecution for abuse of process.

One lawyer connected with one of the cases said yesterday: "Once again, a judge has had to rule that there should not be a trial because of serious problems within Customs and Excise. He will, as far as I can tell, rule either that senior officers have lied to him or that they are institutionally incapable of living up to their legal duties."

The five were charged by Customs during Operation Venison, an investigation into VAT fraud, in which it was alleged that £120m of tax had been siphoned off from the importation of mobile phones. The alleged fraud involves importing goods VAT-free, selling them on with the VAT added and disappearing without paying the tax.

A similar Customs case collapsed last month after the judge at Blackfriars Crown Court in London stopped proceedings. In that case seven men and one woman were charged with VAT fraud on the transportation of computer chips across European borders. Together the cost of these two cases is expected to be about £65m.

In a third, related, case, a businessman accused of masterminding Britain's biggest VAT fraud was found not guilty by a jury last month.

Dylan Creaven, 30, an Irishman, was arrested nearly three years ago as part of a Customs investigation known as Operation Chipstick. He was initially accused of stealing up to £162m from UK taxpayers, although he was eventually prosecuted in relation to £14m.

All three cases are part of Customs' continuing investigation into a scam that costs Britain £2bn in lost revenue.

In the case of Operation Venison, defence costs for 12 barristers and their instructing solicitors have already reached £6m. The prosecution costs are expected to reach similar figures after blunders forced Customs to twice change its team of prosecuting barristers. Each time newly instructed counsel were paid for reading thousands of legal papers from scratch.

This year Customs lost the right to prosecute cases after a series of high-profile court failures costing the taxpayer tens of millions of pounds.

Separating prosecutors and investigators was a key recommendation of a review of Customs prosecutions carried out by Mr Justice Butterfield, a High Court judge. His findings were published in July 2003 and were prompted by the mishandling of informants by Customs in a huge spirits and beer fraud at bond warehouses trading as London City Bond.

Announcing the separation of the two roles, the Attorney General said: "The independence of prosecutors is a bedrock of our system of justice and a key constitutional safeguard. It is essential for public confidence in the conduct of criminal cases.

"This move will further enhance the independence of Customs prosecutors ... To be most effective, prosecutors must be independent - and be seen to be independent - by judges, by their colleagues and by the wider criminal justice system.

"The creation of an independent Customs Excise Prosecutions Office, accountable to me, will institutionalise and further protect that independence."

Spokeswomen for both Customs and Excise and the new Revenue Customs Prosecutions Office declined to comment on the case until after the judge had given his ruling today.

Civil liberty groups, lawyers and opposition leaders have all pledged to resist Lord Goldsmith's plans to scrap trial by jury in cases such as these, allowing judges instead to sit alone in cases considered too complex for ordinary members of the public to understand. When he announced the plans earlier this week, Lord Goldsmith said it had been apparent for some time that justice was not being done in some serious fraud cases.

He said it would end the system of "two-tier justice" where it was easier to prosecute benefit cheats than to try City fraudsters because of the complexity, expense and length of prosecutions.

Expensive legal failures

PRUDENTIAL, April 2005

Five defendants charged with conspiracy to defraud the Prudential in a prosecution dating back to 2001 walked free after a judge ordered their acquittals.

The judge at Southwark Crown Court said that the five defendants could not receive a fair trial because the prosecution had persistently failed to disclose vital documents to the defence and had neglected to take action to prevent the Prudential from destroying large numbers of documents crucial to the case. Cost: £10m

JUBILEE LINE, March 2005

Conspiracy to corrupt public officials and gain insider information on a £2bn extension to London Underground's Jubilee Line.

Six men were freed after the length of the case and problems with the jury forced the Crown Prosecution Service to abandon the trial.

Defence barristers and their instructing solicitors have clocked up £14m in legal aid, while the three prosecuting barristers are to be paid £1.8m out of public funds.

Further costs are expected to bring the total figure for the case to £60m.

PEOPLE TRAFFICKING, June 2004

The two Chinese restaurant workers were accused of masterminding a £5.2m operation to run illegal immigrants into Britain on behalf of the Snakeheads, a vicious gang of Chinese criminals. A third man was acquitted.

The prosecution decided to drop its case after a legal ruling against them, and subsequently the three defendants have been released.

Cost: One unofficial estimate puts the total cost of the investigation and subsequent trial at £6.5m - more than £1m more than the alleged human trafficking operation.

LONDON CITY BOND, 2002

The collapse of a trial in Liverpool against 15 defendants accused of conspiracy to cheat Customs out of millions of pounds in spirits and beer taxes.

The collapse compromised 28 different investigations, and eventually led to 109 defendants having convictions quashed or evidence against them withdrawn.

A High Court judge who reviewed the case cleared Customs officers of trying to entrap criminals but called for reform of the criminal justice system to handle sophisticated tax fraud, warning that it has not been effective.

The report said that a vital element in restoring confidence in the Customs service would be the assurance that independent lawyers could conduct prosecutions.

Cost: As well as losing £668m in taxes, Customs spent £14.3m on wasted prosecutions, £3.5m in wasted investigations, and still faces the compensation bill from wrongly convicted or charged defendants.

DRUGS, 1997

Kenneth Togher, 34, and Brian Doran, 53, from Glasgow, were sentenced to 25 years at their second trial in 1997 for smuggling 300kg (660lbs) of cocaine.

But the men were cleared by the Court of Appeal, which ruled the trial judge had misled the court during his summing up of what was then the UK's longest trial.

Charges against the men were dropped altogether when a retrial heard that Customs officers had planted bugging devices at the luxury Swallow and Lanesborough hotels in central London without permission.

A report by Gerald Butler QC, absolved Customs and Excise officers of dishonesty and perjury during the trial.

However, he went on to recommend a number of changes to the organisation.

Cost: estimated to be £20m.