20210921 Cases that won’t make the news and the launch of compliance officers’ training packages.

Hello

I’ve a round-up of some stories that haven’t made the news but which give
pause for thought.

The FBI’s embarrassing plea.
The strange case of municipal bonds fraud.
Will a case relating to a Royal Will at last give transparency to Deferred
Prosecution Agreements?
Training: a new package for compliance teams with CPD and a certification.

The FBI’s embarrassing plea.

First is the news that the USA’s FBI has issued a wanted persons’ notice in respect of Richard Ayvazyan and Marietta Terabelian and have even gone so far as to offer a reward. It’s not a dead-or-alive notice and the FBI wants information, not physical delivery of the pair. You might think that this is because they are dangerous criminals or members of a major crime family but no. That’s not what happened.

Perhaps it’s just that it’s American but to me the begging letter masquerading as a press release from the FBI seems lost in the woods.

It says they are wanted for breaching their “pretrial release” and that they were “charged federally by the United States District Court for the Central District of California, Los Angeles, California, with conspiracy to commit wire fraud and bank fraud. On December 4, 2020, they were placed under pretrial release supervision at their residence.” That was on 20th October 2020.

In June 2021, they were amongst four persons convicted of fraud relating to fraudulent loan applications seeking millions of dollars in “Paycheck Protection Program” (sic) and Economic Injury Disaster Loan COVID-19 relief funds.

The pair is convicted of offences relating to Covid-19 related fraud that it is alleged netted them “multi-millions.” Then the court let them go free, setting sentencing for 13th September. One can almost imagine them looking at each other, unspoken words passing from eyeball to eyeball: words like “Result!!!! ” and “F… this – we’re outta here” but not immediately.

In August 2021, they simply cut off their tracking bracelets and ran away.

The FBI seems to have uttered a collective sigh and an indignant “how dare they?”

Dunno. Answers on a postcard, please.

The strange case of municipal bonds fraud.

In a completely different type of case, the USA’s Securities and Exchange Commission has sued a former officer of a San Diego School District – and the district itself. The SEC alleges that Sweetwater Union High-School District and its former Chief Financial Officer, Karen Michel, misled investors who purchased municipal bonds worth USD28 million. The allegations are that the projections upon which valuations were based were hugely out of whack – a projected USD19.5m surplus was in fact on track to
be a USD7.2m loss. The SEC says that Michel managed the bond offering for the district and was aware of reports showing that the projections were untenable and contradicted by known actual expenses.”

“Without admitting or denying the allegations in the complaint, Michel agreed to settle with the SEC and to be enjoined from future breaches of the relevant provision as well as from participating in any future municipal securities offerings. She also agreed to pay a USD28,000 penalty.

The settlement is subject to court approval. Sweetwater also agreed to settle with the SEC and consented, without admitting or denying any findings, to the entry of an SEC order finding that it breached Sections 17(a)(2) and 17(a)(3) of the Securities Act, and requiring it to engage an independent consultant to evaluate its policies and procedures related to its municipal securities disclosures.” (edited)

It’s not the securities fraud that’s especially interesting, it’s who committed it. Even more interesting is that this is the latest in a long list of cases relating to the issue of bonds “by or on behalf of schools and colleges” and a number of municipal advisers who provide services to school districts.


Will a case relating to a Royal Will at last give transparency to Deferred Prosecution Agreements?

The Will of HRH Prince Philip who died recently has raised a fascinating point. In a judgment relating to that Will (I’ll get to that in a minute) there is reference to a case involving the Will of the late Princess Margaret, Countess of Snowden. As has become customary (although not of long standing: it began in 1910), her Will, as a senior member of the Royal Family was sealed – and no copy kept in the Probate Court or published. A copy, along with other Wills since 1910 was sealed and placed in a safe in the custody of the President of the Family Division. Some years later, according to the current President, ” Robert Andrew Brown sought a direction for the unsealing of the wills of the late Queen Elizabeth, the Queen Mother and the late Princess Margaret, Countess of Snowdon. Mr Brown claimed to be the illegitimate child of Princess Margaret and asserted that he had an interest in unsealing and inspecting the wills in order to advance and/or establish that claim.”

The Court at the time gave Brown short shrift:. The Lord Chief Justice, Lord Phillips of Worth Matravers LCJ said that Brown’s “belief is without any foundation and is irrational”. But Brown persisted. At one point, his claim was struck out as “vexatious and an abuse of process.” And still he persisted. He got a case as far as the Court of Appeal which found that his claim had no basis in fact but that the then President should have allowed him to raise a number of questions of public importance relating to the process by which Wills are sealed and the Court certified several such issues. Once he had that order, he made an application under the Freedom of Information Act 2002.

What Brown’s persistence had revealed was that there had been a process by which the Wills had been sealed and that process had not been known outside those taking part.

The Court of Appeal said “It is unfortunate that the important issues to which we have drawn attention should be raised by an application made by a person motivated by a belief that is both irrational and scandalous. We have, however, concluded that the appellant was and is entitled to have a substantive hearing of his claim to inspect the wills. For these reasons this appeal is allowed.”

It is this that interests me for in financial crime we are engaged in opaque quasi-judicial activity all the time. But the area that most fascinates me is the reaching, behind closed doors and with sealed orders, of “deferred prosecution agreements.” I’d have to do a great deal of research and apply a great deal of thought to it but my initial question is simple: if the process by which a person’s Will is not made public can be overturned in the public interest, then can we do the same in relation to such agreements which prevent justice being seen to be done – and there can be, surely, no greater issue of public importance than that.

It might not be as straightforward as it seems: in the case of Prince Philip’s Will, the current President of the Family Division found that it is justifiable to keep that and others sealed and under lock and key. However, sealed should not mean secret. He ordered that there should be a list of sealed wills that he holds.

Then he said something that seems so far out of left-field that it’s a surprise: applications to unseal and make public the Will may be made after 90 years has elapsed from the Grant of Probate. He said ” It must be absolutely plain to one and all that any application to open a sealed will, prior to the expiration of the 90 year period, is likely to be dealt with by the President of the Family Division on a summary basis and is highly likely to fail in the absence of a specific, individual or private justification relating to the administration of the deceased’s estate (for example a potentially meritorious claim of entitlement to inheritance). In short, the publication of the list is intended to be an end in itself, in order to achieve transparency, and nothing more.” The expression “by the President on a summary basis” means that all applications should be made direct to him and not processed through the lower courts.

As the existence of Deferred Prosecution Agreements is made public, along with such facts as prosecutors wish to set out, this might be close to the President’s objective. But that still leaves the question of the process. In this case i.e. relating to the Will of Prince Philip, the process was conducted, without reference to the terms of the Will, openly and the Judgment hides nothing. But what if the hearing had been held in camera and the judgment a truncated version of a private judgment handed down to the parties?

It is interesting that the current case was brought by the Executor of the Will, represented by Farrers, the long-established solicitors to the Queen in her personal capacity. The defendant was the Attorney General, the legal adviser to the Government because it affects the Probate Office. It is clear that the case was brought to avoid allegations of hidden dealings.

Will it open up doors relating to back-door deals with criminals? Only time will tell: after all, this was a Family Division, Probate matter, not in the Criminal Courts and often principles don’t travel well. But it’s interesting, nevertheless.

Training: a new package for compliance teams with CPD and a certification.

In your browser, on desktop or mobile: no app required.

We have today announced a package of nine modules producing 76 hours of CPD (where recognised) and sufficient credits to earn the designation Certificate in Financial Crime Risk and Compliance (cFCRC). It’s more than GBP800 worth of courses for the package price of GBP600 per person, including UK VAT where appropriate. It is designed for teams of at least five persons.

This Q3 package is available for a limited time only.

You can download the brochure here:
https://www.financialcrimeriskandcompliance.com/info/lt.php?tid=MyUv90GNlQW8Aa9LmF+4H2+pbfMniDaQiWNfYk/L4ae6uIlv8ItX1ro3NymnCwjb

The enquiry form is here:
https://www.financialcrimeriskandcompliance.com/info/lt.php?tid=UY/FoX6uJDunhppZwOtWdm+pbfMniEaQiWNfYk/L4ae6uIlv8IsH1ro3NymnCwjb

Thanks for reading

Nigel Morris-Cotterill
www.countermoneylaundering.com