IN 2011, The appellant was charged in the Royal Court with money-laundering offences. The appellant was a Guernsey businessman with experience in the insurance industry. He was the director of a number of Guernsey companies

The factual background

The appellant is 61 years of age. He came to Guernsey in 1984. He is a businessman with significant experience of the insurance industry. At the material time he was a director of several companies including some registered locally, Sartor Resources Ltd. (“Sartor”), European Management Ltd. (“EML”), Quantum Resources Ltd. (“Quantum”) and Legend S.A. (“Legend”).

He had been introduced to Michael Summers in the late 1990s by a mutual friend called Paul Sutherland. Summers was a con man who operated a Ponzi fraud over several years involving a sum well in excess of $12m. He created a number of so-called investment schemes through which he succeeded systematically in defrauding members of the public in England and across the Atlantic of individual sums, some small and some involving more than $100,000.

One of these schemes constituted a bogus investment scam by means of a “secure investment programme agreement” or SIPA. Investors were assured that their money was being retained in “bank trading programmes.” They were promised returns of up to 60% of the sum invested. In fact the sums were used to fund the lifestyles of Summers and his associates. The first phase of the fraud involved the use of banks based in Switzerland. In the second and third phases, the services of banks in the Channel Islands were deployed.

The investigation into the activities of these men began in 1999 and was instituted by the Devon & Cornwall Police because of a complaint by the solicitors of an elderly victim who had invested all her savings with Summers and who lived in a care home in Torquay. When the size of the fraud became apparent the investigation was taken over by the Serious Fraud Office (“SFO”) in London.

It was discovered during enquiries into the money trail that some of the funds of the investors had been channelled through the Quantum and Legend accounts at the Butterfield Bank in Guernsey. In November 2001 the bank was notified that moneys passing to these accounts might well be the proceeds of fraud and the bank closely monitored the accounts thereafter. On April 12th, 2002 the bank decided to freeze them and notified the appellant who was the signatory on both accounts.

1On 16th May 2002 an investigator from the SFO and a detective from the Devon & Cornwall Police came to Guernsey to talk to the appellant. They wanted to find out how funds which they believed to be fraudulent had come to be routed via two of his companies. At the interview during which, in accordance with international protocols, an officer of the Guernsey Police, Det. Const. Goude, was present, the appellant said that he knew nothing of Summers’ fraudulent activities and insisted that he believed that the money paid into the accounts constituted commission payments honestly earned by Summers from property deals and that the money which he had paid out of these accounts on Summers’ instructions were sub-commission payments to colleagues of Summers.

In relation to his earlier association with Summers, he said that Paul Sutherland had suggested that the three of them should undertake some property ventures together, none of which had in fact materialised, and that Summers had insisted that Quantum, which the appellant acknowledged to be a dormant company at the time, would be a suitable investment vehicle for this purpose.

He claimed, in addition, that Summers had made a request to make use of both the Quantum and Legend accounts at the Butterfield Bank for the purpose of crediting those accounts with sums of money which he, Summers, was earning as commissions on other deals, notwithstanding that both these accounts were and remained under the control of the appellant, who was also Managing Director and beneficial owner of both companies. The appellant also suggested to the investigators that it had been intended that Summers should become a director and co-beneficial owner of both companies but that this had never happened.

He insisted that he had received no benefit or payment for these services although he acknowledged that some of the money in the Quantum account constituted what he called “an open term interest free loan” from Summers. This sum was later identified as an amount of about $450,000 which had been paid to the appellant in 2001/2002, according to the evidence which he gave at his trial. He also admitted in a police interview, prior to his trial, that despite some complicated conditions attaching to the loan which he explained to the police, no paperwork had ever been brought into existence to evidence it. He was asked whether he knew other men into whose activities the SFO were also making enquiries, Shinder Gangar, Alan White and Terence Dowdell. He denied ever having heard of them.

When he was shown one of the SIPA documents used in the fraud, which showed Quantum as the “facilitator” of the contract and Summers as an agent for Quantum whose bank account was reported on the agreement to be the account to which the “investor’s” money would be credited, the appellant registered astonishment, claimed never to have seen such a document before and insisted that Summers had no authority to represent himself as agent for Quantum. The investigators accepted his account of events and invited him to make a witness statement in the proceedings against Summers.

The meeting ended with the officers telling the appellant that Summers was being investigated for serious criminal offences, advising him in clear terms not to further Summers’ interests in the future in any way lest, unwittingly, he should become involved in the fraud. They advised him that in their view Summers was a crook. The appellant admitted in evidence that something to this effect had been said although he denied that the investigators had expressed themselves in such trenchant terms.

Following the meeting, the appellant made a witness statement on June 17th, 2002 which was forwarded by Det. Const. Goude to the SFO in London.

On September 3rd, 2002, Det. Const. Goude wrote a letter to the appellant which he delivered by hand to the appellant’s address that same day. The letter was headed “Re Michael Summers, Quantum Resources Ltd., Legend S.A . . .” The letter warned the appellant that an application would soon be made for the repatriation to the United Kingdom of the money in the accounts, which had remained frozen. The last paragraph of the letter read:

“May I repeat the advice provided to you following your interview in that as these funds are deemed to be the proceeds of crime and to avoid any allegations of money laundering on your part, you must not make any attempt to move them to other accounts or pay them away to a third party.”

The appellant claimed in evidence at his trial that the letter had remained unopened and unread until March 2003. The claim was inherently implausible but was rendered more so by the fact that he made this claim for the first time in the witness-box at his trial in November 2010. He had made no such suggestion in any of the interviews which he gave as a witness during the course of the SFO enquiries into Summers and his associates between 2002 and 2006, nor during the lengthy interviews conducted by the Guernsey Police on the day of his arrest in December 2009.

On September 4th, 2002, the day following the delivery of the letter to the appellant’s home address, the appellant made efforts to open a bank account for Legend in Switzerland with Summers as the signatory.

Within one month of the date of Det. Const. Goude’s letter, and in defiance of it, the appellant commenced the series of transactions which were the subject matter of the indictment against him. The first, Count 1, was a payment to himself of $11,991 on October 1st, 2002 and the second, the next day, a payment to Summers of $7,941. These payments were made by the appellant from another bank account of Legend which he had opened in the spring of 2002 at the Standard Chartered Bank in Jersey as a direct consequence, as he admitted in his police interview, of the freezing of the Butterfield Bank Legend account in Guernsey.

The subsequent payments to Summers from the same Legend account, Counts 3–7, occurred during the next four months. They constituted on each occasion sums either a little in excess of, or a little less than, $10,000.

Moreover, during this period, on December 21st, 2002, he sent to Summers a fax enclosing a letter dated October 9th, 2002 addressed to Quantum from an aggrieved investor complaining that he had not been paid interest on his investment. Attached to the fax is a “post it” in the appellant’s handwriting and signed by him. Addressing himself to Summers, and plainly referring to the investment, the appellant says: “. . . I don’t think it’s an old one. Will be on mobile. Happy Christmas!”

In the early months of the following year, the appellant made more payments from accounts under his control to Summers. The last two counts (Counts 8 and 9) represented sums paid to Summers of just over $8,000 and £15,000 which were made, respectively, on March 17th and April 24th, 2003. These payments were made from the appellant’s company, EML, out of its Royal Bank of Scotland account in Guernsey.

The appellant was still furthering Summers’ interests in September 2003. On that date he contacted the compliance officer of the Butterfield Bank in an attempt to persuade him to unfreeze the Quantum account to enable Summers, to whom the appellant said he had recently spoken, to make payments from this account, activity (in relation to Quantum) which he had been discouraged, or perhaps it would be more accurate to say forbidden, to undertake by Det. Const. Goude in the letter he had written almost exactly a year before.

Summers was arrested with two of his associates in February 2004. In anticipation of Summers’ trial, the appellant made another statement on December 24th, 2004 dealing with further SIPA documentation, and a deposition on March 16th, 2005 amalgamating both earlier statements.

It should be noted that all these witness statements were taken at the behest of the SFO in London for use in the prosecution of Summers. In fact, when the SFO discovered in about June 2002, a month after their first visit, that the appellant had opened the Legend account at the Standard Chartered Bank in Jersey, they became more wary of him but, having taken advice from Queen’s Counsel in London, decided to continue to treat him as a witness because of his value to them in the prosecution of Summers.

In February 2006, Summers pleaded guilty at Bristol Crown Court to 33 counts of criminal deception reflecting fraudulent activity between December 1997 and October 2004. He was sentenced to 4 years’ imprisonment.

Two of his associates, Mary Mills and Bruce Mead, faced trial in the same indictment. Both pleaded not guilty. During their trial a commission rogatoire was held in Guernsey to enable counsel for these two defendants to question the appellant. The object of the cross-examination was to demonstrate that the appellant had been taken in by Summers in a fashion similar to that by which these two defendants claimed to have been duped.

A number of faxes and emails sent to the appellant by Summers, instructing him to make payments in 2001 and 2002 from the bank accounts referred to above, were produced to the appellant in the commission rogatoire by counsel for the two defendants. He was invited to say that he carried out each transfer, often to Summers’ bank account or for his benefit elsewhere, without the least suspecting that Summers was conducting a fraudulent business, a proposition to which in respect of each payment the appellant was very ready to agree.

Later, the Guernsey Police began to investigate the appellant’s conduct in relation to Summers. It will be necessary subsequently in this judgment to explore events between 2006 and 2009 in more detail. Suffice at this juncture to say that the appellant was arrested on December 15th, 2009 and interviewed that afternoon and evening.

During his police interviews, and in relation to the transactions later reflected in the indictment, the appellant claimed that the payment to himself (Count 1) out of the Legend account of the Standard Chartered Bank in Jersey was made to reimburse him for expenses which he had incurred on Summers’ behalf, that the payments to Summers during the rest of 2002 (Counts 2–7) from the same account were made at Summers’ request, and that the payments to Summers in March and April 2003 from the EML account at the Royal Bank of Scotland in Guernsey (Counts 8 and 9) had been made at his own instigation to start the process of reimbursing Summers for the loan of $450,000.

He insisted that these payments/repayments were made in all innocence and at first he stuck to his story that he believed that the credits into both accounts, which enabled him to make these disbursements, far from being “investments” made by the victims of Summers’ fraud, were commission payments honestly earned by Summers. However, in the light of the evidence in the possession of the police which was put to him in interview, his denials became increasingly difficult to sustain and towards the end of the interviews he admitted that he had suspected that Summers was conducting a fraud at the relevant time.

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