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When The Pensions Regulator came to town

by Ann Mulligan

Two Company Directors who faced fraud charges arising out of a failure to pay pensions contributions deducted from employees' wages have been acquitted following a five - day trial at the Crown Court. The case was prosecuted by the Pensions Regulator, the new regulatory body for work based pension schemes in the UK.This was only the second prosecution conducted by the Pensions Regulator and the first trial. The case had been inherited from OPRA.

The Pensions Regulator (http://www.thepensionsregulator.gov.uk) opened for business on 6th April 2005, replacing OPRA, the Occupational Pensions Regulatory Authority.In essence the new Regulator has more extensive powers than its forerunner and it has a defined set of statutory objectives. Those objectives are set out in the Pensions Act 2004 and include the promotion of well run schemes and the protection of the benefits of members. The Act provides the Regulator with a range of powers in addition to those powers inherited from OPRA.

Counts 1 to 7 of the indictment alleged offences of being knowingly concerned in the fraudulent evasion of direct payment arrangements, contrary to section 111A (12) of the Pension Schemes Act 1993. (As amended by the Welfare Reform and Pensions Act 1999.) Both defendants were jointly charged on these counts. Count 8 related to the second defendant alone and alleged that when he was interviewed by OPRA, he knowingly or recklessly provided information which was false or misleading in a material particular.

There was, in short, no dispute in the case that certain sums deducted from the earnings of employees had not been paid over to Legal and General, the manager of the Group Stakeholder Pension Scheme. However, the allegation that the second defendant had acted dishonestly was very much in dispute. Further, it was the defendant's case that the assurances he had given in interview in relation to repayment were honestly given by him at that time.

The Crown's case rested largely on the evidence of the company bookkeeper who said in his witness statement to OPRA that both directors had instructed him NOT to raise cheques to pay the contributions because there were financial problems with the company. It was the Crown's case that the directors had acted dishonestly in giving that instruction.

The unused material in the case was voluminous considering how small the trial bundle was. On very close inspection that material proved to be hugely important to the defence case. Time and again documents in the unused material supported contentions made by the second defendant in interview. Such contentions were otherwise unsupported on the face of the Prosecution case. A prime example was the defendant's suggestion that Legal and General had been at fault as a result of errors and failures at their end. It transpired that there was ample unused material which once deployed in cross-examination elevated this contention to undisputed fact during the trial ! On more than one occasion earlier versions of a witness statement were found to contain evidence helpful to the defence case which were not included in the final version of that statement !

One very powerful example of this problem was the interview with the bookkeeper which had taken place before a witness statement was taken from him. At that stage he had said that he did not know which director had given him the instruction not to raise cheques! By the time he made his witness statement he, it seemed, knew it to have been BOTH directors ! In this way as the trial progressed an abuse of process submission as well as a half time submission became inevitable.

In the event, at the end of the evidence in chief of the star witness, the company bookkeeper, the Crown finally succumbed to pressure on behalf of the second defendant. Just before cross - examination commenced an indication was given by Prosecution counsel that unless the evidence of the witness "improved" during cross-examination he would offer no evidence against both defendants. At that point a VERY hasty decision was made (literally as the Judge and the jury were filing into court) NOT to cross - examine the bookkeeper at all.

Given the importance of this witness to the case and the sense of anticipation which had built up during the trial, the impact on the Court was quite dramatic ! Fortunately the calculated risk paid off and Prosecution counsel stood by his indication. Verdicts of not guilty were returned on the direction of the Judge and both defendants were discharged.

During the course of the trial the BBC Documentary "When Satan came to town" was screened detailing for the first time the Rochdale "abuse" cases. The point made by an expert, who had given evidence in proceedings arising out of those cases, was that the social workers had not acted with malice but had in effect got carried away in the whole excitement of the "satanic abuse" scenario. In this way they had come to interpret perfectly innocent comments made by the children concerned as comments supporting their own Satanic abuse theory. This problem had in its own way a parallel in the alleged pensions fraud.

OPRA initially investigated the matter with a view to potentially imposing a financial penalty on the company. In the event, OPRA had decided not to proceed following the voluntary liquidation of the Company. However, one of the employees was not prepared to accept that decision and he contacted his local CID and specifically alleged fraud against the directors. As the witness explained in his evidence at trial, money had been deducted from his wage packet and not paid over, and as far as he was concerned that amounted to FRAUD.

From that point onwards as the case was re-investigated it was viewed through a very narrow "fraud" lens and was presented at trial in that narrow way.

Evidence which might possibly detract from that "fraud" theory was despatched summarily to the unused basket from which later so much was to be retrieved. Had anyone stopped along the way and considered carefully the question "were the directors acting DISHONESTLY?" then in all likelihood they would have had concerns that they were not, or, that at the very least, they may not have been.

Two lessons

1. Where a prosecution is brought by a REGULATORY authority DO NOT ASSUME a level of understanding or experience as to how the criminal process works.
2. NEVER NEVER underestimate the potential importance of "UNUSED" material! (By the time this particular case came to an end the Crown had exhibited two items and the defence eighteen items, all of them from the unused material!!!)

Note: Ann Mulligan represented the second defendant.

24 January 2006

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