This morning the Telegraph reports on an expenses claim by Elliot Morley for mortgage interest he never owed; and for the first time, this report mentions potential offences, with a quote from solicitor Steven Barker, quite rightly saying that any offence that an MP might have committed in these circumstances would be under the Fraud Act 2006, or else under section 17 of the Theft Act 1968.
Under the 2006 Act, there are three ways of committing fraud. Under section 2, you commit the offence of fraud by false representation if you dishonestly make a false representation intending to make a gain; a representation is false if the person making it knows that it is, or might be, untrue or misleading, and includes any representation as to fact or law, including a representation as to your state of mind.
Note, therefore, that it’s enough to know something might be misleading; and you can commit the offence by saying something you know might mislead people as to your intention, say about where you will spend most of your time. Critically, though, to be guilty of this offence you must act dishonestly, which under the two-limbed test in R v Ghosh means
– what you did was dishonest by the ordinary standards of reasonable and honest people, and
– you knew it would be regarded as dishonest by reasonable and honest people.
Under section 3, you commit fraud by failing to disclose information if you dishonestly fail to disclose to another person information which you are under a legal duty to disclose, intending to make a gain. And under section 4, you commit fraud by abuse of position if occupy a position in which you are expected to safeguard, or not to act against, the financial interests of another person and dishonestly abuse that position, even by omission, with intent to make a gain.
Fraud carries a maximum sentence of 10 years imprisonment and/or an unlimited fine.
It seems to me section 2 is the only realistic potential fraud offence here; while section 4 seems at first blush apt to cover an MP acting fraudulently against the taxpayer’s financial interest, I think it’s intended to cover the kind of situation where a trustee, say, misappropriates money, without necessarily saying anything false. In the scandal over MPs expense, my feeling is that if any offence is committed, it’ll be because an MP has made a misleading claim. In those circumstances, section 2 looks like the right one to charge.
The most likely alternative would be false accounting under section 17 of the Theft Act 1968. You are guilty of false account if dishonestly, with a view to gain, you falsify any account, record or document made or required for any accounting purpose; or if in furnishing information for any purpose you produce or make use of any such document which you know is or may be misleading in a material particular. Section 17 is a classic white collar fraud offence, very apt to catch gaining money dishonestly by making a dodgy expense claim.
The maximum sentence for that offence is seven years in prison.
It’s also important to bust a myth that seems to have spread at Westminster and in the blogosphere: the old offence of obtaining a pecuniary advantage by deception is a complete red herring. That was under section 16 of the Theft Act 1968; but if you followed that link, you’ll see it’s been expunged from the statute book, having been repealed in January 2007 by the Fraud Act 2006. If that weren’t enough, it wouldn’t apply to any MP’s expense claim even before 2007 because the offence was limited to very specific circumstances, the best example of which was getting a job by lying on your CV. This book by Catherine Elliott and Frances Quinn explains pretty well what section 16 used to cover.
Head of Legal – if I may say so, a concise and precise summary of the criminal law position re fraud. I also noticed how the media continue to refer to “obtaining pecuniary advantage by deception” (Theft Act 1968 s16 – which was, generally speaking, a legal mess). We should not be too surprised. The media have just about stopped talking about larceny and embezzlement.
Neither arrest nor prosecution are very likely however. After all, they are not single mothers who fail to inform DSS when they have got a few hours work over and above the permitted amount. [I do not condone the latter but merely highlight the contrast in treatment by the law. The hypocrisy of MPs and Ministers is appalling].
In some ways MPs have sought to provide legal cover to their “6 o’clocks.” For example, the Income Tax (Earnings and Pensions) Act 2003 section 292 – conveniently inserted by Parliament to give a very significant tax benefit to members.
“Neither arrest nor prosecution are very likely however. After all, they are not single mothers who fail to inform DSS when they have got a few hours work over and above the permitted amount.“
I would like to echo Peter Hargreaves’ sentiment in the lines above.
HoL highlights clearly and concisely the liabilities but falls short of mentioning the prosecutors code. The two stage test of, ‘is there a reasonable chance of conviction‘ and ‘is it in the public interest‘.
I think we should all know by now that the Theft Act only applies to the working classes. For evidence of this statement think of the theft in Hinks.
while never wise to disagree with the august HoL (not being snidey here!) i think s4 fraud act is wider than the mere fiduciary relationship. it seems by comparison to earlier offences to be intended to do just what it says: punish people for abusing a position of trust – in a formal or informal relationship. there are after all many other ways to get breach of fiduciary relationship.
s2 i agree is the most likely; and the good news is exactly as you say it needs only knowledge that rep might be misleading. (and the bonus that no actual gain is required) however a rep as to state of mind will be difficult because they then have to prove it was untrue when he made it. if he subsequently changed his intention it’s fine (as per misrep).
also good that failure to check may be enough for ‘might be misleading’. recklessness by the back door.
all of which is even more reason for us to take this through the courts and not prejudice it via the media. don’t want any of them getting away with it on that count, do we!
anyway there must be some single mothers in parliament we can get… which is perhaps an argument in itself for a more representative HoC so we can have some of the usual suspects in there to throw on the bonfire at times like this.
Section 4 – The Law Commission explained the meaning of “position” as follows:
“The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. We see no reason, however, why the existence of such duties should be essential. This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
which must surely include the relationship between single mother and society…
we gottem bang to rights!
slightly less seriously, are they saying it is a mixed question of law and fact, or purely law??? can’t make it out from the above.
and what exactly is the status of pronouncements by the law commission? persuasive?
Statements by the Law Commission are “persuasive” in court. Given that the Fraud Act 2006 is substantially the same as the Law Commission’s draft Bill then the Law Commission’s view would be particularly cogent.
At a trial the judge would decide whether as a matter of law a particular section of the Act was applicable. The jury would then decide whether on the facts the defendant was caught by the section.
In the Magistrates’ Court the two questions are decided by the magistrates but if the court comprises “lay magistrates” then they receive legal advice as to the law from an adviser. Can’t see any case against an MP staying before the local “beaks” however.
peter – thanks – however i wasn’t querying the implication for a court of whether something is a question of fact or law but rather what the (to me confusing) definition above of whether it is actually fact law or both. (precisely because of those points you mentioned)
Is there some Law which says that all taxpayer’s money must be audited? If so and presuming none of the MPs correctly went through the required process, isn’t that something else they are guilty of?
Whilst I accept that in reality there is unlikely to be any prosecutions, I am interested in possible offences. I may be going off at a complete tangent, but if there is a case of an MP who is alleged to have claimed mortgage interest payments for mortgages that have been paid off, and to which officers in the Fees Office have agreed, despite knowing the situation, is there not a possible offence of conspiracy to defraud? The Green Book does not allow for false claims (ie claiming for something that does not exist), even given some of the vewpoints expressed by certain MPs. I see no difference in these circumstances to where an employee who thinks he should be paid more and a company accountant who agrees, they both agree that if the employee puts in bogus expense claims, the accountant will pay them, thereby defrauding the company. The only difference as I see it is that it is the taxpayer who is being defrauded.
Even if the Fees Officer cannot be identified for some reason, the indictment could read ‘conspiracy with another or others unknown’.
I am particularly interested in this possible offence because in the AG’s guidance on the use of the offence of conspiracy to defraud (www.attorneygeneral.gov.uk/attachments/conspiracy%20to%20defraud%20final.pdf) it states there was a ‘widespread view in favour’ of keeping this offence after the enactment of the Fraud Act, but nevertheless its existence will again be reviewed when the Fraud Act has been in force for 3 years.
– what you did was dishonest by the ordinary standards of reasonable and honest people, and
– you knew it would be regarded as dishonest by reasonable and honest people.
That’s the electorate, so that test is passed.
Now what is the defence?
Ah, I can see it now. You can’t prosecute me because you can’t find a jury that isn’t my victims.
Nick