In February this year, Somerset farmer Richard Coate was jailed for three years and nine months after defrauding HM Revenue and Customs (HMRC) out of nearly a million pounds in taxes. His crime was unusual, involving 425,000 sheep, a mysterious Senor Questos and VAT claims under an agricultural compensation scheme. It later transpired the sheep were a complete fiction; only 29 were ever traced. Meanwhile, Mr Questos, a Spanish farmer who had supposedly sold the 425,000 sheep to Coate, did exist, but had no connection with the cunning ovine fraud.
Coate?s conviction was secured thanks to the efforts of the Revenue and Customs Prosecution Office (RCPO), the organisation responsible for prosecuting all Inland Revenue and Customs criminal offences, which this month marks its first anniversary.
It is not just imaginary sheep scams that keep this new government department busy ? the caseload ranges from straightforward VAT and direct tax fraud to the much more exotic: vast ?carousel? frauds, known as MTIC (missing trader intra community) frauds involving hundreds of million of pounds; drug-smuggling cases, from large-scale organised gangs dealing in heroin and cocaine to airport ?stuffers and swallowers?; illegal exports of weapons and other military hardware; illegal trade in endangered species and conflict diamonds; and huge excise frauds involving alcohol and tobacco.
The RCPO is the product of two separate initiatives: the recommendation in the 2003 Butterfield report that Customs prosecutors be made independent from Customs investigators; and the 2004 O?Donnell Review, which proposed the merging of the government?s two tax-gathering bodies, Customs & Excise and Inland Revenue. Thus the RCPO was born, bringing Customs and Inland Revenue prosecutors together for the first time in a single prosecution authority.
Its first director is David Green QC, a criminal barrister of 25 years? experience, and former civil servant in the Defence Intelligence Staff (he was inspired to change to a legal career by his brother, Geoffrey Green, now senior partner of City law firm Ashurst).
Despite its colourful and often high-profile work, the RCPO is not yet widely known, unlike its two fellow prosecuting authorities, the Crown Prosecution Service (CPS) and the Serious Fraud Office. Mr Green intends to put this right and since being installed says he has been spending ?a great deal of time? explaining to various groups ?who we are and what we do?. Clearly anxious not to be seen as the poor relation of the much-larger CPS, he is quick to underline the RCPO?s ?heavy and serious? work. ?We don?t do punch-ups in pubs,? he says.
The ?crucial? change, says Mr Green, is that the RCPO is now a fully independent organisation, separate from HMRC and accountable to the Attorney-General. Previously, all Customs and Inland Revenue prosecution work was carried out by in-house solicitors, an arrangement identified in the Butterfield report as one of the key reasons for the failure of so many Customs prosecutions in recent years. ?The lesson from the past was that there was a need for physical and philosophical separation of investigators and prosecuting lawyers,? says Mr Green. ?That, after all, is perfectly normal and standard, and what you see between the CPS and police.?
To carry out its duties, the RCPO has a budget of ?35.5 million and 256 staff spread between offices in London and Manchester. Most are based in London; 40 are in the Manchester office, which prosecutes all cases from Birmingham up to the Scottish borders and in Wales. Overall, there are around 80 lawyers, some formerly in private practice, others career civil servants with legal qualifications. According to Mr Green, there is a roughly equal split between solicitors and barristers.
While he intends to ?beef up? in-house advocacy and has established a six-strong advocacy unit, resources mean that the RCPO relies heavily on the bar. It has 15 standing counsel for larger cases and also uses the Attorney-General?s unified list of counsel, which is shared with other prosecuting agencies.
Covering all courts in England and Wales is a challenge for a relatively small organisation, he says. ?We are trying to arrange for our work to be corralled into certain strategic centres where we can provide a more efficient service and hopefully have proper facilities at court, rather than begging a corner of the desk from the CPS.?
Currently, RCPO work is conducted in five casework divisions. The commercial fraud division prosecutes VAT frauds such as MTIC, which involves fraudsters importing goods VAT-free, selling goods at VAT-inclusive prices and then disappearing without handing over the VAT levied. This is today?s ?crime of choice? among the criminal fraternity, according to division head Matthew Wagstaff ? there are quick profits to be made, and relatively light sentences.
Then there is the direct tax division, which handles income tax and tax credit fraud, headed by Bruce Butler; border detection and drug-related money laundering, led by David Richardson; excise, based in Manchester, which deals with duty evasion on cigarettes, alcohol and oils, run by Elizabeth Bailey; and the newly launched Serious Organised Crimes Agency (SOCA) division. SOCA, which was launched on 1 April, is a new government agency focused on major international organised crime, particularly drug and human trafficking. The RCPO will be prosecuting the bulk of SOCA?s cases that involve drugs and weapons smuggling and related money-laundering activities.
Mr Green says SOCA represents a ?new departure? in law enforcement. ?It will be an intelligence-driven operation where early prosecutorial advice will be provided and the most effective course of action chosen, be it disruption or prosecution, depending on the evidence available.? Disruption, explains Mr Green, is a ?course other than prosecution.? He adds: ?Remember, they got Al Capone for tax evasion.?
According to SOCA division head Gregor McGill, one aspect of the new approach will be using civil sanctions where there may not be enough evidence to found a criminal prosecution, such as using the Proceeds of Crime Act 2002 to seize money ? ?although as we?re dealing with serious criminals, the primary focus will always be to prosecute?. Currently nine lawyers strong in London and Manchester, the SOCA division will shortly be advertising for two ?senior? lawyers, says Mr McGill, to assist with the new caseload.
Another high priority for the RCPO is asset forfeiture. ?Very often at the end of a successful fraud case or drug smuggling case, defendants who have substantial assets have managed to dissipate them, and the best way of dealing with that is to focus on restraining assets at the earliest possible stage,? explains Mr Green. ?Frankly, I?d like to get more restraint orders.?
That will be a growing part of RCPO activities. According to the head of the asset forfeiture unit, Soumya Majumdar, the team currently has 960 cases and will shortly be recruiting several additional lawyers to the seven-lawyer team. ?Our job is to take the money out of crime, and make sure crime doesn?t pay ? the means to do it is criminal confiscation,? says Mr Majumdar. Already, the office has a major share of asset forfeiture; in the last 11 months, out of a total of ?52 million seized in criminal confiscations, ?18 million was obtained by the RCPO.
Following the introduction of a new asset recovery incentivisation scheme, the office has an additional reason to increase its efforts in this area. As from this financial year, as part of a two-year scheme, the RCPO will be able retain one-sixth of the assets it recovers, with similar proportions to be shared between investigatin
g agencies and the Courts Service. The half remaining goes back to government. While this few million will be a welcome addition to the RCPO budget, Mr Green stresses ?it emphatically does not mean that people break the rules to confiscate more?.
The RCPO is currently handling a caseload of between 1,700 and 2,000 cases, and thus far has secured a conviction rate of 89%. In the first six months it concluded 885 cases, 594 in the Crown Court. While it is still early days for the agency, Mr Green says the RCPO is ?unquestionably? making good progress: ?Three-quarters of our cases in magistrates? and Crown courts result in guilty pleas, so we must be doing something right.?
Looking further ahead, he says he would like the RCPO to be respected as an ?independent and thoroughly professional prosecutor.? Perhaps even more importantly, he says he wants a situation where ?even the bad guys will recognise us as a force to be reckoned with?.