In the Media

The road to recovery

PUBLISHED January 5, 2007

The Assets Recovery Agency has hit the headlines for the wrong reasons. Its director, Jane Earl, and legal chief Sue Edwards insist that this bad press was undeserved, says Philip Hoult

Last summer was a difficult time for the Assets Recovery Agency (ARA). A report by Conservative MP Grant Shapps revealed that it had only recovered slightly more than ?8 million since its launch in February 2003 as part of a government drive ?to make sure crime doesn?t pay?.

The press had a field day, claiming that the agency ? which was established under the Proceeds of Crime Act 2002 (POCA) with extensive powers to recover criminal assets ? was failing since it had cost taxpayers close to ?60 million during that time.

The ARA?s director, Jane Earl, unsurprisingly sees things differently, and insists that the press reports do not portray the whole picture.

Its performance should not be measured on just one indicator, she says, pointing to the amount of money the agency has frozen ? currently standing at more than ?100 million ? as an example of how it has disrupted criminal activity. There is also the work it does training investigators in organisations such as the police, local authorities, and trading standards.

Ms Earl acknowledges that there has been a time lag in turning frozen assets into money that can be paid to the Home Office. Since the Shapps report, however, the ARA has received a significant boost after Dylan Creaven ? who had been acquitted of missing trader VAT fraud ? agreed to pay the agency and its Republic of Ireland counterpart ?18 million and to transfer his Spanish villa and four racehorses. It has now confiscated or ?recovered? ?22 million since its launch.

Ms Earl admits that she was over-optimistic about how much money the agency would be able to confiscate in its early years. ?Our original targets were not wrong conceptually,? she says. ?I take full responsibility ? I did not give enough credence to just how long the civil litigation would take. The original model was that litigation would take 18 months to two years, but even relatively straightforward cases are taking four to five years.?

Sue Edwards, head of the ARA?s 20-lawyer legal team, says its cases are taking about the same time as ordinary civil litigation in the High Court, even though on paper there was meant to be a fast-track procedure. The timetables for exchange of information are a particularly thorny problem.

One of the major obstacles the agency has also faced has been the flurry of legal challenges to its jurisdiction. However, Ms Edwards says that ?to a large extent? the major questions have been answered. These included whether or not the agency?s activities are really criminal proceedings in disguise, and therefore whether the full force of article 6 of the European Convention on Human Rights (the right to a fair trial) applied.

The Court of Appeal in Northern Ireland in Walsh v Director of the Assets Recovery Agency [2005] NICA 6 settled the issue in the agency?s favour, she says, with leave to appeal to the House of Lords refused, although it is still possible that Mr Walsh may apply to the European Court of Human Rights.

Another key case was ARA v Green [2005] EWHC 3168, where the High Court held that the agency has to establish the kind of criminal conduct alleged to be the source of the assets in dispute ? it cannot simply rely on the defendant?s failure to provide an explanation as to how they have been legitimately obtained.

Ms Edwards insists that this was not the setback for the agency that has been portrayed. ?We proactively chose to test that ? we ran the argument to the widest interpretation,? she claims. ?It [the judgment] did not come as an enormous surprise.?

As the case law surrounding the ARA becomes more settled, so will cases be concluded more quickly, she predicts. In the meantime, she does not blame the courts for the delays, pointing out ? understatedly ? that many of the respondents are ?not your typical party? to civil litigation. ?They are reluctant litigants and they behave as such.?

Significantly, the Creaven case was only concluded after his solicitors proposed mediation. The ARA had never taken part in a mediation before, although it had achieved settlements through part 36 offers and negotiation, and thought long and hard about whether to agree.

Given the successful outcome, why not use alternative dispute resolution (ADR) more frequently and adopt a more commercial approach? Should the agency not tone down what defence solicitors argue is too often an unnecessarily aggressive and confrontational approach? After all, this could free up the courts, bring in more money more quickly, and get the likes of Mr Shapps off its back.

Ms Earl says the ARA ?learned a lot? from the Creaven case and agrees that there is scope for using ADR further. However, she stresses that the agency?s role is not just about operating on a purely commercial basis. ?What we are about is using these powers in terms of crime reduction and in terms of reducing crime in communities,? she says. ?We have to be mindful that any settlement will be open to public scrutiny.?

She also rejects the suggestion that the agency should concentrate on ?easier? cases, insisting that as it has been given such an important set of new powers, ?it is right for us? to test them out?.

Armed with a ?15.5 million budget, the agency aims to run 100 to 110 cases each year. This workload is split three ways: those that are high value; those run for larger regional police forces; and those that are smaller value but which have a high community impact.

As an example of the latter, Ms Earl points to a case where a group carried out distraction burglaries on the elderly. ?The police did get a successful conviction but only of specimen counts,? she explains. ?It was relatively small money, so there was no confiscation order. We discovered that the respondents had amassed a number of assets, such as a motor home and a property in London that was let out to tenants. We demonstrated that they had made these investments out of the money from the burglaries.?

Ms Earl says this case might not involve a ?Mr Big?, but when the police can tell victims that property has been frozen, it has a ?real impact? and boosts community confidence.

From the perspective of defence solicitors, one issue that has been of considerable concern throughout the ARA?s existence ? and another cause of delay ? is the question of how their fees are paid. Originally, it was envisaged that legal aid would be available, but obtaining it proved difficult.

It was then hoped that regulations that came into force in January 2006 would settle the issue. These established that frozen assets could be used to fund ?a reasonable defence?, although there were safeguards against ?champagne defences? that would dissipate the assets.

What is controversial, however, is that the ARA effectively retains control over the expenditure. This can become a bone of contention ? a defence lawyer might argue that a certain stage will take many more hours of work than the ARA thinks it should, or insist that the respondent should be allowed to instruct their own forensic accountant.

Defence solicitors? sense of aggravation is increased by the sums the ARA has to pay the court-appointed receivers required under POCA ? not to mention the amount that goes to external counsel.

Ms Edwards acknowledges that ?there?s always argument as to where the line should be drawn?. However, she adds, this is not a case of the respondents spending their own money ? its ownership is in dispute. ?We take the view that we are responsible for public funds.?

Nevertheless, Ms Earl says that the agency recognises that it should not get into protracted negotiations with the defence. ?What we ought to do is get it [the issue] back in front of the judge.?

What, then, does she think of calls for an independent body to be set up to administer the funds? Ms Earl argues that this
idea was raised during the consultation that took place before POCA became law. ?The policy intention was to make sure that people could not use an extended legal process? so that the money disappeared.? However, she says that the agency ?would have no difficulty? if defence lawyers wanted to suggest to government how the system might be improved.

Towards the end of the interview, Ms Earl confirmed that she is to step down this April. She originally signed up to do the job for three years, but is leaving before the end of her two-year contract extension ? for lifestyle reasons, she insists.

Looking back, she maintains the agency has come a long way. ?There is a very committed band of people who make it a success,? she says. ?Whoever comes in will no doubt want to make changes but they will see that they have a very strong base on which to move forward.?

Earlier, she likened setting up the agency to ?taking a car out of the garage and starting to drive until you get into top gear?.

Whether it is a Ferrari or a banger perhaps remains to be seen but ? after a few bunny hops ? the ARA is finally picking up speed.