In the course of business and personal affairs, people are trusted, and later accusations may be made that trust has been abused. In the extreme, phrases such as ‘breach of trust’ or ‘embezzlement’ have been used historically by fraud lawyers and the media to describe this. But when a relationship deteriorates, does it always mean that someone has abused their position? Can prosecutors and police make mistakes about a situation and draw the conclusion that a fraud by abuse of position has taken place when the truth is considerably more innocent?
Mary Monson Solicitors are known as specialists in the law relating to section 4 Fraud Act 2006, and this means that we are regularly instructed in cases of alleged employee or trusted person abuse of position.
Some of our recent clients include:
- The Vice President of a major international media, entertainment and technology company accused of misappropriating funds in seven figures.
- An accountant in a firm of receivers accused of stealing over half a million pounds of client money over several years
- An MP’s spouse concerned about allegations relating to share deals on behalf of a third party
- A book-keeper in one of the world’s largest banks accused of stealing £5m from the bank’s UK property accounts and from one other employer.
- An administrator in a magic circle accountancy firm prosecuted for claiming tens of thousands of pounds in non existent expenses
- A financial adviser accused of withholding money invested by a client
- A letting agent affiliated to a major franchise accused of dishonestly withholding rents held on behalf of multiple professional landlords
Being accused of any crime can be an unpleasant experience, but nobody appreciates being accused of betraying trust or a position of duty, often where the complainant is a former client, employer, or customer. A good fraud solicitor aggressively pursues the proactive defence of the case wherever possible, and also shows sensitivity to what the client is going through. Most have never been in trouble with the police. All are scared of the possibility of prison and are desperate to avoid it. It is our job to help the client avoid either a conviction and/or a prison sentence where possible. We take this responsibility seriously.
For anyone who wants more information about how abuse of position, embezzlement, employee fraud or related offences are dealt with in the courts, we have included a free guide to the basic principles in this area below. If you or a friend or family member are accused of a fraud by abuse of position, please call our national switchboard on freephone 0808 155 4870 and ask to speak to a member of our fraud team in our London, Manchester, Salford or Birmingham offices. We are happy to discuss your case on a no-obligation basis.
The Law – section 4 Fraud Act
1. A person is in breach of this section if he:
a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person
b) dishonestly abuses that position, and intends, by means of the abuse of that position:
- to make a gain for himself or another, or
- to cause loss to another or to expose another to a risk of loss
2. A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.
The test for dishonesty in fraud cases is based on the definition in the case of Ghosh. This means that a defendant could be found guilty of Fraud and in particular fraud by abuse of position even though he or she genuinely believed him or herself or another to have a right to the property in question. This would depend on whether a jury decided if the defendant came by the property as dishonest even though they accept that he had a right to it in any event. An example of this might be where a creditor tricks a debtor into paying over an amount which is legitimately owed to him. This strange position did not seem to be a problem under the law preceding the Fraud Act 2006. But the wording of the new law seems to actively urge the court to look, not so much at the dishonesty of the motive but at the dishonesty of the means. For example, S.2 deals with fraud by dishonestly making a false representation with a view to making a gain, rather than making a false representation with a view to dishonestly making a gain. So, an accountant, retained by a company uses his position to obtain, by a dishonest method, arrears of fees properly owed to him, may be convicted of fraud by abuse of position.
Fraud Act 2006, s. 5 states:
Extend only to gain or loss in money or other property include any such gain or loss whether temporary or permanent and ‘property’ means any property whether real or personal (including things in action and other intangible property. ‘Gain’ includes a gain by keeping what one has, as well as a gain by getting what one does not have. ‘Loss’ includes a loss by not getting what one might get, as well as a loss by parting with what one has.
A defendant may act with ‘intent to gain’ even where he/she seeks to acquire property owing to him/her; and even intent to gain or lose on a temporary basis may suffice, for example, where payment is withheld by an accountant in order to accrue interest or to help cash flow.
Liability by omission
It is clear that this section 4 Fraud Act 2006 encompasses both action and inaction with intent to cause gain or loss. A company director who intends to get new business for himself personally rather than seek to secure new business on behalf of his company would be within the ambit of this offence. What of the position of an employee who fails to pass on new business leads to the loft conversion company that employs him, diverting them instead to his brother in law who is a builder? Can this person be guilty of fraud by abuse of position?
Who is in a position of trust?
Section 4 Fraud Act 2006 is clearly intended to prevent the dishonest abuse of position by those whom we are entitled to consider above suspicion e.g. a trustee, company director or executor of a will. However, it is not all together clear who will be regarded as falling into the category of being expected to safeguard, or not act against, the financial interests of another person. Employees who use their position to gain something for themselves even though they are not actually stealing property would be caught by this section. A clear example is where catering or bar staff buy in their own goods to sell to customers instead of those of the employers. What about the a nurse who is looking after a patient or a less formal carer? In a recent case this section was considered in relation to a young man who persuaded his elderly next-door neighbour to give him the million pounds that he had won on the lottery on the basis of family friendship. It will in all cases come down to a matter of fact and degree as to who is or is not in a position of trust for the purposes of this section.