REGINA v Kallakis & Anor

Factual and Procedural Background

This opinion concerns two related cases involving serious offences of conspiracy to defraud and statutory fraud offences, heard together for convenience due to common legal issues. The first case involves two offenders charged with multiple counts of conspiracy to defraud two banks by dishonest means to obtain substantial loans secured on property, involving forged documents and sham companies. The offenders were convicted and sentenced to concurrent terms of imprisonment and disqualification from acting as company directors.

The second case concerns an offender who pleaded guilty to multiple counts of fraud involving a Ponzi scheme where investors' funds were misappropriated to sustain an extravagant lifestyle. The offender was sentenced to a total term of imprisonment reflecting the scale and seriousness of the fraud.

The court was asked to consider the appropriate approach to sentencing for conspiracy to defraud, the relevance of sentencing guidelines for statutory fraud offences, the role of financial loss in mitigation, and the use of consecutive sentences.

Legal Issues Presented

1. Whether and to what extent the Sentencing Guidelines Council's guideline on sentencing for statutory offences of fraud is relevant to sentencing for conspiracy to defraud.
2. To what extent the absence of loss may mitigate the seriousness of the offence.
3. The appropriate use of the power to impose consecutive sentences for substantive offences of fraud and conspiracy to defraud.

Arguments of the Parties

Attorney General's Arguments

• The sentencing judge erred by applying the statutory fraud guideline to conspiracy to defraud offences, which the guideline excludes.
• Consecutive sentences may be appropriate where overall criminality is not adequately reflected by concurrent sentences, especially for offences against different victims.
• The starting point for the principal offender's sentence should have been near the statutory maximum due to the massive scale of the fraud.
• Deterrence is a significant factor given the economic context and the extensive harm caused by fraud on banks, which is not victimless.

Respondents' Arguments

• The sentencing judge, having presided over the trials, was best placed to assess seriousness and did not err in his approach.
• Although the statutory fraud guideline does not strictly apply, its principles are relevant and were considered.
• The judge was correct to conclude that the principal fraud was not of the utmost gravity warranting the statutory maximum sentence because repayments were maintained for some time and actual loss was unlikely.
• The judge rightly declined consecutive sentences for the second count, viewing it as an extension of the same conduct.
• Deterrence is not given special prominence in sentencing; banks' own carelessness does not mitigate the offence.
• The loss to the bank was considered a "paper" loss due to potential profit on resale of properties, reducing the seriousness.

Appellant's Arguments (Levene)

• The sentencing starting point of 17 years was manifestly excessive compared to prior cases.
• The discount for guilty pleas was inadequate given the circumstances.
• The judge wrongly rejected mitigation that the fraud was not fraudulent from the outset but developed due to trading losses.
• The absence of some aggravating features present in other frauds, such as targeting vulnerable victims and being a prime mover in a group, should mitigate sentence.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first acknowledged that the Sentencing Guidelines Council's guideline for statutory offences of fraud expressly excludes conspiracy to defraud but noted that the underlying principles remain relevant to sentencing conspiracy offences. The court emphasized that seriousness is assessed by considering both culpability and harm, including intended, actual, or foreseeable harm.

In the conspiracy to defraud case, the offenders demonstrated high culpability through prolonged, audacious, and international fraud involving forged documents and sham companies to obtain over £730 million. Although a net loss to the bank was unlikely due to ongoing repayments and potential property resale profits, the risk of substantial loss and disruption to the bank's business was significant. The court agreed the judge was generous in not imposing the maximum sentence but found the starting point of 8 years for the principal offender appropriate.

The court disagreed with the judge's decision to impose concurrent sentences for the two conspiracies, holding that the Bank of Scotland was a separate victim and a consecutive sentence was warranted, subject to totality principles. The appropriate total sentence was assessed as 11 years for the principal offender and 8 years for the co-offender, achieved by substituting consecutive terms.

Regarding the Ponzi scheme offender, the court found the judge's rejection of mitigation that the fraud was not from the outset justified, as the offender engaged in a determined and dishonest course for personal gain. The offender's conduct caused unprecedented losses in the UK context, with multiple victims and prolonged concealment. The court adjusted the starting point from 17 to 15 years, considering the offender's late guilty plea and partial cooperation, resulting in a total sentence of 12 years after applying a 20% discount for plea credit. The court found the judge's approach to credit for guilty pleas appropriate and declined to increase it.

The court extensively reviewed relevant precedents to ensure sentencing aligned with established principles, emphasizing that maximum sentences are reserved for offences of utmost gravity and that consecutive sentences may be appropriate to reflect overall criminality and distinct victim impact.

Holding and Implications

The court ALLOWED the Attorney General's reference in the conspiracy to defraud case by quashing the concurrent sentences on the second count and substituting consecutive sentences, resulting in total sentences of 11 years for the principal offender and 8 years for the co-offender.

In the appeal against sentence of the Ponzi scheme offender, the court ALLOWED IN PART the appeal by reducing the total sentence from 13 to 12 years imprisonment, adjusting the starting point and the discount for guilty pleas accordingly.

The decisions clarify the application of sentencing guidelines to conspiracy to defraud offences, affirm the relevance of principles underlying statutory fraud guidelines, and confirm the appropriateness of consecutive sentences where separate victims and distinct criminality exist. No new precedent was established beyond these applications, but the rulings provide detailed guidance on sentencing in complex fraud cases.