Legal Aid Agency criticised for trying to prosecute major law firm fraud through local authority rather than CPS

Lord Thomas: Lord Chief headed the bench in the Court of Appeal

The Crown Prosecution Service (CPS) has taken over prosecution of a major legal aid fraud by a law firm after the Court of Appeal criticised the Legal Aid Agency (LAA) for trying to run the case through the fraud department of a local authority instead.

Expressing surprise that both the LAA and Thurrock council had tried this course of action, the appeal court – led by the Lord Chief Justice, Lord Thomas – ruled that the general power to bring legal proceedings that the Essex-based local authority has under section 222 of the Local Government Act 1972 did not extend to a case such as this.

The three unnamed defendants in the criminal case are the principal of a law firm in London, its compliance officer and practice manager – also the principal’s husband – and the office (and billing) manager. The firm’s legal aid contract was terminated in December 2013.

They are awaiting trial at Southwark Crown Court on a count of conspiring to defraud the LAA over a six-year period by submitting legal aid claims for immigration work that was not done; the loss to the LAA is said to be £4m.

They also face a charge of perverting the course of justice by forging client files and submitting them to the LAA to conceal the alleged fraud. They all deny the charges.

In the case before the Court of Appeal, R v AB & Ors v [2017] EWCA Crim 534, the three challenged whether Thurrock council had the power to bring the prosecution under section 222. It has a fraud investigation department that was set up in 2013.

The LAA claimed that both the Metropolitan Police and the City of London Police had declined to take the case on, citing lack of resources, which was why it approach the council. Surprisingly, the LAA attempted to engage the police by simply making a report through the public Action Fraud website.

The Court of Appeal found that the LAA’s efforts to engage the police even at the investigation stage were “half-hearted and at a low level” – the matter did not go directly to anyone above detective sergeant level at the Metropolitan Police and even then it was only to seek help with executing warrants and arrests.

Instead, the LAA contracted with Thurrock to investigate and then prosecute the case; it did not ask the CPS to consider instituting what the appeal court called “this very significant prosecution”. Thurrock’s motivation was to generate external income to keep its fraud department going.

However, overturning the decision of HH Judge Grieve QC, the Court of Appeal ruled that the council’s decision to prosecute fell outside the ambit of its broad powers under section 222, as they had to be exercised in the specific interests of its own inhabitants, even if broad policy considerations could be taken into account.

“There were no proper grounds for it to consider that that it was expedient for the promotion or protection of the interests of the inhabitants of Thurrock to prosecute the appellants (and not to refer this very serious matter to the DPP for prosecution). The council could not reasonably have thought that there were.

“As for the suggestion that it could be considered in the interests of the inhabitants of Thurrock that the legal aid system, from which all may benefit, should not be defrauded, the alleged criminality to be prosecuted must have an actual or potential impact on the inhabitants of Thurrock as inhabitants of Thurrock, not just as UK taxpayers more generally.”

Further, the general financial justification behind Thurrock’s decision did not “come close” to meeting the requirements of section 222.

“Otherwise, section 222 would empower any local authority to offer a prosecution service (or indeed a defence service) to any individual or organisation prepared to pay for it. This cannot have been Parliament’s intention.”

The court said that the “unhappy facts of this case demonstrate well the dangers inherent in a system where agencies try to act as substitutes for prosecutions by the CPS in respect of national issues”.

It highlighted various failings, including a memorandum of understanding with the council that was not “presented directly” to the LAA’s executive committee; the LAA taking the council’s word that it had the power to prosecute the case without considering the matter itself; the LAA not approaching the CPS; and the lower court nonetheless being told that it was “unlikely” and “fanciful” that any other body would agree to prosecute the matter.

The appeal court observed: “Regardless of the outcome of this appeal, the LAA would be conducting a review of the decision-making surrounding this matter and would endeavour to agree a protocol with the CPS in relation to potential future cases.”

The court had invited the CPS to attend the hearing and last month the Director of Public Prosecutions exercised her power to take over the prosecution. The defendants had no objection to this.

“It is in the public interest that major prosecutions such as this are handled by the single prosecuting agency established by statute to conduct them,” the appeal court concluded.

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