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23.03.21

Insider-dealing and intrigue: Court of Appeal rules on scope of disclosure

The appeal of R v Abdel-Malik and Choucair [2020] EWCA 1730 was a case that had everything: glamour and intrigue, insider dealing, exotic nightlife at Tramp, burner phones, city traders, undercover surveillance, public interest immunity, post-conviction disclosure by the prosecution, secret identities revealed by the Wall Street Journal and ‘fresh evidence’ applications by both the Crown and the Defence.  But principally the case was about disclosure and specifically about the extent to which the real issues in a case determine the extent and nature of disclosure to which the defence is entitled.

In her role as compliance officer at UBS Fabiana Abdel-Malik (‘FAM’) had access to price sensitive information about prospective mergers and acquisitions involving clients of the bank. It was not disputed that she accessed such information or that she did so regularly and at material times. The prosecution said that she passed on this information to Walid Choucair (‘WAC’), a trader on his own account, who then used it to profit from derivatives trades. Crucially, the prosecution did not charge the case as a conspiracy but rather pairs of substantive counts dealing with each individual transaction (contrary to section 52 of the Criminal Justice Act 1993). There were a number of features of the evidence which provided very substantial support for the prosecution case: i) It was proven that FAM accessed information for all of the subject trades; ii) in so doing she obtained confidential price sensitive information in stocks whose prices were later inflated by the publication of that information; iii) WAC had traded in each of the companies and made approximately £1.4m on the subject transactions; iv) there were hundreds of texts and calls passing between the two at crucial times; v) they communicated using pay-as-you go ‘burner’ phones which were frequently changed; vi) WAC purchased for FAM a Blackberry identical to her work Blackberry (so she could disguise at work what she was doing); and vii) there were identified meetings between the two at material times.

Thus, the prosecution case was overwhelming (or perhaps more accurately it ought to have been). FAM and WAC were not in sexual relationship but instead, according to the Court of Appeal, the prosecution “pointed to an abundance of evidence suggestive of FAM being very appreciative of her (and her friends) being taken on occasion by WAC to impressive venues such as the night club Tramp: particularly when in her upbringing that would not have been readily achievable and when WAC was presumably viewed by her family as a suitable escort. Thus the social capital, as it were, so acquired could be viewed as one motivation, along with a desire to please WAC”.

In her defence, FAM did not deny accessing the information, or even on occasion printing it out, but she said she did so to educate herself and denied giving it to WAC. The defence of WAC was more ‘technical’ to the extent that he denied obtaining the information from FAM but rather he said he relied upon information received from other sources. As the counts on the indictment were particularised on the basis that he had received the information from FAM (as opposed to others), the prosecution was required to prove he received the information from FAM (although he was still guilty of the offences if it was proven he received the information from FAM and others). WAC’s defence was ‘developed’ through the service of more than one defence statement in which he had named individuals other than FAM from whom he received the information in respect of each trade. One such individual was Alshair Fiyaz. It was disclosed by the prosecution that there was surveillance of a meeting between Fiyaz, who was a wealthy businessman, and WAC at the Four Seasons Hotel in 2014. Naturally, WAC pursued disclosure of relevant material relating to information in the possession of the Crown relating to Fiyaz and the other named parties in his defence statement.

This satellite litigation over disclosure gave rise to a series of rulings by the trial judge and also applications for Public Interest Immunity (‘PII’). PII applies to ‘sensitive’ material on which the prosecution require a ruling from a trial judge to withhold disclosure in the absence of the defence. The trial judge determines whether it is necessary for the material to be disclosed in order to assist the defence i.e. she applies a balancing test between the public interest in retaining secrecy over certain categories of sensitive material and the need for the defendant to have the material to be able to have a fair trial.  In effect, such material should only be disclosed if it is crucial to the defence.   Essentially, these rulings were predicated on the single issue that another person, other than FAM, could have been responsible for providing the information to WAC, and as such the jury ought to know about them. WAC was also alleging corruption in a National Crime Agency investigation related to the investigation into Fiyaz (if there was such an investigation).

The trial judge made an order for disclosure which was further developed in light of further disclosure and then during the trial a note of agreed facts (based on the disclosure) was put before the jury. The note linked Fiyaz and the receipt of information from a ‘source’ at Citibank thereby presenting the jury with an alternative source for it to consider in line with the WAC defence.

WAC and FAM were, perhaps unsurprisingly, convicted and sentenced to three years imprisonment each. However, this was not the end of the story. Immediately following conviction and sentence, an article was published in the Wall Street Journal which named a former Citigroup employee called David Johnson as the middleman in an insider trading scheme involving Fiyaz. Understandably, the trial judge had rejected an application by the defence for disclosure of the identity of any individual known to prosecution on policy grounds (although it had been revealed to her) but she did order disclosure of the fact that the Financial Conduct Authority (‘FCA’) had information that such a source possibly existed.

FAM and WAC appealed against their convictions based, inter alia, on the fact that the disclosure contained in the Wall Street Journal article (and subsequently confirmed by the prosecution) ought to have been available to them to ‘flesh out’ the agreed note put before the jury. Following submission of the Notices of Appeal, the prosecution made yet further disclosure in a Respondent’s Notice and subsequently sought permission to adduce fresh evidence in the form of evidence from the individual at the FCA responsible for the prosecutions. In that evidence, he dealt with the intelligence in possession of the FCA and the extent to which that material was disclosed to the trial judge in the course of the PII hearings.

The Court of Appeal spent the first week of the appeal engaged in pre-reading which gives some idea of the extent of the material both at trial, and pre-trial, it was required to consider. Having reviewed all the material including material which would not have been disclosed to the defence at all (the Court of Appeal also considered sensitive material ex parte) it was of “the firm view that the judge’s conclusions and disposals following such hearings relating to disclosure were justified and, having regard to the requisite balancing considerations, were fair to the defence”.

The Court then had to decide essentially whether the absence of the newly disclosed material in the agreed note may have affected the decision of the jury and hence rendered the convictions ‘unsafe’. It dismissed the appeals. In so doing, it addressed the fundamental principles behind the statutory scheme on disclosure set out in the Criminal Procedure and Investigations Act 1996 and developed in case law – relevance and necessity. The defence is not entitled to use applications for disclosure tactically to distract from the real issues in the case and engage on an “entirely speculative fishing exercise of no directly obvious evidential value but liable to give rise to the making of speculative comments to the jury as to what may not have been done or investigated. Indeed, it would potentially have operated to distract the jury from the issues which really mattered. It is the proper function of a trial judge, seeking to achieve the overriding objective, to be astute to prevent such a position arising”.  Thus, it could not be said that “the newly disclosed material opened up an entirely new defence for the appellants. To the contrary, such material related to a line which the defence were already actively pursuing at trial”.

The Court concluded that: “The principal, even if not sole, focus of these particular appeals has been on disclosure issues – whether disclosure as given before or at trial or disclosure as given after trial or both. But those disclosure aspects, and the related Agreed Facts, in their fundamental respects relate to but part of one issue in the case: whether WAC may have derived his information, aside from his own researches and expertise, from one or more of his associates before entering into these trades. The allegation that those associates (in particular, but not necessarily only, AF) may have had, via an intermediary, a source at a financial institution other than UBS which was involved in all five transactions went to that issue. Further, we repeat that the possibility that WAC may, via his associates, have had access to price sensitive information by no means necessarily meant that he did not also have access to, and used, price sensitive information obtained from FAM”.

WAC’s defence was an unattractive one to the extent that he was not necessarily denying receiving price-sensitive information but rather suggesting alternative sources for that information. In his comprehensive judgment Lord Justice Davis systematically deconstructed the clever arguments of both counsel for the Appellants as to the necessity for disclosure of detail to flesh out the WAC defence and, in so doing, isolated the material that was relevant to it. Such interpretation is not always clear-cut and in cases where sensitive material is to be subjected to the test of relevance and necessity the balancing act must be carefully exercised. PII applications are often made in cases where the outcome is of very grave importance to a defendant and the need for the kind of detailed defence statements prepared in the instant case should never be under-estimated.

 

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