Fun at the Fair Marketing

In July, the UK music and film industry secured a significant verdict in its fight against copyright crime. The UK Record Labels Association, the BPI and FACT (The Federation Against Copyright Theft) in conjunction with Hertfordshire Trading Standards, compiled compelling evidence which led to a successful conviction for money laundering offences against a family run company, Wendy Fair Markets Limited and two of its Directors. The approach taken – and successful result – may prove a useful model and tool for tackling similar cases in future.

Background to the case

Wendy Fair Markets Limited (the “Company”) had been running many markets for around 30 years. The majority of its markets are private markets where either the Company, a property company or individuals own the ground itself. The Bovingdon Market in Hertfordshire was the subject of these particular proceedings. The Court heard that this market netted the Company circa £1m between May and November 2005 by way of pitch rent paid by the market traders to the Company.

The Company accepted pitch rent from market traders who were able to sell illegal DVDs, CDs and counterfeit clothing on stalls. The Company and its Directors were convicted in this case of a money laundering offence under the Proceeds of Crime Act 2002 (“POCA” or the “Act”).

How is the Act applied?

There are three principal money laundering offences under POCA. These are:

Concealing, etc. criminal property
Arrangements and
Acquisition, use and possession of criminal property

Criminal property is an integral feature of all three offences. Property is criminal property if it constitutes a person's benefit from criminal conduct or it represents such a benefit in whole or in part, whether directly or indirectly. Further, the alleged offender must know or suspect that it constitutes such a benefit. Included in the ambit of criminal property is money.

An offence of entering into or becoming concerned in an arrangement may be committed by a Company and/or its Directors if it/they knew or suspected the arrangement facilitated the acquisition, retention, use or control of criminal property, by or on behalf of another person. The arrangement in this instance – accepting pitch rent in return for providing facilities for market stalls for illegal sales of counterfeit goods - would have facilitated the market traders by enabling them to obtain criminal property in the form of money.

The penalty for a principal money laundering offence in the Crown Court is imprisonment for a term not exceeding 14 years, a fine, or both. In the Magistrates Court, the penalty is imprisonment for a term not exceeding six months, a fine not exceeding the statutory maximum, or both. In this case, the Company and the Directors have been convicted in the Crown Court and, although there has been an indication that the Judge is minded to award a fine, sentencing has been adjourned until confiscation proceedings have been completed.

Confiscation proceedings

The purpose of confiscation proceedings is to deprive a defendant, individual or company of the financial benefit that he or she has obtained from criminal conduct.

To do this, the Court must decide whether the defendant has a criminal lifestyle. If the Court decides that the defendant does have a criminal lifestyle then the Court calculates the benefit from general criminal conduct using a certain set of assumptions set out in POCA.

If the Court decides that there is no criminal lifestyle, then instead, the Court will calculate the benefit from particular criminal conduct i.e. the actual offences for which the defendant is convicted.

A Confiscation Order is an order to pay a sum of money, and is enforced as if it were a fine. Confiscation is a useful order if there is no obvious property or asset that directly results from the offence charged but it can, nevertheless, be established that the person has a criminal lifestyle: in other words, has benefited from a course of criminal conduct over a period of at least six months.

Applications for Confiscation Orders are made by the Prosecution in the Crown Court and often take several months to resolve. This is so because an initial requirement is that a financial enquiry be conducted so that the Court has information from both sides as to what, if any, assets are being considered the benefit and part of the criminal lifestyle.

As mentioned above, the pitch rent received from market traders at the Bovingdon Market allegedly netted the firm circa £1m between May and November 2005. Ongoing Confiscation Proceedings now mean the assets of both the Directors and the Company are now vulnerable to a claim under POCA.

Previous efforts

Traditionally, the fight against counterfeit crime has been against the sellers of the counterfeit goods. However, in 2005 Redcar & Cleveland Borough Council won a national award for its investigation and successful "groundbreaking" prosecution against the promoter of Redcar Racecourse car boot sale. The Council's work resulted in establishing the offence of aiding and abetting for use against organisers of car boot sales.

Whilst this was a step in the right direction, by increasing the scope of individuals who can be penalised in the fight against counterfeit crimes, it appears this attempt was rather more cumbersome than securing the conviction for money laundering in the Wendy Fair Markets case.

All those involved in protecting a valuable brand will await the final sentencing decision with interest. The Court has a real opportunity to send a strong message that turning a blind eye to what is sold under a market organiser’s supervision may cost the organiser heavily.

For further information please contact Fiona Carter or Nina Best.