In this issue, Guernsey AFN member John Greenfield gives an overview of Guernsey’s approach to fraudulent activity and an example of his team’s successful recovery of assets acquired through fraud perpetrated against Motorola.

Next month, Cecilia Garcia Podoley, Counsel in TNT’s Group Integrity and Security Group will examine the reasons why multinational companies should be aware of the Foreign Corrupt Practices Act (FCPA) and the bribery convention. Cecilia will provide a simple background of the reasons why keeping an eye on the enforcement of the FCPA is important for multinational companies, even if they are “non-issuers” in the United States. The article will outline the most relevant aspects of the FCPA and the conventions and present an overview of the most salient enforcement actions taken by the US Department of Justice and the Securities and Exchange Commission during the last year. It will also take a look at some of the current developments concerning anti-bribery law enforcement in Europe.

Nick Burkill

Fraud and Asset Tracing & Recovery –
A Guernsey Perspective

Guernsey's established position as a leading offshore financial centre relies largely on its reputation as a well regulated jurisdiction—a reputation the Island authorities are extremely keen to preserve. With new jurisdictions opening their doors for business on a regular basis, maintaining competitive advantage is essential for the Island's continued growth. The Guernsey regulatory legislation, which largely mirrors UK regulation, was established and has developed in such a way as to ensure the Island is a secure, well regulated yet flexible jurisdiction in which to conduct business. The Guernsey Financial Services Commission is the organisation responsible for supervising the various financial sectors in the Island—banking, insurance and fiduciary.

Guernsey, like Jersey, has a unique position with regard to its relationship with the United Kingdom in that it recognises the authority of the Queen in Privy Council but not the authority of the United Kingdom Parliament at which it has no representation. The Island enjoys legislative and fiscal independence.

The Courts
The Guernsey Court Structure is tripartite and differs significantly from that of the UK.

The starting point for asset recovery and tracing actions is the Royal Court of Guernsey, the equivalent of the English High Court. This Court is presided over by a locally qualified Judge (known in the Island as the Bailiff), or one of his deputies. The Bailiff sits alone at this stage unless there are questions of fact to be determined in which case Guernsey has a panel of Jurats—lay people appointed by the local government.

The Court of Appeal is the next stage and is constituted by a panel of leading English QCs who are regularly in the Island for this purpose. Finally, the Privy Council is the ultimate Appellate Court
The Asset Tracing and Disclosure remedies available in Guernsey are much as you would expect to find in the UK—Freezing Orders, Disclosure Orders etc. Gagging orders are also available in certain circumstances. All the usual pre-conditions for these orders apply: a good, arguable case against the defendant; the likelihood of assets being within the jurisdiction; and a real risk of the dissipation of assets if the order is not granted.

A Recent Case
One of the more interesting and significant cases we recently worked on was Motorola v Uzam (& others).

We initially obtained a judgment in the Guernsey Court on behalf of Motorola for US$2.1 billion arising out of fraud perpetrated on Motorola in respect of a business it was setting up in Turkey. We identified that one asset belonging to the defendant was a £multi-million yacht owned by a Guernsey registered company but sailing in Turkish waters and therefore not susceptible to an injunction.

The defendant initially tried to block our application in the Guernsey court by saying we had delayed process for over two years. The reason for the delay was because the boat was effectively being hidden in Turkish waters and we were only able to act when it came out of those waters for repair at an Israeli port. The defendant filed an affidavit from the captain of the ship to say that he had been sailing the boat openly and we could have taken action at any time during the two years. However, private investigators intercepted an e-mail exchange from the captain to an old friend on shore a few days before the hearing in which he confirmed he had been “hiding” the boat and that is why his old friend had not seen him for two years. The defence quickly capitulated and judgment was obtained.

The problem did not end there. We wanted control of the shares of the Guernsey company that owned the yacht to be able to sell it at one of the world's major boat shows—not in some form of fire sale. The defendant had unfortunately put his original shareholding in the Guernsey company into another party’s name. After much deliberation, however, the court granted us orders transferring the shares of the company back into the defendant’s name and then allowed us to sell the shares by public auction in Guernsey. We went along to the auction on behalf of the client and bought the shares for just US$1 as there were no other bidders in attendance! This enabled us to sell the yacht without compromising its value.

The practice of law in Guernsey in the area of fraud and asset tracing & recovery is often challenging, always interesting, and constantly changing. And given the Island’s location, it can often demand the use of your sea legs.

John Greenfield is the Managing Partner of Carey Olsen Guernsey and Head of the Litigation Team. He regularly undertakes major litigation work including asset tracing, multi-jurisdictional disputes and commercial and trust litigation. John is a recognised expert in this field and is Chairman of a Fraud Advisory Panel currently reviewing the latest UK Fraud Act. He is also the only Guernsey member of an international body set up by the International Chamber of Commerce known as Fraudnet—a known centre of excellence in this area. Contact Details: T: + 44 (0) 1481 727272 E: john.greenfield@careyolsen.com