Human rights and the investigation of fraud Saunders v United Kingdom
| Date | 01 February 1997 |
| Published date | 01 February 1997 |
| Pages | 169-172 |
| DOI | https://doi.org/10.1108/eb024924 |
| Author | Joanna Gray |
| Subject Matter | Accounting & finance |
Human rights and the investigation of fraud
Saunders v United Kingdom
(European Court of Human Rights: Strasbourg)
Date of Judgment: 17th December, 1996
Reported at: Times Law Reports, 18th December, 1996
Journal of Financial Regulation and Compliance Volume 5 Number 2
FACTS
This case arose out of the criminal trial in
1990 of Mr Ernest Saunders, the former
chief executive of Guinness plc, on charges
of conspiracy, theft and false accounting
for his role in the unlawful share support
operation conducted by Guinness plc
during the course of its 1986 contested
takeover bid for Distillers plc.
The share support operation was
mounted by supporters of Guinness buying
its shares on the market in exchange for
secret indemnities against any losses they
might incur and sometimes in exchange for
success fees if the Guinness bid were to
prove successful. The operation was unlaw-
ful in that the inducements paid to suppor-
ters of Guinness were not disclosed to the
market under the City Code on takeovers
and mergers and insofar as Guinness' own
funds were used to finance the share sup-
port this contravened the prohibition on a
company giving financial assistance in the
purchase of its own shares contained in s.
151 Companies Act 1985.
Its purpose was to make Guinness' offer,
which included a substantial share
exchange element, more attractive to Dis-
tillers'
shareholders. It succeeded in its pur-
pose since, during the course of the bid,
the price of Guinness shares rose signifi-
cantly and then fell sharply once the bid
reached a successful conclusion. This
alerted suspicions and rumours that there
may have been some artificial and deliber-
ate inflation of the share price as a tactical
bid weapon and at the end of 1986 the
DTI appointed inspectors under ss 432 and
442 of the Companies Act 1985 to investi-
gate any misconduct surrounding the
Guinness bid.
The inspectors began taking oral evi-
dence under their compulsory statutory
powers and in January 1987 informed the
DTI there was evidence of criminal con-
duct. This information was passed onto the
prosecuting authorities and it was decided
that the inspectors would continue the
inspection and pass on transcripts of oral
hearings and any other documentary evi-
dence they obtained to the DTI. Mr Saun-
ders was interviewed by the inspectors on
several occasions throughout the first part
of 1987 and transcripts and documents
obtained as a result were passed onto the
police. He was charged and tried along
with three other Co-defendants (directors
and advisers of Guinness) on several counts
relating to the share support operation.
The trial judge ruled that transcripts
from the DTI inspectors' hearings were
admissible against the Applicant, despite
the fact that under the 1985 Act powers of
investigation inspectors could ask witnesses
questions that could incriminate them and
witnesses were under a duty to answer.
However, transcripts from hearings that
took place after Mr Saunders had been
charged were not admissible against him in
his criminal trial as the trial judge thought
Journal of Financial Regulation
and Compliance, Vol. 5, No. 2,
1997.
pp. 169-172
© Henry Stewart Publications,
1358-1988
Page 169
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