Re M (Restraint Order: External Confiscation Order)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STUART-SMITH,LORD JUSTICE ALDOUS,LORD JUSTICE SWINTON THOMAS |
| Judgment Date | 08 July 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J0708-9 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 July 1998 |
| Docket Number | QBCOI 98/0339/4 |
[1998] EWCA Civ J0708-9
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
(MR JUSTICE LATHAM)
Royal Courts of Justice
Strand
London W2A 21L
Lord Justice Stuart Smith
Lord Justice Swinton Thomas
Lord Justice Aldous
QBCOI 98/0339/4
MR ANDREW MITCHELL QC and MR KENNEDY TALBOT (instructed by The Crown Prosecution Service) appeared on behalf of the Appellant (Plaintiff).
MR ALUN JONES QC and MR JAMES LEWIS (instructed by Messrs Palmer Cowen) appeared on behalf of the Respondents (Defendants).
Introduction
On 5 September 1997, Collins J. made Restraint Orders against Kathleen Montgomery and Lee Montgomery who are husband and wife. These orders were made ex parte on the application of the Government of the United States of America pursuant to the provisions of the Criminal Justice Act 1988 (Designated Countries and Territories) Order 1991 ("the 1991 DCO"). Their purpose was to aid in the enforcement of a judgment and order of the United States District Court, Middle District of Florida, Jacksonville Division, whereby on 15 November 1995, the Court ordered that a criminal forfeiture judgment against Kathleen Montgomery's former husband, Larry Barnette of 15 October 1984 should be amended to provide that he forfeit $7,876,207.60 cents to the United States of America and, having adjudged Larry Barnette and Kathleen Montgomery guilty of contempt, ordered their arrest unless within 10 days they forfeited the same sum or deposited it into the Court's Registry. Kathleen Montgomery and Lee Montgomery applied to Latham J. to discharge the Restraint Orders on the grounds that the Court had no jurisdiction to make them, that there was material non disclosure by the Government of the United States of America when it sought to obtain them, and that there has been undue delay, such that the Court in the exercise of its discretion should set aside the orders. On 20 February 1998 Latham J. set aside the order of Collins J. at an inter parties hearing. The United States Government now appeal with the leave of this Court.
The Background Facts
The Criminal Forfeiture Order made on 15 October 1984 resulted from Larry Barnette's conviction on 15 counts of fraud and racketeering. Between 1977 and 1981 Larry Barnette, through the medium of companies which he controlled, dishonestly obtained from the United States Government very substantial sums of money from contracts to launder clothes for the United States army. The prices which these companies obtained for the laundering services were inflated by the submission of false invoices purporting to represent the cost of providing those services. It was alleged that Larry Barnette siphoned off the excess profit, amounting to some $15,000,000 into a Panamanian company, set up and controlled by him, called Old Dominion S.A. ("ODSA"). The fraud was investigated between 1981 and 1983; and on 31 August 1983 Larry Barnette was indicted by a Grand Jury. Meanwhile, on 19 August 1983, Larry Barnette transferred to Kathleen Barnette and his two children all 900 shares which he held in ODSA; 800 into the name of Kathleen Barnette and 50 into the name of each child.
On 20 July 1984, Larry Barnette was convicted of 15 of the counts on the indictment; and the jury made a special Order of Forfeiture in the sum of $7,000,000 against him. On 15 October 1984, District Judge Black, the trial judge, ordered that Larry Barnette's 900 shares in ODSA be forfeited. On 2 November 1984, Larry Barnette was sentenced to 5 years imprisonment, and the special Order of Forfeiture made by the jury was given effect by ordering that Larry Barnette pay $7.000,000 restitution to the United States army. On 17 November 1984, District Judge Black ordered that any sums collected under the Restitution Order, or the Forfeiture Order of 15 October 1984 were to be credited against each other. On 10 January 1985, Larry Barnette paid $7,000,000 to the Court pursuant to the Restitution Order.
Thereafter, Larry Barnette sought to persuade the Court that the payment of $7,000,000 had extinguished his liability under the Forfeiture Order. There were innumerable motions in which the relevant United States authorities attempted to discover the whereabouts of the assets of ODSA, and Larry Barnette sought to avoid disclosure. These culminated in a ruling by the District Court in February 1991 that the $7,000,000 was to be off-set against the Forfeiture Order but that the transfer of the shares in ODSA to Kathleen Montgomery and the children did not deprive the United States Government of its interest, because its interest vested at the time of the unlawful activity, which was prior to August 1982, and that Larry Barnette must provide evaluation of the stock of ODSA so that the Court could determine whether the payment of restitution extinguished his liability to meet the Forfeiture Order. On 15 December 1992, the Court ordered Kathleen Montgomery to disclose the assets of ODSA and the books and records of ODSA. In her affidavit in these proceedings, Kathleen Montgomery asserts that she complied with that order, although by then she was no longer resident in the United States, and had indeed renounced her United States citizenship in April 1992.
Eventually, in May 1995, the District Court heard motions to declare Larry Barnette and Kathleen Montgomery in contempt of court, and to resolve whether or not the original Order of Forfeiture had been met by the payment of $7,000,000 restitution. Kathleen Montgomery was neither present nor represented at these hearings. District Judge Moore gave his opinion on 18 August 1995. Having considered the valuation evidence presented to him, he found that the value of the 900 shares in ODSA as at 15 October 1984 was $11,217,833.1 cent, which left a liability to the United States Government of $4,217,833.1 cent. He found that Larry Barnette had engaged in a systematic effort designed to evade the terms of the original criminal forfeiture judgment and had systematically attempted over 10 years to impede the United States Government's efforts to enforce its rights in relation to the shares in ODSA; he further found that Kathleen Montgomery had aided and abetted or acted in concert with him in his scheme to evade the criminal forfeiture judgment. He ordered that instead of forfeiting the ODSA shares Larry Barnette should forfeit $4,217,833.1 cent to the United States of America and that, having found Larry Barnette and Kathleen Montgomery in contempt, they should both be arrested and incarcerated unless they paid that sum to the United States Government or deposited it in the Court's Registry.
That opinion was then challenged both by Larry Barnette and by the United States Government. In January 1995, the United States Government had seized $3,758,117 from ODSA accounts in Liechtenstein; Larry Barnette sought an order of the court that this sum be set off against the sum which District Judge Moore had determined to be the liability under the original Forfeiture Order; he also sought to have a further sum of $459,708.8 cents, which was apparently interest accrued on the deposit of the $7,000,000 in 1984, also credited, so as to leave a deficit of only $11. The United States Government, on the other had, sought an order that it was "entitled to interest on the withheld forfeiture that was due since October 15, 1984"; it also asked for reimbursement of investigative and legal fees, costs and expenses in the sum of $326,275.58 cents.
District Judge Moore, in effect, acceded to both applications. The result, however, was to add substantially to the amount due to the United States Government. He accepted that as a matter of principle, interest was due. He held that a District Court could grant interest on a criminal forfeiture judgment, to protect the Government's interest in "forfeitable property" and to prevent a defendants continued unlawful gain. He concluded that to award only the sum he had held to be due and owing in his August opinion, without interest, would reward Larry Barnette "for his 10 years scheme of evasion". He held that the award of interest was not intended as a punitive measure, but represented "a present value adjustment on a payment that was due 11 years ago". The computation he made was based on the valuation of the stock, multiplied by a factor of 2.79, based upon published United States Treasury rates of interest from January 1985 to June 1995. He further added the legal, investigative and expert fees, but subtracted the assets seized in Liechtenstein and the interest on the $7,000,000 paid in January 1985. As a result, he amended his opinion of 18 August 1995 to substitute the sum of $7,876,207.60 cents for the figure in that order, and made the order referred to in paragraph 1. On 20 November 1997 the appeals of Larry Barnette and Kathleen Montgomery against the order were dismissed under the "fugitive disentitlement doctrine". No decision was taken on the merits.
As far as the personal relationship between Larry Barnette and Kathleen Montgomery is concerned, Kathleen Montgomery has deposed in her affidavit that she separated from Larry Barnette in 1983 and has remained separated from him since then. She obtained a divorce in the Dominican Republic in summer 1995; she subsequently filed a petition for divorce in this country. A Decree Absolute was granted on 3 June 1996. She has now married Lee Montgomery, with whom she has been living since 1993. He is a mature student at...
To continue reading
Request your trial
-
United States of America v Montgomery
...from any judgment of the High Court in any criminal cause or matter." The Court of Appeal (Stuart-Smith, Aldous and Swinton Thomas LJJ) [1999] 1 All ER 84 overruled the objection. They said that enforcementproceedings under the DCO were civil in nature. A restraint order wasnot a judgment i......
-
Attorney General's Reference (No. 25 of 2001); R v Moran (Frank Adam)
...Not Defined In The Criminal Justice Act and Should, In Our Judgment, Be Accorded Its Ordinary Meaning. In United States V. Montgomery [1999] 1 All E.r. 84 At 96d To E, Stuart-Smith Lj. Indicated That There Was No Reason To Accord a Restricted Meaning To The Expression In Section 71(5) of Th......
-
R v David Cadman Smith
...is not defined in the Criminal Justice Act and should, in our judgment, be accorded its ordinary meaning. In United States v Montgomery [1999] 1 All ER 84 at 96D to E, Stuart-Smith LJ indicated that there was no reason to accord a restricted meaning to the expression in section 71(5) of the......
-
Are Tax Evasion Offences Predicate Offences for Money‐Laundering Offences?
...Wadsted v Barretto [1994] QB 392, [1994] 1 All ER 447; US v Montgomery (sub nom Re M (Restraint Order: External Confiscation Order)) [1999] 1 All ER 84; [1998] 2 FLR 1035. And compare United States v Monaco (1999) 194 F 3d 381 (statute applies to proceeds generated before enactment of the s......