The Price of Contempt
| Published date | 01 March 1995 |
| Date | 01 March 1995 |
| DOI | https://doi.org/10.1108/eb025693 |
| Pages | 128-130 |
| Author | Saul Froomkin QC |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 3 No. 2 — Key Comment
KEY COMMENT
The Price of Contempt
Saul Froomkin QC
As financial crime continues unabated as a growth
industry, the frustration of the victims of those
crimes seems to be growing exponentially. In the
past the major concerns were focused on how to
deal with massive multi-jurisdictional frauds,
extradition, and the lack of international coopera-
tion. With time, many of those concerns have, to a
great extent, been alleviated.
More recently, the outcry has come from the
victims themselves who are no longer satisfied
with seeing the accused incarcerated, only to be
released in a relatively short period to enjoy the
fruits of his fraudulent conduct, which have been
safely salted away in a benign and often corrupt
jurisdiction.
Those adversely affected, often economically
ruined, are now more concerned with restitution
than retribution. Accordingly the ingenuity of
counsel has been put to the test to encourage the
courts to expand and develop existing remedies to
trace, attach and recover the ill-gotten gains of
those jackals who prey upon others.
The modus
operandi
of the white collar criminal
to conceal and put out of reach the proceeds of his
crime remains fairly consrtant: the use of corporate
entities, offshore banks with or without secrecy
provisions protecting their information, and of
off-
shore jurisdictions of questionable integrity.
Courts have been prepared to 'pierce the cor-
porate veil' in those cases where the predominant
purpose has been to create a sham, a mere mask, to
conceal the assets of the beneficial owner. If one
can pierce or lift or peek through that veil, the
next appropriate step would be to obtain a declara-
tion that the corporate entity is, in fact, merely the
alter ego of the defendant, and its assets and docu-
ments are in fact his. Such a declaration can be of
great assistance in tracing and attaching the assets
of the perpetrator.
The development of the Mareva injunction, and
the acknowledgment by the courts that where
appropriate, it may be granted with worldwide
effect, has been a boon in the recovery of
assets,
or
at least in the, discovery of their location. Coupled
with 'unless' orders, requiring the defendant to
disclose the whereabouts of his assets and requir-
ing him to authorise his offshore banks to disclose
to the plaintiff particulars of his accounts is a rela-
tively new weapon in the armoury of those at war
against the economic criminal. The sanction of
failing or refusing to comply with an 'unless order'
may result in either a committal for contempt or,
of far more significance, striking out the defend-
ant's defence and entering summary judgment.
In those not unusual cases, where the defendant
is resident outside the jurisdiction where the action
is brought, contempt proceedings are of little ben-
efit. On the other hand, the prospect of a judg-
ment being entered against the defendant with
either enforcement in the jurisdiction of his resi-
dence or in the situs of his assets, or alternatively,
bankruptcy proceedings in those jurisdictions, can
be most effective.
A number of countries have reciprocal agree-
ments to assist in bankruptcy proceedings and the
reciprocal enforcement of judgments and will
accordingly assist in the attachment and tracing of
assets.
In civil law, countries such as France, one
can obtain a 'saisez conservatoire' order, pursuant
to a worldwide Mareva injunction, to freeze the
assets of the defendant. As major economic crime
continues to burgeon internationally, and the citi-
zens and institutions of the world are adversely
affected thereby, more and more countries are
realising that they are either going to be part of the
solution or part of the problem. Accordingly,
under pressure either diplomatically or politically,
jurisdictions, which have been loath to assist in the
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