Dawn raids can prove a nasty wake-up call to companies that suddenly fi nd themselves under investigation. Here, Rahman Ravelli explains what occurs during such raids and uses a recent, high-profile case to illustrate the grounds on which those being raided can challenge the authorities
Dawn raids are exactly what the name implies. Raids on a business premises or a home as early as possible with the intention of catching by surprise the person being raided. They are carried out by a number of organisations, ranging from the Financial Services Authority (FSA), the Office of Fair Trading (OFT), the Serious Fraud Office (SFO) and HM Revenue and Customs; which has been raiding with increasing frequency since it gained new powers under the 2008 Finance Act. All such raids are designed to catch a person off guard and help the authorities find compromising evidence for their investigation. Yet it is still possible to prepare for the possibility of such a raid and to minimise its impact. At Rahman Ravelli, we regularly see the effects of raids on companies and work to reduce the disruption they cause.
Whether an organisation carries out a raid at a work premises or a person's house, they can demand copies of any documents they find during the raid. The defi nition of documents is now wide enough to include taking away computers from raided premises. And with the law on raids regularly being reviewed, it is vital that anyone who could be the subject of such an action takes expert legal advice. Such advice is important in helping companies ensure that they are not doing anything legally contentious that could prompt a raid from the authorities. Procedures need to be put in place so a company is being run in a legally compliant way. Those figures within a company that would come into contact with the authorities if there was a raid – such as senior management, IT staff and receptionist – must also be briefed about what they should do if a raid happened. At Rahman Ravelli, our experience of many such incidents has seen us step in to assist a countless number of firms that have been left flummoxed by a raid.
The vast majority of search warrants are issued under the Police and Criminal Evidence Act 1984 (PACE) and specifically the PACE Code of Practice B. Those that find themselves on the wrong end of such a warrant do have certain rights of access to the seized material. This is all contained in s21 of the Act. Perhaps more importantly for companies is the seizure of computers. These days there is recognition that companies need their computers to trade and it is possible that hard-discs will be copied at the scene – if not, then the original needs to be returned as soon as reasonably practicable; Code B, para 7.17. The real danger here is that officers will simply seize vast amounts of digitally stored material most of which could have no relevance to the investigation.
Many law firms will have little experience of last year's new Supplementary Attorney General's Guidance-The Guidance on Disclosure of Digitally Stored Material (July 2011). This outlines the limits on those carrying out the raids regarding material that is stored digitally; such as on a computer. At Rahman Ravelli we are used to dealing with these sorts of issues and understand the discipline that the courts are now expected to apply to the ambit of searches. When vast swathes of digital material are seized during the investigation stage then, during the prosecution stage, there is a risk that the case will become un-manageable as document management of ‘unused' material becomes a live issue. By sections 50 and 51 of the Criminal Justice and Police Act 2001 officers can seize, for example, data discs and then search them later for relevant material – ‘search and sift'. But unless PACE, the Attorney General's Guidelines and so on are properly applied then these sweeping powers can end up causing the investigators real diffi culties when the subsequent defence team insist that the prosecution properly schedule every item seized and abide strictly by guidelines imposed at that (the litigation) stage. A forthright and knowledgeable lawyer present at a search will ensure that the exhibits officer is informed in writing that the subject of the warrant will demand proper full schedulisation of seized material, return of computers, copying of material and so on. This, in turn, strengthens the hand of the defence when such demands are not me unreasonably.
A computer hard drive or single item of media, such as a back-up tape, is a single storage entity. This means that if any digital material found on the hard drive or other media can lawfully be seized then the computer hard drive or single item of media may, if appropriate, be seized or imaged. In some circumstances investigators may wish to image specifi c folders, fi les or categories of data where it is feasible to do so – without seizing the hard drive or other media, or instead of taking an image of all data on the hard drive or other media. In practice, the confi guration of most systems means that data may be contained across a number of hard drives and more than one hard drive or item of media may be required in order to access the information sought.
Digital material must not be seized if an investigator has reasonable grounds for believing it is subject to legal professional privilege, other than where sections 50 or 51 of the Criminal Justice and Police Act 2001 apply. If such material is seized it must be isolated from other seized material and any other investigation material in the possession of the investigating authority.
But the right legal advice is equally important when someone is raided; so they know exactly how to proceed in their dealings with the authorities. Any company raided must check the legal authority for that raid. Is there legal authority for a raid on that particular company? What type of raid must the company submit to? Are the raiders individually named on the mandate? Can each of them produce valid proof of identity? Is the mandate for the correct period of time? Companies must also request that the raiding authority gives them a short time for their legal representative to be present. Bodies such as the OFT will grant companies such a period of time but it is important that any such request should not be used as a delaying tactic, which could even lead to a fine in its own right.
A company has to have the right legal representation to ensure that the raiders do not exceed their powers. Without a lawyer with experience in this field it is unlikely a raided company will know if the raiders are behaving in accordance with the law and only taking what they are allowed to. In April 2012, a judge heavily criticised the SFO for using 135 officers to raid the homes and business premises of two people, the Tchenguiz brothers. The SFO's inability to prove the need for the March 2011 raids was, according to the judge, “wholly unsatisfactory''. In the following 12 months, the SFO carried out no raids – compared to 47 in the previous 12 months – which may or may not show the power of an informed legal challenge to would-be raiders.
Just last month, the High Court ruled that the SFO used misrepresentation to obtain search warrants unlawfully for the homes and businesses of the Tchenguiz brothers. The brothers are now talking about suing the SFO for an estimated £100M damages each. But of greater signifi cance for businesses is the criticism the court made of the SFO's handling of the case. Such criticism not only highlights faults in the SFO's workings – it also shows areas where legal challenges can be made to the lawfulness of such raids. As such, the Tchenguiz case is a stark example of how legal challenges can be made to an authority's ability to plan and execute a raid.
Search warrants are obtained by offi cers seeking one from a judge. There will always be a statutory test to be met www.rahmanravelli.co.uk fines can be reduced by up to 50% if a company admits wrongdoing early – 4 – before the judge can issue the warrant. However, whatever statute applies it has long been the law that the offi cer giving evidence, in private, to the judge has a duty of full and frank disclosure. He or she must give a complete and accurate account of the investigation, the reasons for the suspicion and why a search is necessary and proportionate. Get it wrong and the warrants could later be quashed on an action by the suspect. If the warrants are quashed then the material will have to be returned and the chances of anything seized by way of an unlawfully obtained warrant being subsequently used in evidence in criminal litigation are remote in the extreme. This is why challenges to searches can be made where there is reason to suppose that enthusiastic investigators have simply overdone it. This is essentially what happened in the multi-million pound Tchenguiz case.
The High Court blamed the SFO for non-disclosure and misrepresentation of information – actions that, if they had been challenged, could have prevented the search warrants being granted. Failure to explain the complex financial background and chronology of the brothers' dealings and giving unfair and inaccurate oral evidence when applying for search warrants were just two of the SFO's shortcomings according to the High Court – conduct that helped ensure the search warrants were granted.
The raid itself, the court heard, led to legally privileged information at searched premises being read and taken away unlawfully: 139 of 320 bags of documents taken away were returned two weeks later with an admission that they had been seized in error. No independent legal advisors were present when the raids took place, which clearly emphasises the need for a raided business to have their legal expert on site during the raid.
The scenario led to the High Court granting the brothers the right to a declaration that the search warrants, searches and seizures were all unlawful. Having the right legal representation in the right place at the right time could prevent such SFO misconduct ever being repeated with other firms. As we explain here, the lawyer can play a crucial role at all stages of a proposed raid.
With raiding authorities able to take any relevant documents, the raided company must make copies of anything taken and make notes of any questions asked and answers given. The investigators should be followed to make sure they do not take things they are not entitled to and do not read legally privileged documents. In such circumstances the best person to do this shadowing is the company's legal representative. Only he will know what material any particular authority is entitled to take and what the recent case law is regarding raids. The lawyer will probably be the only person during a raid who knows what material is legally privileged. Confi dential written communications between a company and their external lawyer regarding their legal defence are privileged under EU law while UK law extends this to in-house lawyers. The failure to protect communications subject to legal privilege could prove costly if investigators gain access to them. On the other hand, it is imperative that companies are not seen to obstruct investigators. Striking the right balance in accordance with the law, therefore, is all important – and emphasises the need for legal advice.
No one outside the company – beyond its external lawyer – should be notified of the raid and no emails should be sent that mention it. No real or electronic documentation relevant to the investigation should be destroyed and nobody should tamper with any evidence officially sealed by the investigating authorities. In 2010, a company was fined 38 million Euros for breaching a seal on evidence after a dawn raid. Companies have to be aware of the law in such circumstances.
The raid is just one part of an investigation that may have been going on for some time. Now the cat is out of the bag and the suspects are aware that they are under investigation – it is then that the suspects have a choice to be supine and hope for the best or be pro-active.
Once the raid has ended, the company must establish a team to deal with all aspects of the imminent investigation. Quality legal advice must be at the core of this team's selection and its subsequent actions. Experienced legal advisors, senior staff who have access to all relevant information and possibly a public relations consultant to handle any media coverage should all be part of the team. This team must analyse the evidence taken during the raid and examine the strength of the case against the company, c onsidering all the documentation and its employees' behaviour.
With the investigating authority wanting explanations, access to documents and document freezes, a company has to be able to respond swiftly and appropriately and know where it stands legally. Informed legal advice is essential if a company is to know the limits of the investigation, its own obligations to investigators and its options. For example, fines can be reduced by up to 50% if a company admits wrongdoing early – before other offending companies have the chance to “come out of the woodwork''. A company also has to determine quickly just what the scope of any wrongdoing is. How long has it gone on for? What is its scale? Does its wrongdoing take place in more than one country? If so, how should a company report this to other authorities? Under the Bribery Act 2010, a company with any UK connection can be prosecuted here for any corruption carried out anywhere in the world, so the scope of wrongdoing has to be established as quickly as possible.
A company must carry out an internal investigation to establish who is potentially involved in wrongdoing, their seniority and the degree of negligence in compliance procedures. Only in this way can the possible wrongs be put right as soon as possible and any potential liability be limited. New compliance procedures have to be established, introduced and monitored, with staff given regular training and updates to ensure everyone is aware of what has to be complied with. Such procedures must be introduced with the assistance of expert legal advisors if they are to be worthwhile in preventing any further wrongdoing and persuading the authorities that the previous misconduct is a thing of the past.
The steps taken immediately after a dawn raid are vital. Only awareness of the law in this fi eld can determine what steps should be taken. And the effects of such a strategy will be clear in hindsight if a company is raided.
Looking for more information?Read about Fraud Defence, Corporate Fraud Solicitors, Taking Immediate Steps.