Legal experts clash as freezing orders on assets relaxed in high profile cases

Following at least three instances in which high profile individuals accused of money laundering, fraud and corruption successfully appealed sweeping freezing orders on their assets, two seasoned legal sources consulted by The Shift provided completely opposing assessments on the matter.

While both sources acknowledged that a freezing order can essentially put the accused’s life on hold and that it can be dangerous if abused, one source argued that it is far more dangerous to “treat money launderers with kid gloves” while the other argued that the law does provide fairer recourse than the “carpet bombing” approach which a freezing order request implies.

In particular, the sources disagreed over the burden of proof being placed on the prosecution in cases in which a freezing order request is issued, a departure from the court’s pre-2014 tendency to issue freezing orders when a crime is established while allowing for recourse through the first court if it is deemed necessary by the accused.

We spoke to two experts on the issue who offered contrasting opinions on the matter; one source, an academic and practitioner, argued that placing the burden of proof on the prosecution limits its ability to successfully investigate and prosecute financial crime. The other source, one of the lawyers pushing arguments against wide-reaching freezing orders in court, argued that placing the burden of proof on the prosecution preserves the presumption of innocence.

Both sources were asked to comment on decisions taken by the same magistrate – Donatella Frendo Dimech – in relation to three individuals: former Progress Press chairman Vince Buhagiar, former chief canvasser for Evarist Bartolo Edward Caruana, and former financial controller for Nexia BT, Katrin Bondin Carter.

In all three cases, after the publicity of high profile individuals arrested and their assets frozen, they were then quietly reduced allowing the accused to get on with their life.

Buhagiar was accused of receiving kickbacks in exchange for his role in the issuance of a €30 million tender to Kasco Group, the group of companies representing the web of business interests owned by Keith Schembri, the former chief of staff of disgraced ex-prime minister Joseph Muscat.

Buhagiar and former Nexia BT financial controller Katrin Bondin Carter are three out of a total of 12 individuals charged as a result of inquiries looking into Schembri’s dealings.

In the case of Caruana, who was accused of soliciting bribes while holding public office, the magistrate decreed that all assets belonging to him are to be released, bar the token sum of €5,000 which represents the amount of money which the prosecution managed to link to Caruana in the corruption investigation.

The academic stated that the decisions taken in each of the three cases to relax the capping on the total value of the freezing orders led him to believe the judiciary was “downplaying” the issue.

“We treat white-collar criminals with kids’ gloves. There is a major problem with sentencing disparities and inequalities in this country, and it doesn’t take an expert to say that. All you need to look at is who gets sent to jail and who doesn’t. Maltese people from certain social classes and families are treated differently – white-collar crime, which notoriously goes unpunished, is not taken seriously enough. These kinds of judgements downplay such crimes,” he said.

The same source also flagged how the State’s prosecution, normally conducted either through the police force or the office of the attorney general, is made up of “young and inexperienced” lawyers who are no match for seasoned lawyers in the private sector.

“There is a great mismatch between lawyers in private practice who have good connections with magistrates they practically see every day while the lawyers representing the State are young, inexperienced and unable to respond in a way that makes for suitable opposition,” he added. “There’s also the novelty of the prosecution; we have been notoriously absent when it comes to these kinds of money laundering and corruption prosecutions. We have no experience of them, and it shows.”

In a contrasting view by one of the lawyers pushing the argument in court for relaxation on the freezing of assets in a number of high profile cases,  the argument is that these judgements were not passed because of the individuals themselves but because the legislative framework for the freezing order is “draconian” in its sweeping approach.

He argued that the law provides for “situations in which the prosecution is still investigating and doing their research to decide whether or not to prosecute and determine the extent of money laundering” through the issuance of temporary freezing orders and the placement of a court guarantee equivalent to the criminal proceeds in question.

“Essentially, a freezing order is there to ensure that if there are any proceeds from the offence, the court can, if it reaches a declaration of guilt, also impose upon the guilty person a confiscation of those proceeds,” the lawyer stated, adding that the Asset Recovery Bureau can seize property if the assets have been dissipated.

“Back in 2014, the idea that the prosecution should identify these proceeds when highlighting an offence began gaining traction. The argument was that freezing orders essentially carpet bomb everything the accused owns when the actual amount of proceeds may amount to a few thousand euros, for example,” they continued.

While the academic argued in favour of the deterring incentive provided by a sweeping freezing order, the other source pointed towards the need to allow the accused to access assets they acquired legitimately while ensuring the court secures its claim to the criminal proceeds highlighted by the prosecution.

“For the following years, such an order means that until the case is closed, the accused has no credit cards, no accounts, has frozen property and cannot do anything. So I am not completely in sync with the idea that there is anything untoward or unwarranted in these cases,” the lawyer representing clients whose assets were frozen said.

Not-so-frozen orders

A magistrate’s decision to oblige three separate appeals on the scope and breadth of freezing orders issued by the court raised eyebrows given that all three appeals were filed by high-profile individuals charged with accusations of money laundering, fraud and/or corruption.

According to a recent judgement from the criminal court, “the purpose of a freezing order is to stop the accused, who is charged with a relevant crime or the crime of money laundering, from disposing of the monies or property the provenance and use of which is derived from criminal activity, and this in the interests of the community”.

Court precedent suggests that a clear distinction is usually made between when the accused was an active participant in the activity which generated criminal proceeds or whether they were involved in the processing of said proceeds without actively knowing they were enabling money laundering.

The law has been repeatedly criticised and even challenged in court by lawyers arguing that the blanketing nature of the freezing order, which can target all of an accused individual’s assets that are not directly related to accusations of financial crime, is disproportionate.

On 19 January, Buhagiar successfully appealed to magistrate Donatella Frendo Dimech to cap the freezing order he was served with at €247,000 given that prosecutors alleged Buhagiar could not explain a total of €246,880 in payments he’d received from a Gibraltar-based company which belonged to Schembri.

On the same day, Bondin Carter, who was accused of falsifying documents and money laundering in relation to an alleged €100,000 kickback Schembri received from Nexia BT partner Brian Tonna, had her freezing order reduced to just €5,000, effectively granting her access to her bank accounts in spite of the fact that, like Buhagiar, she has not been cleared of the charges levelled against her.

The same magistrate overseeing the appeals filed by Bondin Carter and Buhagiar had also relaxed conditions on the freezing order issued on the assets of Evarist Bartolo’s former chief canvasser, Edward Caruana, following the charges of corruption and embezzlement of public funds.

In the case of Caruana, court sources told The Shift that the prosecution had produced all its witnesses and had, somehow, not managed to prove any connection between the charges and Caruana’s possessions, including the infamous Rabat block of apartments.

The verdict on the freezing orders issued on Caruana, Bondin Carter and Buhagiar contrasts with a similar case involving Sebastian Dalli, brother of disgraced former European Commissioner John Dalli. In November of last year, Dalli filed a court case seeking compensation for, and the cancellation of, an asset freeze in place since 2009 when he was arrested during a police operation at Miġra l-Ferħa. Both the attorney general and the criminal court refused Dalli’s request for the freezing order on his assets to be revoked.