How to take effective action when you’ve been defrauded

There has recently been a significant stir in the UK press about HNW victims successfully privately prosecuting fraudsters in criminal courts. Critical media have referred to it as the dawn of a “two-tier justice system” where the affluent are able to afford fast and effective criminal justice whilst the public system barely functions.

Private prosecutions are conducted in the same way as public prosecutions: They still require an investigation, adherence to court rules and procedures and a full, public prosecution. If the prosecution is successful, it will result in a jail sentence for serious matters and a confiscation order if the victim is out of pocket. This confiscation can be enforced and ultimately, non-payment will result in a secondary jail sentence.  

The recent conviction of international businessman, Elie Taktouk received widespread media coverage. On 2 August 2021, Taktouk was unanimously convicted of 11 counts of fraud and dishonesty offences relating to a failed property redevelopment in Knightsbridge following a four-week trial at Southwark Crown Court. Respected investors Adrien Noel and his father Frank Noel had been defrauded of £2.5 million and decided to private prosecute Taktouk. Taktouk leveraged his reputation as a wealthy property tycoon to con the Noels into investing large sums through a series of calculated lies about the true state of the redevelopment. 

In 2015, Taktouk reported to the Noels that he had made significant advances in re-developing the property. Taktouk made a series of requests to the Noels totalling £2.5 million, in each case representing to the Noels that the funds would be used for specific aspects of the redevelopment such as the installation of a kitchen, a high-grade sound system and high-quality wood flooring.  Quotes for the work were produced to support the request for funds and suppliers never heard from Taktouk again.  Taktouk also made requests to the Noels for loan financing for the property, namely that advanced interest and a deposit was due to the National Bank of Abu Dhabi.  

An investigation revealed a vastly different picture to that represented by Taktouk to the Noels;  a mortgage was not taken out with the National Bank of Abu Dhabi for the purchase and the Noels’ funds were not paid to the National Bank of Abu Dhabi, suppliers did not undertake the work and the property was left in a shell-like state.  A mortgage was eventually taken out with the National Bank of Abu Dhabi but Taktouk did not comply with the terms of the mortgage and the property was ultimately seized by the National Bank of Abu Dhabi and sold at auction. 

Instead, Taktouk kept the Noels’ funds for himself, living a life of extravagance.  This life of luxury included using the Noels’ funds for expensive private school fees for his children, the purchase of a Porsche, paying rent at a luxury property in Kensington (exceeding £21,000 per month) and shopping sprees at Harrods totalling thousands of pounds.  Taktouk also paid for legal fees from his widely publicised divorce from Daniella Semaan, who went on to marry former Chelsea football player Cesc Fabregas.  Renowned in the British, Lebanese and Nigerian communities, Elie Taktouk boasted about his property development expertise but failed to pay his own bills.

Taktouk is due to be sentenced on 20 September 2021. 

So, why is it that HNW clients are pivoting to private prosecutions?

• Complex fraud is rife in the UK, and particularly in London. Often HNW victims have been defrauded by someone they trust which is doubly frustrating. It is estimated that in 2020, 3.8 million frauds were committed and that the cost to Londoners was some £349 million.
• In 2020, following a review of the UK’s fraud response forces, Sir Craig Mackey reported that the capacity and capability of forces to investigate fraud were outweighed by the scale of fraud offences 
• The UK’s “Action Fraud” reporting system has been so plagued by inaction that as of July 2021, the Government has announced it will be scrapped.  
• If a case is selected for public prosecution, it typically has a vulnerable victim. The case selection process is very slow and ultimately, unlikely to favour HNW victims.
• Control of the speed and efficacy of the process
• A higher conviction rate than public prosecutions (if using an experienced private prosecutor)
• Often quicker and more effective results than the civil litigation process, particularly against a fraudster
• HNW clients often wish to send a message to those who they do business with or have friendships with. It is often important to show that the HNW should not be considered an easy target.
• Private prosecutions are easier to publicise than civil actions.

What are the costs ramifications for clients?

Legal proceedings come with inevitable cost but there are some aspects of private prosecutions which are commercially more attractive than other legal proceedings:

• Unlike civil proceedings, there are no costs orders if the prosecuting party loses (unless the prosecuting party has conducted the litigation incompetently or the prosecutor has failed to be honest on an important point)
• If a prosecution is properly brought, if the private prosecutor wins or loses, they can reclaim their reasonable costs from the State
• Whilst there is an upfront cost (and clients can typically expect to outlay at least 25% of what they have lost to recoup it) many clients believe the speed, efficacy and comparatively low litigation cost (if any) are worth it.

Legal proceedings should never be embarked upon lightly; they require time and an outlay of funds. However, many clients are deciding, like the Noels’, that where effective justice is available it is ultimately worth the effort.

Kate McMahon is a founding partner in the London-based private prosecution firm, Edmonds Marshall McMahon