It has long been a recognised principle of law that when fraud is perpetrated, then the victim is entitled to be put back into the position that they were before the fraud was committed. A significant Supreme Court decision in R v Andrewes emphasises the point, in dealing with the consequences faced by employees who are caught lying on their job application. This case reviewed the meaning of ‘disproportionate’ when looking at confiscation proceedings; employees who are untruthful on their CVs may be stripped of their earnings.
In 2004, a hospice decided to advertise for a new CEO; applicants were required to have a first class degree, 3 years of experience in a senior role and 10 years of management experience. Mr Andrewes applied for the role and falsely claimed that he held a BA and MPhil from Bristol University, as well as an MBA and an Advanced Diploma alongside a number of falsely inflated work experiences. The hospice was completely unaware that Mr Andrewes’ statements were false and, without completing requisite due diligence, they hired him for the CEO role. Using similarly false representations, Mr Andrewes applied and was appointed to the role of Director and Chair of Torbay NHS Care Trust, and Chair of the Royal Cornwall NHS Trust.
In 2015, Mr Andrewes’ lies unravelled and the NHS discovered the truth about his fraudulent CV; his employment was terminated and his case was referred to the Police. Mr Andrewes was charged with obtaining a financial advantage by deception contrary to the Theft Act and two counts of fraud by false representation; he was sentenced to two years’ imprisonment.
Following the conviction, the Proceeds of Crime Act 2002 entitled the Court to make a confiscation order against Mr Andrewes (a confiscation order works to prevent individuals from benefitting from the crimes they have committed). In this case, an order was sought and the Court was tasked with calculating the figure Mr Andrewes should be made to repay to his former employers. They had to decide whether he should be allowed to keep the salary he had dishonestly procured on the basis that, on the whole, he had actually performed the job very well and routinely received very positive appraisals for his work. The court eventually calculated that Mr Andrewes should repay the sum of £96,737.24 and a confiscation order was made for this sum. The Court argued it would be appropriate for the confiscation order to reflect Mr Andrewes’ entire net salary earned over the 10 years.
Court of Appeal ruling
Mr Andrewes appealed this decision on the basis it would be disproportionate to impose such a high confiscation order as he had carried out his work to the complete satisfaction of his employer. The Court of Appeal overturned the decision made by the Court and agreed with Mr Andrewes that it would be disproportionate to impose such a confiscation order.
The effect of the decision by the Court of Appeal was that Mr Andrewes was able to retain any property he had gained as a result of or in connection with his offending. It was thought that this outcome was inconsistent with the legislative aim of ensuring criminals do not profit from the crimes they commit. Therefore, this was subsequently appealed to the Supreme Court.
Supreme Court ruling
The Supreme Court looked at the previous approaches taken by the case parties as either “take all” (in the case of the Crown) or “take nothing” (in the case of Mr Andrewes).
In relation to the “take all” approach, the Supreme Court decided that requiring the defendant to repay his entire net earnings would qualify as ‘double confiscation’ and would be entirely disproportionate. It ruled that requiring the defendant to repay his entire net earnings would go as far as constituting a penalty. However, the Supreme Court went on to rule that the “take nothing” approach was also incorrect. Although Mr Andrewes would never have been employed by the NHS if the truth had been known, he would end up profiting from his crime if there was no confiscation order was made.
The Supreme Court decided that, if the individual did a reasonably good job in the role (as was the case with Mr Andrewes), then it would be unreasonable and disproportionate to confiscate all the net earnings he had made. The correct approach should be to confiscate the difference between Mr Andrewes’ higher earnings (made as a result of the fraud committed) and the lower earnings (that Mr Andrewes would have made had he not committed the fraud). Mr Andrewes should be required to give up any profit he made through his lies.
The Court stressed that, when working out what profit had been obtained from the fraud, a figure should be not simply plucked out of the air but, instead, some evidential basis should be provided in order to be able to compare the earnings made with, and without the fraud. This means, taking the difference between the salary earned in his previous job and the initial salary in the job Mr Andrewes obtained as a result of the fraud. . However, it was also noted that this should not be a too detailed or time consuming exercise; a broad brush approach should be adopted in order to avoid complicating the administration of justice. The Court should address the question of proportionality in relation to the actual recoverable amount rather than the benefit that had been obtained; there is no need to spend unnecessary time and effort assessing the amount if it is already clear that, in any event, the difference would exceed the overall recoverable amount.
It was decided by the Supreme Court that, before Mr Andrewes had been employed by the NHS, he had earned £54,261 gross of tax and the salary he was on by reason of his fraudulent activities was £75,000 gross of tax (£643,000 over the course of his fraudulently obtained employment); this resulted in an increase of 38%. Therefore, using the broad brush approach, a proportionate confiscation order would be 38% of the total net salary Mr Andrewes earned, being £244,568. This was the overall profit Mr Andrewes had made from his fraudulent actions. The Supreme Court concluded that, since the confiscation order made by the Crown quantified the recoverable amount as only £96,737.24, this was deemed a proportionate amount. So the Crown won the appeal.
Another aspect that the Supreme Court considered when making their decision was Mr Andrewes’ false claims about his qualifications, which were a requirement for the position he applied for. The Court acknowledged that he had lied about his qualifications and experience, but there was no specific statutory/regulatory requirements for him to hold those specific qualifications. The Court did, however, make a point of stressing that this would not be the same if the performance of services was illegal (i.e. if the individual applied for a job as a surgeon or airline pilot but did not have the necessary qualifications). In these instances, a criminal offence would be committed and it would be appropriate to confiscate the full net earnings of the individual.
Key points for employers to note
• The Supreme Court decision in R v Andrewes re-enforces the principle that fraud does mean that the fraudster does have to pay back the value of the benefits obtained, but not all, because of the proportionality principle.
• The case is also a helpful reminder to employers of the importance of carrying out due diligence exercises to make sure all applicants hold the relevant qualifications required for the role they are applying for. It is important to ensure any records kept on employees are and true and accurate to avoid any potential legal action arising.
• Employers should note that employees may not be entitled to recourse if they have benefited from fraud and/or deception. They will not be permitted to keep earnings just because they have been able to carry out their role reasonably well.
• Some recent surveys suggest that CV fraud has increased during the pandemic. Individuals have turned to online ‘diploma mills’ to boost chances of getting a better paid job. Employers should be diligent and check the legality of degrees/courses being referenced.
If you require any assistance with this kind of employment matter, please do not hesitate to get in touch with our Employment team.