O'Hanlon, R. v

In sentencing fraud by misleading statements to investors, the court should assess the amount involved, the manner and duration of the fraud, the offender’s position and control, investor losses, the effect on market confidence, and any personal benefit. A custodial sentence will not be reduced on appeal unless it is manifestly excessive after those matters and personal mitigation have been assessed.

A director-disqualification period may be reduced where its length is excessive in light of elapsed time and the conviction’s other effects. A prosecution-costs order is inappropriate where payment would operate as further punishment rather than reflect a realistic ability to pay.

The appellant pleaded guilty at Southwark Crown Court to making misleading, false or deceptive statements or forecasts contrary to section 47 of the Financial Services Act 1986. As chief executive of an OFEX-listed company, he gave a short online interview containing five knowingly false statements about the company’s business and one reckless forecast. Trading was suspended after the interview and investors suffered losses, although the loss attributable solely to the interview could not be quantified.

He received 18 months’ imprisonment, a ten-year director disqualification and an order to pay prosecution costs of £27,255.04. With leave, he appealed against sentence, contending that the imprisonment, disqualification and costs order were excessive.

1. The appeal was allowed in part. The Court upheld the 18-month custodial sentence, reduced the director-disqualification period from ten to seven years, and quashed the prosecution-costs order.

2. In assessing the custodial sentence, the Court applied the factors identified in R v Feld [1999] 1 Cr App R(S) 1. The appellant occupied a position of authority as chief executive. Five statements were knowingly false, trading increased immediately after the interview, and some small investors suffered substantial loss. Those were serious aggravating features.

   The Court also gave weight to the interview’s spontaneous and short-lived nature, the corrective statement, the absence of personal gain, the appellant’s genuine belief in the company’s ultimate success, his good character, the lengthy delay before sentence, and his personal circumstances. It reaffirmed the view in R v Bailey and Rigby [2006] 2 Cr App R(S) 36 that lengthy imprisonment may be expected for deliberate and persistent investor fraud. This offending was less persistent, but five statements were knowingly false. The sentence was therefore not manifestly excessive.

3. The ten-year disqualification under section 2 of the Company Directors Disqualification Act 1986 was excessive. The Court relied on the time since the company’s collapse, during which the appellant had not acted as a director, and the conviction’s other effects. It substituted seven years.

4. The appellant had no realisable assets and only limited prospective earning capacity. Requiring him to raise more than £27,000 would require a secured loan and extended repayment. The costs order would therefore impose further punishment and was inappropriate. It was quashed.

• Court of Appeal (Criminal Division): In [2007] EWCA Crim 3074, the Court upheld the custodial sentence but reduced the disqualification period and quashed the costs order.
• Southwark Crown Court: Following a guilty plea, the appellant received 18 months’ imprisonment, a ten-year director disqualification and a prosecution-costs order.