Males: Different regimes
The Court of Appeal has largely rejected appeals against confiscations orders totalling £8.3m against the three people jailed for conspiracy to defraud legal expenses insurer DAS.
The orders were made in July 2019, a year after the trio were convicted following a private prosecution brought by DAS.
Paul Asplin was sentenced to seven years in jail and disqualified as a director for 12 years and David Kearns to four years and three months’ imprisonment.
Sally Jones received three years and nine months’ imprisonment and was disqualified from acting as a director for eight years. Her appeal against conviction was rejected last month.
His Honour Judge Beddoe found that the total loss suffered by DAS was £11.2m – made up of the secret profits and the salaries paid to the two men – but limited the confiscation orders to the defendants’ realisable assets.
This was £5.3m for Mr Asplin or face a further eight years in prison if not paid within six months, £1.4m for Mr Kearns or serve an extra six years, and £1.6m for Ms Jones or also serve six more years.
The judge made compensation orders for the same amounts. As none of the defendants had sufficient means to satisfy both orders, he ordered that the compensation be paid out of what was recovered under the confiscation orders.
Mr Asplin was the chief executive of DAS until 2014, while Mr Kearns was employed until the end of 2004 as head of claims and general manager.
Ms Jones had worked for DAS as head of marketing but she left in 1999 when she began a relationship with Mr Asplin. They married in 2001 but divorced four years later.
Mr Asplin and Mr Kearns set up a company, Medreport, and arranged for DAS to contract with it to provide medical reports – it handled over 90% of the reports DAS required.
They were accused of making secret profits over a period of around 14 years, keeping their involvement in, control of and profit from Medreport secret from DAS all the time.
Ms Jones became a manager of Medreport and later an owner and director, continuing to run the company after Mr Asplin transferred his interest in it to her.
They appealed the confiscation orders on various grounds with limited success. The Court of Appeal agreed that the salaries of the two men included in the calculation of benefit should have been net rather than gross, and the value of their pensions should been on a net basis too.
But it upheld HHJ Beddoe’s decision to include the salaries – nearly £4m for Mr Asplin and £285,000 for Mr Kearns – as benefits received from the conspiracy for the purposes of the confiscation orders.
While “a considerable part” of their work at DAS was unconnected with the fraud, and indeed they contributed to DAS’s overall success, “it is impossible to sever legitimate work promoting DAS’s interests from illegitimate work connected to the commission of the fraud. Rather, on the facts here, the two were inextricably linked”.
Lord Justice Males continued: “Nor is it possible to quantify that part of their work which can be regarded as legitimate. It is impossible, therefore, to allocate part of their salaries to legitimate work.
“As the judge said, any attempt to do so would involve plucking a figure out of the air in circumstances where there is no factual basis for drawing such a distinction.
“In the circumstances it is clear, in our judgment, that Asplin and Kearns cannot be regarded as having given full value for the salaries which they received.”
However, in relation to the compensation orders, the court said the salaries should not be included.
While DAS would have dismissed Mr Asplin and Mr Kearns if it had known about their involvement with Medreport, it would have paid equivalent salaries to another CEO and head of claims.
“To make an award of compensation in the full amount of the salaries paid would therefore provide DAS with an unwarranted windfall,” Males LJ said, especially as they did provide some value for the salaries they received.
He added: “The fact that the salary does count as part of a defendant’s benefit for the purpose of confiscation but does not count as part of the victim’s loss for the purpose of compensation may seem superficially odd, but in reality it merely illustrates the differences between these two regimes.”
The judge said removing the salaries left a loss for DAS of £7m. “In view of the defendants’ realisable assets, the compensation actually ordered against each of them was less than this (and in the cases of Asplin and Kearns, the realisable asset figure will need to be reduced to some extent as a result of our decision on the pension issue).
“Accordingly, notwithstanding Asplin’s success on the point of principle, the compensation order made against him (and against the other defendants) must stand.”
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