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England and Wales Court of Appeal (Criminal Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Criminal Division) Decisions >> R (The Financial Conduct Authority) v Abdel-Malek & Anor  EWCA Crim 1730 (16 December 2020)
Cite as:  EWCA Crim 1730
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ON APPEAL FROM SOUTHWARK CROWN COURT
HER HONOUR JUDGE KORNER CMG, QC.
Strand, London, WC2A 2LL
B e f o r e :
MRS JUSTICE TIPPLES
MR JUSTICE WALL
| REGINA (THE FINANCIAL CONDUCT AUTHORITY)
|- and -
| FABIANA ABDEL-MALEK
(Transcript of the Handed Down Judgment.
Copies of this transcript are available from:
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7414 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Richard Wormald QC and Mr Robert Morris (instructed by Peters and Peters Solicitors LLP) for the Second Appellant
Mr John McGuinness QC, Ms Sarah Clarke QC and Mr Tom Broomfield (instructed by the Financial Conduct Authority) for the Respondent
Hearing dates: 19th and 20th November 2020
Crown Copyright ©
LORD JUSTICE DAVIS :
"(1) An individual who has information as an insider is guilty of insider dealing if, in the circumstances mentioned in subsection (3), he deals in securities that are price-affected securities in relation to the information.
(2) An individual who has information as an insider is also guilty of insider dealing if
(a) he encourages another person to deal in securities that are (whether or not that other knows it) price-affected securities in relation to the information, knowing or having reasonable cause to believe that the dealing would take place in the circumstances mentioned in subsection (3); or
(b) he discloses the information, otherwise than in the proper performance of the functions of his employment, office or profession, to another person.
(3) The circumstances referred to above are that the acquisition or disposal in question occurs on a regulated market, or that the person dealing relies on a professional intermediary or is himself acting as a professional intermediary.
(4) This section has effect subject to section 53."
"Inside information", "price-affected securities" and "insiders" are defined in s. 56 and s.57.
(1) First, a proposed take-over by Vodafone PLC of Kabel Deutschland Holding AG. The indictment particularised the dates of FAM allegedly passing inside information and WAC allegedly using that information as between 3 June 2013 and 10 June 2013.
(2) Second, a proposed takeover by Essex Property Trust Inc of BRE Properties Inc: the relevant dates being 29 November 2013 to 4 December 2013.
(3) Third, a proposed takeover by LG Household and Healthcare Ltd. of Elizabeth Arden Inc: the relevant dates being 17 April 2014 to 22 April 2014.
(4) Fourth, a proposed takeover by American Realty Capital Partners of NorthStar Realty Finance Corporation: the relevant dates being 22 April 2014 to 25 April 2014.
(5) Fifth, a proposed takeover by Energy Transfer Equity LP of Targa Resources Corporation (with a related company called Targa Resources Partners LP): the relevant dates being 16 June 2014 to 19 June 2014.
(1) Kabel Deutschland (Counts 1 and 2)
(2) BRE (Counts 3 and 4)
(3) Elizabeth Arden (Counts 5 and 6)
(4) NorthStar (Counts 7 and 8)
(5) Targa Resources (Counts 9 and 10)
The respective cases
The course of proceedings in the Crown Court
"1. Prosecution should disclose, to both defendants, any material in their possession and, in the case of material which is to their knowledge in possession of another prosecuting authority, should seek disclosure, which:
- Might reasonably be considered capable of suggesting, that WAC or his associates i.e. Fiyaz, Kuperfis, Glas, Rodrig, McCracken and Harrington had an 'insider' i.e. someone with access to price-sensitive information, in UBS, outside FAM, who provided price-sensitive information, during the period 1 January 2013 31 December 2014.
- Might reasonably be considered capable of suggesting, that WAC or his associates had an 'insider' in any of the financial institutions who were advising the companies concerned in the merger/acquisitions negotiations which underlie the trades of the subject of the indictment.
2. For the purposes of this order "material" means:
- Telephone intercepts obtained by an authority outside the UK
- Suspicious Activity/Transaction Reports
- Evidence of meetings between WAC or his associates and persons with access to price-sensitive information in any of the financial institutions who were advising the companies concerned in the merger/acquisitions negotiations which underlie the trades the subject of the indictment."
We were told by Mr McGuinness that the prosecution in fact chose to interpret paragraph 2 rather more widely than the use of the word "means" strictly might connote. No criticism of this Order, as we were informed in oral argument, is now pursued: although criticism is made of the prosecution's alleged non-compliance with it. At all events, following that Order the prosecution gave disclosure of a quantity of materials, including a significant number of Suspicious Transaction Reports filed by brokers in respect of WAC, AF, AK, YR and (to a much lesser extent) NG.
" .the prosecution should re-evaluate, for the purpose of listing on the MG6C, any material in their possession, arising from this, or associated investigations, which, in the light of issues raised during the trial, is capable of having an impact on this case. This re-evaluation should include, but is not limited to, consideration of telecommunications material relating to the named associates of WAC."
"Pursuant to the second bullet point of the first paragraph of the Court's Order dated 2 November 2018, the prosecution makes the following disclosure.
The prosecution has recently received intelligence that Alshair Fiyaz had via an intermediary a source at Citibank. As a result of the intelligence, the prosecution has recently acquired further material. This material provides limited support for the credibility of the intelligence received to the extent that the prosecution cannot exclude the possibility that for a period of time Alshair Fiyaz did have an insider at CitiGroup and that period may have included 2013-2014."
"1. On 14 May 2019, an informant provided the FCA with information concerning a person said to be an 'intermediary' between Alshair Fiyaz ('ASF') and a 'source' at Citibank.
2. As a result of the information provided the FCA conducted its own inquiries and gathered material which identified an individual consistent with the information as to who the alleged 'source' was.
3. That identification has been further supported by:
(a) Limited telephone contact between the intermediary and the individual in 2015 and 2017 (no records are available for the indictment period).
(b) Other material provided on a confidential basis by another source.
4. The identified 'source' was employed by Citigroup, during the indictment period, in a position which would have given him access to PSI.
5. Providing the names of the intermediary and/or the 'source' carries a substantial risk of identifying the original informant who may be endangered by such identification."
183. On 14 May 2918, an informant provided the FCA with information concerning a person said to be an 'intermediary' between Alshair Fiyaz ('ASF') and a 'source' at Citibank.
184. As a result of the information provided, the FCA conducted its own inquiries and gathered material which identified an individual consistent with the information provided as to who the alleged 'source' was.
185. That identification has been further supported by:
(a) Limited telephone contact between the intermediary and the individual in 2015 and 2017 (no records are available for the indictment period)
(b) Other material provided on a confidential basis by another source
186. The identified 'source' was employed by Citigroup, during the indictment period, in a position which would have given that individual access to Price Sensitive Information.
187. Such material as has been obtained from Citigroup indicates that the individual did not themselves have computer access to Price Sensitive information in respect of the 5 indictment deals (although given the short time available it has not been possible to carry out the sort of detailed investigation that has been carried out in respect of the UBS computer systems), and the Prosecution in the short time available cannot exclude the possibility that the individual had access to such Price Sensitive Information in another way (such as by the FCA reviewing emails or making enquiries with Citigroup employees).
188. On 23rd May 2019, the Prosecution asked Citigroup whether any Citigroup entity advised on the Kabel/Vodafone deal and/or the Targa Resources Corp and Partners/Energy Transfer deal. The response from Citigroup indicates that:
i. Citigroup were engaged in pitching to advise Vodafone in both the proposed take over of Kabel and the equity stake-building role (helping Vodafone buy Kabel shares in the market); and,
ii. Citigroup acted as advisors to both Targa Resources Corp and Targa Resources Partners in the merger with Energy Transfer Equity.
"What matters in relation to any count on the indictment is whether you are sure that Mr Choucair received inside information from Ms Abdel-Malek, dealt in the securities to which that information related (and securities just means shares or stocks it is just a different way of describing them) whilst he was in possession of that information, and if you are sure of that it matters not whether you find also that Mr Choucair did or might have received information, or tips, or even inside information directly or indirectly from an 'associate'. That is in inverted commas because there are various people he has named as associates of his for example, Mr Al Fiyaz or Mr Roderick, whom you have just heard an admission read out about although in Mr Roderick's case he says he was the one he knew the least. In any event, it would not matter if you came to the conclusion that he was also getting information from his other sources, from his other associates, or the journalists, or whoever it was he was talking to, if you were sure that Ms Abdel-Malek had given him that information, so I hope that is clear."
"The defence suggest that these agreed facts demonstrate that it was or could have been Fiyaz and not Ms Abdel-Malek who passed inside information to Choucair in respect of NorthStar and Targa. This only applies to Northstar and Targa because those are the only two where Mr Choucair says I traded well, he said I traded in a number of factors, but I got information largely [inaudible] trade off Fiyaz."
She then went on to give full legal directions on topics such as lies and good character.
Events following conviction
"81. In light of the publication of the article, the Respondent confirms, by way of disclosure, that the intermediary referred to in the Amended Disclosure Note dated 23 May 2019 and the Further Disclosure Note dated 31 May 2019 (see paragraph 75 above) is David Johnson. The Respondent also confirms that in respect of the home address of David Johnson referred to in the article:
a) The property is 42 Chester Square, Belgravia, London SW1W 9EA;
b) Since 14 August 2014, the freehold title to the property has been registered to Redfox Management Limited, company registered in the BVI; and
c) The beneficial owner of that company is Alshair Fiyaz.
82. Since the retrial ended, the FCA has received intelligence that the same source at Citibank (referred to in the above Notes) was also a source, via David Johnson, for Yomi Rodrik and this may have been during the indictment period.
83. Since the retrial ended, the FCA has received intelligence that there were occasions when Alshair Fiyaz received information that originated from an insider and would provide that information to other traders before he traded in the stock.
84. In light of the disclosures made in the previous three paragraphs, the Respondent has considered whether there is material in its possession which, subject to the public interest, requires further disclosure to be made to the Applicants. The Respondent makes the following disclosures:
a) In April 2011 there were four communications between a contract mobile telephone number that has been attributed to David Johnson and a contract mobile number attributed to Alshair Fiyaz;
b) David Johnson and Yomi Rodrik met at The Berkeley Hotel in London on 25 November 2016;
c) Between 9 October 2016 and 18 January 2017 there were communications using unregistered PAYG numbers attributed to David Johnson and Yomi Rodrik;
d) On 18 January 2017 (the date on which Yomi Rodrik was arrested on suspicion of insider dealing by an officer of the NCA acting on behalf of the FCA) use of an unregistered PAYG mobile telephone number attributed to David Johnson ceased;
e) Between 4 October 2016 and 18 January 2017 there were communications between unregistered PAYG mobile telephone numbers attributed to David Johnson and contract mobile telephone number attributed to Ben Harrington; and
f) During the period 2013-2014, the FCA received 13 Suspicious Transaction Reports (STRs) of trades in stocks on accounts in the name of David Johnson. These included trades in BRE (and in Essex) and NorthStar (both indicted transactions). Information from Dealogic and within the FCA suggests that Citi advised on 6 of the relevant deals. The Respondent will provide the Applicants' legal representatives with (i) copies of the STRs and (ii) copies of the trading data relating to the trades in BRE/Essex and NorthStar each within 7 days of the filing of this Respondent's Notice."
The Decision of the Single Judge
"When considering whether the convictions are arguably unsafe, it is better to start with the meat of the issue, rather than to examine minutely rulings which were given before the issue became starkly apparent. In my judgment this appeal is not only about whether the judge's rulings were justified at the time when she made them or not, but about whether material now exists which shows that the convictions were unsafe."
Events following the ruling of the Single Judge
"On 31 May 2019, the Prosecution disclosed that;
On 14 May 2019, an informant provided the FCA with information concerning a person said to be an 'intermediary' between Alshair Fiyaz ('ASF') and a 'source' at Citibank,
As a result of the information provided the FCA conducted its own inquiries and gathered material which identified an individual consistent with the information provided as to who the alleged 'source' was.
An individual named "David Basra" was the individual referred to in the 31 May 2019 Disclosure Note as being "consistent with the information provided as to who the alleged Citibank source was."
The Prosecution has obtained further material from Citigroup. Of the material that has been reviewed to date, there is no evidence that David Basra accessed price sensitive information relating to the five deals which were the subject of the Trial Indictment.
Consequent to the Prosecution's decision to identify David Basra, and the receipt of material from Citigroup, additional disclosure will be made concerning connections between David Johnson and David Basra."
(1) On Kabel (where Citigroup had unsuccessfully pitched on the "buy" side) there was no financing element and no reason for, or record of, any involvement of DB. It was concluded that he was unlikely to have been aware of the transaction.
(2) On BRE, on which Citigroup had acted, this was a wholly American transaction, with no Europe, Middle East or Africa nexus and no mention in the records of DB being involved. However, a financing element was involved. Accordingly it was considered possible that DB might have been aware of the transaction.
(3) On Arden, where Citigroup had acted, there was no Europe, Middle East or Africa connection and no reason for DB to have been involved. However, there was a financing element. Accordingly it was considered possible that DB might have been aware of the transaction.
(4) On NorthStar, where Citigroup had made a pitch, there was no Europe, Middle East or Africa nexus and no financing element. It was thus considered that DB was unlikely to have been aware of the transaction.
(5) On Targa, where Citigroup had acted, there was again no Europe, Middle East or Africa nexus and no financing element. It was thus considered that DB was unlikely to have been aware of the transaction.
(Mr Wallace did also assess the position with regard to various other, non-indictment, transactions: but we do not think, for present purposes, that really advances matters.)
Applicable legal principles
Grounds of Appeal
(1) First, FAM was not provided with, and was wrongly prevented from placing before the jury, evidence of the limitations of the investigation; and was thereby deprived of an opportunity to undermine the inference that she had disclosed price sensitive information.
(2) Second, there was a material failure to disclose at trial the facts set out in paragraph 84 of the Respondent's Notice in so far as they related to the intermediary referred to in paragraph 183 of the Agreed Facts.
1. The judge erred in failing to require the Prosecution to list all non-sensitive material gathered during its investigation into the Appellant and his trading associates upon its MG6C and by limiting the disclosure test, thereby preventing the Appellant from obtaining material likely to assist him.
2. The judge erred in preventing the Defence from cross-examining the Officer in the Case to demonstrate the "holes" in the Prosecution case and the limits of the investigation.
3. The judge erred in by declining to order disclosure of the name of the informant, the intermediary and the insider who the FCA were told connected AF to a financial institution which had price sensitive information in respect of all five Indicted stocks.
4. The judge erred in by not requiring the Prosecution thereafter to disclose all of the material it had in its possession which tended to suggest that AF was involved in insider dealing.
5. The judge erred in by not requiring the Prosecution to disclose material which suggested that AF had engaged in corrupt activities in respect of the investigation and had been fed information from the NCA: furthermore, by not permitting the Appellant to give evidence about these matters before the jury.
(A) David Johnson ("DJ") was employed at Citi within the M&A department between 2nd November 2006 and 2nd January 2013;
(B) there was evidence of a close connection between DJ and Alshair Fiyaz ("AF", to whom Walid Choucair ("WAC") in his evidence attributed the information leading to his trading in the fourth and fifth indicted trades (Northstar and Targa)), including telecommunications in 2011, and AF's ownership of DJ's home address in Belgravia;
(C) DJ and Yomi Rodrig (to whom WAC in his evidence attributed the information leading to his trading in relation to the first of the five indicted trades (Kabel Deutschland)) had had telephone and face-to-face contact in 2016 (including over unregistered PAYG telephones);
(D) DJ had telephone communications, using unregistered PAYG telephones, in 2016 with the journalist Ben Harrington (to whom WAC attributed information leading to this trading in relation to the third of the five indicted trades (Arden)); and
(E) DJ had himself carried out trades in relation to Essex Property Trust Inc "Essex" and BRE, and Northstar Realty Finance Corporation, in circumstances which suggested that he had access to price sensitive information in relation to the transactions that were the subject of Counts 3 and 7 on the indictment (the second and fourth indicted trades), respectively."
Other grounds of appeal
"Of course, at the end of an appeal this court must stand back and look at the overall state of the case. That is something much easier for this court to do than the participants in a lengthy and complex trial ."