No. 2007/04917/A4
Neutral Citation Number: [2007] EWCA Crim 3074
IN THE COURT OF APPEAL
CRIMINAL  DIVISION

Royal Courts of Justice
The Strand
London
WC2A 2LL

Date: Thursday 1 November 2007

B e f o r e:

LORD  JUSTICE  HOOPER

MR  JUSTICE  PITCHFORD

and

MRS  JUSTICE  DOBBS  DBE

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R E G I N A

- v -

MARK  O'HANLON
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Miss L Cartright appeared on behalf of the Appellant
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Judgment

LORD JUSTICE HOOPER:  I shall ask Mr Justice Pitchford to give the judgment of the court.

MR JUSTICE PITCHFORD:
1.  The appellant, Mark O'Hanlon, is now 46 years of age.  On 8 June 2007, at Southwark Crown Court, he pleaded guilty to a single count laid under section 47 of the Financial Services Act 1986 of making a misleading, false or deceptive statement or forecast.  On 2 August 2007, he was sentenced by His Honour Judge Stone QC to 18 months' imprisonment, with a direction under section 240 of the Criminal Justice Act 2003 that 99 days spent on remand should count towards his sentence.  The judge assessed the prosecution costs at £27,255.04 and ordered the appellant to pay that sum within two years.  Lastly, the appellant was disqualified from holding the office of director of a company under section 2 of the Company Directors Disqualification Act 1986 for a period of ten years.  He now appeals against sentence with the leave of the single judge.

2.  In January 2000 the appellant was the Chief Executive Officer of a company called Monticello plc.  That company was formed in 1999 at a time in the financial world of the "dot.com" boom.  Monticello was listed on OFEX, a listing dealing facility managed by JP Jenkins Ltd. 

3.  Monticello had identified a promising opportunity in the market which was to identify start-up internet businesses and to offer them accommodation and business services in return for a share of the equity in those companies, typically 15%.  It was estimated that, while many of the businesses would fail, from time to time there would be a nugget which became a success story, and by that means the value and income of Monticello would increase proportionately.  

4.  It was a novel business idea and it attracted interest in the financial community and by the public investing in new businesses.  Between 6 January 2000 and the morning of 19 January 2000, the share price in Monticello rose from 12p to 122-140p.  At 11am on 19 January the appellant gave an interview on-line to a journalist representing the internet news agency.  That interview lasted for a period of about ten minutes.  During it he made a number of statements and forecasts about the company which were false.  He made a number of observations which were capable of affecting the share price.  In consequence, trading in Monticello's shares was suspended on the afternoon of 19 January and was not re-instated until 27 January, following a corrective statement on the 26th.  

5.  Immediately after the interview given by the appellant, the share price rose, reaching a high of 155p.  It continued to be buoyant for a time following re-instatement of trading, although there were fluctuations.  Share trading on OFEX was suspended from late 2000.  The appellant left the company in 2001.  Eventually, Monticello was wound up in 2003.

6.  The appellant was sentenced by the learned judge on the basis that he made six relevant statements.  Five of them concerned the current state of the company's business and trading, which the judge found were knowingly false.  The sixth statement made as to the prospects of the company was found by the judge to have been reckless.  

7.  The appellant had contributed £12,500 to the start-up costs of Monticello's business.  When the company went into liquidation he lost that investment, together with the value of his shareholding which was approximately 9% of the issued share capital of the company.  He did not benefit from the interview which he gave to the journalist.  He did not seek to exercise share options or at any time thereafter to realise his share-holding.

8.  The prosecution was conducted by the Department of Trade and Industry which had taken several statements from individuals who had invested in Monticello throughout the period of its existence and in particular during the period of the significant share price rise in early January.  It was discovered that many investors had lost a very considerable sum of money, but it was impossible to tell how much money was lost only as a result of the interview which took place on the 19th since, as we have observed, there had already been a significant increase in the share price before that interview took place.

9.  Miss Cartwright argues that the sentence of 18 months' imprisonment was manifestly excessive when regard is had to relevant factors in the offending and personal mitigation available to the appellant.  Relevant factors were identified by the court in R v Feld [1999] 1 Cr App R(S) 1.  They include the amount involved, the manner of the fraud, its duration, the position of the offender and his control over the company, the consequences of the fraud (including loss to small investors), the effect upon public confidence in the City and integrity in commercial life generally, and the presence or otherwise of personal benefit.  

10.  Counsel recognises that there were here several aggravating factors.  The appellant was Chief Executive of the company.  He would be regarded as an authoritative source of information in an area in which investors were taking a close interest.  There were six statements, five of which were calculated (in the objective sense) to cause investors to consider investment favourable.  The immediate effect appears to have been increased trading in the company's shares.  Several investors (some of them small investors) suffered loss; some lost large sums.  

11.  Mitigating factors included the apparently spontaneous and short-lived duration of the claims; the appellant co-operated in the preparation of a corrective statement; he made no personal gain and eventually lost his employment.  Although the statements themselves were false, the judge accepted that the appellant had a genuine belief in the ultimate success of his company.  In other words, this was not a cynical fraud for private gain at the expense of investors.

12.  Our attention has been drawn by counsel to other decisions of the court, in particular R v Bailey and Rigby [2006] 2 Cr App R(S) 36, the facts of which bear some comparison with the present case.  The defendants pleaded not guilty but were convicted of recklessly making misleading statements, contrary to section 397(1)(c) of the Financial Services and Markets Act 2000.  Mr Rigby was Chief Executive of the company.  A trading statement claimed that profit for the year would be in line with market expectations.  That was a misleading statement because it assumed income from three contracts which had not yet been secured.  Letters to the contractors concerned, acknowledging that fact, were suppressed.  Corrective statements had been issued shortly afterwards and the share price of the company, which had risen temporarily by 20p on publication of the favourable statement, collapsed.  Several investors lost money, having been influenced by the statement to purchase shares.  Mr Rigby's sentence was reduced on appeal from three and a half years to 18 months' imprisonment.  A disqualification from holding office as a director for six years was not the subject of appeal.  While Mr Rigby had pleaded not guilty, he was sentenced for reckless rather than knowing behaviour.  He relied upon considerable personal mitigation, the chief of which was voluntary re-payment of compensation to investors in the sum of £200,000.  

13.  At the time of his offence, this appellant was aged 38 and a man of good character.  He had enjoyed a successful early career in the City.  Seven years had elapsed between the offence and his sentence.  In the intervening period his marriage broke down under the strain.  He suffered personal injury in 2002 which confined him to a brace for a period of nine months.  By the time of trial he had remarried and was living in comparatively modest circumstances.  In October he had obtained work as an office clerk.  When he was remanded in custody on 25 April he made no application for bail, recognising the inevitability of a sentence of imprisonment.  A pre-sentence report expressed the risk of re-offending as low.  The appellant's period in custody on remand had brought with it a severe deterrent effect.  He recognised that his offence was deserving of imprisonment.  

14.  We reiterate the opinion of the court in Bailey and Rigby that lengthy sentences of imprisonment can be expected for deliberate and persistent fraud on investors.  But in this appellant's case we have noted the comparatively spontaneous nature of his misrepresentations, knowingly false as they were.  The judge's starting point for this offence must have been two years three months (or thereabouts).  Having considered the nature of the offending and the personal mitigation available to the appellant, we are not persuaded that a sentence of 18 months' imprisonment can be described as manifestly excessive.

15.  The judge disqualified the appellant from holding office as a company director for a period of ten years.  Having regard to the period of time which elapsed following the collapse of the company, during which the appellant did not in fact serve as a director, and to the other effects of this conviction upon him, we think that period of disqualification was excessive.  We shall reduce it to seven years.

16.  Finally, we consider the order for payment of prosecution costs made by the trial judge.  The appellant has no realisable assets of his own.  He has an arguable beneficial interest in a flat which he shares with his present partner, valued at £130,000, but the legal interest in that flat is hers and the flat is in her name.  Were the appellant required to raise a sum of money in excess of £27,000 the only means at his disposal would be the taking of a loan, using the property as a security, and binding himself to the repayment of that loan over a very extended period of time.  We have noted that upon his arrest he was employed as a clerk.  He will on release from prison (on or about 25 January 2008) have a very limited earning capacity.  We take the view that the effect of the order for payment of costs on this occasion was to impose upon the appellant further punishment.  Accordingly, we consider that the imposition of the order for payment of prosecution costs was inappropriate and we quash it.  

17.  To that extent, namely the reduction to seven years of the period of disqualification and the removal of the order for payment of prosecution costs, the appeal is successful.

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