Mortgage fraud – Recovery orders

Serious Organised Crime Agency v Athos Thanos Pelekanos: QBD (Mr Justice Hamblen): 2 October 2009

The applicant agency applied for a recovery order under part 5 of the Proceeds of Crime Act 2002 against the respondent (P) in respect of five properties.

Police intelligence to the effect that P was involved in drug trafficking had provided a starting point for the agency’s investigation into his affairs. The agency argued that the only inference that could sensibly be drawn from the evidence gleaned from its investigation was that P derived his income through unlawful conduct in the form of drug trafficking and money laundering. It further argued that, almost without exception, every mortgage application made by P in relation to the relevant properties contained false information about his income and the source of that income. That, it submitted, also amounted to unlawful conduct.

Held: (1) The allegation of drug trafficking, which relied on police intelligence and P’s association with individuals with drug convictions, had not been proven. The same went for the allegation of money laundering. However, with one exception, the agency had made out its case on mortgage fraud. P had made substantially false statements as to his income and he had intended and expected those statements to be relied on.

(2) (Obiter) The case illustrated the breadth of application of the civil recovery legislation. As the law stood, any person, however otherwise law-abiding, could be the subject of a recovery order if he made a deliberately false statement in a mortgage application form. It was important that that should be more widely known, and it would be desirable for mortgage-providers to spell out in their application forms that possible consequence of a misstatement.

Application granted.

Claire Dobbin (instructed by the in-house solicitor) for the applicant; Andrew Bodnar (instructed by Lewis Nedas & Co) for the respondent.