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Another UK lawyer loses licence over Chiluba’s thefts

Another UK lawyer loses licence over Chiluba’s thefts
By George Chellah and Chibaula Silwamba
Sun 06 Feb. 2011, 04:01 CAT

FREDERICK Chiluba’s syndicate lawyer Mohamed Iqbal Meer’s practising licence has been suspended for three years because of his dealings involving the stolen Zambian government money. This is according to the Solicitors Disciplinary Tribunal findings and decision, which have been filed with the Law Society.

The Solicitors Regulation Authority, who were the applicants in the matter, were represented by David Burton while Mohamed Iqbal Meer of Meer Care and Desai was represented by David Morgan of RadcliffesLeBrasseur.

Meer’s firm was used to launder money stolen from the Zambian government by former president Chiluba’s (left) syndicate.

The tribunal heard that Meer sent 125,000 pounds to a Swiss outfitter who made suits and shoes for Chiluba.

He paid 50,000 pounds for the education of Chiluba’s children using the Zambian government’s money. Meer also supplied Chiluba with bundles of cash when he visited London and assisted him to build up a property portfolio in Brussels.

Below is the Tribunal’s finding and decision

Allegations

The allegations against the respondent were that he had:
1. Contrary to the provisions of Rule 1 of the Solicitors Practice Rules 1990 compromised or impaired or had been likely so to do, either or both of the following:
(i) his independence or integrity; (ii) his good repute or that of the solicitors’ profession.
The particulars were that he had: (a) permitted money to pass into and out of his client account when there had been no underlying legal transactions or the provision of legal services and where he had merely been acting as a conduit to receive and pass on/return monies to clients or third parties. “(b) failed to be alert to the very substantial sums of money passing through client account and the circumstances relating to their distribution which should have put him on inquiry as to their authenticity or legitimacy. (c) failed to investigate or to adequately consider the possibility that his firm had been utilized to facilitate money-laundering or other illegal activity. It was alleged that the responded had been grossly reckless.
2. Contrary to Note (ix) to Rule 15 of the Solicitors’ accounts Rules 1998 failed to exercise caution when asked to provide banking facilities through his client account.

Factual Background

The respondent, born in 1940, was admitted as a solicitor on the 1 December 1987. His name remains on the Roll of Solicitors.
At all material times the respondent had been carrying on practice as Meer Care & Desai from 97-99 Park Street, London W1K 7HA.
The Attorney General of Zambia had brought proceedings in the Chancery Division of the High Court in London seeking the recovery of monies. Those monies had been misappropriated during the presidency of Dr Chiluba and had been partly laundered through London bank accounts operated by the respondent’s firm and that of another firm of London solicitors.
The two firms had been the first and second defendants in those proceedings together with 18 other defendants. The trial of that action had taken place between 31 October 2006 and 27 February 2007 with judgment being handed down on 4th May 2007. The trial had been heard in private so that criminal proceedings in Zambia against Dr Chiluba and others would not be prejudiced.

The High Court Judge, Mr Justice Peter Smith, had found that the respondent had dishonestly assisted in the removal of money from the Republic of Zambia. The Court of Appeal had allowed the respondent’s appeal against the finding of dishonesty against him but otherwise the High Court judgment had been undisturbed.
A report, dated 18 August 2006, and a Supplementary Report of 26 January 2007 by Grant Thornton UK LLP, instructed as joint expert, and presented to the Court as agreed expert evidence, had traced monies passing through the respondent’s client account back to the Zambian Ministry of Finance. That expert forensic accountancy evidence had not been disputed by the respondent in the court proceedings. The total sum paid from Zamtrop, an account at Zanaco – a branch of the Zambia National Commercial Bank in London, to the respondent’s client account, as detailed in the Supplementary Report, had been $6,401,020.17.
The respondent had operated office and client accounts from National Westminster Bank Plc in North Audley Street, London. As at the date of the Law Society’s Forensic Investigation Report (the Report) 17 October 2003, the firm had one office account and client accounts in Pounds Sterling, US Dollar, Australian Dollar, Euro and South African Rand.

Persons and Bodies relevant to the proceedings

Zanaco – Zambia National Commercial Bank – a Zambian government owned bank. It had a London branch from which the respondent received payments into his client account.
Zamtrop – the name given to an account at Zanaco in London – monies had been paid into that account from Zambia and then paid into the Respondent’s client account.
ZIS – Zambia Intelligence Services – the Zamtrop account had been opened and/or maintained for the benefit of that organization.
AFS – Access Financial Services – a company for which the respondent had acted. It had been described in a letter of 20 December 2002 to the Law Society as “a financial institution incorporated in Zambia and duly registered and regulated by the Reserve Bank of Zambia (Central Bank) and authorized by the Zambian Government to act as a financial institution in Zambia”. It had acted for corporate and individual clients and for the ZIS and it had introduced many of its clients to the respondent. The respondent had described in his letter of 17 April 2003 how he had made payments on behalf of clients of AFS. When monies had been transferred from the Zamtrop account they had been credited to client ledgers in the name of AFS, said by the respondent to be “for ZIS”.

Faustin Kabwe – AFS chief executive officer and a director of AFS. He had held the same position for Access Leasing Limited, a wholly owned subsidiary of AFS. He had been a long standing client of the respondent. He had informed the respondent when to expect credits from the Zamtrop account and had given instructions for the money to be distributed. On 24 November 2004 the Attorney General of Zambia had obtained a worldwide freezing injunction against Mr Kabwe (and others) in his capacity as a defendant in civil proceedings brought by the Attorney General of Zambia.
Irene Kabwe – Faustin Kabwe’s wife and 55 per cent shareholder in AFS; she and their children had resided in USA (New York) and she had also been a defendant in the same civil proceedings brought by the Attorney General of Zambia.

Mr Xavier Chungu – Director General of the Office of the President of Zambia during the presidency of Dr Frederick Chiluba. He had been a joint and then a sole signatory to the Zamtrop account. The respondent had met him after Mr Kabwe had made an introduction. No attendance note had been kept of the meeting. He had also been a defendant in the same civil proceedings brought by the Attorney General of Zambia.
Aaron Chungu – Director of AFS with Mr Kabwe and had given instructions with him to the respondent as to how money was to be distributed. He had also been a defendant in the same civil proceedings brought by the Attorney General of Zambia.

Francis Kaunda – Chairman of AFS and a defendant in the same civil proceedings brought by the Attorney General of Zambia.
In order to investigate and establish the facts, on 2 April 2003, the respondent had been interviewed by Mr Uddin and Mr Fletcher, investigation officers employed by the Law Society. Prior to that on 21 and 22 August 2002, the respondent had had discussions with Mr Uddin.

Access Financial Services (AFS) and Mr Faustin Kabwe had both been long standing clients of the respondent. Mr Kabwe had been the chief executive officer of AFS and its majority shareholder. He had controlled AFS. The chairman of AFS had been Mr Francis Kaunda and AFS had worked for the Zambian Government. During the discussions in August 2002, the respondent had stated to Mr Uddin that monies had been paid into and out of the firm’s client account in circumstances where there had been no underlying legal transaction and where the firm had been effectively providing banking facilities to AFS and/or Mr Kabwe.

The respondent had stated that the firm had not received specified sums of money for specified purposes but had received and transmitted monies as instructed by Mr Kabwe. The firm had not known, at any time, what sums were going to be credited to its client account, only that sums were to be credited and that Mr Kabwe had complete discretion as to what was to be done with such monies. Monies had been sent out of and back into Zambia via the firm’s client account.
The respondent had explained to Mr Uddin that he had not been required to apply legal skills because the monies had not been processed as part of the provision of a legal service but he had been providing what the respondent had described as a “secondary services”. While often monies from Zambia would be remitted back to Zambia, sometimes monies would be disbursed, on instructions, to various recipients.

The respondent had also explained, when giving evidence in the court proceedings, that he had had a long relationship with Mr Kabwe, who had introduced clients to the firm. In April 1995, Mr Kabwe had made contact with the respondent in London and had informed him that he was setting up a new company called Access Financial Services Ltd, the purpose of which would be to provide financial services to businesses in Zambia. Mr Kabwe had wanted the respondent’s firm to act as the company’s London solicitors.
Subsequently, in the Autumn of 1995, at the Churchill Hotel in London, Mr Kabwe had introduced Mr Chungu, the Director of the Zambian Intelligence Services (ZIS), to the respondent and it had been that introduction that had resulted in the relationship with Zamtrop and the movements of monies. The respondent had not been paid for those services, which had not been in connection with legal work and which he had described as secondary services.

The respondent had accepted that he had been requested to provide such secondary services by both Mr Kabwe and Mr Chungu. However, his meeting with Mr Kabwe and Mr Chungu had not been documented by way of any file note or letter of confirmation of instructions. The respondent had been aware that AFS would be carrying out unspecified financial services for ZIS and that ZIS would be using both AFS and the respondent’s client account to disguise its role. He had assumed subsequent transactions to have been related to those services.
Between November 1995 and April 2001, large sums of money had been credited to the respondent’s client account. The Forensic Investigation Report had revealed that substantial sums of money had been transferred, from time to time, from the Zamtrop account in Zanaco on behalf of AFS. The monies had been credited to the firm’s client account, usually in US Dollars, pending the receipt of instructions from Mr Kabwe as to what to do with them. It had been a recurring feature of the receipts that they had not been made to enable the firm to carry out any legal transactions in which they had been instructed to act as solicitors.
The firm would receive instructions from Mr Kabwe, from time to time, to disburse sums of money; sometimes but not always, the same sums as had been received. Those instructions, which the Report had noted had invariably been complied with immediately and without enquiry, had been to disburse sums to a variety of recipients in various countries.
The evidence given by the respondent in the High Court proceedings had been to the effect that he had received monies into his client account in substantial sums and had distributed such monies to third parties on the instructions of Mr Kabwe, whom he had trusted. He had failed to pay any or any proper regard to the Law Society’s warnings to the profession on money laundering.

The Forensic Investigation Report had contained a summary of the individual amounts of US Dollars and Sterling received into the respondent’s client account in seven client account ledgers under the names of Mr Kabwe and/or AFS and of the payments out of client account from those ledgers. Over a period of about seven years, the respondent’s firm had received approximately $9.48 million and 69,000 pounds of which some $7.82 million had come from the Zamtrop account. The balance had been accounted for as “repayment of loans to AFS” ($1.11m and 7,000 pounds) and “other sources” ($536,000 and 62,000 pounds). The report had also contained a detailed analysis of all the amounts received and what had happened to those sums.
Payments made from client account had also included substantial sums in cash paid to Mr Kabwe, amounting to some $64,000 and 43,000 pounds, and not linked to any legal transaction. Transfers of amounts of $408,000 and 4,000 pounds had been made to Mrs Kabwe, as well as payments to educational establishments of $137,000.
Payments of $987,000 to Cave Malik a firm of solicitors had been made by the respondent. He had explained to Mr Uddin, the Law Society’s investigator, that Cave Malik had been acting for AFS on certain legal transactions and that it had not been possible for the funds to be sent directly from AFS to Cave Malik although the reason for that had been unclear.

30. The Forensic Investigation Report had referred to other payments amounting to $1.8m and £155, 000. Some ten payments from client account had been made on instructions from AFS and/or Mr Kabwe, although the Respondent had said that he had not known why the specific monies had been paid out other than as a provision of a “secondary service” i.e. the provision of banking facilities.

31. Some $150, 000 had been made “as loans” although the respondent confirmed that he had simply made payments on the instructions of AFS and had not acted in the setting up of the loans or provided any legal services connected to them.

32. The respondent’s professional indemnity insurers had declined to afford indemnity insurance in connection with any claims arising from the instructions from Mr Kabwe/AFS. That declinature had been upheld at arbitration on the ground that the respondent had not provided services as a solicitor in the course of his practice, following a challenge by the respondent.


Preliminary matter

33. Mr Morgan told the tribunal that the respondent admitted the second allegation i.e. that contrary to note (ix) to rule 15 of the Solicitors Accounts Rules 1998 he had failed to exercise caution when asked to provide banking facilities through his client account.
Documentary evidence before the tribunal

34. Inter alia, the Tribunal reviewed the Rule 4(2) Statement and the documentary exhibits attached to that statement, including the forensic investigation report dated 17 October 2003. The tribunal also had the benefit of the agreed expert tracing evidence prepared by Grant Thornton for the High Court proceedings, the Respondent’s first statement, dated 8 September 2006, made within those proceedings, as well as excerpts from the transcripts of the evidence given by the Respondent.

35. The Judgment of Mr Justice Peter Smith dated 4 May 2007 in the High Court proceedings and the Judgment of the Court of Appeal dated 31 July 2008 were both considered by the Tribunal, as well as a Statement in Response to the Tribunal proceedings, dated 10 November 2010, together with its exhibits. References on behalf of the Respondent were also reviewed by the Tribunal.

Oral evidence from the respondent


36. The Respondent relied on his Statement in response to the Tribunal proceedings, dated 10 November 2010, together with its exhibits.

37. In relation to the payments that he had made to Mr Kabwe, after he became aware of the allegations against Mr Kabwe following the publication of articles in the Zambian press in June 2002, the Respondent insisted that he had believed at the time that those payments had been appropriate.

38. The Respondent explained that he had made a payment from AFS funds of $7,500 to Mr Kabwe’s lawyer in Zambia believing it to have been a legitimate payment because it had been a firm of lawyers. A further payment of $75, 000 had been made to Cave Malik. That payment, the Respondent said, had been made from credits in the name of Harptree Holdings Ltd; a separate company from ASF and owned by Mr Kabwe.

39. The Respondent stressed that he had been told, during the meeting at the Churchill Hotel, by Mr Chungu that ASF would be working for ZIS (the Zambian Intelligence Services). He insisted that he had no reason to suspect the bona fides of either Mr Chungu, the head of the Zambian Securities Services, or of Mr Kabwe, whom he had known in a professional capacity for some 30 years. Indeed, the Respondent said that he had believed that he had been helping a democratic, multi-party Zambia. The funds had been coming from a bank owned by the government of Zambia, based in London. Moreover, the fact of the monies passing into and out of client account had not been hidden in that all transactions had been fully recorded in his firm’s accounts.

40. In cross-examination, when detailing his professional history, the Respondent accepted that he had been aware of the concept of money laundering but had not been actively involved in dealing with it as an issue in his work and had believed it to be mainly related to drugs and crime.

41. In relation to the fact that some $7.1 million of Zambian Treasury money had passed through his client account, the Respondent said that he had been horrified and damaged professionally by the events. However, he insisted that while looking back he could accept that he had been foolish and naïve, and might have been negligent, he found it difficult to accept that he had compromised his independence or integrity.

42. The respondent agreed that he had never seen any documentation to confirm that the monies being paid into his client account had in fact belonged to ASF. He had believed it to be ASF money because Mr Kabwe had told him that it had been and because ASF had been working for ZIS.

43. The Respondent agreed that he had trusted Mr Kabwe and had never asked about the reasons for the financial transactions. He had acted on Mr Kabwe’s instructions in writing and could not recall whether he had ever thought to ask for explanations. While he was now aware of a payment of some $200,000 from his client account to a mens’ outfitters in Switzerland, at the time he had probably assumed that it had been to a financial institution. The Respondent agreed that he had been aware that he had been making payments in respect of school fees and while with hindsight he should have been suspicious, he had not been so at the time.

44. The Respondent explained that he had seen himself as acting as a man of affairs for an overseas client and had not considered that he had had any right to ask that client about the origins of payments in or the purposes of payments out. While agreeing that maybe he should have enquired a bit more, the Respondent said that it would have been very difficult for him as it would have been prying into his client’s business.
45. In relation to the payment of $75, 000 that he had made in October 2002, some four months after he had become aware of the allegations of fraud against Mr Kabwe, the Respondent agreed that at that time he had no longer trusted Mr Kabwe. He also agreed that he failed to properly assess the risk involved in making that payment in that he could not have been sure of the origin of the money in the Harptree account. The respondent said that as he had been sending the money to Cave Malik, he had not considered it a risk.
Moreover, Harptree had not been mentioned in the reports in the Zambian Press.

46. In relation to the payment of $7,500 to Mr Kabwe’s lawyers, the respondent explained that he had probably paid the money out of ASF funds on the written instructions of Mr. Kabwe. At the time he had not thought about the possibility of it being money belonging to the Zambian Treasury, although he had been aware of the serious allegations of fraud and corruption involving Mr Chungu, Mr Kabwe and AFS. In any event he had felt the need to wait to see what the Zambian authorities would do.

Findings as to Fact and Law

Allegation 1 – compromised or impaired independence or integrity and/or his good repute or that of the solicitors’ profession.

47. The Applicant had explained that the allegations related to the flow of money through the Respondent’s client account which had often, although not exclusively, been circular in nature in that monies had gone back to source. If not circular, monies had been disbursed on instructions to various recipients. The Applicant had referred to the common features of such movements of monies as being the absence of legal transactions, the absence of knowledge as to why the monies had been passing through client account and the absence of explanatory documentation on the matter files. Moreover, the recipients of the monies had not been clients but third parties who had no connection with any legal transactions. The Applicant had submitted that effectively the Respondent had become a banker for Mr Kabwe and AFS. The Tribunal accepted those submissions.

48. The applicant had referred to the Respondent’s evidence in the High Court as being entirely supportive of the allegations. He had submitted that to have simply trusted Mr. Kabwe and to have acted, as he had done, with so much money, which had in fact been stolen from the Republic of Zambia, the Respondent had been grossly reckless.

Moreover, as well as providing no legal work, the Respondent had acted in secret by not telling his partner of the meeting with Dr. Chungu and by not recording that meeting or the instructions arising from it.

The Respondent’s departure from the standards expected from solicitors had been, the Applicant had submitted, very substantial. Again the tribunal accepted those submissions noting only that the Respondent’s partner would have access to and involvement with the firm’s accounts in which all the transactions had been recorded.

49. The Applicant had submitted that principals should always know why money is passing in and out of client account and that the circumstances had demonstrated that the Respondent’s firm’s client account had been operated by the Respondent as a respiratory for the money pending a direction from AFS/Mr Kabwe in a situation where the Respondent had failed to make any proper professional enquiries. The Tribunal agreed and found that to have been the case.

50. Referring to the Supplementary Report of 26 January 2007 by Grant
Thornton UK LLP, the Applicant had submitted that the individual traces of monies had shown the receipt of monies from the Zambian Ministry of Finance to Zamtrop and thence to individual ledgers of the Respondent's client account. Payments out from client account, on the instructions of AFS/Mr Kabwe, had shown repetition, a circular flow of money and the provision of banking facilities for others involved in substantial misappropriation of money in that inter alia the Respondent had paid cash, school fees and credit card bills. Again the Tribunal accepted that position.

51. While accepting that under cross-examination the Respondent had appeared to have conceded that his actions had caused some damage to the reputation of the profession, Mr Morgan had submitted that the Respondent had not compromised or impaired his independence or integrity.

52. Mr Morgan had noted that some legal services had been provided to AFS. Moreover, he had submitted that it was important for the Tribunal not to apply today's standards when considering transactions taking place some years ago and handed to the Tribunal referred to a summary of the relevant money laundering regulations and guidance.

53. Mr Morgan had reminded the Tribunal that Mr Kabwe had been a long time client and work colleague of the Respondent. Mr Kabwe and Mr Chungu, the Head of the Zambian Intelligence Services, had told the Respondent that ASF would be carrying out services for ZIS and that ASF would be receiving monies. Mr Morgan had referred the Tribunal to the Respondent's evidence in the High Court proceedings and to the comments of the Court of Appeal. He had submitted that the Respondent had been stupid and naïve believing himself to have been more worldly than in fact he had been. Unknowingly, he had been sucked in to an intelligent scam. Monies had appeared to have been coming from impeccable source and the Respondent had believed that he had been following appropriate instructions.

54. Having fully considered all of the extensive evidence, as well as the helpful submissions of Mr Barton and Mr Morgan, the Tribunal found the allegation proved and fully substantiated on the facts. The Tribunal was satisfied, so that it was sure, that in permitting monies to pass into and out of his client account when acting for Mr Kabwe and AFS without any enquiry, the Respondent had compromised his independence and integrity and his good repute and that of solicitors' profession.

55. In assuming the role of “a man of business”, the Tribunal was satisfied that the Respondent had lost or ignored his ability as a solicitor to form independent judgments of transactions. His conduct in his relationship with Mr Kabwe and with ASF had involved very serious failings in terms of professional misconduct.

56. The Tribunal was extremely concerned that following the meeting in the Churchill Hotel in 1995, the Respondent had failed to make a detailed attendance note and to seek confirmation of his instructions in writing. Thereafter, the Respondent had received monies from various sources and disbursed monies to various sources, opening accounts in the names of non-clients, all without question or inquiry.

57. The Tribunal did not accept that the Respondent had been unaware of the issue of money laundering. As a solicitor, he had been under a duty to follow the guidance provided to the Profession by the Law Society and he had failed to have regard to those warnings and to exercise proper caution in relation to the vast sums of money passing in and out of his client account over a period of some seven years. In this the Tribunal was satisfied that the Respondent had not been merely negligent but reckless. He had an obligation to ascertain what had been happening and he had decided not to ask appropriate and pertinent questions.
58. The Tribunal considered that the recklessness of the Respondent had increased as the amounts of money and diverse payments had increased.
In particular, the Tribunal found that there could be no excuse whatsoever for the two payments made by the Respondent in 2002 following the allegations of fraud and corruption in the Zambian press. In both cases the Respondent had sought to justify his actions by saying that he had been following his client, Mr Kabwe´s instructions, while acknowledging that at the time he had not trusted him. The Respondent had appeared to have taken no regard of the possibility, which he had acknowledged in evidence, that the monies that he had handed over, could properly have been traced back to the Zambian Treasury and had not been acquired legitimately.

59. The Tribunal noted that in doing something out of the ordinary for clients i.e. “acting as a man of business”, the Respondent had had no regard to the assessment of risk in such situations.

Allegations 2 - Contrary to Note (ix) to Rule 15 of the Solicitors’ Accounts Rules 1998 failed to exercise caution when asked to provide banking facilities through his client account.

60. This allegation was admitted and the Tribunal found it to have been fully substantiated on the facts.

Mitigation

61. Mr Morgan reminded the Tribunal that the Court of Appeal had exonerated the Respondent of any dishonesty. He submitted that the damage to the Profession had been limited by the nature of the mainly overseas press coverage.

62. Mr Morgan referred the Tribunal to the various references submitted on behalf of the Respondent including one from former President Mandela and to the Respondent’s previously blame-free and long career law.

63. The Respondent might have been naïve, stupid and foolish but, Mr Morgan submitted, he had not realised what had been happening until it had been too late. Mr Morgan also referred again to the lower general awareness of money laundering when the events had taken place some eight to 15 years ago.

64. Mr Morgan detailed the personal and financial consequences of the Respondent and his wife, who had been a salaried partner in the firm, of his involvement with Mr Kabwe and with AFS from the commencement of investigations in 2002 to the present. Although the Respondent did not wish to practise again, he was involved in charitable work from which, if he were to be struck off, he feared he would have to resign.

Application for costs

65. The Applicant sought an order for costs to be subject to detailed assessment if not agreed.

Sanction and Reasons

66. Having taken all the representations and references into account, the Tribunal determined that given the absence of any dishonesty and the fact that it did not consider the Respondent to be a danger to the public, the penalty of striking off was not appropriate or necessary.
However, in the light of the Tribunal’s findings of recklessness, a penalty of suspension for a period of three years was appropriate and the Tribunal so ordered.

Decision as to costs

67. The Tribunal was satisfied that the proceedings had been properly brought and that accordingly there should be an order for the Applicant’s reasonable costs to be paid by the Respondent to be subject to detailed assessment if not agreed.

The Order of the Tribunal

68. The Tribunal Ordered that the respondent, Mohamed lqbal Meer of c/o David T Morgan, 9 Gray’s Inn Square, London, WC1R 5JF, solicitor, be suspended from practice as a solicitor for the period of three years to commence on the 23rd day of November 2010 and it further Ordered that he do pay the costs of and incidental to this application and enquiry to be subject to a detailed assessment unless agreed between the parties to include the costs of the Investigation Accountant of the Law Society.
Dated this 31st day of January 2011

On behalf of the Tribunal
JN Barnecutt
Chairman

Labels: CORRUPTION, COURTS, FREDERICK CHILUBA

posted by MrK @ 7:28 PM