22 August 2014

Proceeds of Crime

In following up the preceding item about 'the Corby Raid' I've noted the May 2014 Senate Legal and Constitutional Affairs References Committee report Current investigative processes and powers of the Australian Federal Police in relation to non-criminal matters [PDF].

The report comments that
Several submitters and witnesses commented on the AFP's processes and use of investigative powers in the recent case involving Seven West. Concerns were raised in relation to several issues, including: the AFP's decision to proceed with a search warrant; errors in the warrant and associated documents; and the conduct of officers during the execution of the warrant. 
Decision to proceed with a search warrant 
The decisions made on 17 February 2014 by the AFP to proceed with seeking and then executing search warrants against Seven West were questioned by submitters and witnesses. AFP representatives gave an explanation at the committee's public hearing as to why the decision was taken to proceed with executing the search warrant: 
[We] needed to ascertain as best we could whether or not we had the ability to obtain a literary proceeds order and we had to do that as soon as possible, because previous dealings in relation to literary proceeds matter with this family—nothing to do with Channel 7 whatsoever, though—had seen money go offshore and outside the jurisdiction. So we wanted to move quickly in case a deal had been done, and we tried to establish whether or not a deal had been done. I know Channel 7 has said that no deal has been done. I must take that on face value to say that no deal has been done, but at this particular point in time when we executed the warrants and had served production orders we were not aware that that was the case. 
Timing of obtaining the search warrant 
The timing of the AFP's decision to seek a search warrant was queried, given that the warrant was sought early in the afternoon of 17 February, several hours before the 5.00pm agreed deadline for Seven West to provide additional documents to the AFP. Representatives from the AFP acknowledged that it would have been  preferable to seek out a magistrate after the 5.00pm deadline had lapsed, rather than obtaining a warrant earlier in the day. However, the AFP defended obtaining the warrant on the basis that it was a pre-emptive measure to ensure that it was available, if necessary, for execution the following day:
[The warrant was obtained] with a view to executing it if necessary on the following day. It was purely a logistics exercise. It is not one that I would like to repeat. An instruction has been provided to our officers that in my view it is less than optimal that you apply for a warrant prior to the expiration of the time given to comply with the production order. But at the end of the day nothing changed. The circumstances had not changed. We still were not in receipt of the materials that we believe existed, and indeed we located during the search warrant. 
Acting AFP Commissioner Andrew Colvin APM OAM emphasised that obtaining a search warrant did not mean that the AFP was obliged to proceed with executing the warrant, and argued that the AFP would not have had to execute the warrant if Seven West had provided the material the AFP expected by the 5.00pm deadline on 17 February. 
The AFP noted that the timing of seeking the warrant was also influenced by the availability of a magistrate: It can be quite challenging, particularly in New South Wales, to locate magistrates after hours who can issue warrants. So, it has become practice on some occasions to try to identify magistrates who are available and fit within their schedule. On this occasion, inquiries were made and we were advised that the last possible time available that day for any magistrate was 3.30pm, and if we missed that time frame it would not be available to us until the following day, but they could not confirm a time. 
Further, the AFP informed the committee that the decision to go ahead with execution of the warrant (on 18 February) was made at 5.49pm on 17 February, after the 5.00pm deadline for the production of information. 
Content of the search warrant, affidavit and section 246 order 
The contents of the search warrant and associated orders obtained by the AFP on 17 February 2014 was canvassed thoroughly in submissions and at the committee's public hearing, with errors in those documents and the omission of other relevant information the primary concerns raised. 
Errors contained in the warrants and associated orders 
The AFP acknowledged as early as 21 February 2014 that the section 246 order obtained on 17 February contained an error, being the statement that Seven  West's legal representative was 'reasonably suspected of having committed the offence stated in the relevant warrant', when this was not the case. At that time the AFP stated that '[i]t is a regrettable error, but it is an innocent word-processing error'. The AFP also stated that it did not consider the error to invalidate the order or warrant its revocation. 
In addition to the section 246 order, the search warrant itself listed various parties as 'suspects, entities or other matters that are the subject of the investigation', when in fact those parties were not suspects. In the Federal Court judgment in relation to this matter, her honour Justice Jagot found that both the section 246 orders and search warrants issued were materially affected by legal error and ruled that the orders and warrants be quashed as invalid and of no effect. 
The AFP stated that the errors in the search warrant and associated orders occurred as a result of mistakes made using standard form documents during the drafting process. In relation to the section 246 assistance order, Deputy Commissioner Michael Phelan APM informed the committee:
[T]he people in our office in Sydney had not done a section 246 order before. It is a very similar order to that contained within the Crimes Act section 3LA...They asked Canberra for advice, and that advice was given, but the advice that was provided was wrong. It was off one that had been provided similar to section 3LA of the Crimes Act, which had those provisions in it...[T]he correct document in format is actually in the DPP search warrant manual, which with all those manuals is on our system. I stand to be corrected, but I think section 246 orders are in that manual in the correct format and were in the correct format prior to that day. Had the correct procedures been followed—in other words, officers downloading from the internal system, which they are guided to under all of our guidelines et cetera, doing that one and the supervisors checking it, then arguably the fatal flaw of those words would not have occurred. It would not have changed the substance of anything else; just those [incorrect] words would not have been in there.
Deputy Commissioner Phelan explained that a similar failure to follow established process led to the errors associated with the search warrant:
The other [mistake] is the words that were contained within the affidavit or the search warrant. I believe that it referred to 'entities' as being 'suspects'. That is also a pro forma that sits on our website—on our investigators' toolkit. The correct warrant and affidavit format is in there as well. It contains drafting instructions in terms of filling out bits and pieces: 'If they are suspects, write "the suspects". If they are entities, write "the entities".' And so on. The drafting instructions were not removed from this particular  search warrant. Therefore...that was also fatal in terms of the warrant and the affidavit. The correct documents and the correct pro-formas exist now and existed at the time, as well. They were just not used. When things were vetted they were not picked up [by] supervisors, et cetera. So in terms of practice and procedures, they are there. We have to do some work about making sure that they are followed.
The AFP confirmed that it was reviewing its internal processes to ensure such documents are used correctly in the future:
We have taken a fair bit of remedial action over the last six weeks, as you would probably imagine. We will still take some action, going forward, to ensure that supervisors make sure that these properly drafted documents are used properly. These documents have been drafted by the DPP, our own lawyers and everybody else and are correct; we continually update them as the law changes, whether the parliament alters the law or whether it is judge-made law. We are continually updating these and they are the one source of truth for our members when they go ahead and do it. If the documents are wrong that is a fatal mistake for all of us. But, essentially, those documents are correct—and were correct at the time.
Explaining the legislative framework for literary proceeds matters 
Her honour Justice Jagot held that the AFP did not make it clear to the issuing magistrates that neither the deriving of literary proceeds nor the payment or facilitation of a payment which might give rise to a literary proceeds order is, in itself, an offence. Justice Jagot stated that there 'was no cogent explanation' of the literary proceeds scheme in the material made available by the AFP to the issuing magistrates, and held that it was likely that the magistrates were led into error by the AFP and assumed that the POC Act created an offence relating to the derivation of literary proceeds.3 
Seven West argued in its submission to the inquiry that it is critical that magistrates are fully informed about the operation of Commonwealth legislation with which they may not be closely familiar when considering applications by the AFP: 
It cannot be assumed that a Magistrate would be aware of the way in which the [POC Act] operates and especially not the fact that there is no criminal offence involved or alleged when dealing with the payment of literary proceeds. It is especially necessary in those circumstances that any application for search warrants or section 246 orders involves the full and frank disclosure of all material information to the Magistrate, to the same standard required on any ex parte application for civil relief.
At the committee's public hearing, it was suggested that AFP officers could be directed to take a copy of relevant provisions in Commonwealth legislation when making an application to a magistrate, to ensure that magistrates are fully informed. Acting AFP Commissioner Andrew Colvin commented: 
As a matter of course, there is no guideline that I am aware of that says that our investigators should take the [relevant Act]. Having said that, I know from my own experience that it is commonplace that we would and it is often commonplace that the magistrate would have it as well. The affidavit does go to what needs to be in the magistrate's mind before the warrant, the order or whatever it might be is issued. What they must satisfy themselves of is contained in the affidavit, but of course, if the magistrate wants broader context, then that would come from the [A]ct itself.
The AFP stated further in a supplementary submission:
The suggestion has also been made through the inquiry that applications for warrants or production orders made under [the POC Act] should be accompanied by relevant extracts of the legislation, or that copies of the Act should be made available to the magistrate as necessary and appropriate (particularly where applications are made outside chambers). The AFP would be happy to consider integrating this suggestion into its practices and procedures for literary proceeds investigations.
Scope of the production order and search warrant 
Another point of contention related to the scope of the production order and the subsequent search warrants obtained by the AFP, which were drafted in different terms. During the execution of the warrant at Channel Seven's Pyrmont office, the AFP was provided with two documents that had not been obtained under the original production order:
There were two documents that were handed to police. One identified a number of draft agreements containing payments to a total of $550,000, including consideration of accommodation and security. There was an unsigned exclusive agreement by email dated 7 February 2014 to Mercedes Corby as an agent for Schapelle Corby for an interview in consideration for $550,000 with an attachment detailing accommodation, security and driver services paid by Channel 7. 
One of the key points of dispute between Seven West and the AFP was whether these 'draft agreement' documents produced under the terms of the search warrant also fell within the terms of the initial production order issued to Seven West, and hence should have been handed over to the AFP on 14 February as part of the initial order for production of documents. 
The production order required production of eight different categories of documents, including any electronic and written records relating to payment arrangements or contractual arrangements entered into in relation to Ms Corby, and electronic and hardcopy communications between Seven West and Ms Corby or any relevant third parties. The search warrant was drafted in different terms and called for originals or copies of evidential material including: contracts, agreements, payments, bonuses, financial records, emails, hand written notes, and communications, including electronic communications, in relation to the Corby matter. 
AFP representatives agreed that the search warrant was drafted in broader terms than the production order. It argued, however, that the production order was still drafted widely enough to capture the two 'draft agreement' documents produced under the search warrant: 
The AFP believes that the production order covered certain unsigned draft agreements or similar and that the two documents obtained from Seven West in under the search warrant fell within the scope of the original production order...It is our view that relevant drafts of contracts which were actually finally entered into, or drafts of contracts not ever entered into but communicated between Seven West and Ms Corby, would be captured by the terms of the production order, and that the terms of the production order were sufficiently clear to enable Seven West Media to understand the nature of the documents being sought. 
In particular, Deputy Commissioner Michael Phelan highlighted two conditions in the production order that the AFP believed would have captured these documents, namely:
  • electronic and hard copy records of any other benefit from Seven West Media or other associated companies in relation to [Ms] Corby; and 
  • electronic and hard copy instructions and/or arrangements relating to [Ms Corby] and/or any other person providing direction for any form of payment or benefit derived from the commercial exploitation of her criminal notoriety to a third party. 
Conversely, Seven West argued that the draft agreements did not fall within the scope of the initial production order:
It is clear that the draft documents which were later supplied to the AFP [during the execution of search warrants] on 18 February 2014, did not fall within the terms of the Production Order as those documents did not relate to or evidence any “payment arrangements”, “electronic and written transfers”, “contractual arrangements”, “trust account payments”, “records of any other benefit”, “electronic and hard copy communications”, or “electronic and hard copy instructions and/or arrangements relating to Corby” as specified in the Production Order. The draft documents were never signed or otherwise entered into and therefore did not constitute evidence of any payment or benefit or arrangement. At best, those draft documents comprised a proposal or theoretical deal which had not at the time of the raids, and has not since, been confirmed or agreed. 
Seven West continued:
The ongoing assertions by the AFP that Seven had not complied with the Production Order are of serious concern to Seven. They amount to an allegation that Seven has committed a criminal offence in failing to comply with the Production Order. This is a very serious matter that can have serious implications for Seven in relation to renewal of its broadcast licences and in other areas of its business dealings.
The Rule of Law Institute also commented on this issue in a response to questions taken on notice. RoLIA stated that 'the debate over this issue shows that whether a production order has been complied with by a respondent should be left to a neutral umpire'. It suggested that its proposed amendment in relation to the granting of search warrants (see paragraph 3.19 above) would require that a magistrate who receives an application for a search warrant must first determine whether or not a production order has been complied with. 
Other options for obtaining information that could have been pursued  
Seven West also suggested that the AFP could have sought undertakings from Seven West and its related entities to ensure that any payments made in relation to the Corby matter did not leave Australia: 
It is common practice prior to commencement of other civil litigation for one party to request undertakings from another not to engage in particular conduct. In this instance, as the Federal Police indicated that the specific matter of concern was that money may have been paid and moved out of the jurisdiction, the AFP could have requested a written undertaking from Seven not to make any payments to Schapelle Corby or any person acting on her behalf until such time as they had been able to ascertain whether any agreement existed between Seven and Ms Corby.
The AFP representatives emphasised that during the investigation the AFP utilised the powers currently available to it under the POC Act, and that the ability to obtain undertakings during literary proceeds investigations could be a useful addition to those powers. The AFP made clear in a supplementary submission that it would be supportive of an enforceable undertakings mechanism being introduced in the POC Act only if such a mechanism did not replace the existing investigative powers under the POC Act, but rather gave the AFP another potential course of action for pursuing investigations.  
The AFP noted that a range of factors would need to be considered in framing any enforceable undertakings provisions in relation to literary proceeds matters, including that undertakings: would have to be entered into voluntarily by both parties; would need to override any contractual obligation that the media / publishing organisation may have or intend to have with the individual concerned; and that there would need to be appropriate penalties or action that could be taken in response to breaches of undertakings.  
Conduct of officers during the execution of the search warrant  
Seven West argued that the AFP officers responsible for executing the search warrants on 18 February acted in a heavy-handed manner, including by having firearms visible during the execution of the warrants:
The warrants were carried out in an extremely aggressive manner, using over 30 armed police officers from the Serious and Organised Crime division. The raids caused distress to Seven West Media employees and appear in many aspects to have been carried out not in accordance with the AFP Code of Conduct.  
It was noted that Seven West had lodged a formal professional standards complaint with the AFP over the conduct of its officers relating to the application for and execution of the search warrants on Seven West and its solicitors. Acting AFP Commissioner Andrew Colvin told the committee:
[A]s soon as these matters came to light, [AFP Commissioner Tony Negus] referred it to our professional standards area, who are looking at that, including claims that firearms were visible and that people were overly aggressive. We will take that matter and we are taking that matter very seriously.
Cost of the investigation  
A further issue raised was whether the execution of the warrants on Seven West and associated entities was a proper use of AFP resources within the Serious and Organised Crime Division. Seven West argued that the actions of the AFP were 'completely disproportionate' to the stated objectives of the search warrants, and that the deployment of over 30 AFP officers on this matter amounted to a 'clear misuse of Commonwealth resources'. 
In relation to the number of officers involved in this investigation, Acting Commissioner Colvin stated:
[O]ur officers make judgements, about what manpower they require to execute [a] search warrant. Search warrants, by their nature, require us to search and require us to do certain things. We will use, and we should always use, the minimum force required to get the job done. Obviously, that is a point of conjecture in this matter. 
In response to a question on notice about the cost of the investigation, the AFP informed the committee that, as at 24 February 2014, 'the cost of the time of officers involved in the raid execution of search warrants and associated investigations, including work on [the] production order before the warrant' was estimated at $88,143.
The Committee's recommendations are -
R1 The committee recommends that the Australian Federal Police develops and provides mandatory education and training tools to its investigators in relation to the nature of investigations in support of civil action under the Proceeds of Crime Act 2002 (Cth).  
R2 The committee recommends that, when making applications for search warrants under section 225 of the Proceeds of Crime Act 2002 (Cth), the Australian Federal Police presents all relevant information to the issuing magistrate, including full details of any other information gathering activities undertaken by the Australian Federal Police in relation to the matter and whether such activities are ongoing. 
R3 The committee recommends that the Australian Federal Police implements protocols to ensure that applications made to a magistrate for the granting of search warrants or other associated orders must be accompanied by a copy of the legislative provisions to which the application relates. 
R4 The committee recommends that the Commonwealth government investigates options for distinguishing literary proceeds matters from other matters under the Proceeds of Crime Act 2002 (Cth) with particular consideration given to:
  • retaining literary proceeds matters within the POC Act, and amending the Act to clearly distinguish between literary proceeds matters and other proceeds of crime matters; or 
  • removing literary proceeds matters from the POC Act altogether and creating standalone legislation to deal with literary proceeds matters. 
R5 The committee recommends that the Commonwealth government develops and introduces amendments to the Proceeds of Crime Act 2002 (Cth) in order to ensure that, wherever possible during investigations under the Act, information is sought via a production order before a search warrant is granted. 
R6 The committee recommends that the Commonwealth government investigates options for introducing enforceable undertakings powers as an option available to law enforcement agencies during literary proceeds investigations. 
R7 The committee recommends that the Commonwealth government develops and introduces legally enforceable protocols governing the procurement of information or records from media organisations during investigations by the Australian Federal Police. 
In developing these protocols, the Commonwealth government should consult with relevant stakeholders and have regard to relevant examples from other jurisdictions, including the United States' Government's Policy regarding obtaining information from, or records of, members of the news media; and regarding questioning, arresting, or charging members of the news media. 
R8 The committee recommends that the Australian Federal Police and relevant media and publishing stakeholders develop guidelines to be observed during the execution of search warrants on the premises of media organisations in circumstances where a claim of journalists' privilege is made. 
R9 The committee recommends that the Proceeds of Crime Act 2002 (Cth) be amended to ensure that information subject to journalists' privilege cannot be obtained by the Australian Federal Police during proceeds of crime investigations unless the criteria contained in subsection 126H(2) of the Evidence Act 1995 (Cth) are met.