Jersey Court Endorses Proprietary Claim To Proceeds Of Corruption In re The Representation Of Lloyds TSB Offshore Trust Company Limited

1. The Jersey Court has very recently made a significant finding regarding the basis upon which a financial institution holds money which is said to be the proceeds of bribery and corruption.

2. In Re the Representation of Lloyds TSB Offshore Trust Company Limited (31 October 2013), Jersey's Royal Court was asked to determine the ownership of the assets held in a Jersey law-governed discretionary trust, known as the Rex Trust.

3. The trust was established in Jersey in February 1999. The settlor, Mr Carlos Fragoso, described himself as a civil engineer and informed the trustee that the funds settled into the trust were the proceeds of civil engineering consultancy contracts which he had worked on over the previous twenty years, predominately in the United States, Swaziland and South Africa. He did not disclose that he had held public office in Mozambique.

4. In 2010 the trustee's periodic review brought to light some disturbing information arising from the recent conviction in England of Mabey & Johnson ("M&J") for paying bribes in order to secure construction contracts. An M&J internal investigation had led M&J to self-report to the SFO and to plead guilty to charges of bribery. M&J was ordered to pay £6.6 million in fines.

5. M&J's activities in Mozambique did not form the basis of any charge to which it pleaded guilty, but the opening statement of the prosecution, available on the internet, revealed that M&J had admitted that corrupt payments were made directly to elected or appointed Mozambique public officials.

6. M&J's investigation had found that between 1995 and 1999 M&J had received £6 million from contracts in Mozambique, that Mr Fragoso was National Director of the National Directorship of Roads and Bridges in Mozambique and subsequently the Chair of the National Road Administration, that M&J had met with Mr Fragoso, and that between 1997 and March 2000 it had paid him approximately £300,000.

7. In the light of this information the trustee submitted a Suspicious Activity Report to Jersey's Joint Financial Crimes Unit.

8. The trustee then informed Mr Fragoso of its concerns and sought evidence from him as to the source of funds and specifically that the funds were not the proceeds of crime, which he failed to provide.

9. The trustee then issued a Representation seeking a declaration from the Jersey Court that the trust fund was held by it as constructive trustee for the Government of Mozambique.

10. The Court joined Mr Fragoso to the proceedings, together with members of his...