WALLIN KARLSEN v. DENMARK
Inadmissible
Christos Rozakis
The applicant, Jan Wallin Karlsen, is a Danish national, who was born in 1952 and lives in Åhus, Sweden. He is represented before the Court by Jacob Arrevad, a lawyer practising in Copenhagen The respondent Government are represented by their Agent, Ms Nina Holst-Christensen of the Ministry of Justice. The facts of the case, as submitted by the parties, may be summarised as follows. In the beginning of the 1990s a new concept called “tax asset stripping cases” (selskabstømmersager) came into existence in Denmark. It covered a criminal activity by which the persons involved committed aggravating debtor fraud by buying up and selling numerous inactive solvent private limited companies within a short period, and for the sake of their own profit, “stripping” the companies for assets, including deposits earmarked for payment of corporation tax. Often the persons involved systematically acquired the inactive, solvent companies for the companies' own fund. The persons involved were usually intricately interconnected and collaborated about their economic criminal activities, which concerned very large amounts. According to surveys made by the customs and tax authorities, approximately one thousand six hundred companies with a total tax debt exceeding 2 billion Danish kroner (DKK) were stripped in the period from the late 1980s until 1994. Following a number of legislative amendments, the trade in inactive, solvent companies largely ceased in the summer of 1993. On 11 May 1992 the tax authorities sent a letter to the police in Frederikssund and requested assistance to investigate a case of tax asset stripping involving two Swedish nationals. The preliminary investigation, which was undertaken in secret, began in the autumn of 1992 and revealed that the applicant and many other Danish nationals were also involved. Behind closed doors and thus unknown to the applicant, on 20 January 1993 the City Court in Frederikssund (Retten i Frederikssund), henceforth referred to as the City Court, granted warrants to the police to search the premises of the applicant, but also those of a number of banks, accountants' firms, law firms and companies that had been used by the applicant and others in relation to the tax asset stripping. On 23 February 1993 the applicant was arrested and charged with tax asset stripping of about twenty-seven companies in the period 19891993. At the same time the police carried out a search at his premises in accordance with the above court order. The applicant was released the following day. The City Court issued a discovery order on 25 March 1993 with regard to a specified bank and its documents relating among others to the applicant. Subsequently, on 19 April 1993 the applicant was arrested anew, still charged with tax asset stripping relating to about twenty-seven companies. Also, his premises were searched anew. Subject to court orders, the applicant was detained on remand in the period from 20 April until 2 June 1993 when, on appeal, the High Court of Eastern Denmark (Østre Landsret), henceforth referred to as the High Court, released him stating that there was no reason to suspect that he would be able to hamper the on-going investigation if set free. In the period from the summer of 1993 until January 1996 the City Court issued numerous search warrants and discovery orders concerning banks, lawyers, state-authorised public accountants, credit card companies and other companies. Thus, court orders relating to the above residing in Denmark were issued by the City Court on 26 August, 7 October and 3 November 1993; on 4 January, 25 February and 22 August 1994; on 7 September and 27 October 1995; and on 15 January 1996. Court orders relating to the above residing outside Denmark and corresponding international letters of request were issued by the City Court on 6 July 1993 as to a number of companies on the Isle of Man and in London; on 15 October 1993 as to a credit card company in London; on 5 November 1993 as to two banks in Vanuatu in the Pacific Ocean; on 1 September 1994 as to a bank and a company in Gibraltar; and on 9 November 1994 as to a bank in Switzerland. In the same period, as part of their investigation, the Danish police also required assistance from various individuals and institutions in Sweden, France, Belgium, Luxembourg and Israel. Furthermore, in order to assist the police in processing the material obtained from the searches and the discovery orders a firm of stateauthorised public accountants was hired to untangle the intricate corporation structures and ownership structures of the companies, as well as the problems of tax technicalities posed by the case and the thousands of financial transactions. Hence, in the period from 1 November 1994 until 15 September 1996 audit reports were drawn up for each of the seventy-five companies that had been stripped of their assets as well as an additional number of companies that had been used as intermediaries and buyers and a seemingly fictitious bank registered in Vanuatu. The accountants also made a statement on financial transactions concerning the companies involved. In the meantime, by judgment of 26 May 1994 the City Court convicted the two Swedish nationals, who in May 1992 had been reported to the police by the tax authorities. They were both convicted in accordance with their confessions and sentenced respectively to four and six years' imprisonment. In January 1996 the public prosecution informed the City Court that an indictment in the applicant's case was expected to be ready in April 1996. At the same time it was emphasised that the two Swedish nationals, who had been convicted by the same City Court, were to be heard as witnesses on the prosecution's behalf. Accordingly, in order to avoid issues of impartiality, the presiding judge of the City Court in a letter of 5 February 1996 requested the President of the High Court to appoint a substitute judge in the case against the applicants and the co-charged. The presiding judge of the City Court pointed out that dates for the hearings needed to be scheduled as soon as possible, and that it should be taken into account in this respect that each of the eight defendants had their own chosen counsel, some of whom were already busy with other cases in months to come. In February 1996, the City Court (with a substitute judge appointed), the public prosecutor, counsel for the applicant and counsel for the seven cocharged agreed on provisional dates for scheduling court hearings. As the trial would take up a lot of space, the City Court had to rent suitable facilities to accommodate all the persons involved and all the documents. In June 1996 the City Court signed a lease contract for appropriate facilities which, however, needed to be refurbished before the trial could begin. By indictment of 1 July 1996, submitted to the City Court, the applicant was indicted inter alia pursuant to section 283, subsection 1 (3) cf. section 286, subsection 2, and cf. section 23 of seventytwo counts of fraudulent preference of a particularly aggravated nature involving tax asset stripping of about seventy-four companies, having been committed in collaboration with the seven coaccused and others. Pre-trial reviews were held on 24 June, 2 July and 7 August 1996, during which it was decided inter alia that the trial commence on 9 October 1996 and that two days each week should be scheduled for the trial. Twenty-two court hearings were fixed for the period from October until December 1996; sixty-five hearings were fixed for 1997; and about thirty hearings were fixed for the period from January until April 1998, reserving May 1998 for closing speeches. Also, the City Court appointed back-up counsel for the applicant and the co-accused. Another pre-trial review was held on 12 August 1996. Furthermore, during the months of August and September 1996, procedural questions were determined e.g. as to whether seventy-five audit reports and various other reports concerning the financial transactions of the companies and persons involved were admissible as evidence during the trial. This was answered in the affirmative by the City Court on 15 August 1996, a decision that was upheld on appeal by the High Court on 23 September 1996, and by the Supreme Court (Højesteret) on 4 March 1997. A decision of 23 September 1996, according to which the City Court judge did not have to vacate his seat on the bench due to disqualification, was upheld on appeal by the High Court on 7 October 1996. The proceedings began as planned before the City Court on 9 October 1996. Thereafter approximately two court hearings took place every week, except from the month of July when the parties involved took their summer holiday. Altogether, one hundred and fifty-eight whole court days were used before the City Court for the trial, including fours days of pre-trial review. In February 1997 fifty-two additional dates for hearings to be held during 1998 were scheduled. On 8 August 1997 dates for twelve additional hearings were scheduled for November and December 1998, and fifteen additional hearings for January to March 1999. In December 1997, the City Court allowed that one of the co-accused change counsel, provided that such would not entail any delay of the trial. Also, the City Court stated that the trial had to be brought to an end within the dates previously scheduled and that no extension would be permitted. In the period from 9 October 1996 until 28 January 1999, the applicant, the seven coaccused, and fifty-three witnesses were heard, including two state-authorised public accountants, who gave evidence over several days in which they collaborated on the audit reports, etc. In addition, statements of accounts and a considerable amount of other documentary evidence were presented about e.g. corporate structures involving Danish and foreign companies and money transactions in Danish and foreign banks. Each exhibit for the case took up about one hundred and thirty-five A4 binders and contained approximately fifty thousand pages of documentary evidence, including the seventy-five audit reports concerning the solvent companies that had been stripped of their tax assets and about eight audit reports concerning companies used for emptying the solvent companies and a statement of financial transaction. On 8, 11 And 15 March 1999 the public prosecutor gave his closing speech. Counsel for the applicant gave his closing speech on 10 and 11 May 1999. Counsel for the seven co-accused gave their closing speeches on 12, 17, 18, 19, 20, 25 and 26 May 1999. On 31 May 1999 a hearing was held at which the applicant and the coaccused were given an opportunity to make a statement. The proceedings were then adjourned pending the City Court's deliberations. The court records of the proceedings ran to two thousand three hundred and twenty-three pages. By judgment of 10 August 1999, which ran to two hundred and twentyfive pages, the City Court convicted the applicant of inter alia tax assets stripping in respect of the said seventy-two counts of the indictment. The court found that the applicant was one of the principal offenders and that he had been involved with tax asset stripping concerning an amount of approximately DKK 76 million equal to approximately € 10,133,330. He was sentenced to four years' imprisonment. In addition, for an indefinite period, he was deprived of his right to establish or to become manager and/or member of a director's board in a private limited company, or in a company or an association which would require public approval. By the same judgment five of the coaccused were convicted and two of them acquitted. As to the length of the proceedings the City Court stated as follows: “The [applicant and the co-accused] were charged in the period from February to April 1993, and prosecution was initiated by indictment of 1 July 1996. The trial started in October 1996. There is no basis for establishing that the investigation has been unnecessarily inactive during any period, nor is there any reason to criticise the scope or length of the investigation in view of the nature and magnitude of the case. Thus, there is no violation of Article 6 of the Convention on Human Rights”. However, when imposing the sentence the City Court stated: “Although the public prosecution cannot be blamed for the length of the proceedings, nevertheless, in metering out the sentence the court has taken into consideration the strain inflicted on [the applicant and the co-accused], due to the fact that the proceedings have extended over so many years”. On 16 August 1999 the applicant appealed against the judgment to the High Court and the Public Prosecution cross-appealed on 20 August 1999. The judgment was also appealed against by five of the co-accused, in respect of whom the public prosecution served a cross-appeal during August and September 1999. On 18 October 1999 the High Court appointed back-up counsel for the applicant and the co-accused during the appeal proceedings and in agreement with the parties scheduled a pre-trial review to take place on 11 January 2000. According to the court records of the latter day, the High Court tried to commence the hearings in June 2000, but that this was not possible as several of the counsel chosen by the co-accused had to appear as counsel in other prolonged proceedings. They were therefore unable to attend the appeal proceedings until January 2001. This also applied to one of the applicant's counsel, who could not attend the appeal proceedings because he had to appear for the defence in three other comprehensive criminal proceedings which would take up seventy-two days in the period from 1 June 2000 until 1 January 2001. In addition, he had to attend a number of hearings in other less comprehensive cases in the same period. Thus, the proceedings were scheduled to begin on 30 January 2001 and, at the request of the parties involved, the High Court fixed sixty-eight hearings to take place. In the meantime practical and procedural matters were dealt with e.g., in respect of the latter, the High Court's intention to lift a prohibition against disclosure of names. The trial commenced on 30 January 2001, and thereafter two court hearings took place almost every week. On 12 March 2001 the Public Prosecutor requested that the proceedings against one of the co-accused be separated for a special hearing and that a judgment to acquit him be passed immediately because some conditions of the Administration of Justice Act relating to the indictment had not been satisfied. The High Court passed judgment accordingly. On 19 March 2001 one of the co-accused withdrew his appeal. As the Public Prosecutor withdrew his cross-appeal the High Court dismissed the case as to this co-accused. On 26 March the prosecution submitted an amended indictment of 21 March 2001. Notably, the description of the time of the alleged crime was changed from periods into exact dates in each count of the indictment, and one sentence was inserted as to the counts concerning aggravated debtor fraud so that not only the loss actually caused by the applicant was included, but also the obvious risk of a loss that he had inflicted the private limited companies. Furthermore, the prosecution withdrew four counts of the indictment. Counsel for the applicant and the co-accused claimed dismissal or further corrections of the amended indictment, which was dismissed by the High Court on 2 April 2001. In the period between 26 June and 7 August 2001 the proceedings were adjourned due to illness on behalf of one of the co-accused. On 17 September 2001 the case was set down for judgment. In the period between 30 January and 17 September 2001, altogether thirty-seven court hearings were held, during which the applicant, the coaccused and witnesses were heard, including one of the stateauthorised public accountants. In addition, audit reports, statements of accounts and a considerable amount of other documentary evidence were presented. By judgment of 19 December 2001, which ran to fifty-nine pages, the applicant was convicted in accordance with the indictment of 21 March 2001, but for seven counts, including the four counts that the prosecution had already withdrawn. Thus, the applicant was found guilty of sixty-five counts, in which the total sum of unpaid taxes amounted to approximately DKK 71,000,000 equal to approximately € 9,466,500. The sentence was increased to five years' imprisonment and the deprivation of his right to become manager etc. was confirmed. As to the length of the proceedings the High Court stated: “The acquisitions of the approximately 75 companies originally comprised by the indictment took place from October 1989 until October 1992. In February-March 1993 [the applicant] and [two of the co-accused] were charged with fraudulent preference in relation to the acquisition of 27 inactive, solvent companies which had made claims against the tax authorities for payments of tax compensation of just over DKK 29 million. A report was lodged with the police in May 1992. The indictment was drafted in July 1996, the City Court trial commenced in October 1996, and judgment was passed on 10 august 1999. The High Court trial commenced in January 2001 after a pre-trial review had been held with the then eight counsel in January 2000. Although proceedings lasting almost nine years in a criminal case must be considered, in principle, as a violation of the right to a “hearing within a reasonable time” afforded by Article 6 § 1 of the European Convention on Human Rights, no violation is found to have occurred in this case in respect of any of the defendants. [When reaching this] decision it has been found of importance that the case turned out to involve a far larger number of company acquisitions than originally assumed, that the company acquisitions took place by means of a large number of companies, both as intermediaries and as buyers, that the various tax elimination initiatives made it necessary for the Public Prosecutor to gather [information on] and elucidate a large number of intricate corporate structures, several of which were domiciled in or connected with foreign, sometimes exotic tax havens where investigation had to be made, and that consequently extremely comprehensive audit work was required to elucidate each individual company's money transactions, which were normally pure book entries without any real content. It cannot be attached importance that the City Court proceedings lasted about three years and at that time concerned eight defendants, as the relevant crime was a new form of complex economic crime involving examination of a considerable number of witnesses and production of substantial documentary evidence, and each defendant's role in the group had to be clarified. Moreover, no inactive periods are found to have occurred during the proceedings”. When metering out the sentence the High Court stated: “The High Court ... has taken into account that [the case] concerns aggravated and systematic offences against property involving very substantial amounts and committed by several offenders jointly under cover of highly non-transparent transactions. The length of the time elapsed since the offences were committed has also been taken into account. In view of the nature and the scope of the offences, the High Court has found no basis for suspending the sentences imposed in full or in part.” The applicant's request of 21 December 2001 for leave to appeal against the judgment to the Supreme Court was refused by the Leave to Appeal Board (Procesbevillingsnævnet) on 15 April 2002.