Everybody knows the story. The Chicago police and FBI couldn’t get prohibition-era mobster Al Capone for racketeering or rum-smuggling. So they got him for tax evasion instead.

Capone, badly defended in court and suffering from the first stages of syphilitic dementia, was jailed for 11 years. But his highly politicised conviction did little to reduce gangland violence in the Windy City.

And, despite its high profile, his trial really failed to set a dramatic precedent for smart alternatives to conventional law enforcement.


Image: Al Capone before his tax evasion conviction.

Yet many people assume such tricks – because that is what it was – have been used against the underworld ever since. They haven’t. At least not to any significant scale in the UK.

The Herald, however, can now reveal that for the last 18 months Police Scotland and HM Revenue and Customs have been sharing intelligence about gangsters in a completely new way.

The result? Unprecedented civil and criminal scrutiny of the tax affairs of hundreds of “prominent nominals”, the police jargon for significant figures in the top 20 per cent most troublesome organised crime groups.

Above: How The Herald's Camley saw the showdown between the underworld and the taxman.

David Odd, assistant director of the HMRC’s Fraud Investigation Service, can’t think of an example of such work before. But he has hedged his bets. Such activity, he said, was “vanishingly rare”.

So why, up till now, have Scottish and UK law enforcement not used the Capone trick? And what has changed to make this happen?

Well, Capone was a thug, no doubt about that. And he evaded taxes. But the way he was caught would present difficulties in a modern Scottish or European rights legal framework. Because admissions he had made about his untaxed income during negotiations with US authorities were used as evidence in his criminal trial. Civil and criminal matters were cross-contaminated. And that can get very messy.

In the new Scottish system this shouldn’t happen. Why? Because there are Chinese Walls between civil and criminal matters.

Mr Odd confirmed that civil tax matters were being explored even while parallel criminal investigations are underway.

But evidence from the two processes must be kept apart, firewalls put in place to ensure a civil process does not contaminate a criminal one. Overseeing the whole process is the Crown. But there are more than narrow legalistic reasons why Scotland has not previously tried to use parallel civil and criminal actions against known underworld figures.

Mr Odd, pictured above, explains. “There are difficulties in it. They relate to powers and the fact that it is potentially abusive to mix the powers that you are using.

“We have to be very careful that we are able to separate our activity and our outcomes.

“You have to make certain that, while the work is co-ordinated, that one set of activities under one set of rules does not contaminate another set of activities under another set of rules.

“That is a problem.”

There were cultural issues too that have held back such joint operations.

The job of HMRC, after all, has always been to maximise the tax take. While the work of the police is to tackle criminality.

However, under Scotland’s all-encompassing strategy for dealing with organised crime and the problems it create, including for legitimate businesses, both bodies are signed up to reduce harm.

And that means HMRC has changed its rules of engagement with organised crime. It is “committed” to reviewing the tax affairs of those 20 per cent even if, under its previous risk strategy, this would not have been worth the effort from a financial point of view.

The Herald view: Great potential in new strategy on organised crime

This is controversial. Last week some commentators criticised another parallel effort to disrupte organise crime: civil proceeds of crime actions.


One significant action, stripping £1m from two Glasgow underworld figures, was attacked because the subjects of the action received about the same amount of public money as they lost to defend their case.

It was, therefore, according to such critics, a waste of money going after their cash.

This criticism, however, misses the point. The objective of civil proceeds of crime is not to raise revenue, it is to disrupt criminals. Without cash, they can’t operate.

And even their fight to keep their cash wraps them up in court and legal matters that consume their time and energy when they would otherwise by inflicting damage.

The same logic applies to tax actions against criminals, convicted or otherwise. HMRC may not may not raise additional revenue. But it will do meaningful damage to criminals and their core activities, such as drug dealing.

That is why Police Scotland is so keen on the scheme.

Gerry McLean, a detective chief superintendent who works closely with Mr Odd, said: “For organised crime groups their financial base is their power base. It gives them their profile and standing within the community, supplemented by intimation.

“If you can strip that financial basis away, you can strip the power and standing the group has within the community. You can also bring opportunities for legitimate business and social entperises within that community to flourish.”

So how did Mr Odd and Mr McLean and their colleagues come to work so closely together? Well, because of Gartcosh.

Both men and their teams are based in a huge white building close to the one-time North Lanarkshire steel town. The Scottish Crime Campus, still not two years old, has brought together 18 agencies to fight the underworld. Proximity has sparked ideas.

Mr McLean, who leads on organised crime for Police Scotland, stressed Gartcosh had created innovations as partners in the campus looked at new "tactical options" at joint meetings.

He said: "Rather than exhausting conventional law enforcement tactics we are able to set up an investigation to be more efficient and impactive by looking across the entire table."

Both Police Scotland and HMRC have undergone mergers in recent years. This, officials say, has seen cultural changes and a willingness to share ideas and, again using bureaucratic jargon, "ownership" of issues.

So Police Scotland, for example, is comfortable with bodies such as HMRC taking the lead in certain areas of their joint work.

This has included chasing the wealth tax evaders squirrel away offshore.

Mr Odd said: “We have a number of different fora in Gartosh, two of them are chaired by HMRC as opposed to the police. That raised eyebrows at the beginning. It has worked very well to date and it is going to work even better in the future as we slip in to what we are doing.”

Graeme Pearson, pictured above, was a senior police officer who championed the creation of Gartcosh and working with partners like HMRC.

Now a Labour MSP he stressed that tax actions could reach middle-class white-collar criminals in a way other types of law enforcement could not.

He said: “This is going to be a really positive way of dealing with people who may not get their hands dirty in crime but who profit from criminality.

“It is just a shame it has taken so long to get to this stage.”

Mr Odd stressed that HMRC has never quite ignored white-collar tax evaders, the accountants and lawyers on the fringes of the underworld.

He said: “We have never had our eye off these individuals.

"There is a distinction between a bona fide lawyer whose client base is entirely legitimate and rooted within the community and somebody who makes it their business to be a fellow traveller for organised crime."

He said that the old system was “fit for purpose” but Gartcosh had taken co-operation to a new levels.

Mr Odd explained: "We have managed to refine it and make it better. We will never be in an end state but we will continue to change as it goes along. It will change less now but there are still things that we can do.”


Image: The Scottish Crime Campus at Gartcosh.

Under Mr Odd's wing is the long-standing Criminal Tax Unit. This department has always gone after tax evaders revealed in criminal investigations, but not in a systematic way.

It was, Mr Odd said, "the last chance saloon", using evidence from investigations that, perhaps, had failed to deliver a full prosecution for criminality. But methodical information-sharing is entirely now. "The Capone thing has gone right to the top," Mr Odd said.

But Mr Odd expects results. Scotland’s Capones – and the men and women who disguise themselves as entrepreneurs or philanthropists – are going to have to explain where their money came from.

He said: "Our overall aim is to reduce the harm organised crime causes. We are certainly expecting to win this battle. I can see things happening now that we are doing that they are going to find very difficult to frustrate.”

Here is how The Herald print edition reported news gangsters were facing unprecedented tax investigations: