UK: The Serious Fraud Office Reports...

Last Updated: 25 July 2014
Article by David N. Kirk

The Serious Fraud Office has just published its 2013/2014 Annual Report. Anyone reading it in the hope or expectation of gaining some insights into what the SFO does or what causes it concern may be a trifle disappointed: of the 72 pages of the report, I could find only 4 that contained anything of interest.  In four paragraphs on page 1, David Green CB QC, the Director of the SFO since April 2012, sets out his mission: to take on the really difficult fraud cases, as envisaged by Lord Roskill in the Fraud Trials Committee Report in the 1980's, better cooperation with law enforcement partners in the UK and abroad, and to build up an intelligence capability.  No one could argue with that.  He states that high quality staff have been recruited and retained.  On page 3 there are some statistics about the number of cases in progress (12 new investigations, and 5 trials, of which 3 were completed during the relevant period).  On page 5 there is some analysis of the SFO's budget, which has been in the region of £35-£39m since 2009, but 'Blockbuster' funding for Libor and other cases brought it up to £51,379,000 last year.  On page 27 there is mention of two reviews carried out into a 'data loss' incident which occurred a year ago: this involved sending, by mistake, material gathered during an investigation to a witness.

The remainder of the report, 68 pages, is devoted to accounts, governance statements, risk assessments, lists of salaries, pensions and bonuses, policies, and attempts generally to comply with what might be generously described as transparency requirements. The Director, as 'Accounting Officer', had to sign off on 4 audits and accounts. 

In the old days the annual report was a more festive publication.  It contained some accounts and statistics, but also a good deal of information about how the office works, case studies, photos and profiles. No doubt this is not the current way of doing things in any government department or agency, but it was more interesting.  It might be said that you can go to the SFO's website (currently being reinvigorated) to read case studies, and find out about what people do, but the Annual Report was a convenient template for providing an annual review of progress. 

So what are we to make of the SFO's current state, based on this Annual Report, and on the press reports about the office during the last year?  It may be that the recently demoted Ken Clarke's review of the law enforcement response to City scandals (see my blog on this last month – 'Ken Clarke reviews the law enforcement response to City scandals' - for a critical review of the possibilities) will provide some answers during the next year or so, but I will attempt to flesh out the Annual Report, and provide my own markings. 

First, I will declare an interest: although I have never worked for the SFO, I have had continuous dealings with it since it was set up in 1988, either acting for the defence in their prosecutions (honours about even), or being interviewed for the job of Director (unsuccessfully), or cooperating (more or less successfully) with them as a fraud prosecutor at the CPS and FSA.  I have known, professionally, and in some cases personally, all the Directors and many lawyers and investigators who have worked at the SFO.  In all these dealings I have had huge respect for the work done by the office.  When defending, I always found that the quality of investigation and preparation was high.  It has always been possible, as a defence team, to engage professionally with the SFO about issues and concerns, large and small.  Case presentation, service of documents and trial preparation were always high quality.  When working alongside the SFO while at the CPS and FSA/FCA, I was impressed by the commitment and skill of the people I engaged with.  At the same time, I am only too acutely aware of the massive challenges that complex fraud cases present at all stages of their development, from initial vetting through to trial and verdict. 

I am therefore a supporter of the SFO, and I like to think that my opinion counts for something because of my long association with, and knowledge of, the organization.  Many others, particularly in the press, are less ardent admirers.  Private Eye's extremely well regarded City Slicker column has for many years referred to the SFO as the 'Serious Farce Office' and has derived some pleasure from taking the SFO to task for its failures.  It has never referred to its many successes, including the recent Innospec convictions.  It's only comment on the Annual Report was to draw attention to the size of various redundancy payments.  Failures and cock-ups are so much more newsworthy.  And of course there have been cases that can be cast as failures, most recently in the Dahdaleh case, where there was some controversy about the reliance placed on a 'key' witness who then refused to give evidence; and cock-ups, notably in the applications for search warrants in the Tchenguiz case.  Litigation surrounding the latter continues, and is likely to do so for some time to come, hanging like the proverbial sword of Damocles over the SFO's head.  The truth is, however, that although the buck stops with the SFO for these failures, the causes were far more random than has been reported. 

The failure of a significant bribery case, and being sued for more that £100m, are not matters for rejoicing, but neither should they be used to justify any attempts to start a debate about whether the SFO is worth having.   Those who comment on the SFO from the cosy distance of never having put a complex fraud case together are entitled to express a view, but it is rarely worth taking seriously.  The reasons for having a SFO are as valid now as they were in 1988: overheated City conduct in the wake of Big Bang has many similarities to the financial sector ethics of the last 10 years. The importance of the City being properly policed and called to account cannot be overstated, given London's position as a world financial centre and the need to be able to assure investors and businesses that they can safely do business here. David Green is right to state that the current job of the SFO is to tackle these issues.  It should leave 'standard' fraud (identity theft, boiler rooms and the like which are committed by career, and sometimes, organised criminals) to the expertise of the City of London Police, the Economic Crime Command and the Crown Prosecution Service.  This is not in any way to underplay the challenges of investigating trying these cases, or the significance of such fraud, which causes loss and distress to thousands of victims, and needs to be robustly tackled.  It is simply to emphasise that complex City fraud needs the kind of unified approach, expertise and special tools that Roskill advocated and that the SFO has developed. 

In the Report, David Green lists some of the cases that the SFO is currently pursuing.  This includes the Libor prosecutions, but also the Barclays/Qatar financing and the Rolls Royce corruption investigations.  There are recent reports that the SFO is to begin an enquiry into Forex benchmark fixing.  These, and other, complex investigations present formidable challenges.  In the days before the SFO's existence such matters would be consigned to the 'too difficult' tray.  Taking on these cases, at the extreme edge of what is possible within the constraints of the UK criminal justice system, is now a vital part of the law enforcement programme. 

Concurrently, the SFO must demonstrate that it can prosecute cases under the Bribery Act 2010, so far untested, and work out how best to take advantage of the new Deferred Prosecution Agreement provisions.  It must find a way to take on senior management, holding them to account for corporate failures and criminal conduct within their organisations. New criminal offences may assist in bringing such cases (although I have my doubts about this). It must try to simplify its cases and speed up the investigatory process.  It must ensure that cooperation with domestic and international law enforcement works effectively.  All of this is very much easier said than done, but they are issues that are bound to be high on David Green's agenda.  Ken Clarke's review may also look at all this, in addition, perhaps, to considering whether the Roskill template - unified approach, section 2 notices, preparatory hearings, transfers - needs refreshing in the light of experience, and whether there is scope for adopting the Fraud Trials Tribunal procedure to complex fraud cases (or implementing the part 7 Criminal Justice Act 2003 provisions) in place of jury trial.  

So the Report, if couched in old fashioned school report jargon, might conclude with: "Green could (or perhaps must) do better," "All to play for," and/or "Green's results in the next year will be critical".  After two years in the job, David Green is now about to start prosecuting the cases he has personally taken on, and his judgements and tactics will be under scrutiny.  I wish the SFO luck with its current caseload and look forward to a more illuminating end of term report next year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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