The latest misfortune to explode over the heads of the Serious Fraud Office is the collapse, just before Christmas, of its case against Victor Dahdaleh on charges of corruption in connection with aluminium contracts. Last week a judge at Southwark Crown Court laid the blame for the failure squarely at the feet of the SFO, because by relying on a third party to carry out a significant part of the investigation on its behalf, it had laid itself open to the risk that the third party would not be reliable.
Other problems the SFO has faced in the last year or so include complaints about payments made to departing senior staff, mis-accounting for VAT payments, and the Tchenguiz arrest warrants.
Apart from the major headaches listed above, the SFO has an impressive list of challenges. These include, but are not limited to:
- The problem of ensuring that it has the funds and expertise to mount the most complex cases it has so far tackled. The SFO has, like many public authorities, faced massive funding cuts over the last few years, and although this is partly offset by blockbuster funding agreements for investigations like Libor, it is never easy to absorb cuts to the basic budget without losing momentum and morale.
- The stakes are very high in the Libor cases, and any failure to secure convictions will be met with a torrent of media abuse.
- It must also succeed in getting convictions under the new offences in the Bribery Act 2010 in a way that proves both that the provisions work, and that businesses will behave better as a result. Other challenges come from the increasing globalization of commerce and investigations.
- No longer can the SFO count on conducting investigations in the UK, without having to rely on getting evidence from other jurisdictions. Most of its investigations, including bribery cases, will now involve other jurisdictions (a seriously complicating factor in the Dahdaleh case). The MLAT process always leads to considerable delay and expense.
- The SFO also often has to negotiate with other jurisdictions, and other authorities, about who is going to take proceedings, and in what order.
- Coming up on the rails is the issue of how the agency will deal with its new powers to settle cases by way of deferred prosecution agreements.
- The huge explosion in digital media, and the need to engage in massive disclosure exercises, poses problems that are almost insurmountable.
- There remains a threat that the government will revert to its 2010 plan to concentrate all fraud prosecutions in the CPS, and have the investigations carried out by the police (principally the City of London Police) and a beefed up Economic Crime Command. The Central Fraud Group at the CPS has proved itself to be a very effective prosecutor (and as a former Director of that division I can attest to that) including its successful prosecution in 2012 of Adobole, the UBS rogue trader, whose activities involved losses of over £2bn.
On the surface therefore the SFO appears to have a mountain to climb, and to be mired in an expensive cycle of failure from which it might not emerge for some months or even years.
But is this a fair assessment? Is there, in fact, a good deal to celebrate about the achievements of the SFO since it was set up in 1988? Is the future really so bleak? I believe that there is much to celebrate, and I do not subscribe to the gloomy prognostications of the relentlessly hostile press which the office has endured – dubbed almost from the outset 'The Serious Farce Office' by Private Eye. It is worth remembering that the main reason why the SFO was established, following the Roskill Report, was that complex fraud cases had not been tackled effectively, or indeed at all, by prosecutors. There was a fear that Big Bang in 1986 would lead to increasing seriousness and complexity in fraud allegations. Had the government of the time followed more of Roskill's recommendations the Agency would have been better placed to take on complex cases, but it has, at any one time, always been tackling a number of cases which other agencies would not have been able to take on at all. It is interesting that the SFO is held in high regard in other jurisdictions, but of course no one is a hero in their own country.
When defending SFO cases, as I did throughout the 1990's and through to 2006, I was always impressed by the care and professionalism with which cases were prepared. The current Director, General Counsel and Senior Advisor, are all highly skilled and with usefully diverse experience, and the same goes for the rest of the senior management team. The quality and commitment of its staff continues to be a feature of the office. And at least there was the conviction of Asil Nadir to celebrate in August 2012, 20 years after his Polly Peck empire collapsed and he fled to Northern Cyprus.
But the truth is that the picture painted by high profile results is very mixed. Looking back to its earliest days, it can be said that it was successful in the Guinness prosecution (Ernest Saunders and others). It took on the 'Blue Arrow' case in 1989, following a DTI enquiry, and although convictions were overturned on appeal, the fact of the allegations being investigated at all had a significant impact on City conduct at the time. Other very complex investigations followed, including Maxwell, Wickes and BCCI, with, it must be admitted, very varied degrees of success. The SFO suffered the misfortune that their cases were almost always defended by the best barristers and legal firms, and that the management of trials was extremely difficult to get right. For a period of three or four years around the turn of the millennium there were plenty of successful prosecutions, but it might be said that they did not involve such challenging cases.
During the course of 2013, according to the SFO's press releases, 5 cases resulted in convictions against 6 defendants (the SFO Report for the year to March 2013 refers to 12 trials involving 20 defendants). None of the cases in 2013 was headline grabbing, ranging from boiler rooms, making false statements, theft of about £1m, and bank fraud. All the 2013 completed cases, and most of the cases, like JJB Sports, where charging decisions were announced, were started by the previous administration.
When David Green CB QC became the Director of the Serious Fraud Office in April 2012 he stated that he intended to take the SFO back to where it began – tackling serious and complex City crime, as well as large-scale corruption, which involve damage to UK plc, rather than boiler rooms and the like. He has turned his back on the alternative dispute resolution approach which the previous regime approved, stating that the SFO is a prosecutor, and the public expects individuals and corporations to be prosecuted in the criminal courts rather than reach cosy financial settlements. DPAs will be deployed in appropriate cases, but will not be routine. The cases that he has taken on have, as luck would have it, been complex City fraud, including the Libor cases, Weavering Capital, and the allegations against senior management at Barclays in connection with the Qatar refinancing deal. Forex cases are no doubt waiting in the wings. It is, of course, possible, likely even, that none of these cases will reach trial before David Green's tenure as Director is up, but I believe that he has adopted the right course, and that with a fair wind (and perhaps a little support from the government and the press) he will succeed.
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