SFO needs to bounce back and catch some big ones

Britain's fraud-busters have a battered reputation, a shoestring budget and a brain drain. So James Moore asks: What next?

Once again the Serious Fraud Office (SFO) has egg all over its face. Just days after announcing a new hardline stance, with tough new terms of business which will see an end to the engagement with big corporates preferred by Richard Alderman, David Green's regime had to announce that a three-year-long investigation into property tycoon Robert Tchenguiz had ended in failure.

If Mr Green thought this would represent a clearing of house, he may have another think coming: Mr Tchenguiz is now planning to sue for £100m over the conduct of a case that saw Britain's chief fraud-busting agency engaging in unlawful searches and accused of incompetence by a judge.

Mr Tchenguiz may be lucky to get that sort of sum, assuming a court is willing to indulge in the US concept of punitive damages.

But even a six-figure sum will damage an organisation that is charged with taking on the most complex and difficult cases on a shoestring budget. Not to mention the costs that might be incurred if the SFO opts to fight. The SFO is supposed to do its work on approximately £32m and a Home Office that is cutting across the board isn't likely to make any more available. Particularly given the SFO's record.

To put the figure in perspective the Financial Services Authority (FSA), focused solely on the financial centre as opposed to all of corporate Britain, has more than double that – £75.4m – set aside for its enforcement activities.

Of course, the latter gets its money from regulated firms, who have to either pay up or ship out of the City of London. Its investigation costs are also covered by the fines it levies. The SFO has to make do. So is the new "get tough" stance little more than bravado?

Michael Roberts, a partner at City law firm Hogan Lovells, says of the SFO: "From my perspective, there is a strong element of form over substance. Richard Alderman was more willing to engage. He wanted dialogue and consciously didn't want to look and sound like an old-fashioned prosecutor.

"What David Green is saying is that everyone needs to remember that we are a body that investigates and prosecutes crime. We're not there to give guidance, so they've dropped Alderman's focus on dialogue with corporates and his specific guidance on self-reporting. But this is more about tone than anything else, since the same factors will in practice still be taken into account."

He argues that when it comes to corruption the FSA has arguably achieved more, citing recent cases such as those in relation to the insurance brokers Aon and Willis.

"The FSA is properly resourced and has been able to recruit a different calibre of people. The problem faced by the SFO is that they have severe budget constraints, and a lot of criminal lawyers on locum contracts who don't always have the right experience. Alderman tried to address the issue with more co-operation, relying more on voluntary reporting with less stress on investigative resources. How Green is going to make good on what he wants to do with no change in resources – actually less resources – is open to question."

Mr Roberts highlights a key problem for the SFO, or any public agency requiring high-level expertise – it is expensive. In the last couple of years there have been a string of high profile departures from the SFO. Since 2011 they include Robert Amaee, the former head of the Anti-Corruption and Proceeds of Crime Units, who last year joined the London office of US law firm Covington & Burling. At about the same time Charlie Monteith, head of Assurance at the SFO, joined another US firm, White & Case. He was one of the key experts involved in the drafting of the new Bribery Act.

Kathleen Harris, head of the Fraud Business Group and head of policy, departed for Arnold & Porter. Vivian Robinson, the former general counsel, meanwhile found a home at McGuire Woods.

Such a brain drain has a brutal impact on an agency which usually finds itself dealing with hugely complex, and expensive, cases against defendants with the means to hire the very best defence lawyers (some of whom may have worked at the SFO in the past). Those lawyers are adept at blowing smoke at juries who frequently get lost in the maze of complex financial accusations and counter-accusations that are par for the course in trials that can drag on for months.

And yet, if not the SFO then who? Its work remains vital as Omar Qureshi, partner at CMS Cameron McKenna, who leads the law firm's anti-corruption practice, points out: "If you don't have the deterrent of an effective prosecutor then legislation isn't effective – fraudsters can act with impunity because they won't get caught."

He thinks, despite its challenges, that the SFO can still rebound under Mr Green: "The budget has been slashed, they have lost key people and morale is low but that doesn't mean Green can't pull it together and make it effective. That is what he is trying to do and they have 18 live corruption investigations. What I see is the SFO being a bit more careful in using what they have got and in choosing cases. What they need is two or three big successes so people believe in them again and business takes them seriously."

Of course, his colleague and fellow Cameron McKenna partner Maxine Cupitt hits the nail on the head when she says the problem with the SFO is that it has "been on the path of trying to get the two or three big successes for a decade.

"The FSA and its successor the FCA have twice the budget and a lot of backing. They are responsible purely for the financial sector and have a lot of political support and money being put in. The SFO needs to have funding and focus."

Mr Qureshi agrees and says:"They are doing their job with one hand tied behind their backs. From what we have seen so far the director general is taking a pragmatic view. If he is able to achieve success by prosecuting corporate wrong-doers then that may have a knock-on effect on their budget and resources."

In other words, the need to deliver a big success is greater than ever. Perhaps the Bribery Act will secure the big success the agency craves. A successful prosecution of traders involved in the Libor interest rate fixing scandal would also be hugely popular.

But it won't be easy.

It is also worth noting that in addition to the big four departures to mainly US law firms mentioned above there were two more recently at a more junior level. Their destination? The FSA.

Decades of debacles...


Executives were accused of ramping up the price of Guinness shares to assist its attempts to take over Distillers in the late 1980s. But a number of defendants were acquitted, and even those convicted managed to get their sentences reduced after lengthy appeals. The SFO was found to have failed to disclose some evidence to the defence and the whole shebang cost the taxpayer £30m.

Brent Walker

Tycoon George Walker was acquitted in 1994 after the SFO brought a case against him and his former finance director, Wilfred Aquilina, accusing them of inflating profits at the film division to tempt investors. Mr Aquilina got a supsended sentence. The estimated costs were £40m.

Mirror Group

Less than a month after the death of Robert Maxwell in 1991, the SFO launched an investigation into the group's accounts which eventually led to an eight-month trial of his sons Kevin and Ian. They were acquitted and so was former director Larry Trachtenberg.

BAE Systems

A corruption investigation into the company's dealings with the Saudis over the Al-Yamamah contract to supply fighter planes was dropped after the intervention of the Blair Government in 2006. Robert Wardle, the director general, has always insisted that while the decision "went against the grain" lives would otherwise have been at risk.

The Tchenguiz family and Kaupthing

A three-year investigation into tycoons Robert and Victor Tchenguiz and the failed Icelandic bank Kaupthing which financed them was dropped after a disastrous series of events including botched searches based on miscast warrants and flimsy evidence. Vincent has promised to sue for £100m.

Other cases

Include the £40m Blue Arrow case in 1992 which saw only four of 14 accused convicted, and they were cleared on appeal. Roger Levitt, a financial advisor whose clients included Michael Winner, Frederick Forsyth and Lord Coe, managed to get 62 charges whittled down to just one. The-then director general, George Staple, was saved by Parliament and accused of lying in the mid 1990s.

... and a success

Asil Nadir

To the surprise of many, and after some suggested the SFO was foolhardy to bring a case after so many years, the tycoon, Asil Nadir, was jailed for 10 years over the collapse of his Polly Peck empire. The case was reheated following his return to the UK from his native Northern Cyprus where he had lived in exile having fled before he could face justice.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific