Watching The City's Detectives

The Serious Fraud Office now tries to pick only cases it can win, says Michael Herman

A fugitive surrendering to face charges is generally a prosecutor's dream come true – but when the fugitive is Asil Nadir and the prosecutor is the Serious Fraud Office (SFO), it risks turning into a nightmare.

Mr Nadir made his first appearance at the Old Bailey yesterday, 17 years after fleeing the country saying he could not get a fair trial, and his return has presented the SFO with a giant practical and philosophical challenge.

The tycoon, 69, has always denied charges that he stole £34m from his Polly Peck empire before its collapse. Logistically, SFO investigators are now faced with resurrecting a case that involves trying to decipher mouldy documents and obsolete computer discs that have languished in an SFO warehouse in east London since Mr Nadir fled to Northern Cyprus in 1993.

The freshest available evidence is therefore 17 years old and much of it significantly older. Only one of the investigators from the SFO's original Nadir squad still works there and, most importantly, many of the original 183 witnesses are no longer available because they are unwilling to co-operate, forgetful – or dead.

Serious fraud prosecutions with access to contemporary evidence and witnesses are almost always tricky, so Neill Blundell, the head of fraud at the law firm Eversheds, concludes that the case against Mr Nadir will be even more "fraught with difficulties". Putting aside the practical issues of where to insert a 25-year-old floppy disc in a modern computer, Mr Nadir's homecoming has presented the SFO with a more serious philosophical challenge. The much derided agency has, under the leadership of its current director Richard Alderman, made great efforts to move away from taking on long, uncertain and expensive cases in favour of shorter, cheaper, more secure ones.

Mr Alderman, a former barrister and tax investigator, was the mastermind behind this strategy and staked his credibility on its success. He took over the SFO at a low point in its 23-year history after a string of high-profile failures, including the collapse of its longest, most expensive case – the six-year prosecution of five pharmaceutical companies accused of defrauding the NHS.

Mr Alderman is a notable critic of lengthy fraud trials and the thrust of his strategy has been to avoid them, either outright or in favour of negotiating American-style plea deals. "Come and talk to us," Mr Alderman has said, "and we can do a deal where you should avoid jail."

In May, Robert Dougall, a former executive at a subsidiary of Johnson & Johnson, escaped a jail sentence after agreeing to plead guilty to his role in a £5m conspiracy to bribe Greek healthcare officials. Dougall agreed to give evidence against his former colleagues in an SFO plea- bargain that marked the agency's first prosecution and conviction of a Briton for corrupt practices overseas.

The importation of US-style justice has not been to everyone's taste but observers believe Mr Alderman is making headway in convincing the judiciary, which must ratify such deals, and the Government, which could legislate to make them easier, that they are effective. The SFO has also won support for its focus on picking more likely winners to take to trial. In July, two British nationals were each jailed for seven years after being convicted of running a boiler room in Spain.

In April, Kevin Foster, a taxi driver-turned-investment guru, was jailed for 10 years after being convicted of running a £34m Ponzi scheme. Neither trial lasted more than four months.

Criticism of the SFO is regular and fierce but its detractors acknowledge that the frequency of headlines such as "Multimillion-pound SFO Case Collapses" has reduced, if not vanished, since Mr Alderman took office in April 2008. But while the agency appears to be on something of a winning streak, Mr Nadir's return could prove an upset. Lawyers believe his case is very unlikely to end in a plea deal, leaving as the only outcomes the embarrassment of dropped charges or a long and costly trial. Dan Hyde, a fraud expert at Cubism Law, said: "It is remarkable they are going ahead with it: this is exactly the sort of case they are trying to avoid".

The furore surrounding Mr Nadir, who must return to to the Old Bailey for a second hearing next month, re-opens unresolved issues of how serious fraud cases should be prosecuted, and by whom. The SFO is resurrecting what might be its toughest case in years just as the Coalition Government is preparing to close it down via a partial transfer into a new Economic Crime Agency. The SFO, like other agencies under threat from the Tory amalgamation plan, is jockeying for position and insiders say it is desperate to avoid disaster in its prosecution of Mr Nadir. The Chancellor, George Osborne, appears adamant that his super-agency is the best way to fight fraud but the history of new bodies set up to target economic crime makes disappointing reading. The Asset Recovery Agency was quietly merged into the Serious Organised Crime Agency (Soca) and abolished altogether in 2008, just five years after it was established. Soca itself is soon to be replaced by a National Crime Agency. Both the Financial Services Authority and the Office of Fair Trading took several years to bring any criminal prosecutions.

Peter Binning, a partner at Corker Binning Solicitors, said: "Above all, it is people who must drive forward any new approach in the fight against financial fraud. It is no good setting up a new agency and overnight expecting diverse groups of staff to develop the necessary teamwork and sense of pride that must underpin any successful law-enforcement body.

"The best young prosecutors must be attracted to work there. A failing, small, specialist agency will never attract the talent that a major, world-class law enforcement body would."

Despite his criticism, Mr Binning does not support the status quo. He believes the SFO has "outlived its useful life and should be abolished" and that an enlarged, more powerful Crown Prosecution Service would allow Britain to reach new heights in the fight against financial crime.

Fraud Office Scorecard

Miss: The SFO's largest and longest case saw it accuse five pharmaceutical companies and 10 individuals of defrauding the NHS out of £100m through a conspiracy to fix the prices of antibiotics and generic drugs. Known as Operation Holbein, it involved 150 police and SFO investigators and took six years and a reported £40m to put together. the case was thrown out on a technicality.

Hit: In 2008, the SFO secured the conviction of three men who defrauded banks out of $700m by applying for bogus loans, including one for a company whose registered address was an Indian cow shed. Virendra Rastogi, the former chairman of RBG Resources, was jailed for nine years, with two colleagues also receiving custodial sentences. Rastogi, who appealed unsuccessfully, was later ordered to repay £30m in a confiscation order.

Mixed Result: Last month William Godley, a businessman who admitted running a £178m Ponzi scheme in which most investors lost everything, was jailed for three-and-a-half years. Godley attracted over £250m from 3,000 investors, including Bernie Ecclestone, the motor racing supremo. He pleaded guilty to conspiracy to defraud but his two co-defendants were acquitted on the SFO's third attempt to prosecute them over eight years.