Cash-strapped SFO says Enron could happen here

Britain's most senior fraud official warned yesterday that a "mini-Enron" could happen here and called for increased resources to combat financial fraud.

Rosalind Wright, director of the Serious Fraud Office, said that a large amount of fraud was either going unreported or never being investigated because police resources were now so stretched.

She added that the serious downturn in financial markets increased the risk of major frauds being perpetrated.

"If a genuine bear market does develop then I think we will see a lot more failures in the economy and the great majority of failures are due to fraud. We don't have to follow the US in everything but I wouldn't rule out another Enron here, perhaps on a smaller scale."

Fraud is now estimated to cost the UK £14bn a year but Mrs Wright said that the amount of resources devoted to fraud investigation by the police was rapidly diminishing.

"This is becoming quite an acute problem for us," she added. "We want to be able to get police officers on long-term secondment to the SFO or supplement our own resources with more civilian investigators."

The SFO is currently investigating two big fraud cases in Sussex and Hampshire, yet both counties have recently disbanded their fraud squads and redeployed officers to other duties.

The SFO's annual report, due to be published today, is expected to show that while the organisation's budget and staffing levels have risen year on year so have the number of cases being investigated. Under the latest public spending plans, the SFO's budget will rise to £23m next year and £35m in 2005-06 – a doubling in the space of 10 years.

Mrs Wright, who ends her term at the SFO next April, backed David Blunkett's proposals to end jury trials for "serious and complex" frauds in favour of judges sitting alone to try cases. However, she said this would probably mean a lower conviction rate. "Judges are pretty cynical and are more prepared to look at the evidence than at the defendant. They are more dispassionate. I am sure there is a degree of personal prejudice when a jury listens to a 'fat cat' being tried."