Defendant acquitted in Versailles trial

The Serious Fraud Office suffered a fresh blow to its credibility yesterday after Lorraine Jones, one of the two main protagonists in the Versailles trial, was acquitted of fraud charges.

The Serious Fraud Office suffered a fresh blow to its credibility yesterday after Lorraine Jones, one of the two main protagonists in the Versailles trial, was acquitted of fraud charges.

The Crown's decision to drop its prosecution ended a four-year ordeal for Ms Jones who, along with Carl Cushnie, Versailles' founder and chief executive, had been accused of defrauding the collapsed trade finance company's shareholders and creditors. Both denied the charge.

Anthony Evans QC, for the prosecution, told the jury at Southwark Crown Court that he would offer no further evidence against Ms Jones, who had been accused of two charges of conspiracy to defraud.

"We invite your lordship to direct the jury appropriately to return a verdict of not guilty on both counts," Mr Evans told Justice Rupert Jackson, adding that the decision was taken after "constantly" reviewing the evidence against Ms Jones.

Ms Jonessaid she was "ecstatic". She had been employed as an assistant to Fred Clough, Versailles' former finance director who became the star witness for the prosecution after pleading guilty to falsifying the company's accounts.

Ms Jones' acquittal marks the latest in a string of embarrassments for the SFO, which has in the past been variously dubbed the "Seriously Flawed Office" and the "Nightmare on Elm Street" - a reference to its address in central London - in relation to cases it has brought since it was set up 15 years ago.

Last summer it was left facing a bill of millions of pounds after the entrepreneur Andrew Regan was acquitted of theft in the Co-op scandal. It was also slated over the Maxwell débâcle and the failure to convict anyone over a £20m fraud at the DIY chain Wickes.

Versailles, which provided bridging loans to small companies, collapsed in 2000, having fraudulently inflated its turnover by more than £700m, according to the SFO.

Mr Cushnie has been accused of siphoning off £37m from Versailles, whereas Mr Clough is alleged to have stolen £19m, none of which has been recovered. Two counts of conspiracy to defraud remain outstanding against Mr Cushnie. As with Ms Jones, his lawyers have suggested he was not aware of the fraud committed on a massive scale by Mr Clough.

The former finance director told the court earlier this year that he had spent £120,000 of Versailles' money between 1997 and 1999 on Ms Jones, including buying her a Saab convertible and providing her with holiday spending money. He claimed to have made the payments into Ms Jones' Jersey bank account without telling her.

The SFO, which was created in 1988 to combine lawyers, specialist accountants and police under one roof, has long struggled to shake off its incompetent image. Although it tends to win convictions in more than 70 per cent of cases, its big cases have tended to go wrong.

The case against Mr Cushnie continues.