Exclusive: Regulators ran up £6m for case that collapsed
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Wednesday 07 August 2013
City watchdogs spent nearly £6m on the investigation and prosecution of three former directors of iSoft whose trial collapsed last month, it emerged last night.
Tim Whiston, finance director, John Whelan, former chief executive, and Steve Graham, chief operating officer, had been accused of plotting to create "huge discrepancies" in the software firm's accounts between October 2003 and July 2006. But the case against them was thrown out afer a retrial at Southwark Crown Court last month.
A Freedom of Information request by the law firm Pannone, which represented one of the three, revealed that the Financial Conduct Authority (FCA) – and its predecessor, the Financial Services Authority – spent £5.9m investigating and prosecuting the directors and also Patrick Cryne, the chairman, who did not stand trial due to ill health and has had his case dropped too.
The investigation stage alone – between August 2006 and January 2010 – cost £2.1m. Of that, around £980,000 was classed as internal FCA costs and £1.1m as external costs, including appointing legal counsel.
In the case's prosecution phase a further £3.7m was spent, of which £1.2m, was classed as internal FCA costs and a further £2.5m as "external costs". The figures illustrate the potentially huge costs that can be incurred in investigations of this kind, which rise further if prosecutions are attempted.
The initial trial resulted in a hung jury, and the watchdog, which called the outcome "disappointing", said pursuing a third trial would not be in the public interest. But defence counsel were sharply critical. Anthony Barnfather, a partner at Pannone, which represented Mr Whelan, described the costs as significant, particularly as the FCA's business plan for 2013-14 states that the entire enforcement budget for the year is £19.8m.
He said: "Having been unable to persuade the jury in the first trial in 2012 of the defendants' guilt, the FCA pursued a second lengthy trial which ultimately collapsed as a result of errors on the part of the prosecution.
"The cost of the case should not be ignored and it is important that lessons are learned from this case. The FCA has stated that the collapse of this case was as a result of problems which arose 'from a particularly unusual set of circumstances which are unlikely to recur'. However, the collapse of the case resulted from a disclosure error."
He added: "With its significant funding, the FCA is in my experience one of the better prosecutors when it comes to disclosure. However, this is a costly and embarrassing error for the organisation. The prosecution failing to disclose documents that may assist the defence is a major cause of trials collapsing and a factor in miscarriages of justice."
The three accused had directors' insurance but were left to fund the case on their own after their insurers withdrew cover.
The watchdog's enforcement chief, Tracey McDermott, who spoke of the "unusual circumstances" on the day of the trial's collapse, has pledged that lessons will be learnt.
Martin Wheatley, the FCA's chief executive, said the decision not to proceed with a third trial would not "undermine our determination to bring and prosecute difficult cases".
He said enforcement powers were important in bringing about a "change in the culture" of companies that operate in UK markets.
- 1 Windows 10: man updates PC, wakes up to find porn slideshow on repeat
- 2 The 'world's most beautiful vagina' has been debunked by science
- 3 John Green schools morning show hosts after awkward interview with Cara Delevingne
- 4 Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
- 5 Bulletproof armadillo puts Texas man in hospital after shot bounces off hard shell
Whoopi Goldberg tells Cara Delevingne to suck it up: 'She's not famous. I'M famous'
John Green schools morning show hosts after awkward interview with Cara Delevingne
Supermodel Gisele Bundchen mocked for wearing a burka to avoid being seen visiting plastic surgeon in Paris
Bulletproof armadillo puts Texas man in hospital after shot bounces off hard shell
'Rowdy' Roddy Piper dies: Wrestling legend dies aged 61, according to reports
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...