Yesterday's acquittal is the latest in a string of embarrassments for the SFO which, since it was launched in 1988, has squandered millions of pounds of taxpayers' money on unsuccessful prosecutions.
The SFO is due to prosecute the two Maxwell brothers early next year. Some experts believe the case should now be handed over to the Crown Prosecution Service and the SFO dismantled.
'The way the SFO operates has to be looked at,' Alistair Darling, Labour spokesman on the City, said. 'Why does it take so long for it to get cases to court? Why does it insist on bringing so many charges against defendants?
Can the City's regulatory system be used more effectively to handle some of these cases instead of the SFO?'
'This has to be the final nail in the SFO's coffin,' said a defence lawyer involved in one high-profile City fraud case with the SFO.
'They need to overhaul the whole system and move to something closer to the US model where the regulators deal with large fraud cases instead of the courts.'
The SFO's days as an independent body already appear numbered. A Whitehall committee reviewing the role of the SFO recommended in July that the fraud prosecution body should be merged with the Crown Prosecution Service. The aim was to improve the SFO's performance by bringing it under stronger management.
However, critics believe this would not be a satisfactory solution. 'The risk would be that both organisations would be underfunded and unable to do a proper job,' one lawyer said.
The SFO was set up in the wake of the Guinness scandal to prosecute large and complex fraud, usually defined as worth more than pounds 5m. Headed by George Staple, its staff of about 200 includes lawyers, accountants and policemen.
From the start its record has been at best patchy. It claims a 75 per cent success rate so far this year, with 25 prosecutions from 33 convictions, but between April 1993 and April 1994 it was successful in only 54 per cent of cases.
Most crucially, it has failed in most of the very high-profile cases it has brought. Charges in the second and third Guinness trials were dropped or the defendants acquitted. The Blue Arrow case, which took three years to bring to court, ended in the acquittal of all defendants.
Other embarrassments include the light sentence handed out last year to Roger Levitt, charged with misappropriating pounds 21m, and all charges being dropped in its case against Terry Ramsden, an alleged fraudster. The SFO also allowed Asil Nadir, the former head of Polly Peck, to flee to Cyprus before the case against him came to trial.
The manner of its failures has attracted as much criticism as the failures themselves. The SFO has been accused of taking years to bring cases to court, of confusing juries by bringing too many charges, of harrassing defendants and of presenting its evidence badly.
Most critics of the SFO accept that abolishing jury trials in fraud cases is not the answer. 'Juries aren't daft, but cases need to be presented to them in a comprehensible way,' one experienced fraud lawyer said.
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