In a Commons' written reply, Sir Nicholas Lyell admitted the SFO had taken documents to which it had no legal right and distributed them internally and externally after giving an undertaking that they would not be touched. He said the SFO did so in error.
Senior Whitehall sources have indicated that the decision to go public with the admission - potentially very damaging to the credibility of the SFO - comes in the wake of an investigation by the
Independent which has raised serious questions over its handling of the Nadir case.
Sir Nicholas conceded yesterday that a statement issued in June in response to allegations made by Michael Mates, the former Northern Ireland minister, was 'incomplete on the issue of privileged papers and therefore misleading'. Sir Nicholas had told MPs that two bags of documents taken during a 1990 raid on the headquarters of Nadir's collapsed company, Polly Peck, and following his arrest shortly afterwards, were opened accidentally by police. His predecessor, Sir Patrick Mayhew, had, in 1991, said the same thing in a letter to Mr Mates.
It is now acknowledged, however, that more than five bags were opened and that material was circulated twice to SFO lawyers and to the administrators of Polly Peck, who were seeking recovery of assets for the company's creditors.
Some material included correspondence about Nadir's defence between the fugitive tycoon and his lawyer, Peter Knight, which is covered by legal professional privilege. It was technically illegal for the SFO to seize these documents. George Staple, director of the SFO, issued a statement yesterday saying: 'SFO very much regrets this incident and the fact that earlier inquiries failed to establish the true position.'
In correspondence with Mr Knight, also published yesterday, Mr Staple said he could not be certain that all privileged documents had been retrieved. He has invited Mr Knight to list all relevant material for an independent counsel, yet to be appointed, who will investigate. That inquiry will be paid for by the SFO, he said.
Mr Knight said yesterday: 'It does seem to me that no responsible investigating agency should act in this way: kicking down doors and looting bags of privileged documents. Then they go on to deny it and it is only when you force them that the truth comes out. It is highly regrettable.'
Mr Mates, who has claimed that Nadir is the victim of a conspiracy by the intelligence services, called in June for an independent inquiry. Sir Nicholas has ruled that out. 'I do not believe the facts disclosed today, although regrettable, justify the independent investigation,' he wrote.
Sir Nicholas called for Nadir to return to Britain to face trial. Nadir, who is facing charges of theft and false accounting, fled in May to northern Cyprus. He said yesterday that he would return, after an inquiry had been held and the 'perpetrators are punished'.
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