Richard Alderman: 'We need to get out there, not wait for cases to come to us'

The director of the Serious Fraud Office explains how he is catching credit-crunch criminals using US methods
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The Independent Online

Until last year, the job of Britain's chief fraud buster could have been described as something of a Civil Service backwater. While times were good, there was little interest in bringing high-profile prosecutions against filthy-rich bankers who were oiling the wheels of the extraordinarily profitable City. But the credit crunch has changed all that. Now there are deafening calls for heads to roll.

Richard Alderman, the director of the Serious Fraud Office (SFO), is the man in the hot seat who could be forgiven for thinking that suddenly everyone's become a critic. Last month, the former director of public prosecutions Sir Ken Macdonald QC called for a tougher framework for prosecuting City fraud, while also taking a side-swipe at the "struggling" SFO.

The Tories haven't been any kinder. This week, it was the turn of the shadow Chancellor, George Osborne, who expressed concern that City figures who had caused the credit crisis might be getting away scot-free. He forcibly claimed that Britain lacks a "sufficiently robust institutional framework to hold the City to account".

But Mr Alderman, who took up his post 10 months ago when the true scale of the credit crunch crisis was beginning to unfold, prefers to answer the critics with action. "In the past 10 months we have done quite a lot," says the barrister and former head of special investigations at HM Revenue and Customs. "We've had a pretty good year. The conviction rate is a considerable improvement at 80 per cent since last April."

To Mr Osborne and Mr Macdonald his message is clear: "We are committed to investigating top-level fraud; it is what we are here for."

Mr Alderman has good reason to believe that he can deliver the kind of prosecutions that are being demanded of him. One of the first tasks he undertook when he accepted the job last year was to commission a review of credit crunch fraud.

Mr Alderman said: "We have been concerned about this since the early part of last year. And we were talking to a number of people about events in the City and the sorts of areas of potential fraud; frauds that have been committed and also new areas of fraud."

Reading the global runes of the credit crunch, Mr Alderman decided early on that it was also important to see how the Americans were tackling fraud. Last year, he toured the offices of the FBI and the US Department of Justice. There, he was greatly impressed by some of the creative methods adopted by American prosecutors to bring about results in big and complex fraud cases. To the plea-bargaining and civil court lawsuit actions, already in the SFO armoury, Mr Alderman would like to add the US-style "deferred sentence".

Under the terms of deferred prosecution, the defendant enters into an agreement with the district attorney's office or the Department of Justice, accepting full responsibility that criminal offences have been committed and paying a substantial fine. The defendant, usually a corporation, also agrees to a full inquiry and the introduction of changes to improve the company's corporate culture. In consideration of that, the Department of Justice will defer a prosecution, but if the defendant breaches the agreement they are taken back to court for a plea of guilty before a grand jury.

Mr Alderman says: "It's very different [in the US] because it is part of the criminal justice system and it wouldn't be so over here. But I wouldn't want to send out the wrong signals. This is not going soft on people. In fact, the experience of America is rather the reverse and it's a way of being really tough on people. When you look at the settlements in respect of Siemens and UBS, the sums of money involved are really very considerable."

Mr Alderman realises that in a recession, frauds will be uncovered which might not come to light in better times.

"I asked before Christmas for whistleblowers and members of the public to come forward because I was conscious of the fact that there would be employees and ex-employees who would have evidence of potential fraud. Certainly, something that I picked up when I was in the States; they depend very considerably on whistleblowers. That really struck home to me and I thought, 'Right, this is something we need to do much more in the UK and we need to encourage whistleblowers to come forward'."

Mr Alderman has also followed the American example by inviting corporates who have uncovered fraud in their organisations to come forward to discuss possible outcomes with the SFO. "When I came back from the States, we stepped up what we were doing by talking to a considerable number of people in the City about what was going on. They had lots of things to say to us.

"That's what I see as being the new SFO model... Get out there, find out what the problems are and work out what we should be doing about it."

With every indication that the credit crunch fallout will worsen significantly before it gets better, Mr Alderman can expect his updated approach to fraud-busting to be tested to the full.

SFO: The big cases

Successful: The Guinness Four

In 1990, four senior Guinness executives were convicted of conspiring to drive up the price of shares. Former chairman Ernest Saunders was freed after serving only a third of his 30-month sentence after being diagnosed with dementia. Gerald Ronson, Sir Jack Lyons and Anthony Parnes were also convicted after the most expensive court action in British legal history at a cost of £7.5m.

Unsuccessful: BAE systems

In 2004, allegations of corruption at the arms manufacturer surfaced, connected to its £43bn deal with Saudi Arabia. The SFO halted its inquiry in 2006 when the Attorney General, Lord Goldsmith, said it would cause "serious damage" to UK-Saudi relations and threaten national security. In 2008, the House of Lords ruled the SFO had acted lawfully.

Pending: Langbar International

The holdings company was investigated in 2005 after it became clear that £360m it claimed to have did not exist. In January 2009, Spanish police arrested six men. The SFO can seek to have the six extradited to Britain, where they face a maximum of seven years in jail.