Serious fraud needs serious handling

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The Independent Online
Anyone tempted to become blase about fraud should ponder this: in purely financial terms, it is by far the biggest crime of all.

The late Robert Maxwell is alleged to have looted from the Mirror Group and other pensioners more than the annual total value of theft of and from motor vehicles. One big fraudster is able to clock up as much in a year as all the young men nicking cars and car radios in the land.

So pity, for a moment at least, the Serious Fraud Office as it faces the possibility that yet another of its high-profile cases might collapse. On Thursday, the four people who had been found guilty at the Guinness trial in 1990 had their convictions referred to the Court of Appeal because new evidence had emerged which was not available to the defence at the time of the trial.

This is, of course, a serious embarrassment that has led - yet again - to calls for the SFO to be abolished and its work incorporated within the Crown Prosecution Service.

Every time the agency that is trying to cope with the biggest crime of all fails to get a conviction, it finds that its very future is called into question. Yet while the SFO is responsible for the prosecution of serious fraud cases, it is not responsible for the legal system that both defines the offence and frequently seems to make it difficult to get convictions to stick.

The SFO's problem - or rather one of its problems - is that not only are frauds the biggest crimes, they are also the most complicated. Typically, they involve shuffling money or shares backwards and forwards between companies - often nominally based abroad - making it difficult not only to see what has happened but for most people to distinguish between normal (if sharp) business practice and outright fraud.

Sometimes, with fraud, no one seems to get hurt. It is easy to distinguish the victim of a car theft, but it is much harder, for example, to identify who has lost out because of insider trading. If someone buys shares in a company ahead of a takeover announcement, knowing that the takeover was on the cards, they make a profit. Since money cannot appear out of thin air, somewhere else there must be a loss. But it is very hard to identify the loser or losers. The person who sold the shares? But he or she had decided to sell the shares anyway. The broad mass of other shareholders? Not really, because they will get the profit on their shares just the same. The bidding company? No, because it had already agreed to make the bid.

There is yet another level of complexity, for what is and what is not legal has been shifting in recent years. The result is that something which, however unsatisfactory, was not an offence 15 or 20 years ago, now may be so. The obvious example is insider trading. In the 1950s and 1960s, investors rather expected their stockbroker to come up with good "tips" about future takeovers. Gradually, the moral ground shifted, but insider trading only became a criminal office in 1981.

It was against this shifting background that the SFO was formed in April 1988. There was a general concern that fraud was becoming both so prevalent and so complex that the existing combination of the Fraud Investigation Group at the CPS and the Fraud Squad was inadequate to cope with what was perceived as a surge in a new type of crime.

If one accepts that all new bodies are liable to suffer teething troubles (witness the plight of the Child Support Agency) it could be argued that the SFO has not done too badly. It has secured at least one conviction in about two-thirds of all the casesit has brought, including at least one "high-profile" case - that of BCCI. It has also successfully prosecuted in a number of middle-weight cases (frauds in the £50m league) which have not hit the headlines.

And the SFO has been hampered by the arguably proper checks and balances in our legal system. For example, the Roskill report in 1986 suggested that juries should not hear complicated fraud trials. The nub of the argument was that it was not possible fornon-specialist jurors to remember all the details of a trial taking the best part of a year, let alone come to a sensible decision on it. This suggestion was rejected by the legal establishment, which believed that the right to trial by jury was too important to jettison.

It has also been suggested that British fraud trials should introduce active plea-bargaining, common practice in the United States. At present, the person charged can plead guilty in expectation of a reduced sentence, but no specific bargains can be struck. But such a measure might not only save substantial costs; it could also save scarce court time - cases might last a matter of months rather than the four years in the case of the Guinness business.

It is difficult to apportion blame between the SFO, the legislation that it is required to apply and the British court procedures. A research study on the investigation, prosecution and trial of serious fraud was produced last year for the Royal Commission on Criminal Justice. Its author, Professor Michael Levi, concluded that there would always be a conflict between fairness and efficiency.

He pointed out that often the people accused of fraud were prominent in their fields. These defendants would argue that "they should receive from the media a more sympathetic reception to their complaints than is normally afforded to suspected serious offenders". He was concerned that we might return "to a situation in which all but the most flagrant white-collar offenders escaped conviction".

And that, of course, is why the SFO was created. It is easy to criticise its administration; it probably has not been well managed. In particular, it has failed to create a cadre of young fraud specialists who might make their names and then go on to have successful careers elsewhere. It is easy for well-connected people to obtain publicity for their protestations of innocence. And it is easy to point to the failure to secure convictions in other cases.

But the questions about the effectiveness of the SFO are really questions about our society's attitude to fraud: it costs the country far more than all the "conventional" crimes like robbery and burglary put together. Yet many people seem to believe thatstealing people's pensions is somehow not as serious an offence as stealing their car radios. Until that attitude changes - and the legal system accommodates it - expect the SFO to continue to have a rough ride.

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