Climbdown threatens SFO

THE Serious Fraud Office may be forced to scale back the prosecution of a key case, Landhurst Leasing, after recent counsel's opinion that the evidence does not justify the charges that were originally envisaged.

Sources close to the investigation say that after two years the embattled SFO may have to abandon charges against some individuals in the affair and reduce those against others. No final decision has yet been taken.

The discovery that its case is not as strong as it had hoped will come as a further blow to the SFO, which is fighting for its life after a string of recent embarrassing setbacks. Its handling of the Guinness case has come in for particularly severe criticism.

The continuity in handling the Landhurst case has already been upset by the departure on Friday of the case controller, William Waite, who is to join Kroll Associates, the private corporate investigators. His replacement, Patricia Howse, takes over this week.

The barrister Timothy Langdale QC, the SFO's counsel, has expressed concern about aspects of the case and has pointed out weaknesses of evidence.

"Things are still up in the air. Any charges might involve fewer defendants and might involve less money than was first thought. But the SFO is still hoping to bring this case to court,'' said one source.

These revelations are bound to raise questions about why it has taken the SFO two years to discover the weaknesses of its case.

This is a key week for the SFO, headed by George Staple, because a report on its future by a former Cabinet Office official, Rex Davies, will be handed to the Attorney General, Sir Nicholas Lyell in the next few days. The report is expected to recommend that the SFO should lose its independence and be merged with the Crown Prosecution Service.

The SFO was passed papers on the Landhurst case, one of the largest it is currently pursuing, in October 1992 by Arthur Andersen, the receivers to the company. Andersen referred 10 transactions that it felt were worthy of police investigation.

The SFO would not comment on the details of the case, saying only that its investigation was "still ongoing".

Landhurst Leasing raised finance from its bankers to lend money to clients, supposedly backed by security. In many cases, however, the security offered for the loans has since been found to be non-existent.