In a blaze of publicity in front of the world press on 9 March 2011 the SFO conducted a series of dawn raids on numerous premises throughout the financial heart of Mayfair. The targets were some of the wealthiest and highest profile entrepreneurs that the SFO would ever investigate and this would, in all probability, be the biggest ever raid in the history of the agency. Over 130 investigators and police raided the business premises of R20 and Consensus Business Group as well as eight private residences and a simultaneous operation was launched in Iceland.
A little over 18 months later, on 15 October 2012, two sentences were written on the SFO’s news page. The investigation into the last remaining fragments of this sorry saga was to be dropped.
What on earth happened?
What was striking to me about this case from the very first day I was involved was the feeling I had that the SFO had completely failed to really grasp and understand the very nature of the transactions that they were investigating. It was apparent to me as the first pieces of information came out from the investigation that they did not in all probability understand the factual basis of the complex deals and arrangements that they had targeted as being corrupt. At Bishopsgate Police Station it was clear when I started to question the investigating and disclosure officers, and all too apparent that they did not themselves understand what they were investigating and had little more than a rudimentary grasp of the complex derivative trades and the financial structures and restructuring arrangements upon which they were focusing their questioning. They even failed to understand the actual roles of many of the persons involved in both the business and banking organisations which had been targeted.
It was here I feel the SFO, in my view, got it wrong from the start. Even though they must have had the explanations within the material under their control, which the SFO had accumulated long before the decision to arrest was reached, I felt the agency were determined to flex their muscles and take on this case; a war in which it would be shown in due course that they should never have engaged, as there was nothing to fight for. There was simply no crime. Perhaps the SFO were under pressure to find a villain within the piece, and lost focus in the hunt for such. Where such pressure came from, I am sure will arguably be revealed once the claims for damages for wrongful arrest are finally adjudicated upon.
In the early days there were failings. Information for the initial warrant had not been verified or independently reviewed. It contained factual errors which had not even been checked against the material that had been acquired during the early investigation, including the Section 2 interviews which had been carried out only months before the decision to plan the arrests was made. The information forming the background to the warrant, it was discovered, came largely from Grant Thornton who were themselves acting for Kaupthing Bank against one of the main targets in related civil litigation. Conflicts of interest which needed to be addressed and properly considered were ignored. In the words of the President of the Queen’s Bench Division, Sir John Thomas commented that the Crown Court Judge listening to the application for the warrant, “Needed to know of their [Grant Thornton’s] interest and the lack of independent verification of their conclusions.” He went on further to add, critically, “The Judge should have been put on notice so that he was alert to any possibility that the SFO was being used to promote the interests of one party to civil litigation.”
Unpleasant reading, indeed.
The raids were also very badly handled in my view. More concerned with media coverage, the SFO failed to appreciate that much of what they seized was LPP material, as there was ongoing litigation in this very matter being conducted from the premises that were raided. It is a frightening statistic in this case that over 40% of the material seized in this case was done so incorrectly and was returned shortly after the raids.
I feel that there was an overall inability to cope with the sheer volume of information in the possession of the team and coupled with a quest to find something damning, irrespective of the material which they controlled, a dangerous mix was brewing. A classic example of a theory being allowed to grow unchecked and be used to direct an investigation rather than objectively assessing the weight of the evidence in possession.
Lessons learned?
The case highlights the need for proper information to be objectively and independently assessed before any steps are taken. Government agencies should not be persuaded to take action by either media or other external pressures. Any investigation has to have proper funding, as the long-term costs when it goes wrong – as indeed this case shows it inevitably will – far outweigh any savings which are trying to be made at the front end.
Lastly, in a week in which it was disclosed that the former SFO chief executive at the time of this affair received an unapproved £400,000 redundancy package, it may be that many more lessons are to be learned from this affair. The first of these, I would suggest, is not to spend anything else at the moment as I would be rather concerned that a number of writs for substantial damages arising from this affair are on their way.
