This Thursday's Public Accounts Committee hearing should be an interesting one for all serious fraud defence lawyers. The SFO's former Director, Richard Alderman, and the Current Director David Green QC are likely to be "on the rack" and will face some tough questioning about a range of issues, not least the seemingly generous and the allegedly "unauthorised" severance payments to senior members of staff. Though I doubt that I am alone when I express some cynicism that these payments were as "unauthorised", as we have been led to believe.
The history of the SFO has been a sorry one; it began with so much promise. Those of us who have been defending SFO cases for some time will remember how the legal profession regarded a position at the SFO as a prestigious one. Things seemed to go wrong when they failed to recruit senior experienced criminal lawyers but rather preferred to attract corporate/commercial lawyers from the City, often on secondment. Most of the SFO directors, until the appointment of David Green QC, also hailed from City commercial backgrounds which meant that the SFO leadership knew very little of the cut and thrust of criminal law and how to deal with good, aggressive, successful defence lawyers (a breed apart).
It is this leadership weakness which is responsible for the problems that the SFO now face. I have heard many reports from those who have worked there of poor management, poor leadership, poor communication... there seemed to be very little team work. Various specialists such as the lawyers, accountants and financial investigators refused to speak to one another. Much of the decision making was "risk averse".
As a result there was a constant stream of talented experienced staff defecting from the SFO, which has to have contributed to the string of high profile prosecuting failures, not least the appalling treatment which the Tchenguiz brothers suffered.
The Tchenguiz brothers have comfortably and confidently launched a claim for damages in excess of £300 million, reportedly. This means that, it is likely that the failures of the SFO will be exposed, again, in a high profile trial, albeit a civil one.
Richard Alderman looked to our American cousins for a possible solution to the SFO's dismal prosecution record and he found that the US authorities have been experiencing great success with Deferred Prosecution Agreements. This meant that those deemed to be Corporate crime offenders could avoid an expensive criminal prosecution as long as they self reported, paid eye watering sums and promised to behave properly in the future after installing state of the art compliance systems. Mr Alderman was very keen on this, and we now find that DPAs are to be enshrined soon in statute (s32 sch 16) Crime and Courts bill, and will be used when the SFO, primarily, investigates corporate offending, including bribery/corruption, money laundering and fraud.
It is suggested that a large portion of any fines paid under DPAs will be used to support the SFO's work.
David Green QC, when appointed, decided to take a slightly different approach, stating in last Autumn that despite DPAs coming into force, criminal prosecutions for this type of offending were not off the table. He remained silent on the issue of self reporting. Private Eye in January 2013, stated that they believed that there were 20 bribery investigations on the desks of the SFO, none of which have been deemed suitable for prosecution. It is suspected that these will be dealt with using DPAs.
The problem which the SFO will have is that they are no longer perceived as a real force amongst seasoned defence practitioners because essentially that their budget has been slashed to £33 million in 2013 and again in 2014 their budget will be further reduced to £29 million. These sums sound huge, but in reality go nowhere when dealing with allegations of offending by multinational companies across numerous jurisdictions.
So many of the large corporates will be asking themselves why bother self reporting if there is little to fear from a crippled prosecuting agency without the money to prosecute.
Adding further insult to injury, there have been various inquiries into whistle blowing complaints made by SFO staff, namely a Cabinet Office inquiry which did not find any wrong doing and a more recent inquiry by Treasury Solicitors (TSOL). The latter inquiry again focused on whistle blowing evidence, according to reports in the Financial Times (03/03/2013) alleging that the SFO's digital forensic unit was not fit for purpose, that the SFO management were aware of this and that information relating to the quality of this evidence should have been disclosed to the defence. It is suggested that this may open the door for appeals against conviction for the relatively few that have been convicted by the SFO or who pleaded guilty. It will certainly have an impact on any confiscation orders made in those cases. According to Caroline Binham's article in today's Financial Times, it is unlikely that the results of that internal inquiry will be published. I would strongly suggest that the defence profession will be clamouring to see that report in order to ascertain if it will affect their client’s case, and that it will probably see the light of day, eventually.
What lies ahead for the SFO? Very likely it will be absorbed into either the new National Crime Agency or the CPS, though I do not see many largescale corporate crime prosecutions in the future. More likely, these agencies will follow the DPA route should they find any corporates willing to engage with them.
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