The SFO in 2015

The SFO has changed its mission statement in recent years and has a busy pipeline of cases, but its future still looks unsettled.

The direction taken by the SFO under David Green’s leadership is by now well understood; the SFO is not a regulator, an educator, an advisor, a confessor, or an apologist. Its role is to investigate and to prosecute the topmost tier of serious and complex fraud and bribery. The SFO has a widely reported pipeline of ongoing and high profile fraud and bribery investigations, and has secured blockbuster funding from HM Treasury to help fund the larger cases.

SFO successes

The SFO has secured some recent high profile successes. In early December 2014, the SFO secured its first convictions against two individuals under sections 1 and 2 of the Bribery Act 2010. Both individuals, together with a third defendant, were also convicted of various fraud offences. These convictions followed the SFO’s investigation of Sustainable Growth Group, including its subsidiaries Sustainable AgroEnergy plc and Sustainable Wealth (UK) Investments Ltd. Sentences handed down ranged between 6 and 13 years’ imprisonment. All three defendants were disqualified from acting as directors for between 10 and 15 years.

December 2014 also saw the SFO secure its first conviction of a company for bribing foreign public officials, following a contested trial. The trial marked the end of a three year SFO investigation. A jury found Smith & Ouzman Ltd, a printing company, guilty of making £400,000 of corrupt payments in Kenya and Mauritania. The company’s Chairman and the Sales and Marketing Director were also both convicted of agreeing to make corrupt payments. The defendants were sentenced, in February this year, to between 18 months and three years’ imprisonment. The sentencing of the company is still pending and will provide an important benchmark for the sentencing of companies under the Sentencing Council guidelines published in January 2014 (for more on this, see our article and our worked example of how the guidelines might be applied).

The Smith & Ouzman Ltd convictions are particularly notable as both the company and its executives were convicted under the pre-Bribery Act legislative regime, whose widely recognised complexities were a key driver for the reform of the law in this area in 2010. For further information in relation to these, and other, recent corruption cases, see our Corruption Enforcement Tracker.

However, we have yet to see the SFO prosecute a corporate for Bribery Act offences. Similarly, we are waiting for the first Deferred Prosecution Agreement to be entered into by a corporate, following the entry into force of the regime in February 2014. For further information on DPAs see our article.

It is highly possible that 2015 may see both of these events.

Continued criticisms

Despite its successes, the SFO continues to be the subject of substantial criticism, following a series of well-publicised errors. Many of these problems would appear to have been caused by legacy issues, which arose under the previous directorship. Examples include:

  • the collapse of the corruption case against Victor Dahdaleh in December 2013
  • an HMRC fine of more than half a million pounds, announced in July 2014, for £4m in unpaid VAT liabilities
  • the settlement, in July 2014, of civil damages claims brought by Vincent and Robert Tchenguiz and related companies, arising from their arrests and searches of their homes and business premises in March 2011
  • a £180,000 fine in March 2015 from the Information Commissioner’s Office, after thousands of confidential documents relating to the BAE Systems investigation were mistakenly sent to the wrong person.

However, the recent stinging criticism made of the SFO by Mr Justice Hickinbottom in the case of Evans and others v SFO cannot be attributed to historic issues.

A charge of conspiracy to defraud brought against six defendants by the SFO was dismissed on 18 February 2014, following a five day hearing in Cardiff Crown Court. After the case was dismissed, the SFO applied to the High Court for a ‘voluntary bill of indictment’, to re-open the case. Following a seven day hearing, the application for the voluntary bill of indictment (which contained two counts, one identical to that which had been dismissed by the Crown Court), was refused.

Five of the six defendants subsequently applied for costs orders against the SFO, estimated to be in the region of £7m. The court granted the defendants their costs, despite the relevant provisions making such an order “very rare”, and “generally restricted to those exceptional cases where the prosecution has acted in bad faith or made a clear and stark error”. The judge found that the SFO had committed a series of errors and that the case lacked legal merit, and was “from the outset, doomed to fail”. The SFO was also criticised for having appointed as prosecution Lead Counsel a barrister who had already advised several prosecution witnesses in respect of the same matters.

An uncertain future?

Such criticisms play into the hands of those who continue to cast doubts upon the future of the SFO as the lead prosecution agency for serious and complex fraud in the UK. As recently as October 2014 it was reported in the press that the Home Secretary, Theresa May, intends to revive plans to abolish the SFO as a stand-alone agency, bringing its activities within the remit of the National Crime Agency (NCA). This proposal was first aired three years ago, but fell away in the face of opposition from Dominic Grieve, the former Attorney General, and Ken Clarke, justice secretary at the time.

It is notable that the UK Government’s Anti-Corruption plan, published in November 2014, makes little reference to the SFO and its role in targeting corruption over the coming year; instead being heavily focused towards the NCA. In addition, David Green’s four year term as Director of the SFO is to come to an end in April 2016; whether he will stand for a further term is at present unclear.

Further, the future of the SFO is likely to be determined, at least in part, by the outcome of the upcoming Bribery and Corruption Enforcement Review. The review has been commissioned by the Inter Ministerial Group on Anti-Corruption, and is due to be completed by June 2015. Its stated aim is to “improve the coordination and effectiveness of the UK’s enforcement response to bribery, corruption and related fraud, through full consideration of the powers, capabilities and organisations involved”. Its terms of reference include a review of the SFO’s role in fighting corruption, alongside other agencies. The review is to consult with industry, practitioners and civil society. It is likely, given the deadline for the completion of the review, that this consultation will be published shortly.

The SFO’s critics have not presented a particularly compelling picture as to how the prosecution of serious fraud and corruption would be more effective in the hands of the NCA, or a reconfigured SFO. What must be clear is that further upheaval and structural change will, at least in the short term, serve as a major distraction from the investigation and prosecution of serious and complex fraud and bribery in the UK. The reasons for a dedicated investigation and prosecution body for the most serious fraud and corruption cases remain as strong, if not stronger, now than when the SFO was established in 1987.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.