SFO wastefulness should not be allowed to continue

SFO - David Green

This year has seen the extension of the tenure of the Director of the Serious Fraud Office (SFO), David Green QC, alongside much praise for the change in organisational direction he has overseen. Indeed, there has not been a singularly catastrophic case since that of the Tchenguiz brothers in 2012. The first trial in the long-running Libor investigation saw a major scalp for the SFO, with Tom Hayes being jailed for 14 years in August 2015. 2016, however has seen a return to the inconsistency that seems to plague the agency.

The Libor investigation has been the SFO’s largest undertaking, and was the origin of the ‘blockbuster’ funding model. The successful conviction of Hayes, a man who gave over 83 hours of testimony while cooperating with the SFO before choosing to fight his case, was trumpeted as a major coup. On the 3rd August, the Financial Times boldly proclaimed that “Mr Green went so far as to once tell a parliamentary committee that he accepts his agency would be judged on the outcome of the Libor investigation. Now he can be glad he did.”

While praise was initially sung from the press for the first conviction in a worldwide scandal, the acquittal of six of Hayes’ alleged co-conspirators two months later caused cries of incompetence once again to ring out. The case was branded a “shambles” by one defendant’s solicitor, signalling a return to the SFO’s traditional inconsistency. The third Libor trial that came to a close in July saw further mixed results – there was one guilty plea, one unanimous decision and two majority decisions. The other two defendants were released after no verdict was reached, with the SFO having signalled their intent to pursue a retrial and those who were found guilty intend to appeal. It remains to be seen whether the SFO will see their prior success in these trials wiped out, and what the final cost will have been to the taxpayer.

Equally troubling is the failure of the SFO to build a strong case in the third trial of a nine year, three part, investigation, which had already seen nine convictions. The two men accused of participating a $120m boiler room scam were acquitted in a trial lasting nine weeks. No outside experts were consulted, no business information was demanded from the company, and the SFO never once visited Hong Kong, where the accused’s business operated.

The silk in charge of the defence stated: “Large parts of the SFO’s case have relied on unjustified and unsustainable assumptions. There was no proper analysis or scrutiny of the evidence”. If a strong case cannot be built in nine years of investigation, it bears question why it ever went to trial. Not only was this a waste of the SFO’s budget, it also turned out to be a waste of the court’s time.

It is stated in the SFO’s Statement of Principle that their role is to “investigate and, where appropriate, prosecute… cases fairly and effectively”. In 2015-16, the SFO was clearly ineffective in prosecuting cases. Of those that went to trial, only three out of 16 defendants were successfully prosecuted. Whichever way you look at it, these figures run contrary to their Statement of Principle. Either they are not effectively prosecuting, or they are prosecuting when it is not appropriate, or both.

The implied purpose of a body that exists to investigate fraud is to deter future offences from happening. In this, again, the SFO can be seen to have failed. The total conviction rate for 2015-16 was 31.6%, meaning that over two thirds of all defendants walked away from the court without a conviction. That clearly cannot be seen as a successful year for any body that works to prosecute, regardless of any mitigating factors.

Deferred Prosecution Agreements (DPAs) are often cited as one such factor. Standard Bank were the first corporate to take up a DPA in the UK, and this has been noted as an improvement on the prior civil settlements that were made behind closed doors.

But even this was fraught with controversy. A former employee of Standard Bank in Tanzania, where the alleged bribery took place, has claimed that the London-based employees of Standard Bank “suppressed key facts” in their co-operation with the SFO. A London-based Tanzanian activist has stated “corruption has caused huge problems for our citizens and we need to know the perpetrators are going to be brought to justice”. A slap on the wrist in the UK is unlikely to deter corruption elsewhere in the world, to the detriment of justice in those jurisdictions.

The SFO also has internal issues, as recently highlighted by the 2015 Civil Service People’s Survey. It was widely reported that the ‘blockbuster’ funding model was holding the organisation back, creating staffing and skills gaps. The report also concluded that power is overly concentrated in Green, suggesting that a CEO is required for effective running in the future.

This points to another key flaw: the lack of funds available to ensure the SFO has high quality employees. Skilled lawyers, investigators, accountants etc. are required for a government body to compete with corporate counsel, but the SFO does not offer an adequate compensation package to entice the best and brightest into its ranks. Only 23% of employees felt “that my pay adequately reflects my performance”, and only 18% felt their pay reasonable “compared to people doing a similar job in other organisations”.

If skilled people feel undervalued by the SFO, it follows that they are likely to leave, creating yet more staffing problems. In three of the past five years, more permanent staff left the organisation than joined it, and in spite of recruiting over 100 new members of staff in 2014/15 the net gain for the previous five years was only been 39. Such a high turnover of staff is indicative of clear problems within the organisation, and suggests that a lack of competent subordinates may be why Green holds so much of the power himself.

While there had been something of a resurgence under David Green, it is difficult to argue now that the Serious Fraud Office is fit for purpose. Results have been declining in spite of the rising budget, which itself is clearly still not adequate, while staff are underpaid and feel undercompensated for the difficult work they undertake. The wastefulness evident at the SFO should not be allowed to continue, particularly in this time of austerity and uncertainty. The current discussions around amalgamating the SFO with the National Crime Agency could provide the clean slate required.

 

Written by:

Steve Cochrane
Steve Cochrane