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Serious Fraud Office: Boost to Coffers Is Vote of Confidence

The UK’s Serious Fraud Office (“SFO”) recently received an unexpected, yet significant, increase in baseline funding for the 2018-2019 fiscal year. The funding boost comes in spite of Prime Minister Theresa May’s previous efforts, following several high-profile prosecutorial setbacks for the SFO, to fold it into the UK’s National Crime Agency (“NCA”). Relatedly, a new funding arrangement addresses prior concerns of the Organization for Economic Cooperation and Development (“OECD”) about potential conflicts of interest. It is probable that these changes will enable the SFO to better develop and retain internal talent.  These developments should come as good news to Lisa Osofsky, the newly appointed Director of the SFO who will begin her renewable five year term on September 3, 2018.

In this two-part post, we look first at the alleged chequered history of the SFO, seemingly causative of attempts by the government over time to disband it, before then focusing on a remarkable turnaround in its fortunes, both figuratively and literally.

SFO: purpose and history

During the 1980s, a series of conspicuous frauds shook public confidence in traditional law enforcement’s ability to detect, investigate, and prosecute white collar crime. Public outrage eventually culminated in a Parliamentary investigation and the Fraud Trials Committee Report 1986 (known as the Roskill Report), which recommended the creation of the standalone, specialist SFO. One year later, the SFO was officially empowered by the Criminal Justice Act 1987 and it has gone on to assume the role of “chief enforcer” of the Bribery Act 2010.

However, the SFO’s fortunes over the years have been somewhat mixed.

 Tchenguiz fraud investigation dropped; costly settlement ensues

 In March 2011, the SFO conducted highly publicized arrests of Vincent and Robert Tchenguiz, real estate developers accused of fraudulently obtaining a £180 million loan from Icelandic bank Kaupthing just prior to its collapse in 2008. The case against the brothers began to unravel in late 2011. The SFO admitted there were “factual errors” in the search warrants used to conduct initial raids and returned materials seized. By June 2012, the SFO conceded there were “no longer reasonable grounds” to consider Vincent Tchenguiz a suspect, and ultimately dropped the investigation of Robert as well.

The Tchenguiz brothers subsequently sued the SFO, alleging trespass, false imprisonment, malfeasance in public office, and malicious prosecution. Their combined suits sought some £300 million in damages. In April 2014, the SFO estimated that it could spend £18.5 million fighting the lawsuits in a filing for emergency funding. The cases settled before trial, with the SFO agreeing to pay £4.5 million and some of the Tchenguiz’s legal expenses. Then SFO Director David Green also publicly apologized to the brothers for their ordeal.

 Brokers accused of financial misconduct acquitted

In total, the SFO arrested and prosecuted 13 individuals in connection with the London Interbank Offered Rate (“LIBOR”) manipulation scheme. Ultimately, it only secured four convictions and one guilty plea. The other eight defendants were acquitted including, on January 27, 2016, all six of the interdealer brokers charged with conspiring with former UBS and Citigroup trader Tom Hayes. Many critics excoriated the SFO’s conviction rate and lack of senior executive prosecutions, given the magnitude of the fraud and the £21.4 million spent investigating it.

Even the SFO’s convictions in the LIBOR scandal were not without controversy. On appeal, it was revealed that an expert witness paid £400,000 by the SFO had limited expertise and texted a friend for help while providing evidence. The English Court of Appeal characterized this “an embarrassing debacle” for the SFO.

 Manifesto to combine the SFO and the NCA

 In May 2017, Prime Minister May revived previous proposals from 2011 and 2014 to incorporate the SFO into the NCA, purportedly to improve intelligence sharing and bolster resources. A poor showing in the June 2017 snap election, when May’s Conservative party lost its working majority, derailed this latest attempt at reform.

As we discuss in the second part of this post, there is a body of public opinion to suggest this was perhaps for the best. Moreover, in an about-turn by the government, the SFO has recently been empowered, financially speaking, to redouble efforts to tackle white collar fraud and corruption head on.

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Richard Gibbon Criminal Defense Lawyer Squire Patton Boggs Dubai
Attorney

Rich Gibbon is a member of our Government Investigations & White Collar Practice and focuses on white collar criminal defense, regulatory enforcement and internal investigations. He has been based in the Middle East for eight years and has garnered extensive experience counselling boards of directors and senior management across the Middle East and Africa, Levant, Europe, and South Asia through multi-agency, multi-jurisdictional financial crime investigations and enforcement actions. This includes multinational corporates in connection with anticorruption regimes and...

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Caleb Barker, Washington DC, Squire Patton Boggs, Criminal Defense attorney
Associate

Caleb Barker represents international and domestic clients in white collar criminal matters, government enforcement actions and internal investigations.

Prior to joining Squire Patton Boggs, Caleb spent a year and a half practicing corporate law with a focus on mergers and acquisitions, corporate governance and SEC compliance. While in law school, Caleb interned at the Department of Justice in the Public Integrity Section. Prior to law school, Caleb worked at the Department of Justice for three years.

Caleb Barker represents international and domestic clients in white collar criminal matters, government enforcement actions and internal investigations.

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