The Serious Fraud Office: Ways To Deal With It

Aziz Rahman explains
how to respond to a Serious Fraud Office (SFO) investigation in order to secure
the best outcome.

The fact that a Serious Fraud Office (SFO) investigation found
no evidence of criminality in how the Bank of England operated in the financial
crisis will be a relief to those involved.

But it is also an indicator that the SFO does sometimes have
to concede that it has not obtained the evidence to gain a prosecution or, even
if it has, that a prosecution may not be the best option.

It must be emphasised that the SFO’s actions can depend on
the response it receives from those under investigation.

SFO investigators had initially believed that something was
not right about the Bank of England’s auctioning of central bank funds in
return for collateral. But the case showed that assumptions can always be
challenged. In the case of SFO investigations, this is done by producing
material that counters the allegations and by legal argument.

Negotiation

Robust defence is often vital when facing SFO allegations.
But shrewd negotiating skills and an ability to look at “the bigger picture’’
can be just as important; especially where wrongdoing has been found.

A number of high-profile cases from this year illustrate
this point. Rolls-Royce admitted huge
bribery in a number of countries over a number of years and yet was not
prosecuted. Tesco did not challenge the allegations it faced over its
accounting scandal. It was also not prosecuted.

Barclays, however, has been charged over its financial
dealings with Qatar. Both the company and senior figures within it are being
prosecuted. Unlike Rolls-Royce and Tesco, it has not admitted any wrongdoing,
has not accepted it is liable for punishment and has not actively cooperated
with the SFO.

Only time will tell if Barclays’ non-negotiation was
worthwhile – or costly short-sightedness.

Process

All three cases indicate the importance of knowing the SFO’s
investigation process and how to manage a defence if you are put under its
scrutiny.

The SFO receives information from many sources, which it
assesses to see if it is worthy of investigation. If the SFO believes the
situation undermines UK financial and corporate interests, it will accept it
for investigation; involving the unique range of powers it has under Section 2
of the Criminal Justice Act 1987.

This involves SFO teams of skilled experts investigating
and, where necessary, using Section 2 to compel any individual or organisation
to provide the SFO with information or documents that it believes are relevant
to its investigation. The SFO has even told lawyers that they are not
guaranteed a right to accompany a client that is compelled to go in for
interview under Section 2. If a lawyer wants to attend a Section 2 interview
with their client, they must argue why they should be allowed to attend and
even agree to certain restrictions on their role in it – an approach the Law
Society has called “inappropriate’’.

With its own range of powers and its ability to ask for
extra “blockbuster’’ funding for major investigations, the SFO has all the
resources for a thorough investigation. But that is not to say the SFO cannot
be successfully challenged.

Expertise

A defence lawyer can make representations and arguments to
challenge SFO allegations and do everything possible to make the SFO doubt the
strength of its case at the investigation stage. This can mean the SFO deciding
to end an investigation with no charges being brought.

After a 17-month investigation, the SFO abandoned its
bribery investigation into Soma Oil and Gas late last year, as it said it had
failed to find enough evidence to prosecute. No one has the power to force the
SFO to abandon an investigation. But challenging the allegations, as we do in all such cases, can influence the SFO’s
decision on whether to prosecute;

It must be emphasised that the chances of successfully
challenging the SFO are highest if such legal help is sought at the earliest opportunity

Such help can, for example, involve challenges to search
warrants obtained by the SFO: whether they were obtained lawfully and if the
searches were conducted appropriately. A defence team can seek to have a
warrant quashed and any seized material returned.

A high-profile example of how the SFO can get it wrong is
the case of Robert and Vincent Tchenguiz. The brothers’ premises were searched
and arrests were made but the defence then showed that the SFO had failed to
check the credibility of information it presented to the court when applying
for the search warrants. The case ended with the SFO apologising to the
brothers and paying them £4.5 million.

Evidence

The SFO can also be challenged at all stages of an
investigation regarding the reliability of information and material it intends
to use as evidence. Section 21 of the Police and Criminal Evidence Act (PACE)
gives people the right of access to any material of theirs that has been seized
by the SFO, while the Attorney General’s Guidance on Disclosure (December 2013)
laid down guidelines on dealing with the seizure and search of digital material;
to prevent anyone under investigation being disadvantaged.

If an investigation leads to the SFO obtaining what it
believes is enough evidence to give it a realistic chance of a conviction, charges
will be brought. If they are brought, a shrewd defence team can also use the
law of disclosure to gain access to material gathered by the SFO which does not
support its case but which may help the defence.

Investigation

Earlier in this article, however, we touched on the
importance of negotiation. Such negotiation with the SFO is only really
possible if you know the extent of any wrongdoing that may have been committed
by the company or people working for it.

Any suspicions of wrongdoing have to be investigated
immediately; ideally by someone experienced in following the evidence trail in
such circumstances.

This allows you to establish the true situation and may give
you the chance of a deferred prosecution agreement (DPA). A DPA involves a
company admitting criminal behaviour and agreeing to meet certain conditions.

These conditions can involve changing working practices,
removing certain staff, paying fines or introducing measures to prevent any repeat
of the criminal behaviour. Under a DPA, if the company meets these conditions
for an agreed period of time, it is not prosecuted. But it is prosecuted if it
fails to meet them.

The negotiating skills we talked about are important both when
seeking a DPA and, if that is successful, in agreeing the terms of it.

Rolls-Royce secured a DPA with the SFO largely due to the
cooperation it offered the SFO and efforts it made to put right the wrongs. But
it also emphasised how a prosecution would damage its wellbeing, the UK
aircraft industry and tens of thousands of jobs in its supply chain. Such an
approach has to be seen as a negotiating tactic: Rolls-Royce was happier to pay
the £497M DPA fine and acted accordingly.

Similarly, Tesco made changes to its personnel and working
methods and agreed a £129M fine as part of securing a DPA. It considered this
preferable to prosecution and tailored negotiations with the SFO towards such
an outcome.

Both cases show the value of negotiation.

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