Staying alive

Let’s be honest – things might have gone a bit too far. In recent years, both the mainstream and business press have frequently stuck the boot into the Serious Fraud Office (SFO) – ‘Serious Farce Office’, anyone?

It has been with good reason – there have been legitimate failings worthy of legitimate criticism. By all accounts, the agency has achieved very little since signing a near-€1bn deferred prosecution agreement (DPA) with Airbus in January 2020. But in the context of woeful government funding, the agency’s
rare bright spots can appear even brighter. And sometimes, criticism can be totally wide of the mark. The white-collar community is generally in agreement now that an obsession with convictions in the face of unpredictable jury trials is misguided, for example.

And at what point do ostensibly well-meaning criticisms cross over into the realm of the personal? Avonhurst partner Audrey Koh spent 16 months on secondment at the SFO and offers an individual insight: ‘My expectations were low because of all the SFO-bashing I had heard, but I was pleasantly surprised. People have been quite unfair on the SFO, because there are some excellent investigators and accountants and other professionals. They’re hard-working people, not 9-5 civil service types.’

In this regard, there are interesting contrasts between the SFO and its US counterpart, the Department of Justice (DoJ). While the SFO’s investigators are preoccupied with justifying their own existence, in the US, it is a rite of passage for talented white-collar practitioners to work in public prosecution. It is associated with a prestige and a public service far removed from its transatlantic cousin. ‘Thank you for your service’ posts on LinkedIn are not uncommon for those leaving the DoJ for a generally lucrative private practice role.

‘If you look at the personal cost of someone speaking up against their business, their whole career might be impacted. In the US there’s a framework for remuneration.’
Camilla de Silva, Simmons & Simmons

Current SFO director Lisa Osofsky was meant to bridge this gap. Announced as successor to the widely respected Sir David Green QC in June 2018, Osofsky brought a credible CV adorned with stints at both the FBI and DoJ in addition to her tenure at compliance and risk group Exiger. But she was on the backfoot from day one, as white-collar partners criticised a seemingly inexplicable delay in announcing her appointment. Four years on, it is fair to say the jury is still out on Osofsky’s impact, but more on that later.

Canvassing the great and good of London’s white-collar community, Legal Business attempts to compile an action plan to reinvigorate the SFO. David Savage, head of financial crime at Stewarts, accepts the task as a kind of tough love: ‘The SFO isn’t helping itself, but a lot of people do want it to succeed. Partners aren’t kicking it because they think it’s shit, but because they want it to be better.’

Economic warfare

For many, the elephant in the room when offering the SFO some practical advice is the historic absence of adequate funding. But with a focus on the realistic, there is widespread agreement that some surgical legislative changes could go a long way toward reviving the agency.

In fact, some argue that the funding issue could be remedied in part by legislative backing. Neill Blundell is head of the corporate crime and investigations practice at Macfarlanes, and he points to data from Spotlight on Corruption’s January 2022 report: Closing the UK’s economic crime enforcement gap. According to the report, the SFO generated £1.63bn for the UK Treasury in the last five years through fines and confiscation. It says that if just a quarter of that figure was reinvested into the SFO, it could have hired an additional 289 investigators. He summarises: ‘There is no good reason as to why there shouldn’t be a piece of legislation that allows the SFO to keep a percentage of money recovered.’

Camilla de Silva, now a partner at Simmons & Simmons, spent six years at the SFO between 2014 and 2020. She most recently acted as the agency’s co-head of fraud, bribery and corruption, but had been a case controller prior to that. In addition to leading on the Airbus case, she oversaw the Rolls-Royce DPA that generated over £497m, regarded by most commentators as a major victory. But for de Silva, the investigation leaves a bitter taste.

‘Receiving some money from successful investigations should be available. I was a case controller for the Rolls-Royce investigation – many millions were brought into the Treasury as a result of that but we didn’t see any of it. There’s not an obvious financial benefit to the SFO in pursuing these cases. I’m not saying that they should put specific monetary rewards against certain cases because you don’t want accusations of selective effort, but clearly with some percentage recovered of the money brought in by successful cases going back to the SFO, this would pay for the SFO potentially for the next five years.’

Green was director of the SFO for six years before embarking on a private practice stint that began at Slaughter and May in 2018. These days, Green has a part-time partnership role at Cohen & Gresser, alongside similarly-storied white-collar practitioners John Gibson and Richard Kovalevsky QC. He is characteristically bullish on the question of where the SFO should get its money from: ‘We are the seventh largest economy in the world. We spend 0.042% of our GDP on tackling economic crime.’

And it seems like the SFO isn’t the only party lacking a monetary incentive. A common suggestion among those interviewed was a shake-up of whistleblowing rules – a majority argue that there is currently nowhere near enough of an incentive for employees to stick their neck out and report wrongdoing. Savage contends that whistleblowers ‘need to receive a percentage of the money recovered as a reward for being brave’. De Silva outlines some of the potential risks for whistleblowers: ‘If you look at the personal cost of someone speaking up against their business, their whole career might be impacted. In the US there’s a framework for remuneration.’

On comparisons between the SFO and the DoJ, an oft-cited reason why the DoJ can go about prosecutions more efficiently is it has access to a broader range of tools. DPAs were written into UK law in 2014, and they allow a company charged with criminal activity the chance to reach an agreement with a prosecutor without going to trial. Such agreements are not generally allowed in the UK on an individual basis.

The UK legislative stumbling block is the Serious Organised Crime and Police Act 2005 (SOCPA), which does allow for a small number of named individuals (the director of the SFO being one of them) to arrange these plea bargains with individuals rather than companies. However, as per Blundell’s personal experience, the process is far from a formality: ‘SOCPA is quite constrained. What’s remarkable is I’ve had clients who have fully co-operated try and get SOCPA and they haven’t been offered it. In the US they would be all over it!’

Some argue that the SFO faces an uphill battle in most prosecutions due to the 2010 Bribery Act. According to the legislation, it is not enough for an individual to behave in a criminal way at an organisation. For the SFO to have a chance at securing a prosecution of the company, it must adhere to the ‘identification principle’ and prove that the ‘controlling mind’ of the organisation was implicated in the illegal conduct. Generally, this means someone at boardroom level. Savage describes the identification principle as ‘totally bonkers’.

In smaller companies with comparatively fewer chains of command, this can be straightforward to establish. But at large corporates steeped in bureaucracy, finding a link to the controlling mind has been notoriously difficult. Green can’t help but be sarcastic: ‘The identification principle was absolutely fit for purpose during the industrial revolution. But these days, corporate structures are far too sophisticated, the board is often miles away from the action. It’s simply inadequate.’

Therefore, white-collar practitioners have largely endorsed the idea of creating a ‘failure to prevent economic crime’ law, which would drastically lower the burden of proof required to secure convictions. Savage says: ‘If you have systems in place to counteract wrongdoing, that is a defence. If you don’t have those systems in place, then a director can be more easily prosecuted. But you must be able to prove that they had knowledge of the offence and didn’t act, which is a very high bar. A “failure to prevent economic crime” law should be created.’

If new legislative tools are what the SFO needs, then help may be just around the corner. Due to recent events in Ukraine, the UK government has fast tracked the Economic Crime Bill through Parliament, positioning the legislation as part of the UK’s punitive economic measures against Russia. Upping the rhetorical stakes, Conservative MP David Davis recently declared: ‘We should not kid ourselves. This is not an economic crime Bill, but an economic warfare Bill, and it is a war that liberal democracies cannot afford to lose.’

The Bill is set to considerably beef up the SFO’s arsenal, particularly via unexplained wealth orders (UWOs), which will allow law enforcement to confiscate criminal assets without having to prove that it was obtained as a result of crime. Additionally, the Bill will introduce ‘strict liability’ for sanctions offences, meaning that the Office of Financial Sanctions Implementation can impose monetary penalties on individuals regardless of intent or knowledge of the breach in question. This brings the UK’s sanction regime in line with
the US system.

But perhaps more importantly, the Bill represents a shift in mindset from the Government towards taking economic crime more seriously. Koh notes: ‘There needs to be an upheaval in corporate crime liability. With recent sanctions on Russia, the Economic Crime Bill is coming to pass and that has given the government a real kick up the behind.’

Walk the walk

For many, if the SFO is set to thrive then it depends on the quality of its leadership and its people. A quick glance at the recent history of SFO directors reveals a chequered past.

Between 2008 and 2012, the agency was run by barrister and former tax investigator Richard Alderman, and it is fair to say that this period is not remembered as a vintage one for the SFO. In the years that followed, Alderman has been widely characterised as being too soft and lacking a focus on prosecutions. After stepping down from the position in 2012, Alderman appeared before the Public Accounts Committee in 2013, where he was criticised for running the SFO in a ‘sloppy’ and ‘slovenly’ way. Committee chair and Labour MP Margaret Hodge described Alderman’s conduct as ‘shocking’ over three generous severance packages given to colleagues without Treasury approval.

Alderman was followed by Green, who brought a fresh ambition to reposition the SFO as a hard-nosed prosecution agency. During his tenure between 2012 and 2018, Green oversaw the first handful of DPAs after they were legally available in 2014, with high-profile and valuable settlements agreed with Standard Bank, Rolls-Royce and Tesco. He also secured several individual prosecutions, including that of former UBS and Citigroup derivatives trader Tom Hayes, who became the first individual to be convicted of manipulating Libor in 2015.

One prominent white-collar partner recalls a palpable shift in atmosphere when coming up against the SFO early on in Green’s tenure: ‘The change in the organisation was noticeable immediately. He took it all very seriously, he didn’t even offer us cups of tea! It felt ridiculous at the time, but he was trying to put in place a different mindset.’

Despite this no-nonsense approach to investigations, Koh’s experience from working under Green paints an entirely different picture: ‘Leadership is impactful. David Green was head when I was there, and he was first class. He had very sound judgement and was not too high and mighty, in fact he was very personable. Everyone loved him.’

In contrast, while generally applauded for the Airbus DPA, the most valuable corporate plea deal in UK history, Osofsky’s time as director has been tarnished with high-profile setbacks (See boxout, ‘Highs and lows in the Osofsky years’). After the SFO bungled the disclosure process in a December 2021 case involving a former Unaoil executive, the Attorney General announced in February that an independent review of the SFO will be launched, led by Sir David Calvert-Smith, former Director of Public Prosecutions. According to three Court of Appeal judges, the SFO had withheld ‘embarrassing’ evidence involving contact between Osofsky and a US private investigator that led to former Unaoil Iraq manager, Ziad Akle, being jailed.

As the Yearbook went to press, things went from bad to worse as a second executive had their conviction quashed. Paul Bond, a co-defendant of Akle and formerly a manager at Dutch energy services company SBM Offshore, launched a successful appeal of his own three-and-half year jail sentence after Akle’s sentence was overturned.

An SFO spokesperson said at the time of the Bond ruling: ‘We are disappointed by today’s decision and are co-operating fully with Sir David Calvert-Smith’s review.’

Koh says: ‘The Unaoil fiasco was very unfortunate. It’s fair to say there’s some naïve leadership, maybe she’s not being switched on to how things work in the UK because of her American background.’

Savage also suggests that there’s something lost in the transatlantic translation: ‘I’m not convinced that Lisa is the right person; they need someone with a better understanding of UK politics and law.’

In the SFO’s defence, the judges that presided over the Akle acquittal in December 2021, Lord Justice Holroyde, Justice Jeremy Baker and Justice Jay, found ‘no abuse of process, no bad faith, no dishonesty’ on the SFO’s part. They also ruled that the disclosure discrepancies ‘may well be innocent errors’, and that they ‘do not suggest that any individual official of the SFO deliberately sought to cover anything up.’

And Green was perhaps expectedly sympathetic: ‘Disclosure is a huge challenge for any prosecutor, and the SFO is no exception. The Rolls-Royce case involved ten million computer documents. The way forward is increasing the use of AI to sift through data, like in civil litigation. The SFO has good technology but it ends up hiring junior barristers to go through reams of material and inevitably mistakes will be made.’

The agency was given a further chance to defend itself when Osofsky and Michelle Crotty, chief capability officer at the SFO, appeared before the House of Commons justice committee on Tuesday 29 March. A charitable interpretation of Osofsky’s performance would highlight her staunch defence of the SFO’s prosecution record: she produced statistics detailing the agency’s 44 successful individual convictions in the past four years. According to Osofsky, the SFO has eight trials in court this year comprising 23 defendants, something she described as an outlier from the usual two or three trials per year.

She also spoke persuasively about the need for legislative change, establishing some common ground with the private practice community. In particular, she rallied against the identification principle as being outdated and not fit for purpose.

However, she drew considerable flak from Labour MP Diane Abbott for dodging questioning around the Akle disclosure failures. Osofsky borrowed a strategy from the Boris Johnson playbook by stating she was ‘duty bound’ to not speak on the matter until the conclusion of Calvert-Smith’s review, which prompted Abbot to exclaim: ‘That’s a tiny bit disappointing…It’s Parliament! You’ve come before a Parliamentary Committee, there’s a Court of Appeal finding, it’s in the public domain, and you’re insisting you can’t say anything about it?’

So, if Osofsky is not the right person, then who is? Unlike in previous rounds of director speculation, there are no obvious candidates being quoted by the market. However, there is uniformity in terms of the type of person that is needed.

De Silva summarises: ‘Any new director needs to be a prosecutor, someone who can walk the walk and with an evident track record in successfully prosecuting cases.’ Savage adds: ‘We need someone like a barrister with a commercial bias, someone who’s a proper lawyer.’

Paul Hastings partner Jonathan Pickworth is blunter: ‘Things cannot continue as they are. If the SFO is to survive it needs leadership with real experience of prosecuting large and complex cases, proper tactical nous, and the instinct and knowledge to help it steer clear of the catastrophic errors that have become a recent feature of the SFO’s handling of its cases.’

In terms of those specifically mentioned, one source put forward DLA Piper’s global co-chair of its investigations and compliance group, Patrick Rappo. Rappo has considerable pedigree, having successfully defended former Barclays executive Thomas Kalaris in a fraud prosecution brought by the SFO in 2020. He also has experience within the agency, having acted as the SFO’s joint head of bribery and corruption before joining DLA.

White-collar crime partner at Skadden, Elizabeth Robertson, was also cited as a potential successor, while the SFO’s current general counsel, Sara Lawson QC, was tipped as a safe pair of hands if needed as an interim appointment.

The consensus is that the SFO would benefit from some refreshed leadership, but what of the rank and file? Gathering opinions here results in more of a mixed bag. Koh is generous with praise for her ex-colleagues, and highlights Will Hotham (principal investigative lawyer), Andy Reston (principal investigator) and Marc Brown (deputy chief investigator) as talented individuals tipped for bright futures within the SFO or in private practice.

Case controllers Jacob Blatch and Laura Haywood were also highlighted as among the most talented, this time by de Silva: ‘The people I worked with were exceptional lawyers, equal of anyone in private practice. In my view, they weren’t being sufficiently monetarily rewarded, they did it out of a sense of commitment to their work and conscientiousness.’

‘If the SFO is to survive it needs leadership with real experience of prosecuting large and complex cases, proper tactical nous, and the instinct and knowledge to help it steer clear of the catastrophic errors that have become a recent feature of the SFO’s handling of its cases.’
Jonathan Pickworth, Paul Hastings

Fountain Court’s Bankim Thanki QC has locked horns with the SFO on more than one market-defining case. Perhaps most notably, he represented ENRC in its Court of Appeal victory against the SFO, denying the agency the right to claim legal professional privilege over substantial volumes of documentation. He has nothing but respect for its people, however: ‘The SFO is too stretched, it bites off more than it can chew. There are very good individual lawyers in the SFO but there are also some overworked lawyers. I don’t think it’s properly resourced. There’s a tendency to exaggerate its incompetence because you can’t expect to win everything.’

Again, the funding issue rears its head. It is no secret that the disparity in pay between the SFO and private practice is stark: according to the SFO’s most recent annual accounts, Osofsky’s base salary was capped at £185,000. This is dwarfed by the pay received by most junior partners in the City. Blundell notes: ‘It’s difficult to keep quality when people can go to a firm and earn a lot more money.’

Green agrees: ‘People have got to be paid better. The big problem at the SFO is retention of staff. You can recruit talented people in the short-term and get lawyers on secondment, but retention is key when it comes to a consistency of approach and a strength in depth.’

But some white-collar partners are unconvinced that simply boosting salaries will lead to long-term success. One prominent partner says: ‘Even with better salaries, you can’t just throw money around. I’ve done a lot of investigations with the SFO over the years and they don’t strike me as the right sort of people.’ De Silva adds: ‘When you talk about funding it needs to be broken down into what you mean by that. Absolutely there’s a problem with funding the SFO in terms of salaries, but I don’t know if that is the differential. The problem is a bit more fundamental.’

Others take an even dimmer view, directly opposed to Koh’s assertion that there are no ‘9-5’ types to be found at the agency. A senior white-collar partner laments: ‘Personally, unless and until you can attract bright people to do it as a badge of honour, the salary won’t make any difference. David Green
and his management team were sensible people and were great in comparison to those before and after. Now it’s mostly civil service types. Jobsworths who want to get the 6pm train home.’

‘The SFO is too stretched, it bites off more than it can chew. There are very good individual lawyers in the SFO but there are also some overworked lawyers. I don’t think it’s properly resourced.’
Bankim Thanki QC, Fountain Court Chambers

For her part and to her credit, Osofsky took the salary question head on recently when writing a response to an FT article that suggested the SFO would benefit from a ‘revolving door’ of talent akin to the DoJ. She said: ‘Your comparison of an SFO investigator to a private sector lawyer’s salary is an attempt to compare apples with pears – they are entirely different roles.

‘In my team I am proud to have individuals with a wealth of experience from both the public sector – National Crime Agency, the Metropolitan Police and HMRC – and private law firms: Fieldfisher and Steptoe & Johnson, to name but two. The SFO does – and I believe always will – attract talented, experienced staff because of the nature of the work that we do.’

The pendulum

If the SFO aspires to mimic the prestigious DoJ, salary obviously plays a large role. But are there some subtler and more cost-effective ways to improve the SFO’s image?

De Silva believes a PR facelift could go a surprisingly long way towards reversing the agency’s fortunes. She says: ‘There’s been a serious failure from the SFO to demonstrate to the public what the benefit of the organisation is through its media messaging. They’ve been on the defensive for so long that the focus has been on essentially crisis comms instead of trying to message what a good job they’re doing. The media ends up inevitably focusing on the big negative stories, but there are other significant positive stories such as the global DPAs and other cases of corporate convictions and fraud where people get convicted.’

In the US of course, the credibility of the DoJ is beyond question. As Koh points out, there is ‘more of a revolving door between big law and justice’ in the US, which leads to an entirely different cultural perception of public prosecution. The no-nonsense public prosecutor is a common stereotype in American cinema.

According to de Silva, these stereotypes matter. She refers to New Blood, a TV show written by English novelist Anthony Horowitz that was released in 2016 on BBC One. The programme followed fictional investigators Stefan Kowolski and Arrash Sayyad as they pursued powerful corporations suspected of malpractice, with Kowolski employed at the SFO and Sayyad working as a trainee detective constable in the police force. It even featured a female SFO director.

De Silva comments: ‘It was filled with factual errors in terms of how people went about getting evidence, but interestingly there was a huge uptick in interest for our junior recruitment.’

‘People have got to be paid better. The big problem at the SFO is retention of staff. You can recruit talented people in the short-term and get lawyers on secondment, but retention is key when it comes to a consistency of approach and a strength in depth.’ Sir David Green QC, Cohen & Gresser

In 2017, then-prime minister Theresa May ran a manifesto pledge to disband the SFO and roll it into her own creation, the National Crime Agency (NCA). These plans were subsequently scrapped after the Conservatives failed to secure a majority, but Koh argues that such thinking could also be dissuaded via public engagement: ‘The starting point in terms of improvements would be a big PR push to make the SFO snazzier and more attractive. At the moment it looks clunky. It needs to be done and dusted with its review, and then make a big PR push to distinguish itself from the Crown Prosecution Service (CPS) and the NCA.’

Despite best efforts, SFO-bashing has returned. But, echoing the sentiments of Savage, it comes with the best of intentions. There is too great of a need for the SFO in these trying times, and, as Pickworth says: ‘The public interest requires there to be an effective agency whose role it is to investigate and prosecute serious and complex fraud and corruption.’

As for Green, the SFO sniping should be largely brushed off, even if he wishes for a greater balance: ‘It would be foolish to complain about any commentary on the SFO. People, for some reason, are fascinated by the SFO and one must accept that journalists can write what they like. I wouldn’t complain about any publicity – except I wish the pendulum would land somewhere in the middle now. If the SFO has secured a conviction, the headline is: “A much-needed boost for the SFO”, whereas if someone is acquitted, it’s “a high-profile defeat.” Surely it can go somewhere in the middle? Let’s bring some responsible balance back to reporting!’

There also needs to be a collective promise to measure the SFO on the metrics that count from now on. Savage suggests that recording the amount of money brought into the government’s coffers would be a good place to start, and the £1.63bn we quoted earlier isn’t too shabby.

But likewise, the SFO can afford to sharpen up its approach to prosecutions, even if convictions are not being hawkishly monitored. The agency can ill afford another Unaoil calamity. As Blundell concludes: ‘It’s not losing, it’s how you lose.’ LB

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