Despite the Serious Fraud Office (SFO) opting in October not to pursue its much-publicised privilege appeal against ENRC any further, it is taking an increasingly hard-line approach in other ways.
Notably, the agency has come under scrutiny for its heavy-handed use of section 2 notices, an order compelling any individual or business to submit evidence or information. Failing to provide what the SFO wants can be punishable by up to six months’ imprisonment, a fine, or both.
At face value, this does not sound particularly nefarious, especially for an agency that has historically been painted as toothless and reluctant to prosecute. But when considering that the number of these notices issued has more than doubled in the last five years, rising from 463 in 2013/14 to 1,032 in 2017/18, there is some disquiet among the white-collar community.
This intensifies when stories emerge of the SFO deploying some cynical tactics. In the recently-published case between the agency and US professional services provider KBR, the watchdog’s case controller, Tom Martin, served a section 2 notice without prior warning.
KBR executive vice president and general counsel Eileen Akerson was summoned from the US to attend a London meeting with the SFO alongside her lawyer, then-Pinsent Masons partner Barry Vitou. Ostensibly, the meeting was to discuss the progress of the SFO’s probe into KBR over alleged bribery and corruption.
The notice, compelling the production of 27 separate pieces of evidence, was handed to Akerson at this meeting on 25 July 2017, despite there being no prior indication of such a move. KBR resisted the order, arguing among other things that Akerson’s temporary presence in the UK did not provide the SFO with sufficient jurisdiction to request the evidence.
‘Struck me as aggressive tactics from the SFO. Why would you risk engaging with the SFO if it will also attack you on privilege?’
Lord Justice Gross dismissed KBR’s appeal but noted: ‘I cannot help observing that there are unappealing features of the SFO’s decision to give the July Notice to Ms Akerson in the course of attending a meeting to discuss the investigation – but however those features might impact on the willingness of others to attend such meetings in the future, they do not serve to invalidate the giving of the July Notice here.’
In August it was announced that Martin had been suspended by the SFO, but whether this relates to his usage of section 2 orders is unknown.
Nevertheless, it is hard to see the benefit of such tactics for the SFO when these stories become public, especially in a climate of increasing challenges to privilege, as seen by the ENRC case. It is an increasingly inhospitable environment for corporate co-operation.
As Fieldfisher financial crime partner Tony Lewis says: ‘[The KBR case] struck me as slightly aggressive tactics from the SFO. It got around the market that it was encouraging people to attend meetings so that it can force you to produce documents. Why would you risk engaging with the SFO if it will also attack you on privilege?’
It is not only counterproductive but also unchecked. Currently there is no judicial scrutiny applied to section 2 orders, despite similar powers such as search warrants being closely monitored by judges. Jonathan Pickworth, white-collar partner at White & Case, comments: ‘They haven’t received any judicial scrutiny at all. It’s quite a draconian power.’
Certainly, the recent relief handed to legal professional privilege via the ENRC ruling should not be downplayed. But, if anything, negative publicity over section 2 notices may contribute to mixed messages at a crucial time: newly installed director Lisa Osofsky struck a co-operative tone during her maiden speech in September.
If the SFO, which did not respond to the points made in this piece, continues to use such tactics, it could soon learn that actions speak louder than words.