Despite intense scrutiny of the SFO and a slowdown in new cases, the market for white-collar expertise is as hot as ever, as Georgina Stanley discovers
The last 12 months may not have been as busy as they could have been for the white-collar community, but that has not stopped the practice grabbing more than its fair share of headlines.
The London arm of US firm Dechert, its controversial former partner Neil Gerrard and the embattled Serious Fraud Office (SFO) have all been publicly scrutinised for their roles in the long-running ENRC corruption case, with Dechert agreeing to pay the Kazakh mining company £20m in interim costs earlier this month (3 August).
This came after 21 July saw the reputation of the SFO and its senior managers battered by a third quashed conviction in the high-profile Unaoil bribery scandal, not to mention the publication of two damning reports – the UK government-ordered Calvert-Smith review into the SFO’s handling of the Unaoil investigation and the Brian Altman QC report into the collapse of the trial of two former Serco managers in R v Woods & Marshall, both of which highlighted failings at the highest level of the organisation.
‘The investigation and prosecution of economic crime in this country is not accorded sufficient priority – prosecuting agencies are woefully under-funded and under-resourced.’ Judith Seddon, Dechert
But despite the SFO and its director, Lisa Osofsky, coming under sustained fire from all sides (shadow attorney general Emily Thornberry’s response to the government reviews was to accuse the SFO of ‘woeful mismanagement and inexplicable misjudgements at the top’) and white-collar partners pointing to a relative dearth of new cases, the white-collar lateral partner merry-go-round keeps spinning, shifting the UK Legal 500 rankings as it does so.
The SFO has stated its commitment to implementing all of the recommendations put forward by the Altman and Calvert-Smith reviews, but there is acknowledgement in the market that government investment is urgently needed in order to support the agency’s efforts to get back on the front foot.
Lateral recruitment
Key moves so far this year include Squire Patton Boggs adding four lawyers to its UK government investigations and white-collar practice, including well-regarded former Peters & Peters partner Hannah Laming, and US firm Cohen & Gresser hiring former SFO director and Slaughter and May consultant David Green as a partner in February.
Meanwhile, last year, HFW added Barry Vitou and Anne-Marie Ottaway from Greenberg Traurig, which itself hired global practice head Jo Rickards from Mishcon de Reya in 2021, following this up in May this year with the addition of Rebecca Meads from Peters & Peters to lead its UK white-collar offering.
All of this hiring activity comes on top of what is arguably going to be the most closely-watched recruitment of all; Dechert’s move to rebuild its London practice in the wake of the Gerrard scandal, with the trophy hire of Judith Seddon (pictured) from Ropes & Gray.
Coming on the back of years of expansion that have seen many big UK and US firms try to expand their criminal practices in London, the ongoing recruitment activity suggests more benign market conditions than many partners are currently either experiencing or predicting.
Enforcement woes
‘At the beginning of the pandemic all the enforcement agencies seemed to struggle to some extent or another,’ comments Seddon. ‘More generally, the investigation and prosecution of economic crime in this country is not accorded sufficient priority – prosecuting agencies are woefully under-funded and under-resourced; as the recent reviews by Sir David Calvert-Smith and Brian Altman QC have demonstrated. It’s a scandal that we’ve got an estimated £5bn of Covid fraud that is largely going unprosecuted.
‘The SFO needs fundamental change at the top if it is to be able to sort out its myriad problems. It is desperately in need of more prosecutorial experience at a senior level.’
Jonathan Pickworth, Paul Hastings
‘The SFO has been given a laundry list of areas for improvement and overhaul in both the Calvert-Smith and Altman reviews. That is clearly the starting point for the SFO to be able to move forward. To do so, there must be a full and clear acceptance by the SFO of the criticisms and a real commitment to change. Crucially, the government also needs to plough more money into the agencies – as opposed to any suggestion of further cuts – in part to encourage enough high calibre people to join those agencies.’
Paul Hastings partner Jonathan Pickworth adds: ‘Under the previous director [Sir David Green] the SFO was quite effective and seemed to be heading in the right direction. But now it seems to be a very different place and one which needs fundamental change at the top if it is to be able to sort out its myriad problems. It is desperately in need of more prosecutorial experience at a senior level so that case teams can be given the right guidance and to ensure that basic errors don’t happen. We all want to see an SFO that operates effectively, but fairly, and which has credibility.
‘One of the things that has been noticeable in recent years is a slowdown in new cases being opened, and in the type of investigations being focused on; all while a number of older cases have been closed. And there have been too many high-profile failures, quite apart from Unaoil and Serco.’
For a practice that depends on the power of agencies such as the Financial Conduct Authority (FCA) and the SFO it is clear from white-collar and corporate crime partners that what they urgently need is better leadership at the top when Osofsky’s term ends, and better funding. As such, suggestions in late July that the SFO, alongside the National Crime Agency (NCA), may be asked to cut their overall staffing numbers by up to 40% could have a devastating consequence on the organisation’s ability to cut crime, given it is already struggling, particularly if this affects investigative or legal staffing.
Laming is just one of those concerned about any potential cuts at a time when she had hoped to see activity and investment increase here in the UK in keeping with increased commitment on the other side of the Atlantic. She says: ‘Most of us recognise the importance of an organisation focusing on economic crime, but this has to be reconciled with the need for change. I hope that activity will pick up. For instance, the government has announced more data sharing between the US and UK. The US has committed to placing much more emphasis on enforcement and prevention of financial crime and recognises that this requires more resources. It would be good if this drove increased focus and resource here too. However, recent news suggesting the government is asking the NCA and the SFO to model staffing cuts of up to 40% is a worrying indication of travel in the wrong direction.’
Over at HFW, Vitou is equally pessimistic about the impact of potential cuts. ‘The government talks a good game on fighting economic crime but there is a chronic lack of investment. The NCA recently complained that it was given only a third of the funding per officer than that given to its US equivalent, the FBI. More, not less, investment is required and talk of up to 40% job cuts to the SFO and NCA is the opposite of what is needed and deeply damaging for morale for those working on the front line as well. An underfunded NCA and SFO is in no-one’s interest.’
Broadening out
Despite the concerns, most remain optimistic that activity will pick up again in future, even though they anticipate ongoing difficulties at the SFO given recruitment for Osofsky’s successor is unlikely to be straightforward without more investment. In the interim, partners are on the lookout for new areas of growth to compensate for the fall in large investigations work.
At Dechert, Seddon anticipates an increase in sanctions-related work. ‘We all think sanctions is going to be an area of focus, given the Russian sanctions landscape. We also see ESG-related investigations as being a potential new work stream, including directors’ accountability for failings in their ESG duties. We also increasingly see a focus on human rights and directors’ and corporates’ duties to protect them – from proposed enhancements to the Modern Slavery Act through to proposals to introduce a corporate failure to prevent human rights abuses.’
‘The government talks a good game on fighting economic crime but there is a chronic lack of investment.’
Barry Vitou, HFW
Laming too forecasts an increase in ESG-related activity. ‘I think we’ll see a lot more investigations into areas like cyber and greenwashing,’ she says. ‘Currently, a lot of people are focused on sanctions work because of the current geopolitical situation but I believe that areas like cyber crime and ESG will be big areas of growth going forward.’
By bucking the trend for lateral moves from UK firms to US with his move to HFW meanwhile, Vitou believes the more challenging business environments across the firm’s core commodities, aerospace, shipping and insurance sectors, will prove a good fit with international investigations work.
As such, partners predict that recruitment is likely to continue both by UK and US firms, even if in the short term there is unlikely to be enough big investigations work to go round, forcing practices to be more creative. All of which means, The Legal 500 rankings are likely to remain dynamic.
‘Currently, a lot of people are focused on sanctions work because of the current geopolitical situation but cyber crime and ESG will be big areas of growth going forward.’ Hannah Laming, Squire Patton Boggs
Vitou says: ‘I wouldn’t be surprised if everyone is really busy again in the not-too-distant future. We’re facing some serious challenges – geopolitical instability, supply chain issues, economies opening and closing. The global dashboard has lots of red lights flashing. I think enforcement conditions for corporates will get less benign.’
And firms don’t want to miss out. As Pickworth concludes: ‘There still appears to be significant interest from US firms seeking to build or expand their white-collar investigations practices in London. The vast majority of the biggest investigations tend to span both sides of the Atlantic and it is vital to have genuine strength in London as well as in the US in order to win the most significant mandates.’ LB
Dechert: Notes on a scandal
‘The white-collar world is small. People know me and they know my reputation for integrity,’ says Judith Seddon of her move to a practice that has hit the headlines for all the wrong reasons in recent months.
Seddon joined the firm from US rival Ropes & Gray in March, just weeks before the damning May High Court judgment which found Dechert’s former practice head Neil Gerrard to have been guilty of leaking information about his client ENRC to the press, breaching his duties to his client and being negligent in his advice and the way he handled the case.
As a consequence of the judgment, Dechert, which maintains it has ‘acted in good faith’ throughout, this month (August) agreed to pay ENRC £20m in interim costs, with the possibility of additional costs further down the line.
There’s no doubt that the firm’s reputation has taken a hit in the short-to-medium term but, despite this, Seddon is confident that she will be able to help rebuild its market perception in London given her own reputation with financial institutions and the reputations of remaining London partners such as Roger Burlingame.
She believes that the firm’s strong US practice and the opportunities for referral work on large international investigations will play an important part in the team’s long-term success. ‘I am supported by an excellent team and I am hopeful for the future. Dechert is a powerhouse in the US and the UK and I believe the opportunities for cross-border work here are excellent.’
Seddon concludes on a sanguine note: ‘Dechert offers a great platform, with a full-service litigation practice as well as a strong white-collar practice on both sides of the Atlantic. The opportunities for complex, high-stakes, cross-border work are plentiful. You simply cannot build a credible white-collar practice without that full-service disputes practice in London and the US, which is what Dechert offers. We have ambitious plans to grow the practice in London and globally and I am delighted to have joined the firm.’