Whether the Serious Fraud Office (SFO) is value for money is a question that’s being asked following developments that could give ammunition to its detractors, asserts Aziz Rahman. The SFO has just announced that it has dropped investigations into Rolls-Royce and drugs manufacturer GlaxoSmithKline, citing either insufficient evidence or that it was not in the public interest to continue with those investigations. Both cases have been lengthy and will surely have cost a sizeable chunk of money.
The announcement comes just days after a Freedom of Information Request compelled the taxpayer-funded SFO to reveal that its unsuccessful prosecution of three Tesco executives cost £6.2 million. It may well be that the Tesco saga has led to some serious soul searching at the SFO regarding how it chooses its cases. After all, the SFO agreed a deferred prosecution agreement (DPA) with Tesco. That DPA saw the supermarket giant avoid a prosecution for its 2014 accounting scandal by admitting there had been false accounting and paying £129 million. However, the acquittal of the three individuals who were charged means that nobody has been found guilty of the wrongdoing that Tesco admitted had been committed.
Maybe this is why the SFO has dropped its investigation into Rolls-Royce. Like Tesco, Rolls-Royce entered into a DPA and admitted wrongdoing which, in its case, involved widespread bribery over many years in many countries. The SFO could be wary of suffering another Tesco-style embarrassment. Its decision to drop both the Rolls-Royce and GlaxoSmithKline investigations could be an indicator that the organisation realises it needs to pick its legal fights shrewdly.
That said, the decision to drop both cases could simply come down to the SFO’s new director Lisa Osofsky. It’s understandable if Osofsky is looking to clear her in-tray of some investigations that she inherited and is keen to avoid any potentially high-profile ‘banana skins’. After all, Tesco is not the SFO’s only major defeat. Just four months ago, a High Court judge denied an SFO application to charge Barclays over its 2008 capital raising. That was only five months after a court originally dismissed the charges the SFO had brought against the bank.
Damned if it does, damned if it doesn’t
The SFO is almost damned if it does and damned if it doesn’t. Dropping such lengthy investigations into Rolls-Royce and GlaxoSmithKline leads to its judgement being questioned and accusations that it isn’t making the shrewdest use of its resources. The criticism is likely to have been twice as loud if the SFO had doggedly continued with such cases only for them to end in unsuccessful prosecutions. On that basis, perhaps credit is due to Osofsky and her colleagues for making some tough decisions and clearing the decks such that the SFO isn’t dogged by its past.
Maybe these latest developments are a sign that situations where both a company and individuals within it could be prosecuted need to be viewed through a different set of lenses. The SFO will certainly want to have avoided Rolls-Royce ending up like Tesco, with nobody being convicted for the criminal activity the company admitted had been committed.
There certainly needs to be some attempt to square the circle regarding how individuals and corporates are investigated and prosecuted, and an awareness that the DPA process is in need of some serious fine-tuning. If such fine-tuning doesn’t occur, there’s the danger that a DPA comes to be seen as a way for senior business figures to escape liability for wrongdoing by pushing the company down the DPA route.
It could be argued that it would be better to see individuals prosecuted first before any decision is made by the SFO regarding whether to prosecute – or enter into a DPA with – the company. In reality, that would take too long. Yet the situation we currently have needs to change to avoid the anomaly where courts have granted DPAs based on evidence of supposed wrongdoing and yet that evidence has been too weak to obtain the conviction of an individual.
In need of a new approach
If we’re in need of a new approach, maybe we’re closer to one than we realise. Lisa Osofsky has already talked of making greater use of what some would call ‘informers’ and others may call ‘co-operators’ or ‘grasses’. A native of the US and having worked for the FBI, Osofsky is familiar with the art of ‘striking a deal’ whereby a suspect receives more lenient treatment in exchange for co-operation.
In the UK, the Serious Organised Crime and Police Act 2005 provides the opportunity to offer more lenient penalties or even immunity from prosecution in exchange for co-operation. This could be the route towards a more cost-effective future for the SFO.
Aziz Rahman is Senior Partner and Head of the Corporate Crime Group at Rahman Ravelli Solicitors
*For expert guidance on serious fraud investigations visit: https://www.rahmanravelli.co.uk/expertise/serious-fraud-office-sfo-investigations/