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Business As Usual Or Storms On The Horizon? A Mid-year Review Looking At The Serious Fraud Office’s Achievements And Upcoming Pressure Points For 2022 – White Collar Crime, Anti-Corruption & Fraud


In this article Shula de Jersey and Matt Davies provide a brief mid-year update
looking at what the Serious Fraud Office
(“SFO“) has achieved so far this year
and what is on its plate for the rest of the year.

In March and April, Richard Sallybanks and Anoushka Warlow
published updates on SFO activity, see here and here. This article builds on those
reviews.

Outcome of the ENRC civil claim against Dechert LLP, Neil
Gerrard and the SFO

In May, Waksman J gave judgment in the Commercial Court in the
trial between ENRC, Dechert LLP, the SFO and Mr Neil Gerrard. Mr
Gerrard was a partner at Dechert, originally representing ENRC
between 2011-2013 in what became an investigation by the SFO into
ENRC and alleged bribery and corruption concerning mining contracts
in the DRC. ENRC denies the allegations and brought proceedings
against Dechert and the SFO alleging that the two had conspired to
have the investigation opened. ENRC further alleged that the SFO
failed to conduct itself properly in a number of regards, including
by failing to keep proper records and by entering into unauthorised
contacts with Mr Gerrard. The trial of the matter took place over
the course of several months in 2021.

In his lengthy judgment which, found for ENRC in certain aspects
and for Dechert and the SFO in others, Waksman J was critical of
the SFO’s conduct, finding that it willingly took information
disclosed to it by Mr Gerrard, which was plainly against the
interests of his client and unauthorised. The SFO’s
bad faith opportunism” led to it encouraging Mr
Gerrard to breach Dechert’s contract with ENRC through its
inappropriate contacts with him.

The SFO was however able to take some small positives from the
outcome of the case. It is still able to use the material obtained
from ENRC’s lawyers. It also rebuffed an attempt by ENRC to
replace members of the SFO case team who had seen those materials.
Most importantly, the SFO was found to have not committed
misfeasance in public office – which was a serious allegation
levelled against it. However, where all this leaves the SFO’s
investigation, opened in April 2013 and now in its ninth year,
remains to be seen.

Whilst Dechert has agreed to pay ENRC £20m on account of
interim costs, a decision on any costs payable by the SFO has been
reserved pending the outcome of a separate trial due to take place
next year on issues of causation and loss.

Convictions, trials and future hearings

Since our last update, in what the SFO has self-styled “the
year of the trial”, it has secured several successful
outcomes:

  • The SFO’s investigation into Global Forestry Investments
    concerned actions by Andrew Skeene and Junie Bowers to encourage
    investors to invest into ethical products that claimed to protect
    the Amazon rainforest. There was no such green investment scheme,
    and the defendants withdrew the money for personal enjoyment. After
    convictions for conspiracy to defraud, Skeene and Bowers were
    sentenced to 11 years’ imprisonment.

  • Following guilty pleas, Glencore Energy (UK) Ltd was convicted
    of all charges of bribery. This case related to an investigation
    into the payment of bribes by Glencore Energy, via employees and
    agents, of over $28 million for oil access and preferential
    treatment. There were convictions relating to five counts under
    Section 1 Bribery Act 2010 and two counts under Section 7 Bribery
    Act 2010 – the corporate failure to prevent bribery offence.
    In what is becoming an increasingly common characteristic, the SFO
    has prioritised action against the corporate suspect while the
    investigation continues against individuals.

  • David Ames was found guilty of two counts of fraud by abuse of
    position in relation to a £226 million fraud involving the
    Harlequin Group, a hotel and resorts development venture in the
    Caribbean. Mr Ames is due to be sentenced in September.

  • Timothy Schools, the founder of the Axiom Fund, was sentenced
    to 14 years in prison for fraudulent trading, fraud by abuse of
    position and money laundering. The Axiom Fund was set up to give
    loans to law firms pursuing no-win-no-fee cases. The money
    investors provided to the fund instead went to just three law firms
    that Schools siphoned money from. As both the Global Forestry and
    Axiom cases show, a defendant of fraud against investors where
    there is a significant element of personal gain (for example, by
    funding a lavish lifestyle), will be met with very severe prison
    sentences.

However, the SFO suffered a setback in July, when the jury was
discharged at the trial of Jeffrey Cook and John Mason in its GPT
Airbus case. The prosecution of Mr Cook and Mr Mason followed the
company’s guilty plea in April 2021 which resulted in a fine of
£7.5m, a confiscation order of £20.6m and an award of
costs in favour of the SFO of £2.2m. Mr Cook was the former
managing director of GPT Special Project Management, which was a
related company to Airbus. John Mason was a subcontractor. Both
defendants are accused of paying £9.7 million in bribes in
relation to contracts awarded to GPT for work for the Saudi Arabian
National Guard; Cook claims in his defence that the payments were
approved by the British Government. Owing to reporting
restrictions, it is unclear why the jury was discharged but it
means that a retrial will take place if the SFO are to continue to
pursue the case.

September is looking to be a very busy month for the SFO, with
multiple trials at the Southwark Crown Court listed to start:

  • Balli Group Plc and Balli Steel Plc, four
    individuals are between them charged with offences relating to
    fraudulent trading and conspiracy to defraud.

  • Greenergy, the SFO charged a biodiesel trader and
    former employee at Greenergy with two counts of fraud by abuse of
    position and one count of money laundering.

  • The third major trial the SFO is preparing for in September
    relates to an underlying investigation into bribes paid to win
    contracts within the UK construction industry. Five individuals are
    between them charged with various counts of bribery, receiving
    bribes and money laundering. The relevant corporate entities are
    not specified.

In contrast with previous years, there have been no deferred
prosecution agreements concluded this year (so far). It was,
however, previously intimated that one might be on the horizon with
UK insurance company, Jardine Lloyd Thompson
(“JLT“). Though not confirmed by the
SFO, a publicly available letter from the US Department of Justice
(“DoJ“) to JLT’s US lawyers confirms
that JLT had agreed to pay $29million in disgorgement of profits
obtained from “corruptly obtained and retained
contracts
” in Ecuador, and that the DoJ “would
credit the Disgorgement Amount against the amount JLT pays to the
UK Serious Fraud Office… pursuant to the Company’s separate
resolution with the SFO that addresses the same underlying
conduct
“. While this indicates that a DPA with JLT may
soon hit the news, it may be that the matter has been dealt with in
the UK through the Financial Conduct Authority which in June
announced that it had fined JLT Specialty Limited (JLTSL)
£7,881,700 for financial crime control failings, which in one
instance had allowed bribery of over $3m to take place.

Reports by Sir David Calvert-Smith and Brian Altman QC

On 21 July 2022 two much-anticipated reports into the Serious
Fraud Office (“SFO”) were published: the review of Brian
Altman QC into the collapse of the Serco trial and Sir David
Calvert-Smith’s Independent Review into the SFO’s handling
of the Unaoil investigation. As Lisa Osofsky, Director of the SFO,
said on their publication, the reviews made a “sobering
read”
.

The two reviews laid bare a catalogue of failings at every level
of the SFO: individual, managerial and leadership weaknesses and
fundamental deficiencies in systems and controls in the disclosure
process. Sir David Calvert-Smith’s review makes a total of 11
recommendations and Brian Altman QC’s review a total of 18
recommendations. The reports raise issues concerning the internal
running of the SFO including a lack of trust between the case team
and senior management, a lack of quality assurance and poor
compliance with relevant internal SFO policies. A key theme running
through both reports is the need for the SFO to have effective
disclosure strategies and management, as well as ensuring that the
disclosure process is properly resourced, that those conducting it
are properly trained and their work is properly reviewed.

Still grey clouds on the horizon?

There is little doubt that the SFO has significant lessons to
learn following the publications of the two reports and there will
be internal pressure focused on rebuilding its reputation. While
the Government accepted all the recommendations in the Altman and
Calvert-Smith reports, it has however asked the SFO to model the
impact of a 20-40% cut in headcount and there is an obvious
disparity between the Government’s stated commitment to clamp
down on economic crime and its willingness to make sufficient
resources available to the SFO.

Subject to any extension of her five-year term, Ms Osofsky’s
tenure as Director will end in September next year, and thoughts
will naturally move to successors. While the SFO may look to its
pending trials as further opportunities to move on from past
failings and demonstrate its credibility as a prosecuting agency,
the question mark over its long-term resources, and the impact that
will inevitably have on recruitment, staffing levels and its
ability to do what it was set up to do (investigate and prosecute
serious fraud and corruption), mean that there might not be a queue
of candidates clamouring to take over from Ms Osofsky.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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