Partner Bambos Tsiattalou examines in The Times Law Brief the problem with the Serious Fraud Office’s (SFO) ‘blockbuster’ funding.

 

Bambos’s article was published in The Times Law Brief, 24 May 2016, and can be read here.

Blockbuster – it’s a dramatic word. It’s also the word used by the Serious Fraud Office (SFO) for additional funding which it receives from the government for major investigations on top of its annual £33m budget.

‘Blockbuster’ suggests that the government views the SFO as the go-to agency for big cases demanding big results. Expectations are therefore high that success is achieved in its major investigations through convictions at trial.

Over the last three years, the SFO’s blockbuster funding has increased dramatically. In 2012-13, it was £7.4m. This swelled to £24 and £24.5m respectively in the next two years, and is scheduled to top £28m in 2015-16 – a figure that almost matches the entire SFO budget.

While the work the agency undertakes is under great public scrutiny, the very fact that it acquires half its overall spending for ‘blockbuster’ cases begs the question: has blockbuster funding been a huge success?

Mandated to combat the highest level of serious fraud, bribery and corruption, the SFO regularly handles investigations that explode into the public domain. This piles on the pressure, requiring enormous resources at short notice.

If the SFO consistently managed to achieve convictions like that of Libor-fixer Tom Hayes, sentenced last August to 14 years (reduced to 11 on appeal), there would be few complaints. Regrettably, they do not. Multiple failures are plain to see, especially this year.

In January, the six other Libor traders involved in trials were acquitted, marring the Hayes success. The Forex inquiry was then abandoned in March: after spending two years reviewing half a million documents, the SFO found “insufficient evidence for a realistic prospect of conviction”.

Insufficient evidence for a scandal that, in the USA, resulted in multi-billion dollar fines for multiple banks. Whether or not this decision was reached as a result of the failed Libor prosecutions is a matter of speculation, but an agency seemingly afraid to bring cases to trial is no deterrent for white collar criminals.

These outcomes magnify the SFO’s shortcomings, and further damage its reputation. Meanwhile a less high-profile SFO investigation that made it to trial has also recently collapsed: two men accused of a $120m boiler room scam. Following a nine-year investigation and a nine-week trial, the jury found the pair not guilty in under four hours.

Significantly, the defence in this trial used evidence presented by the SFO to fight their case. Not for the first time, charges of incompetency directed at the SFO resonate from the courtroom into the press.

This failure may indicate that the focus on investigations in the public eye is also detrimental to less visible cases.

Three failures in rapid succession magnify public scrutiny of the SFO. Against this background, of note is the decision of Theresa May, Home Secretary, to reconsider plans to absorb the SFO into the NCA.

The SFO’s unique independence from ministerial oversight is no longer sustainable given the consistent failures to live up to its ‘blockbuster’ reputation. Incorporation within an agency that does not have a tarnished image would hopefully allow the SFO to focus more on investigations that it undertakes rather than on the public perception of how it operates.

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