UK Serious Fraud Office Annual Report

In the areas of both fraud and corruption, the SFO ran a total of eight prosecutions of 18 defendants last year, with a conviction rate of 85%. It is relevant to note, however, that the numbers are quite small ' 11 defendants were convicted, of whom four pleaded guilty with seven being found guilty by a jury. The SFO also opened 12 investigations last year, and charged 35 defendants. Although from a U.S. perspective this might be considered to be minor, given the scale and complexity of the SFO's work, it actually is a modest success, and it should be borne in mind that the SFO essentially only tackles serious and complex cases.

As for the outlook for the future, the Director states that the SFO is “undertaking fewer but much larger and more complex investigations” and that the SFO has “expanded [its] analytical and intelligence capability, and currently [has] significant pre-investigation projects in development.”

Deferred Prosecution Agreements

What will be of particular interest to watch as a development is the use of Deferred Prosecution Agreements (DPAs) that came into operation earlier this year with the SFO's enforcement of the UK Bribery Act 2010. There have as yet been no public announcements of a DPA going through the system. DPAs are a tool for the SFO (and other government crime authorities) to try and reach a form of plea bargain with corporate offenders and thereby shortcut trials, time and cost. This process is similar to the U.S. plea-bargaining system, but it has major differences, most notably the oversight role of a judge who has to approve any proposed deal (in open court). It will probably take some time for DPAs to bed down and so only time will tell whether DPAs are judged a success or not.

The SFO also appears to have had some regulatory woes of its own on a different front ' including a data loss (in 2012), which led to an investigation resulting in a 98% recovery of material. The incident was reported to the Information Commissioner's Office (ICO), which is the main UK data protection/privacy regulator, as personal data had apparently been inadvertently sent to a third-party. The report states that the ICO undertook a site visit at the end of May 2014 and that the SFO have had a further 10 instances of data-handling issues, although no more details were given. Data losses are an all-too-frequent occurrence these days, to which even top regulatory authorities are not immune.

Since the SFO's report was published, other significant additional activity has included the following:

• The settlement of the SFO's long-running civil actions with the Tchenguiz brothers;
• The sentencing of former Alba CEO Bruce Hall for conspiracy to corrupt, in relation to contracts for the supply of goods and services to a Bahraini Aluminium company. He was sentenced to 16 months in prison and ordered to pay a confiscation order of GBP 3,070,106 (about $5.175 million) or face serving an additional prison term of 10 years (on top of significant sums of compensation he also paid to his former company where the corruption occurred, and a high contribution to prosecution costs that he has also paid);
• The laying of criminal charges against a UK subsidiary of Alstom after a tip-off from the Office of the Attorney General in Switzerland concerning large transport projects in India, Poland and Tunisia; and,
• The sentencing of four men connected with Innospec in connection with their involvement in a bribery scheme in Indonesia and Iraq. Mr. Green said of the prosecutions, “This successful conclusion to a long-running investigation demonstrates the SFO's ability and determination to bring corporate criminals to justice.” The SFO also secured a guilty plea from the company with fines being imposed in the UK and the U.S. after co-operation between the SFO and authorities in the U.S., Indonesia, Switzerland and Singapore.

Conclusion

It is clear from both the report and the activity of the last few weeks that those who think the Bribery Act 2010 is dead have spoken too soon. The SFO is right to focus its resources on the most complicated cases, and, the Crown Prosecution Service, which is the principal prosecuting authority (in England and Wales) responsible for conducting most prosecutions of alleged criminal offences, has also used bribery legislation to bring less complex cases to court. Complex cases take longer to reach court, especially given the need for cooperation with foreign law enforcement agencies. It is likely that the next few months will see more activity as announcements are made in some of the SFO's ongoing investigations.

Andr' Bywater and Jonathan Armstrong, a member of this newsletter's Board of Editors, are commercial lawyers with Cordery Compliance in London, where they focus on regulatory compliance, processes and investigations. Reach them at [email protected] and [email protected], respectively.

In the UK, the Serious Fraud Office (SFO) acts as an independent governmental authority tasked with investigating and prosecuting the most serious or complex fraud and domestic and overseas corruption. As readers might be aware, a few years ago the UK introduced a new legal regime to tackle corruption under the UK Bribery Act 2010, with some describing it as the toughest anti-corruption legislation in the world.

David Green, CB QC, the Director of the SFO, recently published his annual report (2013-2014), which gives the opportunity to reflect on the recent past and look to the future concerning the SFO's activities, notably as regards corruption enforcement.

The Annual Report

In the areas of both fraud and corruption, the SFO ran a total of eight prosecutions of 18 defendants last year, with a conviction rate of 85%. It is relevant to note, however, that the numbers are quite small ' 11 defendants were convicted, of whom four pleaded guilty with seven being found guilty by a jury. The SFO also opened 12 investigations last year, and charged 35 defendants. Although from a U.S. perspective this might be considered to be minor, given the scale and complexity of the SFO's work, it actually is a modest success, and it should be borne in mind that the SFO essentially only tackles serious and complex cases.

As for the outlook for the future, the Director states that the SFO is “undertaking fewer but much larger and more complex investigations” and that the SFO has “expanded [its] analytical and intelligence capability, and currently [has] significant pre-investigation projects in development.”

Deferred Prosecution Agreements

What will be of particular interest to watch as a development is the use of Deferred Prosecution Agreements (DPAs) that came into operation earlier this year with the SFO's enforcement of the UK Bribery Act 2010. There have as yet been no public announcements of a DPA going through the system. DPAs are a tool for the SFO (and other government crime authorities) to try and reach a form of plea bargain with corporate offenders and thereby shortcut trials, time and cost. This process is similar to the U.S. plea-bargaining system, but it has major differences, most notably the oversight role of a judge who has to approve any proposed deal (in open court). It will probably take some time for DPAs to bed down and so only time will tell whether DPAs are judged a success or not.

The SFO also appears to have had some regulatory woes of its own on a different front ' including a data loss (in 2012), which led to an investigation resulting in a 98% recovery of material. The incident was reported to the Information Commissioner's Office (ICO), which is the main UK data protection/privacy regulator, as personal data had apparently been inadvertently sent to a third-party. The report states that the ICO undertook a site visit at the end of May 2014 and that the SFO have had a further 10 instances of data-handling issues, although no more details were given. Data losses are an all-too-frequent occurrence these days, to which even top regulatory authorities are not immune.

Since the SFO's report was published, other significant additional activity has included the following:

• The settlement of the SFO's long-running civil actions with the Tchenguiz brothers;
• The sentencing of former Alba CEO Bruce Hall for conspiracy to corrupt, in relation to contracts for the supply of goods and services to a Bahraini Aluminium company. He was sentenced to 16 months in prison and ordered to pay a confiscation order of GBP 3,070,106 (about $5.175 million) or face serving an additional prison term of 10 years (on top of significant sums of compensation he also paid to his former company where the corruption occurred, and a high contribution to prosecution costs that he has also paid);
• The laying of criminal charges against a UK subsidiary of Alstom after a tip-off from the Office of the Attorney General in Switzerland concerning large transport projects in India, Poland and Tunisia; and,
• The sentencing of four men connected with Innospec in connection with their involvement in a bribery scheme in Indonesia and Iraq. Mr. Green said of the prosecutions, “This successful conclusion to a long-running investigation demonstrates the SFO's ability and determination to bring corporate criminals to justice.” The SFO also secured a guilty plea from the company with fines being imposed in the UK and the U.S. after co-operation between the SFO and authorities in the U.S., Indonesia, Switzerland and Singapore.

Conclusion

It is clear from both the report and the activity of the last few weeks that those who think the Bribery Act 2010 is dead have spoken too soon. The SFO is right to focus its resources on the most complicated cases, and, the Crown Prosecution Service, which is the principal prosecuting authority (in England and Wales) responsible for conducting most prosecutions of alleged criminal offences, has also used bribery legislation to bring less complex cases to court. Complex cases take longer to reach court, especially given the need for cooperation with foreign law enforcement agencies. It is likely that the next few months will see more activity as announcements are made in some of the SFO's ongoing investigations.

Andr' Bywater and Jonathan Armstrong, a member of this newsletter's Board of Editors, are commercial lawyers with Cordery Compliance in London, where they focus on regulatory compliance, processes and investigations. Reach them at [email protected] and [email protected], respectively.