maj 2011 - mt - chasing the white collar crooks

8/3/2019 Maj 2011 - MT - Chasing the White Collar Crooks

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Chasing the white collar crooks

By Chris BlackhurstSunday, 01 May 2011

Despite a soaring caseload, the Serious Fraud Office is under threat of extinction:too many high-profile cock-ups mean that Whitehall has it in its sights. Who's

really on the run, the cops or the criminals?

The Serious Fraud Office is fighting for its very life. It's hard to imagine it's the same agency that recently made

headlines with dawn arrests of property tycoons Robert and Vincent Tchenguiz and five other men, and raids on

their offices. Difficult, too, when you consider the SFO is due to begin one of its most high-profile trials ever in

October, of the former Polly Peck chief and fugitive from justice for many years, Asil Nadir.

Scarcely believable, as well, given the SFO conviction rate has risen from a poor 62% to a creditable 90% in the

past few years. Its workload has also shot up - from 63 cases in 2006-07 to just over 100 on its books at present.

Yet, within Whitehall, there is a determined move afoot to break up the watchdog and fold its investigative

activities into the National Crime Agency when that new body gets underway and also to hand its prosecution

function to the Crown Prosecution Service.

Originally, the plan was to create a new Economic Crime Agency, putting the SFO and the enforcement sections

of the Financial Services Authority and Office of Fair Trading together in the same super-agency.

But the FSA managed to cling on to market abuse and insider trading after a ferocious rearguard action. The

reaction among officials was to propose abandoning the Economic Crime Agency before it was born and to carve

up the SFO's remit - putting investigations into the National Crime Agency and prosecutions into the Crown

Prosecution Service.

This has prompted SFO chief Richard Alderman to mount a stirring defence. 'My view is that the prosecution-led

approach with integrated teams of lawyers and investigators is needed in this very specialist and complex area.

No evidence has been produced to show that separating investigators and prosecutors will improve the approach

to complex economic crime. In my view, the effect will be damaging.'

The truth is there has always been something in the British mindset that doesn't take white-collar crime as

seriously as other crimes. This is disputed by the authorities, naturally, but you only have to compare this country

with others, notably the US, where the sight of executive felons being led away in chains is commonplace. There,

if found guilty, they receive long sentences (Bernie Madoff is doing 150 years). Here, we're more laid-back.

And, often to the fury of US investigators, who point out that New York and London are of similar size in terms of

business activity and occupy identical positions in the international firmament, the Manhattan courts are crowded

with large-scale fraud cases; here they remain rare. Are we to imagine that American businesspeople are more

crooked than their Brit counterparts? Or, do we have a very different, hands-off approach?

The SFO is based in an anonymous office block off Gray's Inn Road in London. With its low-key lack of grandeur

and tucked-away position, Elm House says much about how fraud prosecution is regarded. Some countries site

their SFO equivalents in large, unmissable premises. Not in the UK.

Its director is pleasant and clever, blessed with a sharp mind and able to argue his corner. But Alderman is also

understated in that very British manner - a high-profile, tough-talking Eliot Ness figure he is not. Indeed, when

Alderman publicly went on the offensive, he soon came unstuck. Having said he would charge BAE Systems with

bribery and seek to recover 1bn in compensation, he ended up accepting a 30m penalty and a guilty plea to a


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minor accounting offence over the sale of radars to Tanzania. Not for the first time, the monicker of Serious Farce

Office was applied.

Such criticism, say those close to Alderman, is unfair. What we saw then was the UK end - the SFO was also

working with the Americans on another BAE case in central and eastern Europe. And that resulted in fines

totalling more than 280m in the US.

Alderman and his colleagues go into battle weakened. In the BAE case, for instance, they found themselves

locked in a fire-fight with the company that went on for years (five in all). When the final settlement came,

Alderman would have liked a judge to have ruled on the punishment - to say loudly and publicly that in their view it

was the best that could be achieved for the authorities. That option wasn't available to him, and instead a

combination of BAE public relations and unfounded comment did its worst.

A former barrister who specialised in tax prosecutions for the Inland Revenue, Alderman is no stick-in-the-mud.

He has been a surprisingly pragmatic head of the SFO. He's keen, for instance, to bring the US system of

deferred prosecutions of corporations to the UK and is pressing the Government to make the change.

What he'd like is for companies to own up, pay restitution and move on - and not for both company and the SFO

to become bogged down in a tit-for-tat legal struggle. If they re-offend then the case will be prosecuted.

Otherwise, it remains deferred. That's a much quicker, smarter system than having investigations that drag on for

years while the company operates under a cloud and the only people who make money from the tortuous process

are the lawyers.

In the US, they use deferred prosecutions as a matter of course. Not here. Alderman is pushing for a speedier

clear-up rate and has scored notable success in this regard. He has brought down the length of time from when

the SFO is called in to someone being charged from four years to just over a year. His aim is for 15 months on top

of that as the time it takes from someone being charged until trial.

He has also been keen to open a dialogue with business, to get it to air its concerns and to refer suspected fraud

instances to the SFO - an initiative that has been well received by companies. In the past, there was a mental

barrier between the SFO and the City and business, and consequently many frauds were not dealt with in the

criminal courts.

When the new Bribery Act comes into force, Alderman wants companies to turn to the SFO for guidance and

advice. Far from being an obstacle to commercial life in the UK the legislation should be viewed as a prop, he

says - for the first time, the SFO can follow up claims of fraud levelled at foreign firms with offices here which have

committed fraud in order to win an order over a British rival.

Alderman has been criticised for being too willing to do deals with firms - in the case of Innospec, the chemicals

company, a judge ruled that the SFO had overstepped the mark to become judge as well as prosecutor.

Morale at the SFO has been a cause for concern. A recent internal staff survey highlighted a number of

questions. But that is not earth-shattering either, because of the backdrop of uncertainty and structural change

and the lack of cash.

Not surprisingly, the watchdog has struggled to hang on to senior staff. Less than three weeks after the Tchenguiz

raids, Mick Randall, the SFO case officer in charge of the inquiry, resigned.

Randall was not alone: in all, six senior SFO staff members, including the heads of policy and anti-corruption,have also quit in the past few months. Kathleen Harris, the SFO's head of policy, went to US law firm Arnold &


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Porter; the chief information officer Josh Ellis moved to Goldman Sachs; the anti-corruption chief Robert Amaee

left for Covington & Burling; Charlie Monteith who oversaw the SFO's involvement in the drafting of the new

Bribery Act, was off to White & Case, and experienced investigator Kwadjo Adjepong also departed for the private

sector. The SFO's budget has been slashed, by 26% since 2008-2009, to 39.5m, and by another 25% to

30.5m, by 2014-2015.

Law firms moving into the fraud investigation area are able to pick off their choice recruits one by one. That's

understood to be the case with Randall. He was leading the Tchenguiz investigation but his departure had been in

the pipeline for a while. 'It's got absolutely nothing to do with the case or how well that is going,' said an SFO

source.

'The arrests and searches were planned some time ago. It was always known that he would carry them through

then leave.'

At the time of writing, Randall is still there - he did not go straightaway and is working out his notice. 'It's his

choice. He wants to go. His plan is to go into private practice,' said the source.

Relations between Alderman and some of his colleagues have never been comfortable. Things had become so

bad at the SFO that, before his arrival, the body was made the subject of an unprecedented review by former

New York lawyer Jessica De Grazia - she was asked by the attorney general to look at the SFO's operations.

What she found was an inefficient old boys' club with a heavy drinking culture. When he came in, Alderman

cracked down heavily. He also altered how investigations were viewed, so the SFO focuses on the victims of

fraud and getting justice for them - and recovering their lost cash. As well as the BAE and Tchenguiz

investigations, Alderman has a third case underway which has attracted much publicity - and upon which much of

the SFO's battered reputation similarly depends. This is the pursuit of Nadir. Over decades, the ex-Polly Peck

boss stayed holed up in northern Cyprus, after fleeing there to avoid prosecution.

He made repeated noises about returning one day. He never did, but when it was suggested the authorities would

not resist bail, Nadir decided to chance his arm and fly back. He maintains his innocence and he may also have

been taking a calculated gamble - that witnesses have died or grown a lot older, that the SFO could have lost

some of its evidence, that there wasn't the stomach for a scrap and if he should be found guilty, at his age the

sentence he received would be greatly reduced.

There are those who criticise Alderman for allowing the bail card to be played. They reckon the SFO could come

to regret the move and it would have been far better if Nadir had remained a wanted man rather than someone

who may walk free when the trial eventually gets underway.

That, though, is not how others view it. For them, Nadir's escape and his presence in northern Cyprus was a

blight on the SFO, a constant reminder of an especially embarrassing chapter in its history. This way, win or lose,

there will at last be closure.

The Nadir trial, when it starts, will also highlight once again the difficulty we have in dealing with allegations of

fraud. The trial will drag on for months and it will be heard by a jury. Alderman is a defender of our traditional

system, believing that juries have an instinctive ability to determine if a witness is telling the truth. But, while he is

deciding what tactic to adopt against Nadir, Alderman must battle for the future existence of his organisation.

Ministers stress their minds are not made up and there has not been any singling out of the SFO, that the

slashing of the budget is not sinister but in line with the austerity measures imposed on other public services.


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The omens are not good. Alderman is basing his case on the specialised nature of the SFO's work - arguing that

the CPS staff are not experienced in complex fraud.

He has a point: in the US, they have lawyers working alongside investigators to enforce their bribery and

corruption laws - the Department of Justice is also investigator and prosecutor. 'It's the best model. We want to

replicate the DoJ,' said an SFO insider.

In other words, Alderman would like us to become more like the US in how we investigate and prosecute fraud.

For those who have criticised our approach to financial crime as being too soft and not American enough, that is

music to their ears.

But if the roles are separated and the SFO is disbanded they will see that as further evidence of our absence of

seriousness - another sign that we lag behind the US.

Whoever wins, one thing is sure: Alderman will not be around next year - he is due to retire in 2012 when he

reaches 60.

maj 2011 - mt - chasing the white collar crooks

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