The SFO: clearing the backlog?

The SFO: clearing the backlog?

In the following article Richard Sallybanks and Umar Azmeh look at the flurry of recent charging decisions from the Serious Fraud Office.

After a period of relative inactivity where charging decisions are concerned, the last two months have brought Serious Fraud Office (the ‘SFO’) charges in four separate investigations, comprising 12 individuals and one corporate entity:

  1. On 30 July 2020, the SFO announced that charging decisions had been reached in the GPT Special Project Management Limited (‘GPT’)/Airbus SE investigation. Three individuals, including a former Managing Director and Financial Officer, are charged with various offences including corruption, contrary to section 1 of the Prevention of Corruption Act 1906. GPT itself has also been charged with corruption. The corruption charges relate to contracts awarded to GPT in respect of work carried out for the Saudi Arabian National Guard (investigation into GPT opened in August 2012).
  2. On 21 August 2020, the SFO announced that charging decisions had been reached in the Axiom Legal Financing Fund (the ‘Fund’) investigation. Three individuals, including two former solicitors and a former independent financial advisor are charged with offences including fraudulent trading, contrary to section 993(1) of the Companies Act 2006, and offences under the Proceeds of Crime Act 2002. The fraudulent trading charges arise out of the allegation that the defendants carried out a fraudulent scheme to divert money from the Fund for their own benefit (investigation opened in July 2014).
  3. On 8 September 2020, the SFO announced that charging decisions had been reached in the G4S Care and Justice Services (UK) Limited (‘G4S’) investigation. Three individuals – a former Managing Director, a former Commercial Director, and a former Finance Manager – are all charged with offences of fraud by false representation. The allegations arise out of the provision of electronic monitoring services to the Ministry of Justice between 2009 and 2012 (investigation announced in November 2013).
  4. Most recently, on 29 September 2020, the SFO announced that charging decisions had been reached in the Balli Group PLC and Balli Steel PLC investigation. Four individuals – including the Finance Director, Treasurer, and other members of the Executive Committee – are charged with various offences including conspiracy to defraud, contrary to common law, and fraudulent trading, contrary to section 993(1) of the Companies Act 2006 (investigation announced in May 2017).

Prior to this surge of activity, the last charging decision announced by the SFO was in December 2019 in the Serco Geografix Limited (‘Serco’) case. Indeed, throughout the entirety of 2019, charging decisions were only announced in respect of two further individuals in the Global Forestry Investments investigation. So, while this year has seen a considerable upturn in investigations progressing to charging decisions (as well as Deferred Prosecution Agreements (‘DPAs’) in the G4S and Airbus SE cases), it also has to be recognised that some of these investigations had been ongoing for considerable periods of time; the length of time that SFO investigations can take is widely acknowledged as something which needs to be improved.

Many commentators have noted, perhaps unfairly, that there have been no charging decisions in cases that have commenced under Lisa Osovsky’s tenure as the Director of the SFO (Osovsky was appointed in August 2018). However, practitioners will be aware that it is very unusual for an SFO investigation to progress to a charging decision within two years, not least since the cases investigated and prosecuted by the SFO are by definition serious and complex, and there will always be a risk that a ‘quick’ charging decision may turn out to be premature. By way of example, the charging decisions in relation to the individuals in the Tesco Stores Limited (‘Tesco’) case took less than two years from the commencement of the investigation, and culminated in the cases being thrown out by the Judge, Sir John Royce, with the jury not even being asked to consider the question of guilt or innocence. However, now that Osovsky is into her third year in office, it will be instructive to keep an eye out for charging decisions in cases opened during her tenure. For the record, the first publicly announced case opened under Osovsky was Patisserie Holdings PLC in October 2018.

The trials of the individuals in the Serco and G4S cases will also be of interest. The SFO has, in both of these cases, agreed DPAs (July 2019 and July 2020, respectively). However, as readers will no doubt be aware, the SFO is yet successfully to prosecute any individuals where a related corporate entity has entered into a DPA. In July 2019, three individuals who had worked for Sarclad Limited, a company that agreed a DPA in July 2016, were acquitted of conspiracy to make corrupt payments and conspiracy to commit bribery. Similarly, in December 2019, three individuals who had worked for Guralp Systems Limited, a company that agreed a DPA in October 2019, were acquitted of conspiracy to make corrupt payments. Thirdly, and finally, the SFO and Tesco entered into a DPA in April 2017, with the related individuals acquitted on direction of the trial Judge, as noted above, in November 2018. As the Serco and G4S trials approach, it will be interesting to see whether the SFO finally obtains convictions in respect of individuals after a series of disappointing results in trials where companies had previously accepted criminal liability in respect of conduct of their ‘directing minds’, and where those persons have subsequently been acquitted.

The GPT case will also be a rare example of a company standing trial alongside individual defendants. Since the Crime and Courts Act 2013 came into force, it is clear that in suitable cases, the SFO’s preference is to resolve matters vis-à-vis the corporate suspect by way of a DPA. What is interesting in this area is the extent to which the SFO is moving away from rigid adherence to the criteria, as originally stated, for a case where a DPA resolution was appropriate. The SFO was very clear, from the outset of the DPA regime, that if a company did not cooperate, which in reality meant a self-report (Sir David Green, in March 2018 at the American Bar Association’s Annual National Institute on White Collar Crime, said that the SFO would not accept a ‘Damascene conversion’ from a company), they would not be invited to enter into DPA negotiations. However, what the Rolls-Royce PLC (along with Rolls Royce Energy Systems Inc.) and G4S DPAs make clear (2017 and 2020, respectively), is that even if a corporate entity does not self-report, it is still possible to obtain a DPA, even in a situation where belated cooperation is “less than full at the outset” (see SFO v G4S Care and Justice Services (UK) Limited [2020] Case No. U20201392 at paragraph 40, per William Davis J). The key to a DPA, it appears at present, is sufficient cooperation (even if not fulsome from the commencement of an investigation) together with some degree of waiver of privilege. What this does mean is that the GPT scenario, namely a corporate entity being in the dock alongside individuals including those formerly within its employment, may become increasingly rare.


About the authors:

A partner in BCL for 20 years, Richard Sallybanks has been involved in numerous UK and international business crime investigations and prosecutions. His core practice is defending senior executives who are suspects in investigations. His SFO experience includes the Airbus, Barclays Qatar, Alstom and Kaupthing Bank investigations as well as successfully defending Tesco’s Commercial Director on charges of an alleged £250m accounting fraud. Many of his cases are cross-border and Richard is experienced in managing and co-ordinating teams of lawyers in multi-jurisdictional investigations. In the financial sector he has acted for bankers, brokers, traders and senior executives in criminal and regulatory investigations, by the FCA and overseas authorities, including in relation to allegations of money laundering, insider dealing and market abuse.

Umar Azmeh is a solicitor at BCL, specialising in business crime, financial crime, and regulatory investigations. He has significant experience of criminal investigations involving money laundering and bribery, and has worked with clients on sanctions, tax, and proceeds of crime issues. He has expertise in commercial litigation, including civil fraud with an international dimension, and particularly where there is a criminal aspect. He has also advised both corporations and individuals on potential liability under the Proceeds of Crime Act 2002, the Fraud Act 2006, and the Bribery Act 2010, which includes drafting relevant policies for corporate clients.