Regulation  

SFO is just not scary enough

SFO is just not scary enough

Lisa Osofsky, the former Chicago prosecutor now leading the UK’s Serious Fraud Office has been in post for almost a year and is fast discovering that what works in the US cannot necessarily be easily transposed to the UK.

In particular, the twin weapons of corporate enforcement through deferred prosecution agreements and individual co-operation via aggressive plea bargaining have not travelled well.

SFO dilemma

DPAs have been part of UK law since 2014 and enable a company to admit its complicity in criminal conduct – usually bribery or corruption – but avoid a conviction in exchange for a hefty fine and a promise to clean up its act.

Rolls Royce paid over £500m in 2017 and Tesco PLC stumped up £129m shortly afterwards. 

Most recently, Serco Geografix Ltd agreed to pay more than £20m and Sarclad, a British technology company, settled for £17m in 2016.

Key Points

  • Ms Osofksy is planning to introduce US-style plea bargaining.
  • The SFO does not have the same clout as the US Securities and Exchange Commission.
  • Plea bargaining could be misused by prosecutors .

Both Tesco and Sarclad admitted corporate liability on the basis that individuals of sufficient seniority to be described as the “controlling mind and will” of the organisation were personally guilty of the offences.

Some of them were then put on trial but, contrary to what the SFO purported to be able to prove and what Tesco and Sarclad admitted to, they were all acquitted this year.  

Every case turns on its own facts, but these acquittals present the SFO with two significant and connected problems: how can it persuade juries to convict individuals of serious wrong-doing when even a full confession and co-operation from the company is not convincing enough; and, if corporate liability is predicated on the individual guilt of senior directors, who may well be acquitted at trial, why should the company enter into a DPA rather than hunkering down and taking its chances?

The inability of the SFO to convict individuals risks undermining its policy of encouraging corporate self-reporting and co-operation – a serious headache in the long run.

Part of the problem is that evidence that looks overwhelming on paper – enough to persuade the company to enter a DPA – looks very different after forensic deconstruction in front of a jury.

This leads to the apparent paradox of Tesco and Sarclad admitting the guilt of their senior executives beyond reasonable doubt and paying very large fines, only for juries ostensibly looking at the same evidence to reach a completely different conclusion.

Osofsky’s solution

So, how can the SFO make its cases equally persuasive in the courtroom as in the boardroom?

One solution promoted by Ms Osofsky is to look to the US system of plea bargaining and co-operating witnesses, summed up in her words as: “You can spend 20 years in jail for what you did or wear a wire and work with us.”

An insider with first-hand evidence will always be more compelling than 50 dusty files.

While mechanisms to strike deals with guilty individuals in exchange for evidence exist in UK law, they are rarely used and it has been suggested that British juries have a cultural distaste for the ‘supergrass’.