RegulationOct 29 2020

SFO success is under scrutiny

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SFO success is under scrutiny
Chris J. Ratcliffe/Bloomberg

On August 28 2020, Lisa Osofsky passed the two-year mark as director of the Serious Fraud Office.

Her appointment received some praise at the time, with commentators cautiously welcoming the choice of a “former FBI lawyer who has pursued the Mafia, bank robbers and corrupt financiers”; a figure from outside the establishment with a reputation for toughness.

Early interviews confirmed her intention to be “practical”, reporting that she was “keen to clear the decks and get on with cases she has a better chance of winning”. But now, two years down the line, has the anticipated boost to the SFO’s fortunes actually come about?

Any fair assessment must take into account the SFO’s failures as well as its successes

The SFO has recently been trumpeting its success in securing a €991m (£900m) deferred prosecution agreement in the Airbus case. While this was a great achievement, it is but one case in many, and a single triumph is not a suitable yardstick with which to judge either the SFO or its director.

Any fair assessment must take into account the SFO’s failures as well as its successes, its investigative speed and the extent to which its flaws impact unfairly on those who come into contact with it.

The judicial resolution by DPA must be placed in the context of other outcomes, including prosecutions and the pursuit of those responsible for misconduct.

Unusually, in its 2019-20 annual report, the SFO did not specify its annual conviction rate at trial (87 per cent in 2016-17, 77 per cent in 2017-18, and 53 per cent in 2018-19), instead relying on a four-year success rate of 62 per cent.

Some quick maths, however, based on the figures contained in the report, reveals one possible reason for this omission: continuing the consistent downward trend, the 2019-20 conviction rate appears to have been only 38 per cent.

Key points

  • Ms Osofsky has been at the SFO for two years
  • Her tenure has not been marked with big success
  • The SFO finds it hard to recruit top people

The report boasts “13 defendants brought to trial” (with a graphic showing 15 stick figures), without any mention of the fact that, to result in the rate claimed by the SFO, eight of them (62 per cent) would appear to have been acquitted (four of those, of course, being the senior executives of Barclays).

And the SFO likes to report its conviction rate “by case” – an odd measure by which a case can be judged to have had what the SFO terms a “successful outcome” even if all but one defendant is acquitted.

No doubt the innocent defendants whose lives have been turned upside down would fail to see the SFO’s “success” in that outcome.

But these headline-grabbing figures – trials and defendants, convictions and acquittals – are only the tip of the SFO’s investigative iceberg. The SFO has opened 35 investigations over the past four years (12 in 2016-17, seven in 2017-18, 11 in 2018-19, and five in 2019-20), and most of them are not Airbus, Barclays, Rolls Royce or Unaoil.

Some cases have lingered at Cockspur Street for years, with charging decisions not being made and suspects remaining “under investigation”. For individuals, this can be devastating: jobs are lost, families break down, and the sword of Damocles hangs ever over their heads.

And, of course, the figures for acquitted defendants – high as they are – do not include uncharged suspects, no matter how long they had to wait before their names were cleared. The new Covid-19 working practices have not helped, but the situation was hardly satisfactory even before the ‘new normal’.

So, Ms Osofsky’s great plans to shake things up at the SFO appear to have had little effect: two years on, a series of high-profile failures have pushed the agency’s credibility further downhill.

And, perhaps most worryingly, these failures cannot be explained through unfortunate circumstances or Kavanagh QC-style, last-minute revelations of exculpatory evidence: they have often exposed ongoing systemic problems and instances of poor judgement on the part of the SFO.

For example, both Tesco and Barclays were cases in which charging decisions appear to have been made on the basis of a fundamentally flawed understanding of the facts.

In the former case, the judge held that there was no evidence the defendants even knew of the facts said to constitute the false accounting of which they were accused, and the jury in the latter swiftly rejected the SFO’s case that Barclays had entered into a sham contract with the Qataris. 

In order to regain credibility among both corporates and global regulators, Ms Osofsky will need to take drastic action to address these issues.

One area in which change is clearly needed is the SFO’s approach to staffing; it has long been plagued by the difficulty of attracting and retaining high-calibre staff – an inevitable consequence of its limited funding – and under the current model will always fare badly when compared with the industry-funded Financial Conduct Authority.

SFO staff often lack industry-specific experience and knowledge, hampering its ability to understand and deal with complex evidence.

It is also impeded by the ‘blockbuster funding’ approach, which forces it to hire a relatively limited number of permanent staff, and then boosts their numbers through the use of secondments and fixed-term contracts when caseload demands it.

A more FCA-like staffing model – the recruitment of a highly skilled, permanent staff base drawn in greater numbers from the private sector – would inevitably have a significant cost attached.

But the current downward spiral cannot be allowed to continue, and the government should step in with greater funding and support.

It might be said that the pandemic makes this difficult, but in times of economic uncertainty fraud and corruption are certain to increase, and greater focus is needed on the enabling the effective investigation and prosecution of serious crime through a specialist, well-resourced task force.

Ms Osofsky arrived at the SFO with an agenda for change, but has failed to effect a positive transformation during her tenure. If Ms Osofsky fails to correct the SFO’s course, the spectre of absorption into the National Crime Agency may rear its head again.

The SFO, with Ms Osofsky at the helm, should perhaps use this unprecedented time to pause, take stock and assess the areas that need urgent attention.

A good place to start would be to shift its focus away from headline-grabbing statistics and towards root-and-branch reform, building a sustainable model that can yield reliable results for the future.

Peter FitzGerald is of counsel in the business crime department, and Hannah Laming is partner at Peters & Peters Solicitors LLP