Debate over the SFO: Theresa May should act on her instincts

Debate over the SFO: Theresa May should act on her instincts

‘The SFO is unusual and not very well known and therefore not terribly politically popular.’ The words of Sir Edward Garnier QC, Conservative MP for Harborough, who was Solicitor General for England and Wales between 2010 and 2012. He was speaking in a recent House of Commons debate on the funding structure of the Serious Fraud Office (SFO), which investigates serious fraud in England, Wales and Northern Ireland.

At issue was the adequacy of the Treasury’s current funding arrangements to meet the annual needs of complex SFO investigations, often covering multiple jurisdictions. This is presently divided between fixed core funding and variable blockbuster funding: applied for in cases where expected investigation costs, and potentially prosecution costs, will exceed 5% of the SFO’s core budget. Back in 2008, there was only core funding, then set at £52m. By 2015-16, core funding had reduced to £34m, while the blockbuster funding element was £28m; the combined total being identical to the 2008 figure.

Apart from Robert Buckland MP, the current Solicitor General, ten MPs spoke during the 90-minute debate, timetabled in the morning to make way for the main business of the day, the Article 50 bill. Three of the ten were Conservative backbenchers. Apart from Garnier, who gave by far the longest speech in the debate, these were Alex Chalk, MP for Cheltenham and Mark Field, MP for the Cities of London and Westminster. All three are lawyers, but with quite different views on the SFO.

Garnier and Chalk rightfully declared their interest in the agency. ‘I declare an interest as someone who has previously been appointed to the SFO’s “A” panel of counsel,’ said Chalk, before posing a friendly question about the sums recovered by the SFO under the Proceeds of Crime Act 2002 through confiscation. ‘Its track record on that is certainly better than that of equivalent agencies,’ he suggested, before later adding:

‘Is it not important in this debate to keep a measure of context as well? The sums of money that we are talking about, while not insignificant, need to be set against a wider context. They are less in total, even including “blockbuster” funding, than the cost of one joint strike fighter and, given the ability of the SFO to protect British interests at home and abroad, that context is worth considering.’

Echoing his role as SFO cheerleader, Garnier went further: ‘The SFO instructs me from time to time as a member of the private Bar. One of the most recent cases that I have been instructed in was that of Rolls-Royce.’ Although he added that ‘I do not want to talk too much about my wonderful case load,’ Garnier proceeded to reveal ‘The first deferred prosecution agreement – in which I appeared, as it happened – dealt with the failure of a bank to prevent bribery by one, or a number, of its staff in Dar es Salaam in Tanzania.’

The motivation for Garnier’s enthusiasm became more evident when he added the following about the SFO and its director, David Green QC: ‘What I do not want is for the current Whitehall fascination with sticking things with nice initials into great pots of alphabet soup to destroy David Green’s valuable work or distract him from it. I am proud to say that he is a personal friend of mine; he and his organisation have a proud record of demonstrating to the Government that it is worth every penny it gets and that it ought to get yet more money, so that it can catch more and more villains.’

He continued to advocate the SFO’s case for more money by reference to its US counterparts: ‘When I went to the United States to discuss international corporate crime and learn from American prosecutors about the system for prosecuting corporate crime there, one of the federal prosecutors in Manhattan asked me how much our budget was. I said, “It’s about £40m, going down to just under £30m.” He laughed and said, “Is that just for one office?”

‘I said, “No, it’s for the entire jurisdiction: England and Wales, and Northern Ireland”-unusually for a prosecuting agency in this country, the Serious Fraud Office covers England, Wales and Northern Ireland, but not Scotland. The American prosecutor found it unbelievable that one of the centres of the financial world had a serious fraud office that ran on that amount of money. He went on to joke that he spent more than that on flowers at home.’

This is perhaps unsurprising given that the US Department of Justice 2015 budget for financial fraud law enforcement was $681.5m. It is well-documented that, as Home Secretary, Theresa May wanted to fold the SFO into the National Crime Agency, which had a much larger budget of £448m in 2015/16. Such a move would give it greater clout and centralised control.

Garnier referred directly to this in the debate: ‘When the current Prime Minister was Home Secretary, she was perhaps not a friend, even if she was critical, of the SFO. Possibly – who knows? – one reason I remained a Law Officer for two and a half years, but no longer, was because I fell out with the Home Secretary over the independence of the Serious Fraud Office.’
Although there was nothing improper or unparliamentary in what either Chalk or Garnier said in debate, their parliamentary lobbying on behalf of the SFO does raise legitimate questions over their independence – not least when both are paid for their legal work on behalf of the agency, and one is a personal friend of the director.

By contrast, Field, who does not work for the SFO, but is Vice Chairman (International) of the Conservative Party under Theresa May, was critical of the SFO. He pointed to ‘some lawyers – perhaps those who are less close to the SFO’s workings – who continue to lament the difficulties associated with securing convictions for fraud, especially given the collapse of a number of highly complex jury trials.’

He added that ‘one of the organisation’s main problems is in finding cases to investigate’ and that ‘it too often has lacked the tools or the respect from the market to do its job properly.’ He suggested that a new agency should replace the SFO ‘which would combine the SFO and the FCA’s enforcement division.’

He also argued that it was ‘incongruous’ that the SFO stands under the jurisdiction of the Attorney General: ‘We should now look to place the SFO’s responsibilities within the remit of the Department for Business, Energy and Industrial Strategy, so that the SFO would work alongside the Competition and Markets Authority. By associating consumer protection with fraud and trust-busting, we would give competition its correct place as a central priority in the future commercial landscape.’

At first blush, the SFO’s recent high-profile success in securing a deferred prosecution agreement with Rolls-Royce, which will pay a fine of £497m, has given it a new lease of life. But the undertow of the Commons debate over funding, which ended without resolution, still leaves the future of the SFO in its current form far from certain.

On any view, inadequate funding, too few cases to investigate, and even fewer individuals prosecuted – only 75 in the past five years – raise serious questions about its future role. The American prosecutor may have joked that one of the centres of the financial world had a Serious Fraud Office that runs on only £34m a year plus a blockbuster top – but we should be embarrassed. Prosecuting serious fraud is a serious matter. And it’s about time the government got serious about its future. Theresa May should act on her instincts.

By Dominic Carman, Legal commentator


 

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