Below, Dominic Carman, noted legal commentator, discusses with Lawyer Monthly the shadowed attention given to the lawyers behind some of the biggest SFO investigations of our time, uncovering the real gainers of large fraud.
The phrase cui bono, originally made famous by Cicero, remains a key forensic question in many legal and police investigations. Its literal meaning – for whose benefit – carries a wider interpretation in modern usage: determining who has a motive for a crime that has been committed. In short, the question whodunnit routinely depends on: who had the motive to do it.
Although the Serious Fraud Office does not resonate with cries of ‘cui bono’, the question remains at the heart of its investigations into serious fraud, bribery and corruption by companies, their officers and employees.
In pursuit of alleged fraudsters, the SFO has a full-time equivalent of around 400 permanent staff. These include investigators, lawyers, forensic accountants, analysts, digital forensics experts and a variety of other people in specialist and support roles. In taking on very big cases, the SFO routinely expands its capacity with temporary and fixed term staff. For the Libor investigations, this peaked at an extra 80 staff, for example.
The SFO received £35.7m in core funding last year, topped up by £17.9m in blockbuster funding from the Treasury for additional expenditure in large scale investigations. Although core funding was up slightly from £33.8m in 2015-16, blockbuster funding was down from £28m, largely because the Libor investigations began to tail off. The net effect is that total funding fell from £61m to £53.63m between 2015-16 and 2016-17.
Simultaneously, the SFO has been targeting some of Britain’s biggest companies. Which leads back to Cicero’s question: cui bono. One clear answer emerges: the lawyers. Boutique criminal firms in London have experienced a boom in SFO-related work over recent years. Predictably, this has been good news for the top-drawer players: BCL Burton Copeland, Corker Binning, Kingsley Napley, and Peters & Peters.
And then there are the criminal barristers who have also benefited. A healthy cluster of QCs and senior juniors have found themselves very busy advising on SFO investigations, prosecutions and representing clients at criminal trials. This is especially true at the top sets of chambers: 2 Bedford Row; Cloth Fair Chambers; 2 Hare Court; QEB Hollis Whiteman and 3 Raymond Buildings.
These names are entirely as expected. But far less predictable has been the use of big corporate law firms in this space: Clifford Chance and Ashurst, together with transatlantic firms like Eversheds Sutherland and Norton Rose Fulbright, US firms such as Winston & Strawn and WilmerHale and commercial dispute resolution specialists like Quinn Emanuel Urquhart & Sullivan.
In response to the SFO’s investigations into big UK corporates and banks, they have increasingly turned to their big corporate legal advisers in addition to the white collar boutiques. Herbert Smith Freehills and Willkie Farr & Gallagher are advising Barclays; Linklaters is advising Amec Foster Wheeler; Kirkland & Ellis is advising Rio Tinto. And so on.
When two deferred prosecution agreements (DPAs) were agreed by the SFO earlier this year, Freshfields Bruckhaus Deringer and Kingsley Napley advised Tesco while Slaughter and May and New York white shoe firm Debevoise & Plimpton advised Rolls-Royce. In response to its imminent investigation by the SFO, launched in July 2017, British American Tobacco first hired Linklaters to conduct a “full internal investigation” only to replace one magic circle firm for another by appointing Slaughter and May as its sole adviser on the case.
Since the start of 2012, the total legal spend by companies and wealthy individuals, either subject to or anticipating an SFO investigation, now approaches £1bn. As one of the fastest growing areas and increasingly lucrative areas of legal practice, it explains why some of the world’s most profitable firms - Kirkland and Ellis (annual profits per partner $4.1m), Quinn Emanuel ($5m), and Slaughter and May ($3.6m) - are now taking a slice of the available pie.
An unintended consequence of the SFO’s transparent strategy of going for the biggest corporate names, the rise of the biggest corporate law firms advising on aspects of criminal investigations provides them with another revenue stream. So does it work? The SFO would point to the success of this year’s DPAs: Tesco agreed to pay a fine of £129m while Rolls-Royce paid a total penalty of £497.3m.
However, the public is much less impressed by companies getting away with large fines while no individual is convicted and sent to jail. For all the high-profile investigations of Britain’s biggest companies, not one FTSE 100 company director or former director has yet been jailed for any fraudulent wrongdoing as a result of SFO inquiries.
The forthcoming trials of former senior executives of Tesco and Barclays are therefore eagerly anticipated. If no alleged perpetrators of fraud at major companies or banks end up being sent to prison, then the mere payment of large fines is a distinctly Pyrrhic victory in the long-term battle against fraud.
And the question will become even more urgent: cui bono?
