SFO specialist journalist Dominic Carman here discusses with Lawyer Monthly the SFO's announcement of its annual report at the Cambridge Symposium on Economic Crime. Dominic argues that income generated should not be what we base the SFO's success on, rather we should be pushing the SFO to achieve convictions that result in serious fraudsters going to prison.
David Green, Director of the Serious Fraud Office recently gave his final annual report to the Cambridge Symposium on Economic Crime, of which he also Director. When reviewing the work done by the SFO over the last year, he said that the agency ‘polices a discrete part of the waterfront’ investigating and prosecuting serious and complex fraud, bribery and corruption. ‘We are part of the pursue strand, and contribute to prevention through deterrence,’ he added.
In 2016/17, the SFO’s caseload included: Libor, Rolls-Royce, Tesco, Barclays, GSK, Airbus, BAT, Unaoil, and Petrofac, among others. Big names which have resulted in big investigations, and for some, prosecutions. When determining what and whom to investigate, he defined his ‘take-on criteria’ to be where ‘the apparent criminality undermines UK Plc’s commercial or financial interests in general, or the City of London in particular.’ He cited the complexity of Rolls-Royce, which involved 30 million documents, as an example.
Turning to the highlights of the year, Green said that the most significant were the Deferred Prosecution Agreements (DPAs), in particular that with Rolls-Royce. DPAs allow a prosecution to be suspended for a defined period, provided the organisation meets certain specified conditions. They can be used for fraud, bribery and other economic crime, but apply only to organisations, and never individuals.
Last year, DPAs agreed by the SFO totalled £640 million in financial penalties and costs, of which Rolls-Royce comprised the lion’s share: more than £510m (a £497.25m fine plus costs). That was after the company received ‘a 50% discount’ from the SFO according to Green - equivalent to a year’s profit - for fully complying and acknowledging that it had been involved in sustained bribery covering seven jurisdictions over thirty years.
‘DPAs have been a real success,’ suggested Green in his speech ‘enabling cooperative companies to account for conduct to a court in a transparent way without sustaining a criminal conviction, or the collateral damage (including disbarment), that may well follow. The company is able to draw a line under the past and radically to overhaul compliance and removing the board on whose watch the conduct took place.’
Green then asked the following: ‘What sort of value for money does the SFO provide to the British taxpayer?’ Responding to his own question, he said: ‘Over the period April 2014 to date, the SFO has cost the taxpayer £216m. Over the same period, we have generated £676m in DPA receipts and costs. That is a net contribution of £460m to the Treasury over four years, equivalent to approximately £1m per member of SFO staff.’
So, thanks entirely to Rolls-Royce, each member of SFO staff has made an average net contribution of £1m to the Treasury. But is that really the right criterion by which to judge a fraud agency? If its mandate is to investigate, prosecute and, hopefully, convict criminals - albeit they are typically criminals with money, status and reputation - should there be congratulations when heavy fines are paid, but the individuals responsible for that criminality pay no price, least of all with their liberty.
Apart from fraud, for what other serious crime might a criminal escape conviction, and likely incarceration, by paying a fine instead. Excepting terrorism, serious crimes of violence, or those of a sexual nature, what of the jewel thief, the cat burglar, or the (unarmed) bank robber? The man who steals a famous painting, an expensive car, or valuable silver. If they walked free from court, save for a hefty fine, would anyone be celebrating?
Would Dame Cressida Dick, Commissioner of the Metropolitan Police, ever call a press conference to announce: ‘What sort of value for money does the Met provide to the British taxpayer? We arrested X thousand serious thieves and burglars last year. And although none of them have been convicted or gone to prison, because of the fines they’ve paid, we have managed to contribute to the Treasury £Xm - the equivalent of £1m for every police man and woman in London. Which is very good value.’
Of course, serious fraud has its own distinct challenges: evidence is often weighty and complex; cases usually take considerable time and resources to bring; convictions can be difficult to achieve. But the men and women who perpetrate it are ordinary criminals, just like the thief, burglar or robber. They are not extraordinary because their crime is fraud, even if the opportunity to commit serious fraud is usually confined to those with some degree of affluence and power.
Members of the public might therefore be unconvinced that justice for their crimes is best served by substantial fines, paid for by their company, as they get off scot-free. On the contrary, they may see large organisations with very deep pockets, like Rolls-Royce, buying their way out of trouble, walking away from court with a great big financial slap on the wrists, while no past or present Rolls-Royce employee or director goes to prison for offences running into tens or possibly hundreds of millions of pounds. And yet many people must have been knowingly involved at Rolls-Royce in a sustained pattern of bribery in seven countries over 30 years, including senior employees who sanctioned those payments.
The SFO’s magnanimity does not arise because we are reluctant as a country to lock people up. Quite the opposite. Our prison population has increased by more than 50% in less than a generation to nearly 86,000. Of those sentenced last year, more than 70% had committed a non-violent crime, thousands of them for repeated thefts or burglaries where the amount stolen was worth less than £10,000. Without money, status or reputation, these criminals may be seen as the unlucky many.
Rather than celebrating its status as £1m-a-head revenue generators, the SFO should perhaps be actively piercing the corporate veil in serious fraud to get to the men and women responsible for committing serious crime involving millions of pounds. Agreeing an enormous penalty (including a 50% discount) with a big company, and allowing guilty people to walk free, should not really cause too much self-congratulation.
In achieving value for money, Green’s prevention through deterrence strategy - pour encourager les autres - can only be seen as a real success if there are many more convictions of serious fraudsters that result in them going to prison. It should not be measured by large fines levied on their employers. To many, these represent no more than A Get Out of Jail Free card for the lucky few.
