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10th Annual Corporate Accountability Conference

14 Mehefin, 2012 | Areithiau

David Green CB QC, Director, at the 10th Annual Corporate Accountability Conference, PricewaterhouseCoopers, London.  

I am delighted to have this opportunity to talk about some topical issues to such a distinguished audience.

This is clearly a challenging but exciting time for the SFO. Our role has become somewhat fuzzy and needs restating.  We have come in for some trenchant criticism (both fair and unfair) in the courts and in the media.

We need to ensure we adapt to fight increasingly sophisticated fraud and corrupt conduct and practices.

The Bribery Act 2010 has been in force for nearly one year.  We are likely to obtain a new prosecutorial tool in the form of Deferred Prosecution Agreements (DPAs).

I want to address some aspects of those challenges this morning.

Firstly, my vision for the SFO.

The SFO must focus on top drawer fraud.  By that I mean:

  • cases which undermine confidence in UK plc and the City of London in particular;
  • cases which compromise the level playing field to which investors are entitled;
  • serious bribery and corruption, national or international;
  • those other cases which may have a particularly strong public interest dimension, or which represent a striking new species of fraud.

The SFO is here to use its unique set up and capability to do the most difficult and serious investigations and (where appropriate) prosecutions; those that others cannot do.

By ‘set-up’ I am referring to the fact that we have lawyers, investigators, forensic accountants, and that we use state of the art digital forensics capable of sifting through terabytes of data.

The SFO must resist dilution of its brand.

I do not necessarily agree that it is the job of the SFO to undertake mortgage frauds, boiler room frauds or the prosecution of bent solicitors unless a particular case falls within the remit I have described.

We cannot shrink from undertaking the most difficult or complex cases by chasing apparently eye-catching results.  Ours is the hard slog.

Obviously, when resources are scarce, we must concentrate our forces on targets of strategic value, where our action will have maximum positive impact.  What that maximum positive impact is will depend on the conduct, the available evidence and the public interest.

Depending on all the circumstances, we may decide to prosecute, or we may look at alternatives to prosecution.

Just because an SFO investigation may not result in a criminal prosecution, it does not mean that it is a “failed investigation” (to adopt the language used in certain sections of the media).

For the first time we are seeing (in plans for the National Crime Agency and its Economic Crime Command) the emergence of a strategic approach to the problem of fraud.  The SFO will play a full part in that new co-operative landscape, by doing those cases which call for its specialist skills and capabilities and acting in concert with others, where appropriate.

Secondly, the SFO’s response to sophisticated fraud and corruption.

I am currently engaged in a reorganisation of the SFO’s structure.  In essence, our casework in fraud and bribery and corruption will be conducted by four divisions, comprising mixed teams of lawyers and investigators, each division headed by a Senior Civil Servant reporting to me.

Layers of quality control will be built in.  As well as divisional heads, we will appoint a General Counsel to shape and critique investigations from inception to charge, a post to sharpen the focus of our prosecutions after charge and trial, and to advise on the appropriateness of civil settlement and (in future, if and when we get them) DPAs.

We will also expand and focus our intelligence capability, concentrating on the gathering and analysis of open source material and working that up by blending with other types of intelligence from a variety of sources, including SARs (Suspicious Activity Reports).

Recruitment:  I am anxious to recruit solicitors and barristers from private practice, either to permanent positions or on secondment.  I want to foster and encourage the ‘revolving door’ between private and public sectors.  Experience in both can only be beneficial.  That approach – recruitment or secondment – can also be applied to investigators and those with accountancy or IT skills.

We will have a renewed focus on training:

  • we have established a Legal Excellence Board;
  • we have an Investigator Foundation programme (for new recruits);
  • we run a course on leading and managing complex investigations;
  • we will appoint a new Chief Investigator very soon as head of profession and expert.

We will continue to foster our collaborative relationships, both nationally (City of London Police, other police forces, HMRC, OFT and FSA) and internationally, for example, the DoJ in the US with whom we have had very close liaison recently.  We are also working closely with authorities in Germany and Norway.

We have co-operative agreements with overseas law enforcement agencies, e.g. the Australian Federal Police.

We also have Memoranda of Understanding (MoUs) with international financial institutions such as the World Bank.

As to SFO’s capability, for the avoidance of doubt, I welcome the inspection being carried out by a team from HMCPSI.  Certain sections of media insist on calling it a “review” and linking it in some way to recent high profile litigation involving Vincent Tchenguiz.  This suggestion is piffle.  There is no linkage and I have asked HMCPSI to focus on certain key areas of SFO operations to assist me.  Rest assured, I welcome this inspection and see it as a constructive initiative.

Thirdly, application of Proceeds of Crime (POC) legislation.

SFO has had a dedicated Proceeds of Crime Unit since May 2009.  It is my intention to expand our POC capability into a casework division.

We aim to deploy a cradle-to-grave approach to confiscation investigations: enquiries are commenced in parallel with criminal investigations and carried through to enforcement of a confiscation order.

The Proceeds of Crime Unit covers:

  • confiscation in its purest form;
  • obtaining compensation for the victims of cases we prosecute;
  • addressing Part 5 Proceeds of Crime Act 2002 settlements: civil recovery where a case is deemed unsuitable for prosecution;
  • monitoring of costs orders and obtaining restraint orders associated with incoming Letters of Request.

In the financial year 2011-12 we:

  • obtained 20 court orders worth £18.5m;
  • collected £20m;
  • provided compensation of £1.4m [from funds repatriated with the help from Monaco authorities re Anderson Owen prosecution] and ensured repayment of £30m paid to victims of crime.

We are active in ensuring confiscation orders are enforced as far as possible, e.g., in February 2012 the SFO persuaded the court to activate a default sentence of seven years  on Viren Rastogi, in addition to the nine and a half years he was serving for predicate offence. The Unit has also been responsible for removing income from shareholders who received dividends from corruptly obtained contracts.  This action sends a clear message in cases where shareholders having the appropriate knowledge, understanding and ability to conduct due diligence, elect not to do so even when investing in industries and jurisdictions with a high risk of corrupt practices.

SFO activity around POC will increase. I am very keen on prosecution agencies having their tax-payer funding supplemented by confiscated criminal assets.

Fourthly: Deferred Prosecution Agreements

The Ministry of Justice consultation was launched in May and closes in August.

I am keen on maximising the set of tools available to SFO as an investigation and prosecuting agency, and DPAs represent a new and imaginative tool to deal with serious economic crime committed by commercial organisations.

The practicalities are still being explored – e.g., how best to prevent ‘forum shopping’ for less onerous conditions and penalties. Very important principles need to be observed:

  • sentencing in this jurisdiction is for the judge not the prosecution;
  • corporates cannot be seen to be allowed some special kid glove treatment;
  • Individuals will be prosecuted where that is the appropriate course of action;
  • Admissions as to conduct must be realistic, factual and not fanciful.

The reality is that the present system for dealing with corporate wrongdoing has its inefficiencies and generates disproportionate costs, and a tool more subtle than the present fine or winding up options or doing nothing is needed.

DPAs have obvious attractions in that context. The terms of a DPA might include a financial penalty, costs, restitution for victims, disgorgement of profits of wrongdoing and implementation of reforming measures.

The major benefits are:

  • the avoidance of a lengthy investigation and trial;
  • the avoidance of a conviction and consequent debarment from competition for certain contracts;
  • supporting public confidence;
  • providing restitution;
  • offering flexibility;
  • allowing reform and compliance exercises to keep functioning.

Finally, Corporate Self-Reporting:

At present we are in no man’s land, between rock and a hard place.  A corporate needs to see the advantages of self-reporting.  At present the prosecutor’s role is circumscribed by the Innospec judgment pending the clarity afforded by legislation introducing DPAs.

A corporate which self-reports cannot be given a guarantee in advance that it will not face prosecution.  No prosecutor could do that.  But the fact of self- reporting will be recognised as a factor of significance in the assessment of the public interest limb of the code test applied in deciding whether or not to prosecute.  If a prosecution is not in the public interest, the SFO will be likely to seek a civil settlement.

Obviously, the introduction of DPAs will provide a very useful option in this context.

Self-reporting corporates will also have to be aware that information provided to the SFO in the course of a self-report may be disclosable to overseas law enforcement authorities.  A settlement in UK will not prevent the SFO fulfilling its obligations with regard to Mutual Legal Assistance.  (Obviously, it is likely that a self-reporting corporate would want to achieve a global settlement where practicable.)

In terms of other tools and mechanisms:  The SFO has entered and will continue to enter into immunity agreements under the Serious Organised Crime and Police Act 2005, where appropriate.

Let me make this clear.  In any case where there is a realistic prospect of conviction and it is in the public interest to prosecute then SFO will prosecute, whether the defendant is an individual or a corporate.

I am very proud to lead the SFO.

I aim to re-charge the SFO’s corporate self-respect and to bring it to the top of its game as a major crime-fighting agency.

Thank you for your patience and attention.