Aziz Rahman explains how the Serious Fraud Office (SFO) builds

a case – and how it can be challenged.

The Serious Fraud Office (SFO) has had its critics. But it

remains the major agency for investigating the most serious and complex

allegations of fraud and business crime and is the lead agency for

investigating and prosecuting serious bribery and corruption cases. It is also the lead agency for dealing with

so-called ‘Deferred Prosecution Agreements’.

The SFO is a creature of statute: it was created by the

Criminal Justice Act 1987 to meet a need to specifically investigate and

prosecute the highest levels of serious and complex fraud. As a result, it has its own defined way of

working, which has brought it some success. Yet it has also had a number of

high-profile failures, which indicate that challenges can be successfully

mounted to the allegations it makes and the charges it brings.

Intelligence Gathering

The SFO receives information on possible criminal activity

from a variety of sources. These include whistle blowers, victims, other law

enforcement agencies, the media, companies self-reporting their own wrongdoing

and rival companies highlighting the criminality of their competitors.

This information is analysed and the potential for a full

criminal investigation is then assessed by the SFO’s Intelligence Unit, which

is made up of lawyers, financial intelligence officers, analysts and

investigators. The Intelligence Unit carries out its own research to help

determine whether to commence an investigation.

SFO Director David Green will accept a case for criminal

investigation if he believes that it meets his Statement of Principle. This

includes whether the alleged criminality undermines the so-called “UK PLC’’,

the financial and corporate interests of the City of London; examples being the

Libor cases and when there are reasonable grounds to suspect serious or complex

fraud. This formal acceptance of a fraud matter for criminal investigation

enables the SFO to use its own investigatory powers - known as “Section 2

powers”. as they are set out at Section 2 of the Criminal Justice Act 1987..

Investigation and Prosecution

Once a case is accepted by the Director, the SFO works on a

case in a manner known as the Roskill model: multi-skilled teams of

investigators, accountants, prosecutors, experts and counsel are assigned to the

case, as opposed to the normal UK way of working where police investigate and

then report to the Crown Prosecution Service. Other prosecution or

investigative agencies may also be involved to co-ordinate the SFO’s strategy.

The Director has the power under Section 2 to compel any

individual or entity to provide the SFO with information or documentation which

is believed to be relevant to a matter under investigation. Section 2 is a highly invasive power – other

agencies usually need a Court order for such powers – and is the most powerful

tool in the SFO’s armoury. When

necessary, the SFO may also seek warrants to search premises.

If the investigation results in the SFO finding what it

believes is enough evidence to support a realistic prospect of conviction - and

if a prosecution is considered to be in the public interest - charges will be

normally be brought. Nowadays, however, a Deferred Prosecution Agreement (DPA)

is an alternative in certain corporate cases; with the SFO and the accused

negotiating a settlement whereby a prosecution is suspended for a defined

period, provided that the organisation meets certain specified conditions.

Resources

The SFO believes its model of working is the most

appropriate for the type of investigations it has to conduct. It can request

additional funds – known as blockbuster funding - for major, lengthy

investigations that require extra resources; such as those into Libor and

Barclays. It also has a vast array of experts working for it on any of its

ongoing investigations.

That, however, does not mean that defence teams cannot

successfully challenge the accusations made by the SFO, the charges that it

brings or even aspects of the investigation itself. The chances of successfully

challenging the SFO are highest if the person or company seeks expert legal

help from the moment it becomes clear that they are the subject of an SFO

investigation.

Warrants

A good example of an early challenge may be to search

warrants secured by the SFO. Most search warrants are issued under the Police

and Criminal Evidence Act 1984 (PACE) and the conduct of the searches is

governed by the PACE Code of Practice B. When the SFO applies to the Court for

a search warrant, it must state the reason for the search and provide reasonable

grounds for believing that an offence has been committed and that there is

material on the premises likely to assist the investigation.

The application will be made to a Judge ex parte. In other

words, and for obvious reasons, the defence are unaware of the

application. That in itself creates

heightened obligations upon the SFO when presenting its case without the

benefit of the defendant being present – there have been some spectacular

mishaps in the history of SFO ex parte applications.

If the SFO fails to follow procedural rules regarding either

the application for the warrant or the way the premises was then searched, a

defence team has the scope to apply to have the warrant quashed and any seized

property (which is potential evidence) returned.

Challenges

Search warrants can be challenged by way of an application

for Judicial Review in the High Court, against the SFO and the Court that made

the Order. A High Court judge may be

more inclined to take a robust approach to the principle that a search is a

serious infringement of people’s private lives – as defined under Article 8 of

the Human Rights Act - and demand the highest standards of those making ex parte

applications.

Such a challenge, however, is subject to strict time limits

and can be costly. The alternative is an appeal against the grant of the

warrant under Section 59 of the Criminal Justice and Police Act 2001. For

example, if a warrant is issued and searches are undertaken but schedules to

the warrant are not left at the searched premises then there maybe grounds to

challenge the legality of what has been carried out. Or if a warrant has not

been drafted properly, there are grounds for a legal challenge.

Another high-profile example of how the SFO can get it wrong

is the case that Robert and Vincent Tchenguiz brought against the SFO in 2012. Premises

had been searched and arrests made but the defence was later able to show that

the SFO had failed to properly investigate the credibility of information it

presented to the Court when applying for the search warrant. In effect, the SFO

relied too heavily on an outside agency’s report, commissioned by potential

victims of the bank fraud under investigation, rather than conduct its own

investigation.

Information

The credibility of information that the SFO relies on can be

a major issue in challenging its allegations at all stages of an investigation;

up to and including any trial. But such potential evidence can also prove an

important battleground for the defence team looking to make sure the SFO does

not exceed its authority.

Section 21 of PACE gives people the right of access to any

material of theirs that has been seized by the SFO, which means a defence team

can make sure that the investigators cannot hog or refuse to return potentially

relevant material. Similarly, the Attorney General’s Guidance on Disclosure

(December 2013) laid down guidelines on how to deal with the seizure and search

of digital material; which may contain terabytes of information. In some cases,

this can be of vital importance, as without the relevant material to hand it

can become exceedingly difficult to answer SFO questions or challenge its

assumptions.

Disclosure

Similarly, a shrewd defence team can use the law of

disclosure to gain access to unused material – material gathered by the SFO

which does not support their case Only by being represented by solicitors with

experience and expertise in this complex field can over-zealous SFO

investigators be stopped in their tracks.

Optimising the disclosure regime to the defence advantage

may, alongside proper representations and/or arguments, lead to the criminal

investigation remaining just that – an investigation and not a charge. If the

defence can use its available resources and expertise to cast doubt on the

validity of the case, it may be that the SFO abandons it due to the lack of a

realistic prospect of conviction.

But even if a case does go to trial, the challenges that

were voiced pre-trial can still be used in litigation to once again cast doubt

on the SFO’s assumptions of guilt. The calling of expert witnesses, if used

correctly, can also be a tactic that damages the SFO’s case.

Representing someone being investigated or prosecuted by the

SFO needs an experienced and well-resourced firm that can not just cope with

the SFO’s case, but challenge it.