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.