Aziz Rahman explains

how to respond to a Serious Fraud Office (SFO) investigation in order to secure

the best outcome.

The fact that a Serious Fraud Office (SFO) investigation found

no evidence of criminality in how the Bank of England operated in the financial

crisis will be a relief to those involved.

But it is also an indicator that the SFO does sometimes have

to concede that it has not obtained the evidence to gain a prosecution or, even

if it has, that a prosecution may not be the best option.

It must be emphasised that the SFO’s actions can depend on

the response it receives from those under investigation.

SFO investigators had initially believed that something was

not right about the Bank of England’s auctioning of central bank funds in

return for collateral. But the case showed that assumptions can always be

challenged. In the case of SFO investigations, this is done by producing

material that counters the allegations and by legal argument.

Negotiation

Robust defence is often vital when facing SFO allegations.

But shrewd negotiating skills and an ability to look at “the bigger picture’’

can be just as important; especially where wrongdoing has been found.

A number of high-profile cases from this year illustrate

this point. Rolls-Royce admitted huge

bribery in a number of countries over a number of years and yet was not

prosecuted. Tesco did not challenge the allegations it faced over its

accounting scandal. It was also not prosecuted.

Barclays, however, has been charged over its financial

dealings with Qatar. Both the company and senior figures within it are being

prosecuted. Unlike Rolls-Royce and Tesco, it has not admitted any wrongdoing,

has not accepted it is liable for punishment and has not actively cooperated

with the SFO.

Only time will tell if Barclays’ non-negotiation was

worthwhile – or costly short-sightedness.

Process

All three cases indicate the importance of knowing the SFO’s

investigation process and how to manage a defence if you are put under its

scrutiny.

The SFO receives information from many sources, which it

assesses to see if it is worthy of investigation. If the SFO believes the

situation undermines UK financial and corporate interests, it will accept it

for investigation; involving the unique range of powers it has under Section 2

of the Criminal Justice Act 1987.

This involves SFO teams of skilled experts investigating

and, where necessary, using Section 2 to compel any individual or organisation

to provide the SFO with information or documents that it believes are relevant

to its investigation. The SFO has even told lawyers that they are not

guaranteed a right to accompany a client that is compelled to go in for

interview under Section 2. If a lawyer wants to attend a Section 2 interview

with their client, they must argue why they should be allowed to attend and

even agree to certain restrictions on their role in it – an approach the Law

Society has called “inappropriate’’.

With its own range of powers and its ability to ask for

extra “blockbuster’’ funding for major investigations, the SFO has all the

resources for a thorough investigation. But that is not to say the SFO cannot

be successfully challenged.

Expertise

A defence lawyer can make representations and arguments to

challenge SFO allegations and do everything possible to make the SFO doubt the

strength of its case at the investigation stage. This can mean the SFO deciding

to end an investigation with no charges being brought.

After a 17-month investigation, the SFO abandoned its

bribery investigation into Soma Oil and Gas late last year, as it said it had

failed to find enough evidence to prosecute. No one has the power to force the

SFO to abandon an investigation. But challenging the allegations, as we do in all such cases, can influence the SFO’s

decision on whether to prosecute;

It must be emphasised that the chances of successfully

challenging the SFO are highest if such legal help is sought at the earliest opportunity

Such help can, for example, involve challenges to search

warrants obtained by the SFO: whether they were obtained lawfully and if the

searches were conducted appropriately. A defence team can seek to have a

warrant quashed and any seized material returned.

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

the case of Robert and Vincent Tchenguiz. The brothers’ premises were searched

and arrests were made but the defence then showed that the SFO had failed to

check the credibility of information it presented to the court when applying

for the search warrants. The case ended with the SFO apologising to the

brothers and paying them £4.5 million.

Evidence

The SFO can also be challenged at all stages of an

investigation regarding the reliability of information and material it intends

to use as evidence. Section 21 of the Police and Criminal Evidence Act (PACE)

gives people the right of access to any material of theirs that has been seized

by the SFO, while the Attorney General’s Guidance on Disclosure (December 2013)

laid down guidelines on dealing with the seizure and search of digital material;

to prevent anyone under investigation being disadvantaged.

If an investigation leads to the SFO obtaining what it

believes is enough evidence to give it a realistic chance of a conviction, charges

will be brought. If they are brought, a shrewd defence team can also use the

law of disclosure to gain access to material gathered by the SFO which does not

support its case but which may help the defence.

Investigation

Earlier in this article, however, we touched on the

importance of negotiation. Such negotiation with the SFO is only really

possible if you know the extent of any wrongdoing that may have been committed

by the company or people working for it.

Any suspicions of wrongdoing have to be investigated

immediately; ideally by someone experienced in following the evidence trail in

such circumstances.

This allows you to establish the true situation and may give

you the chance of a deferred prosecution agreement (DPA). A DPA involves a

company admitting criminal behaviour and agreeing to meet certain conditions.

These conditions can involve changing working practices,

removing certain staff, paying fines or introducing measures to prevent any repeat

of the criminal behaviour. Under a DPA, if the company meets these conditions

for an agreed period of time, it is not prosecuted. But it is prosecuted if it

fails to meet them.

The negotiating skills we talked about are important both when

seeking a DPA and, if that is successful, in agreeing the terms of it.

Rolls-Royce secured a DPA with the SFO largely due to the

cooperation it offered the SFO and efforts it made to put right the wrongs. But

it also emphasised how a prosecution would damage its wellbeing, the UK

aircraft industry and tens of thousands of jobs in its supply chain. Such an

approach has to be seen as a negotiating tactic: Rolls-Royce was happier to pay

the £497M DPA fine and acted accordingly.

Similarly, Tesco made changes to its personnel and working

methods and agreed a £129M fine as part of securing a DPA. It considered this

preferable to prosecution and tailored negotiations with the SFO towards such

an outcome.

Both cases show the value of negotiation.