High Court slams SFO over handling of Tchenguiz probe

The Serious Fraud Office (SFO) has been hit with further criticism from the High Court in a judgment handed down today in relation to an investigation into businessmen brothers Vincent and Robert Tchenguiz.

Debevoise & Plimpton’s Lord Goldsmith QC questioned whether the SFO was “fit for purpose” while acting for property tycoon Vincent Tchenguiz after the new director David Green admitted mistakes and dropped its investigation into the businessman and his brother Robert (20 June 2012).

Now Sir John Thomas, president of the Queens Bench Division, has officially ruled that the search warrants issued to the SFO were unlawfully obtained by “misrepresentation and non-disclosure”.

A number of high-profile silks, counsel and litigators have been involved in the case.

Goldsmith was instructed by Wilmer Hale litigation partner Stephen Pollard for Vincent Tchenguiz, with Matrix Chambers’ Ben Emmerson QC and Cloth Fair Chambers’ Jonathan Barnard also instructed.

The former director of public prosecutions, Matrix’s Lord Macdonald QC, is acting for Robert Tchenguiz alongside fellow Matrix silk Alex Bailin QC and Cloth Fair’s Clare Sibson. They are instructed by BCL Burton Copeland partners Ian Burton and Richard Sallybanks.

Representing the Rawlinson & Hunter Trustees & Others, the trustees of the Tchenguiz family trust, in the judicial review was Stephenson Harwood partner Sean Jeffrey. He instructed 3 Raymond Chambers silk Hugo Keith QC and Matrix’s Jonathan Glasson. The trust’s in-house litigation team included Alison Bradley, Laura Simmonds and Andrew Peach.

SFO director Green, who conducted an internal review into the Tchenguiz investigation, was represented by Blackstone Chambers’ James Eadie QC, QEB Hollis Whiteman’s Mark Ellison QC, Allison Clare of 18 Red Lion Court and Ben Watson of 3 Raymond Buildings.

Fiona Barton QC of 5 Essex Court was instructed for the Commissioner of the City of London Police.

In today’s judgment, the High Court issued a postscript warning to the SFO, saying it did not have the “proper resources, both human and financial” to investigate the Tchenguiz brothers.

The long-running case has been embarrassing for the fraud agency. It carried out dawn raids on the brothers in March 2011 as it probed their business dealings following the collapse of Icelandic bank Kaupthing in 2008.

The judgment said: “In the present case, the result has been our decision to set aside search warrants against two well known businessmen after a long investigation of transactions in the financial markets

“In other cases, the result could have been the failure properly to investigate and prosecute successfully conduct where there could be no doubt as to its criminality and serious effect on public confidence in financial institutions and the financial markets.

“It is clear that incalculable damage will be done to the financial markets of London, if proper resources, both human and financial, are not made available for such investigations[…].”

Sir John, who presided over the judicial review hearing brought by the brothers’ lawyers with Mr Justice Silber, said the SFO investigators did not have a “proper understanding” to set out the “commercial background to events”.

He said independent lawyers must be present when warrants are executed where there are privileged documents, calling the SFO’s decision to use its own lawyers “misconceived”. He was withering in his criticism of how long the investigation took, adding “the case is not a complex one”.

Sir John concluded: “The public interest in upholding the integrity of the financial markets is destroyed if those who investigate and prosecute do not have access to the same level of legal and accountancy skills and human and financial resources as those who are the subject of investigation and prosecution.”

Earlier this month, The Lawyer revealed a management shake-up at the SFO (12 July 2012).

Vincent Tchenguiz is pursuing the SFO for £100m in damages to his business empire because of the negative publicity and disruption caused by the investigation. That claim will be listed in the High Court in due course.

The judgment rejected a challenge by Macdonald over the lawfulness of the arrest of Robert Tchenguiz.

The SFO has previously stated that its investigation into Robert Tchenguiz continues, but a spokesman said a statement on that point will be released later today.