David Corker, founder, Corker Binning Solicitors
Opinion: SFO’s new director – the real deal?
14 September 2009
Regulatory risk: new SFO Director signals changes in how the agency will treat companies in the future
8 March 2013
22 August 2013
7 June 2013
15 July 2013
1 July 2013
Richard Alderman was appointed director of the Serious Fraud Office (SFO) in April 2008. He arrived at a moment of considerable turmoil within the SFO about its depressing performance as a criminal prosecutor.
Alderman wasted little time in implementing his plan to transform the organisation. His vision was to steer both the SFO and external perceptions of it away from the conventional prosecutorial model and to develop distinctive if not unique legal responses to fraud and corruption. Alderman has hitherto shown the greatest dynamism in cases of suspected international corruption committed by UK companies and individuals. He has sought to demonstrate that the SFO no longer believes that resolution means either prosecution or no further action, but could implement a sanction that requires financial restitution as a precursor to a culture change within the delinquent company. So far he has tried out two approaches to this, and if recent reports of the deal he is offering to British Aerospace (BAe) are accurate, he is embarking on his third and most ambitious.
The first approach was the settlement reached by the SFO with Balfour Beatty in late 2008. By means of a consent order in the context of a civil recovery action instigated against it by the SFO, the company admitted it had committed a Companies Act offence and paid a ‘fine’ of £2.5m. While in subsequent speeches Alderman has heralded this settlement, there are many who regard it as a very poor outcome for the SFO and the public interest. The fine was paltry in the context of Balfour Beatty’s turnover and the scale of the alleged corruption. Second, why such a low amount was agreed to has remained secret, thus creating a suspicion that the SFO was desperate to do a deal.
The second approach is the Mabey & Johnson case currently before Southwark Crown Court. The company awaits its sentence on sample charges, having pleaded guilty on the back of a US-style plea bargain with the SFO. Details of what the company and SFO each obtained from this bargain are not yet available. From the former’s perspective, while it was unable to avoid prosecution and faces a substantial fine, the threat of a ruinous confiscation order has probably been lifted. From the latter’s, the criticism of the Balfour Beatty deal will not be repeated, as the fine will be set by a judge in public. A handy admission of UK corporate corruption has been gained, which will help in appeasing widespread international concerns about the UK not being serious about tackling overseas corruption.
The third approach is what the SFO has allegedly this month offered BAe at the end of its seven-year investigation into claims of multiple corruption of foreign governments and officials. BAe agreed to pay a substantial penalty to the Treasury and also enter into a deferred prosecution agreement, which if it was later breached would in theory permit the SFO to then prosecute it for corruption. While this type of agreement is a novel one for the SFO, in essence it is analogous to a conditional caution, with which the police are familiar. What is legally unprecedented is the notion that, absent from any form of court proceedings, BAe can resolve its myriad criminal problems by means of a contribution to the public coffers.
The precursor to this alleged deal is probably the one announced in January in Washington DC between the US Department of Justice and Lloyds Bank, whereby the bank ‘forfeited’ $350m (£212.14m) to the US Treasury in return for non-prosecution.
This possible settlement seems a sound one legally for the SFO. There is nothing to prevent it from entering into such a contract with the company. Depending on the quantum of what BAe pays, it may entitle Alderman to claim that the SFO has pioneered a pragmatic solution to its tiresome investigation of the company that satisfies the public interest and rejuvenates its reputation.