Opinion: US corporate fraud investigation puts UK’s to shame
29 March 2010
22 August 2013
Regulatory risk: new SFO Director signals changes in how the agency will treat companies in the future
8 March 2013
7 June 2013
1 July 2013
16 August 2013
The SFO’s efforts to resolve its corruption case against BAE Systems, temporarily halted until the outcome of an application for judicial review, highlights once again the weaknesses of the UK system when it comes to bringing white-collar criminals to justice.
In my SFO Review (2008), I identified two causes contributing to the agency’s under-performance. The first was the calibre of human capital, which director Richard Alderman is addressing, the second, systemic weaknesses outside the SFO’s control. New York has six heavy-hitting prosecutors’ offices capable of mounting headline-grabbing financial crime cases; in the UK there are just two, the SFO and the CPS’s Revenue and Customs Division.
Most SFO cases are tried in Southwark Crown Court where, in non-custody cases, it takes between 12 and 18 months from charge to obtain a trial-fixture date; in contrast, the US Speedy Trial Act (1974) mandates trials to start within 70 days of indictment. To achieve this ambitious deadline, Congress provides federal judges in New York with a staff of five, including up to three lawyers. UK judges, who work on their own, must rely on the parties for effective case management. Whether this works depends on the lawyers, who may have commercial considerations that protract litigation.
Given the lack of resource devoted to economic crimes, one could reasonably expect its efficient use, but the opposite is the case. Disclosure here is impractical and expensive and discourages early pleas, as does the current sentencing regime, which lacks adequate scope for punishment in egregious cases of statutory fraud and corruption. The latter are punishable by a maximum 10-year term, in contrast to the five to 30 years for comparable offences in the US. In the UK, fencing stolen goods is a more serious crime than asset-stripping a plc’s pension fund.
US law disfavours interlocutory actions that delay and disrupt the progress of a case to conclusion. On appeal from conviction, a third-party non-governmental entity may file an amicus curiae brief but, unlike in the UK, a one-issue lobby cannot challenge a prosecutor’s charging or plea decisions, which require the balancing of many factors, including how best to use limited resources to achieve criminal law’s objectives of punishment, rehabilitation, protection and crime prevention.
Corrupt chief executives are as difficult to bring to book as the leaders of organised-crime gangs. US prosecutors are helped by the doctrine of respondeat superior, which makes the corporation criminally liable for the illegal behaviour of employees acting on its behalf and within its employment. Following the catastrophic demise of Arthur Andersen, US prosecutors have mitigated collateral damage by negotiating deferred-prosecution agreements that allow the corporate to admit guilt, make restitution, retain an independent monitor to enforce self-reform, and give evidence against individual malefactors. The UK has a narrow concept of corporate liability (except for the proposed Bribery Bill, whose enactment is uncertain), and has yet to embrace such agreements.
Faced with these obstacles, it makes sense for the SFO to partner with US prosecutors and participate in global plea settlements negotiated prior to indictment (US) or charging (UK). But even this is hampered by the lack of a settled culture for early judicial involvement.
BAE’s conduct is unlikely to be sui generis, in which event the SFO should have no shortage of cases to investigate. Alderman has made a commitment to increasing SFO productivity. Whether he succeeds depends on whether the legal establishment and the next government have an appetite for continuing reform.