SFO faces £10m legal bill on collapsed pharma investigation

SFO faces £10m legal bill on collapsed pharma investigationThe Serious Fraud Office (SFO) could face a £10m legal bill following the collapse of its £25m, six-year investigation into alleged price fixing by drug manufacturers.

The SFO had accused pharmaceutical companies Goldshield, Kent Pharmaceuticals, Generics (UK) and Ranbaxy, of conspiring to defraud the NHS through an alleged pharmaceutical cartel.

The SFO’s original indictment only related to price-fixing, which alone is not an offence. When the SFO tried to amend the indictment to include conspiracy to defraud the Department of Health between 1996 and 1999 its application was refused (The Lawyer, 11 July).

Yesterday, the Court of Appeal took little more than an hour to refuse the SFO leave to appeal an earlier House of Lords decision on the case. Lawyers for the defendants now expect the SFO to be ordered to pay significant legal fees. Goldshield alone is believed to have racked up legal fees of more than £6m.

The SFO has already been asked to contribute to the costs of the House of Lords case that quashed its original claim against the pharmaceutical companies.

The government office has dedicated significant resources to the prosecution. It had to borrow 100 officers from the National Crime Squad for 30 dawn raids to launch the investigation. It seized six million documents and built it’s own database to sift through them.

One lawyer close to the case said: “Richard Alderman’s appointment [in March as SFO director] after the House of Lords case collapsed would have provided a perfect opportunity to draw a line under this claim, but they were determined to carry on.”

Pannone head of regulatory investigations Anthony Barnfather, who acted for John Clark, a director of Kent Pharmaceuticals, added: “The stance of the SFO throughout this investigation has been one of overconfidence verging on misplaced arrogance.”

In July, Alderman told The Lawyer the SFO wanted to adopt preventative measures as an alternative to bringing costly litigation.

“An example of where litigation may not be the right course of action is where two businesses merge,” he said. “One finds out the other has been fraudulent and so those people are thrown out of the company and other steps to rectify the fraud are taken to the best of the company’s abilities.

“In such a scenario the business wants to draw a line under it and start afresh, and I think the SFO should help in that instead of prosecuting needlessly.”