Finance

SFO’s boss in spotlight as fraud hunters ask: ‘When are they going to do something?’

Some in the City are wondering how sharp the SFO’s teeth are anymore as the UK agency tasked with investigating fraud and white collar crime navigates a caseload slump, judicial rebukes and staff complaints about its culture under director Lisa Osofsky.

“The threat of an SFO investigation would today be regarded as remote by many,” said Barry Vitou, the co-chair of law firm Greenberg Traurig’s global white collar criminal defense practice, who represents corporations under investigation by the SFO. “This raises a question of relevance for the SFO.”

It’s a sentiment echoed by other senior white collar lawyers, said one at a City law firm: “Everyone I talk to is saying, ‘What is going on with the SFO? When are they going to do something?” said the lawyer, who represents individuals in investigations conducted by the SFO. 

“Do I think there’s a rosy future long term for the SFO? Not really,” said another senior lawyer,  who also represents individuals involved in SFO probes. ”It’s just a pale shadow of perhaps what it was six or seven years ago.”

READ Lisa Osofsky on SFO’s dwindling caseload, UK’s ‘antiquated’ fraud laws and hiring in a pandemic

The SFO said it had 60 open cases in the year to March 2021, according to its latest annual report published in mid-2021. That’s compared to 75 active cases three years earlier. 

Financial fraud is likely to spike during the pandemic, the UK’s top financial watchdog has warned, as stuck-at-home workers spend more time on the internet and mobile phones, and less time within sight of compliance workers or bosses. 

When Osofsky came into the role in 2018, the enforcement agency was coming under fire over its perceived mishandling of prosecutions related to manipulation of the London Interbank Offered Rate. It also shook off calls for its closure from the Conservatives in 2017 who suggested absorbing the SFO into its bigger National Crime Agency would strengthen Britain’s response to white-collar crime.

Osofky, through an SFO spokesperson, declined to be interviewed for this article. In an interview with Financial News in September, Osofsky said she didn’t feel “the slightest bit bad” about closing dud cases. The spokesperson said the agency was “always open to constructive criticism but many of the accusations directed at the agency here are just plain wrong”.

“The SFO fights the most complex financial crime, delivers justice for victims and protects the UK’s global reputation as a safe place to do business,” the spokesperson said. “We will always bring strong cases to court.”

The spokesperson added that in the four years to 2020, the SFO’s rate of “successful judicial outcomes” was 95% by case and the agency has contributed over £1.3bn to the Treasury – “nearly six times greater than our cost to the taxpayer”. 

“We have also agreed 12 Deferred Prosecution Agreements which compel companies to admit their crimes, pay substantial penalties, and reform to become better corporate citizens,” the spokesperson added. “Should offenders breach the terms of the agreement, the prosecution will resume.”

Osofsky, a former prosecutor for the US Federal Bureau of Investigation, has secured some wins. 

The SFO in 2020 reached a €3.6bn global agreement with Airbus as part of its largest-ever plea deal, following allegations that the aerospace company had used external consultants to bribe customers to buy its aircrafts. A statement from Airbus last year said that the agreement did not “amount to an admission of liability” and that the company has taken steps to “ensure that this conduct will not reoccur.”

In 2020, the SFO also charged three former executives of security company G4S with fraud. The trio are likely to deny all charges when the trial kicks off in January 2022, the Daily Mail reported, while one of the executives, Richard Morris, “refutes these allegations in the strongest possible terms”, his lawyer told Reuters in September. G4S told Reuters at the time that the firm “settled this matter with the customer via a full commercial settlement and agreed a DPA with the SFO” and said it wouldn’t comment on individual cases. 

And it logged three convictions in relation to an alleged bribery investigation into Unaoil, a Monaco-based energy services firm. This year it also secured a £103m non-prosecution agreement with project management firm Amec Foster Wheeler relating to the use of corrupt agents in the oil and gas sector. The chief executive of Wood, an engineering company which acquired Amec Foster Wheeler in 2017, said in a statement following announcement of the resolution that the probes brought to light “unacceptable, albeit historical, behaviour that I condemn in the strongest terms.”

But what some see as embarrassing failures for the SFO have been mounting. 

Osofsky was rebuked alongside other officials in 2020 by a London judge for their year-long contact with David Tinsley, a freelance detective, during the Unaoil investigation. Osofsky told FN in September that she accepted “that there was criticism and we did change our processes”. 

A judge ruled that Tinsley should not have been in contact with the prosecuting team, the Wall Street Journal reported. Reuters reported that Tinsley said lawyers had taken his communications with SFO officials out of context. The case is ongoing.

In early 2021, the SFO’s case against two former executives at Serco, an operations company, collapsed after the SFO failed  to disclose documents to the defence, jeopardizing the trial. The SFO said in a statement that “a prosecution review of its disclosure process for the trial uncovered errors made in the non-disclosure of certain materials”. The two former executives, Nicholas Woods and Simon Marshall, pled not guilty. Marshall told the Telegraph in May that he had been incorrectly implicated in the case.

The Financial Times reported that Woods’ barrister told the jury that his client had no motive to conduct a fraud on behalf of his employer.

The SFO also came under fire in early 2021 for not announcing sooner that it was investigating alleged fraud, fraudulent trading and money laundering at the Gupta Family Group and its financing arrangements with collapsed supply chain financier Greensill Capital. The agency’s announcement came weeks after Greensill’s fall piled pressure on Gupta and his steel empire.  A GFG Alliance spokesperson said in a statement that the company will cooperate fully with the investigation. Greensill declined to comment to the Wall Street Journal on the SFO probe.

Greenberg Traurig’s Vitou said that “criminal law relied on a deterrent effect” and the SFO’s decreasing casework might not help in that regard: “The profile and numbers of cases being investigated five years ago, which included a number of household names, contrast sharply with those being investigated [by the SFO] today.”

READ ENRC case against Dechert and SFO ‘the stuff of conspiracy theories’, lawyers claim

In its business plan for the coming year, published on 13 May, Osofsky also said that the agency would work to “build the SFO brand and image by confidently communicating what the SFO is and does”.

Osofsky said then the agency would seek to “reduce the blockers to high-quality case progression at pace, not only for the year ahead but also laying the foundation for improvements in future years”.

She has also been lobbying for the UK to rethink what she has described as “antiquated fraud laws” that impede SFO convictions.

Osofksy wrote in The Times on 30 June that “present UK law enables bad behaviour because leaders can distance themselves from the actions of their company”

“To complain about it would be like a captain complaining about the sea. So we have to adapt,” she said. “The SFO protects our democratic values by investigating and prosecuting the most complex cases of financial crime.” 

Even so, staff morale appears to be suffering. 

The SFO’s most recent staff survey, published on its website on 11 May,  found that over half of respondents said they did not “believe that [the executive team had] a clear vision for the future” of the agency. 

Just under half did not “have confidence in the decisions made by” the SFO’s senior managers, while 61% did not “think it is safe to challenge the way things are done” within the organisation. 

“In recent months the leadership of the SFO has had its share of criticism from the outside, but this is a damning indictment from within,” said Jonathan Pickworth, a partner in the litigation department at law firm Paul Hastings, who represents companies and individuals under investigation by the SFO. 

Some 67% of SFO respondents who answered in the affirmative a survey question that they had experienced bullying, discrimination and harassment at work, also answered yes to the statement that “the culture in [their] area allows this kind of behaviour to continue”.

It comes in the wake of a July 2019 report from the HM Crown Prosecution Service Inspectorate, which claimed the SFO had “neglectful approaches to management or, in some cases, of unacceptable behaviours”. 

The SFO outlined improvements in its culture in its latest report, saying that a probe by the government inspector of UK prosecution agencies recognised “supporting the health and wellbeing of our staff”. And in late 2020, Osofsky told FN that the agency had subsequently “engaged in a culture change within the organisation” and that she wanted to create an environment in which her roughly 600 employees feel free to voice whatever is worrying them.

Three of the SFO’s top executives, including its head of strategy and policy, chief investigator and head of proceeds of crime, resigned in 2020, adding to a string of departures from the anti-corruption agency in the past 18 months.

That has not had an impact on turnover figures within the agency, however. Around 47, or 7.9% of a roughly 600-strong workforce, left the SFO in the year to April, according to a response to an FOI request from FN. That’s the lowest level of staff departures at the SFO in four years. 

Lawyers specialising in white-collar crime are divided as to what all this means for the SFO, and whether calls for its closure will resonate at higher levels of government. 

One senior City litigator said the fallout from the pandemic may eventually become a key factor in its future. 

“I just can’t believe that in the back end of the pandemic, where there is undoubtedly going to be all sorts of frauds that are going to get discovered… that in that climate they would disband the one specialist fraud agency. That will take some explaining.” 

Still, he said the SFO now had a “philosophical question” to answer: “Is it going to be a body that raises money through DPAs? Or are they going to prosecute?,” he said, referring to Osofksy’s record in securing plea-bargain agreements in SFO cases. 

In Osofsky’s 30 June Times article, she said DPAs were “not get-out-of-jail-free cards or backroom deals”. 

“DPAs are transparent, public events under the watchful eye of a senior judge,” she said then. “DPAs encourage offending companies to uphold the law. They can also prevent unnecessary economic damage where a conviction could put the company out of business and destroy jobs.”

“Our strategy is paying dividends,” she added. “As companies learn the lessons from DPAs, compliance and behaviour improves.”

Greenberg Traurig’s Vitou, said there would “always be a need for specialist investigators to investigate top-end fraud and corruption”. 

But he questioned whether that investigating body would be the SFO: “The question is whether the politicians consider that the SFO should be that body, or whether old arguments are resuscitated to wrap the SFO back into the NCA or similar.”

In the meantime, all eyes will be on Osofsky’s next move. 

To contact the authors of this story with feedback or news, email Lucy McNulty and James Booth

Most Related Links :
reporterwings Governmental News Finance News

Source link

Back to top button