Pressure is on Serious Fraud Office to raise its game in the credit crunch

Blake Coppotelli, senior managing director in Kroll's business intelligence and investigations division, warned: "We expect to see this increase further as conditions become tougher for business and the full impact of the credit crunch unfolds."
There has been a sharp contrast in the ways the UK and US financial authorities have responded to the crisis in the credit markets. And so it has proved with law enforcement, too.

Britain's Serious Fraud Office (SFO) "uses significantly more resources per case than its New York counterparts and achieves significantly less for its efforts". So said Jessica de Grazia, a former New York senior prosecutor, in a report commissioned by the SFO and the Attorney General.
De Grazia found the comparison "startling". For example, in a joint US/UK conspiracy prosecution, the District Attorney's office in New York used a team of eight to convict 14 defendants in a third of the time that it took for an SFO team totalling 31 to prosecute four defendants, three of whom were convicted after an eight-month trial.
An important factor contributing to the SFO's low productivity was the English law of disclosure, which de Grazia described as "unfit for
purpose". Teams of defence lawyers are tied up for months or even years assessing evidence not needed by the prosecution. By contrast, New York prosecutors simply hand over the "key to the warehouse door".

De Grazia recommended in June that "serious consideration" should be given in England and Wales to reinstating this policy, scrapped after 1996 to reduce defence costs and thus the legal aid budget. But the idea was immediately rejected by the Attorney General, Baroness Scotland.

Kevin Roberts, a London-based partner in the US firm Morrison & Foerster, says the current disclosure regime is simply not suited to large fraud cases. "It results in delay, overburdens the SFO and potentially prejudices the defendant. The problem will only get worse as investigators seize increasing amounts of electronic information. Surely defence lawyers are the best people to decide whether this will help the
defendant?"

But don't they want to bump up the fees they can charge for wading through mountains of evidence? "The days of defence teams looking at every piece of paper seized by the prosecution are over," says Roberts.

"In large cases, software is used to identify relevant material. The government is rigid in its approach because

it is frightened of the potential costs — but times have moved on and so should its thinking on disclosure."

Andrew Gordon, head of investigations in the forensic services arm of PriceWaterhouseCoopers, the SFO should be more willing to allow blanket disclosure if the defence can demonstrate a level of independent scrutiny. "In one recent case we undertook for a client, there would have been enough documents to fill the British Museum
10 times over. But a pragmatic, tailored approach using forensic technology significantly cut down the volume of documents requiring review."

Roberts paints a sorry picture of the SFO, comparing it unfavourably with the Office of Fair Trading, the Serious and Organised Crime Agency and Crown Prosecution Service in-house fraud unit — whose head, David Kirk, said last week that the police should make investigating fraud more of a priority.

Although the SFO was vindicated by the Law Lords over its decision to drop its investigation into the Saudi Al Yamamah defence contract with BAE Systems, Roberts says "the episode presents a picture not of an independent powerful fraud investigator but of a political poodle".

But that will be as nothing compared with the row that's likely to break next year over the biggest prosecution ever brought by the SFO. "Operation Holbein" is subject to reporting restrictions, in case it ever comes before a jury.

But what can be safely reported is that a High Court judge quashed the indictment — threw out the case — in June. This followed a decision by the Law Lords that the SFO had got the law wrong.
The SFO's appeal opens on 3 December and we can expect a ruling by early next year.