Afternoon:
15°c
While the politicians slug it out, another scrap is under way — between the Serious Fraud Office and the Financial Services Authority.
At stake is the right to be top dog in the country's new “super-detective” agency if the Tories win on May 6. George Osborne, the shadow chancellor, reiterated yesterday that a Conservative government would create an “Economic Crime Agency” to take over the “work of investigation and prosecuting serious crime”, currently done by, among others, the SFO, FSA, Office of Fair Trading, Revenue & Customs, and the specialist fraud section of the Crown Prosecution Service.
“We are very, very bad at prosecuting white-collar crime,” said Osborne. “We have six different governmental departments, eight different agencies — a complete alphabet soup — and the result is that these crimes go unpunished. There is £30 billion worth of fraud taking place in the British economy each year.”
Osborne said the problem with the present system is that “no one knows who is in charge.” Yes, but who will run it? The two obvious contenders are the heavyweights, the SFO and the enforcement division of the FSA — hence their struggle for supremacy.
At the FSA, they deny that their recent spate of arrests and convictions has anything to do with proving a point over the organisation's future. Of course they do.
Meanwhile, the SFO is trumpeting its success “in advance of its annual report which will be published in the summer” — in other words, in advance of the general election and questions about where the body goes from here. The SFO says its conviction rate has risen from 78% the previous year to 91%.
In the absence of the annual report, it's hard to know how that 91% figure is arrived at. But last year's annual report does provide some clue as to how they reached 78%.
The 78% only covers defendants convicted as a proportion of those who were tried. It excludes the 14 defendants in the Operation Holbein NHS drugs price-fixing case — described in the press at the time as “the biggest prosecution [the SFO] has ever brought” and costing “as much as £25 million. Some estimates put the figure as high as £40 million”.
Holbein was thrown out by the judge before it reached a jury, wasting an eight-year investigation, not to mention the financial cost. If the defendants in Holbein who walked free are included, the SFO's conviction rate falls to a not-so-impressive 60%. Which begs the question: If it's so easy to blow a hole in the 78% claim, what hope is there for the 91%?
Perish the thought the SFO was moved to rush out its figures because of the other bad news that has come its way. Last October, the SFO said it was looking to prosecute BAE for corruption and was intent on seeking to secure up to £1 billion in compensation. In the end, this year, BAE pleaded guilty to accounting technicalities and paid £30 million.
In Whitehall, the Cabinet Office regularly casts an eye over different departments, making them the subject of “capability reviews”. Its recent study of the SFO found that “deep cultural issues remain between functions and operational teams”.
Richard Alderman, the SFO director, his senior management team and staff, said the study, “are all frustrated by the lack of engagement between teams and different levels of management”.
And the review said this: “Staff are confused by layers of decision-making created by the three senior teams in an organisation of 300 people. It is not clear to many staff who is implementing the strategy and who runs day-to-day operational management.” The SFO's strategic management board, its most senior board, “needs urgently to reconsider the SFO's governance structures”.
That doesn't read to me like a body that is ready to assume the mantle of super-detective.
When a bribe is permissible, by the SFO director
Richard Alderman, the Serious Fraud Office director, said in an interview after his office was heavily criticised for reaching a light settlement with BAE over bribery allegations, that “companies underestimate my understated approach at their peril”.
I wasn't sure what he meant by “understated”, but I've come across, on the SFO website, a speech he gave at a recent seminar hosted by the law firm SJ Berwin.
Alderman said how he was approached by a company doing business in a country where corruption was systemic. They'd been told if they wanted to continue doing business with the government there, they'd need to transfer 51% of their local subsidiary to the president's family. They were worried the SFO might think this amounted to a bribe and investigate.
“I assured them that I would have no intention of doing that whatsoever,” said Alderman.
He promised the company the SFO “would not seek to take any action, even if technically the transfer of the interest in the subsidiary constituted a bribe. They found that very helpful”.
I've read this over and over. The SFO director is saying that even if something is a bribe, he will clear it. Presumably, that is what he means by “understated”.
