I was absolutely delighted to read that the SFO is at long last making the right noises. “End ‘antiquated’ fraud rules to make convictions easier”, says the new SFO boss.
I think the SFO, Crown Prosecution Service, FCA, ARGA and/or BEIS should be given more resources and told to pursue problem cases much more speedily. Companies should not be allowed to hide behind expensive lawyers. The whole process of settlements where management admit no blame and shareholders pay the fines/settlement amounts mean management get off scot free and also needs a review. These steps (plus others no doubt) are required to rebuild trust in business and to tackle what Mrs May called the “anything goes” business culture.
ShareSoc made this plea years ago, eg
The Law Society, see https://www.lawgazette.co.uk/news/antiquated-fraud-laws-thwarting-justice-says-sfo-director/5102972.article and the Daily Telegraph (sadly you have to register to read their commentary) and BBC Radio 4 have recently written/reported about it.
Antiquated Fraud Laws
Finally we have signs of of change. The country’s top white collar crime investigator has attacked “antiquated” fraud laws which stop her bringing culprits to justice. Lisa Osofsky, director of the Serious Fraud Office (SFO), called for a legal shake-up after she helped secure a record-breaking €3.6bn (£3bn) global settlement with Airbus over long-running corruption allegations. In what is known as a deferred prosecution agreement, the deal means Airbus escaped prosecution and avoided a conviction. Ms Osofsky appealed for a change to the law when asked why the SFO had failed to put Airbus in the dock. She said: “I wish we had some of the lower standards for fraud because we have a very antiquated system when it comes to fraud.”
The Telegraph reported that SFO chiefs have repeatedly struggled to show juries that wrongdoing was committed in fraud cases, which are typically vastly complicated, involve millions of pages of documents and pit the taxpayer-funded body against firms with huge reserves and top lawyers.
Calls for Change
The demands for a shake-up were backed by a string of top lawyers and Ms Osofsky’s predecessor Sir David Green.
Ms Osofsky told BBC Radio Four’s Today programme that she was hampered by a legal requirement to prove top executives – the “controlling mind” of a business, usually board level – were aware of criminality.
She said: “In fraud cases I have got to have the ‘controlling mind’ of a company before I can get a corporate in the dock. That is a standard from the 1800s when ‘mom and pop’ ran companies – that is not at all reflective of today’s world.”
The Telegraph said Sir David Green, who is now a consultant at “magic circle” law firm Slaughter and May, said there is huge inconsistency between the legal standards for proving fraud and other crimes such as bribery – branding the differences “perverse”. He said: “To prosecute a company [for fraud] in English law it is necessary to identify the controlling mind of the company, usually someone at senior board level, and prove that person’s complicity in the crime. “In these days where the email trail tends to dry up around middle management, getting such evidence of complicity is almost impossible. It’s easier to prosecute a small company, where it’s dead easy to identify the controlling mind, than it is to prosecute a large, complex corporate structure, which is absurd.”
I think it looks like the SFO has left the door open for potential individual prosecutions in the future.
The SFO has faced criticism before for failing to secure convictions in major cases, and striking deals instead. In 2017, it agreed DPAs with Rolls-Royce to settle bribery allegations and with Tesco over false accounting claims.
The FT published my letter on this issue in 2017. https://www.sharesoc.org/blog/rbs-case-shows-why-trust-must-be-rebuilt-in-business/ and https://www.ft.com/content/9e7ca6b8-453e-11e7-8519-9f94ee97d996 . Sometimes change happens very slowly, at a glacial pace, but perhaps we can take some credit for stirring things up. We will continue to champion the cause on behalf of individual shareholders.