FINANCIAL CRIME: An Introduction

Written by Clare Sibson QC 

More than half way through 2019, the Serious Fraud Office (SFO) had yet to clear its desk of investigations into alleged crimes that dated back to the period before the pinnacle of the financial crisis of 2008. Under new leadership this year, the organisation has announced strategies aimed at bringing its cases to conclusion more quickly.

The context is of lengthy investigations, followed by trials (and often, re-trials) resulting in low rates of conviction. In July 2019, the last extant set of criminal proceedings relating to interest rate benchmark manipulation finally concluded, with mixed results. However, criminal proceedings in the “Barclays Qatar” case – which focuses on Barclays Bank’s capital raisings of June and October 2008 – still continue. Barclays Bank PLC, its operating subsidiary and its former CEO, John Varley, have all seen the cases against them thrown out. In the case of Mr Varley this was for want of evidence at the close of the SFO’s case against him at his trial in April 2019. Three further former employees of the Bank are due to be re-tried in the autumn of 2019.

The year did see some investigations brought to an end slightly more swiftly. A little over four years after Tesco PLC announced to the markets that it had misstated its 2014 first-half results (a short time for a UK fraud investigation), the cases arising from that misstatement terminated with the acquittal of Carl Rogberg - the last of three Tesco senior managers charged with criminal offences. Mr Rogberg was awaiting a re-trial, separate from his two former colleagues because of his ill health, but the SFO offered no evidence against him following the acquittal (on the judge’s direction) of his co-accused at the close of the prosecution case in their re-trial. The decision to halt that case – like the decision to stop the trial of former Barclays CEO John Varley – was based upon a judicial finding (upheld on appeal) that there was insufficient evidence to support conviction.

Looking back five years, deferred prosecution agreements (DPAs) were the SFO’s brand new tool. But Tesco Stores Ltd itself entered into a DPA in April 2017. It was in December 2018 and January 2019 that the executives on whose alleged conduct that bi-partite agreement was based were acquitted. Very shortly after that, in February 2019, the SFO announced that it was closing its anti-corruption investigation into Rolls-Royce with no charges against any individual, despite the fact that Rolls-Royce entered into a DPA in January 2017.

Therefore, although DPAs may well be judged successful in their own right, as a pragmatic way to settle corporate criminal investigations in appropriate cases, they have thus far proved a poor prelude to prosecution of individual executives. In the examples given above, which together represent the most ambitious and significant case work the SFO has accepted in at least the last two decades, the two investigations in which the SFO entered into DPAs (Tesco Stores Ltd and Rolls-Royce) concluded in a significantly shorter amount of time than either the LIBOR/EURIBOR manipulation investigations or the ongoing case against former Barclays executives for their role in the bank’s 2008 recapitalisations. And yet it is striking that – notwithstanding that a corporation can, under English common law, only be guilty of a crime if an individual who can be identified “as” the company is guilty - not a single executive from Tesco or Rolls-Royce has been convicted of any wrongdoing.

And so the SFO has announced a radically new approach in its pursuit of individuals. It will be more proactive and more, well, American, reaching for tactics redolent of the FBI: probes, participating co-operators and wires. Whether the UK statutory framework or sentencing practices will enable (or even allow for) this remains to be seen. In the meantime, it is vitally important that anyone associated with a company which is (or might be) placed under investigation for serious fraud seeks early, independent advice from practitioners with up-to-date investigative and litigation experience in this increasingly specialist area.