Time Is Running Out for the SFO Director

Regularly writing on news surrounding the Serious Fraud Office, here Dominic Carman analyses the success of David Green QC’s tenure at the SFO, pointing towards Green’s key moves, role and the poisoned chalice that is the job of being SFO Director.

In one of his more astute observations, Enoch Powell suggested that all political careers end in failure. Of course, the same can equally be said of other careers, not least that of the Director of the Serious Fraud Office. For the present incumbent, the clock is ticking.

Next April, David Green QC will pack up his bags, make his way out across Trafalgar Square, and stroll down Whitehall in his black quilted Barbour jacket. To paraphrase Margaret Thatcher, the seventh SFO Director will be leaving Cockspur Street for the last time after six eventful years – at 64, possibly on his way to do other things, and perhaps with a knighthood to follow for his many years of selfless public service, including spells at the HMRC and CPS.

Green has made the role his own, putting a distinct stamp on the office of Director. I once interviewed George Staple, the third SFO Director (1992-97). Tight-lipped, old school, and patrician, this unworldly former Clifford Chance partner seemed distinctly unsuited to prosecuting fraudsters in Savile Row suits. By contrast, in meeting Green in 2015, it was obvious that he knew his way round a criminal courtroom and the personalities you encounter there. Strikingly different from Staple, Green was garrulous, and behind his genial grin, quietly aggressive.

Before Brexit subsumed everything, the impetus for greater regulation and more effective criminal prosecution of serious fraud had been high on the political agenda. This came in the aftermath of the Lehmans debacle and the ensuing financial crisis: more fraud is usually uncovered during a recession which might not come to light in better times.

Despite media attention straying elsewhere, Green has done his best to ensure that the SFO has never been far from the headlines throughout his tenure. But it has been a double-edged sword.

Green took office with three immediate objectives clearly in his sights: burying the mismanaged investigation into the Tchengzuiz brothers, getting Deferred Prosecution Agreements in place as part of the SFO’s armoury, and prosecuting the fixing of Libor rates by the banks before and during the financial crisis.

Resolving the Tchenguiz affair, which he had inherited from his predecessor Richard Alderman QC, took more than two years.  Eventually, the SFO agreed to pay Robert Tchenguiz £1.5m in damages and unspecified legal costs, in a settlement that brought closure to its torrid investigation into the collapse of Icelandic banks. Robert’s brother, Vincent, was earlier awarded £3m in damages and £3m in legal costs by the SFO.

It was not the agency’s finest hour.

Next on Green’s list was Deferred Prosecution Agreements, or DPAs, which became part of English law in February 2014. As agreements reached between the SFO and an organisation which could be prosecuted, under the supervision of a judge, DPAs allow a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions. Applying to organisations rather than individuals, DPAs can be used for fraud, bribery and other economic crime.

The justification for DPAs is to incentivise companies to co-operate fully with the SFO and to save public funds. They are certainly cost effective for very big companies as a way of buying themselves out of trouble since the most notable element is a large fine. To date, there have been four DPAs. By far the largest was Rolls-Royce which paid an eye-watering £497.3m in January 2017 after admitting sustained bribery and corruption in multiple jurisdictions. Three months later, Tesco also agreed a DPA, involving a fine of £129m for overstating profits by £263m in its annual accounts.

Although the UK Treasury has benefited to the tune of more than £600m from these two DPAs, no-one has gone to prison, or yet faced trial. Understandably, DPAs polarise opinion. Green has trumpeted their success, although others are distinctly less keen to celebrate. Instead, their argument runs: yes, big companies plead guilty and pay a hefty fine for their past misdeeds, but even fines on the scale of those levied on Rolls-Royce and Tesco are affordable to multinationals with vast resources. Meanwhile, no-one goes to prison for fraud offences running into tens, or possibly hundreds of millions of pounds.

Then there was Libor. In his final months of office, Alderman had looked at the issue of rate fixing by the banks and decided not to prosecute. By then, he was in no mood for a fresh SFO challenge, having had a pretty unsuccessful stint in his four years as Director. But Green was. Revoking Alderman’s decision almost as soon as he walked through the door, a range of investigations were launched into the banks. It was the issue by which the SFO’s success should be judged, Green told journalists, unwisely.

The results did not match the rhetoric. So far, 19 traders have been charged in respect of Libor and Euribor manipulation with four trials delivering very mixed results: one defendant pleaded guilty, four were convicted and eight were acquitted. The remaining six defendants will be tried in April 2018.

But of the four convictions, at least two are subject to appeal following fresh evidence when when the lead SFO expert witness admitted under cross-examination that he had been texting questions on technical points from the courtroom. And for all of Green’s bravado, not one senior banker has yet to see the inside of a courtroom as result of Libor manipulation. If we are to judge him on that, as requested, then the SFO has not succeeded.

Green will be well aware that Alderman’s reputation as SFO Director was severely damaged by Tchenguiz and by a slew of other mishaps. After stepping down, Alderman gave evidence to a Parliamentary Committee in 2013, which the Telegraph reported: ‘In a grilling before the Public Accounts Committee, former Serious Fraud Office head Richard Alderman was attacked for his “shocking” stewardship of the organisation and forced to admit he had not obtained written approval for the severance packages to three colleagues.’

Alderman’s predecessor Robert Wardle (2002-8) was similarly sunk by BAE Systems. Labelled ‘the Fall Guy’ by the Guardian, Wardle was further described as ‘a man who will go down in history for caving in to political pressure to drop the investigation of the arms giant BAE over alleged bribes to Saudi Arabia.’ In a final sideswipe, the newspaper added: ‘The departing SFO chief, who steps down today, has been made to look like the primary victim of last Thursday’s crushing legal judgment in the BAE case. Lord Justice Moses said in almost so many words that Wardle had allowed the course of justice to be perverted.’

As the search for Green’s successor gathers pace, the current SFO Director must be starting to wonder about his legacy. There are forthcoming trials which may yet determine this, not least the four senior defendants in the Barclays-Qatar prosecution, the three former Tesco senior executives and the remaining six Libor defendants.

During his tenure, Green will have been painfully aware of Theresa May’s relentless desire – first as Home Secretary and now as Prime Minister – to shut down the SFO and roll it into the National Crime Agency. As part of the Conservatives doomed election manifesto, that policy appears to have been scrapped.

Like Wardle and Alderman before him, Green must now recognise that the role of SFO Director is something of a poisoned chalice. Avoiding the unmitigated disasters that befell his two predecessors, his actions have nevertheless further exposed the incapacity and ineptitude that have too often characterised the SFO in the public consciousness.