International - Written by on Monday, May 23, 2011 23:20 - 1 Comment

Why splitting the SFO would have achieved less & cost more

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Reports first in the Daily Telegraph that Coalition plans to break up the SFO were in disarray and later in the Mail on Sunday that the plans to split the prosecution and investigatory functions of the SFO had been abandoned were welcome news.

The government case for the SFO

There has been plenty of focus on the inefficiency of a prosecutor and investigator function which is split.

The SFO was created to fix a broken system where the functions of investigation and prosecution were split.

Another useful byproduct of such a system in these cash strapped times is that the cost to the tax payer is less and there is even the potential for the SFO to self fund.

Corporates are encouraged self report.  If they do they are encouraged to pay for their own investigation – using their own lawyers and advisers who liaise with the SFO and undertake an investigation the scope and manner of which has been agreed.

The government policy reason for retaining a combined agency has not changed and remains clear.

The private sector case for the SFO

Less has been said of the desirability of a combined agency for corporates and their advisers.

There are compelling reasons why the SFO is the best option for business – in particular business which finds itself under the spotlight of the SFO.

The collapse of Arthur Andersen in the United States marked a significant shift in the attitude of US prosecutors in the prosecution of corporate crime.  Andersen was indicted in relation to the alleged obstruction of justice as a result of the destruction of documents.  Andersen was eventually acquitted.  But not before it ceased to exist as a standalone business and around 100,000 people had to find another job.

Since that time the US DOJ has pursued an aggressive and succesful enforcement strategy turning up the temperature on culpable individuals and levying fines and penalties against corporates up to several hundreds of millions of dollars; but it has not repeated the Andersen approach.

A key feature has been one of dialogue with corporates resulting in numerous Deferred Prosecution Agreements.

Yes. Hefty penalties have been levied.  But: the arrangements have enabled the corporates to continue to trade and pay the penalty without the unnecessary job losses resulting from the business closing down in turn impacting huge numbers innocent employees.

The SFO has been promoting a similar system in the UK. Corporates under the SFO spotlight can speak to a combined investigator and prosecutor.  The SFO, like the US DOJ, actively promotes a settlement in relation to corporate fraud in appropriate cases.

The result mandatory debarment, and in some cases the death of the firm, are avoided.

All this is done against a backdrop that the SFO as investigator and prosecutor can enter into a dialogue with the corporate, a degree of trust can be built and the stage set for an agreed resolution.

Splitting the SFO would have made a dialogue much harder.

Under the shelved government proposals investigators would investigate.  When the investigation is completed the file would be passed to a separate government department, the CPS, to decide whether or not to prosecute.

Investigators would have had little motivation to enter into a dialogue with the corporate under investigation. They would be in no position to deliver any agreement on prosecution in any event.

Prosecutors on the other hand would only receive the file on completion of the investigation and then make the decision whether to prosecute or not.

It is in everyone’s interest for the current direction of travel of the SFO to be maintained.  We’re pleased that there is still someone to talk to.

Image © Crown Copyright 2011

 

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