A busy week for the Serious Fraud Office

It has been a busy week for the Serious Fraud Office.

On Monday, it was reported that the company Arriva could be subject to an investigation after incorrectly self-reporting figures on a deal to provide non-emergency patient transport in the Greater Manchester Area, earning £1.5m in incentive fees.

When asked to allot time for a Parliamentary debate on the issue, the Leader of the Commons stated:

  • “When I was Justice Secretary I referred two of our major providers to the Serious Fraud Office, and I secured from them compensation of many tens of millions of pounds for events that were well recorded at the time”.

The following day, more than two years after charging Olympus and its UK subsidiary Gyrus Group with making false and misleading statements to auditors between 2010 and 2011, the SFO offered no evidence against both companies at Southwark Crown Court. This decision was taken following a ruling that offences contrary to section 501 of the Companies Act 2006, making a statement to an auditor which was misleading, could not be committed by a UK company under audit.

The SFO also confirmed that they could not prosecute individuals in this case as Japan does not extradite its nationals.

During the same week, news of the athletics doping scandal emerged. A leading member of the Culture, Media & Sport select committee, Damian Collins MP, wrote to the SFO asking it to launch an enquiry into the scandal. The letter stated:

  •  “I would like to ask whether the Serious Fraud Office will investigate these very serious allegations, particularly with reference to activity linked to the London Olympics, which fall within your jurisdiction. The Wada report is yet another tragic indictment of the inability of international sporting organisations to police themselves. However, corruption is also a criminal matter and should be investigated by the appropriate international law enforcement authorities where they have the jurisdiction to do so.”

Finally, on Friday 13 November, the SFO issued the first criminal proceedings against ten individuals accused of manipulating the Euro Interbank Offered Rate (EURIBOR).This brings the number of individuals charged as a result of the on-going LIBOR/EURIBOR investigations to twenty four.

The Olympus case is clearly bad news for the SFO. The evidence available to the Case Controller cannot be second guessed, but the choice of the relatively obscure offence under section 501 of the Companies Act 2006 seems strange. Even if the SFO had established the offence could be committed by a company, the maximum penalty for an individual is limited to two years imprisonment, indicative of the offence not being of the most serious nature. One can only speculate why charges under section 2 or 3 of the Fraud Act 2006 were not brought.

The SFO may take some comfort from being seen as the first port of call for politicians when matters of fraud and corruption are uncovered. However, the proposed use of the fraud office for two offences at the opposite ends of the spectrum – an alleged fraud of £1.5 million in the North West of England and a high profile global corruption case involving unimaginable sums of money – perhaps demonstrates the current case acceptance criteria is too wide.

Olympus, just like any unsuccessful SFO prosecution, will lead to the inevitable calls for reform, either of the office itself by rolling it into the National Crime Agency, or for changes in corporate liability law in the UK. Earlier this year, the government scrapped plans for a failure to prevent fraud offence, modeled on section 7 of the Bribery Act 2010.

Olympus itself won’t be the deciding factor in any reform. Over the next few months the SFO is expected to make announcements as to the first and second deferred prosecution agreements and whether the current Director will remain beyond his initial contracted period due to expire in April 2016. Meanwhile, the second Libor trial continues at Southwark Crown Court and a number of named investigations into well known entities for corruption remain “in progress”.

To read more about corporate criminal liability, see the Practical Law practice note, Corporate criminal liability in the UK

To read more about offences under the Fraud Act 2006, see the Practical Law practice notes, Fraud by failing to disclose information and Fraud by false representation.

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