Leading KC says low-level fraud is not even investigated, still less prosecuted
Rather than just looking at SFO and CPS, there's a need for a wider review taking in territorial police forces, financial and other regulators. Anthony Stansfield (former PCC for Thames Valley) was highly exercised about fraud issues, feeling that individuals, businesses and taxpayers were losing out on huge sums of money because too little was done in practice, as accountability was dispersed or non-existent.
Clare's reflections on tackling fraud and the SFO in particular evoked a combination of admiration and sadness. Admiration for the clarity of her analysis; and sadness because it confirmed that 35 years on we are still chasing the same Holy Grail as in 1987.
I declare interest because I then lead on criminal work in the Law Officers' Department (now the Attorney general's Office) and was central to establishment of both the Crown Prosecution Service and the Serious Fraud Office. The latter was inspired by Roskill but flowed more directly from a Working Group of which I was a member chaired by the then Chief Secretary to the Treasury, David Mellor. HM Treasury had the lead because it was responsible for financial sector regulation and a series of cases such as the Lloyds Insurance scandal and the collapse of Johnson Matthey Bank had demonstrated just how ineffective the criminal justice system was in the face of sophisticated fraud. I vividly remember his quest for 'a seamless robe' that brought together investigation and prosecution. The dichotomy between that and the Philips principle underpinning the creation of the CPS was not lost on him because, as a Home Office Minister, he had piloted the Prosecution of Offences Bill through the House of Commons. Nonetheless, he was convinced that fraud was a special case. The only solution was to combine in one organisation thorough investigation with direction by experienced fraud lawyers to build up focused and manageable cases and to equip that organisation with special powers that would not be acceptable across criminal investigation generally. The logic was sound but could not overcome the organisational and cultural problems. Consequently the SFO was NEVER a single or united investigation and prosecution unit. and its authority always rested on a hotchpotch of borrowed police powers and its own limited section 2 powers.
The police service was adamant from the outset that any outside direction of investigations was incompatible with the operational independence of the police. Nor would they contemplate the sharing of such investigative powers as they enjoyed - this was pre-PACE - with other bodies. The best that could be achieved was an agreement that the police service (mainly the City of London police) would second some officers to the SFO on a rotating basis but they would remain under the operational direction of their police commanders and the exercise of their powers of arrest etc would be through the police processes. So the early SFO was in fact two organisations loosely joined. It was remarkable that it was made to work at all. But gradually the police enthusiasm waned and successive Attorneys General received Cries de Coeur from successive Directors that the investigative resources were simply inadequate. Moreover, the rotating of investigators in and out, together with the propensity for them to return to their forces whenever other priorities or promotion opportunities arose, could take them away from major cases at crucial stages. The emphasis may have shifted from reliance on police to inhouse staff for inquiry work but the fundamental problem has not been successfully addressed.
So, Clare is right that the time is right to rethink the Serious Fraud Office. But I do not think her solution of simply passing it to the CPS is viable. The CPS is NOT an investigative body and, even if SFO section 2 powers were transferred, there would be almost total reliance on the police with results no better than at present. Action Fraud is a complete misnomer that absolves individual forces (and therefore Police and Crime Commissioners) from responsibility and signals impunity to fraudsters. There may be greater willingness now by the police service to seek and (usually) accept advice from prosecutors in certain types of cases but prosecutors in England & Wales cannot direct or instruct police. Nor would organisational change necessarily increase the investigative or prosecutorial resources.
The sort of rethink we need is one that addresses the underlying and cultural issues and gets us closer to the seamless robe sought by David Mellor and at least some of the robustness of the US approach despite its imperfections.
Resources are key but also cultural change. Lord Goldsmith appreciated that when, as Attorney General in 2007, he appointed Jessica de Grazia , then a District Attorney in New York to undertake a review of the Serious Fraud Office. What struck me most when her report came across my desk was how far it failed to appreciate the cultural differences between the jurisdictions and how culturally unacceptable its recommendations were likely to be. Plea bargaining or deferred prosecutions is a case in point. Like the police service, the judiciary has long guarded its independence jealously, and rightly so - but that surely needs to take account of other players who also have responsibilities to discharge. My mind digresses to the experience of Graham Boal QC (who died a few days ago) when he was instructed to act for the Crown in relation to the appeals of the Birmingham Six. He and the Crown started from the position that recent developments had undermined the prosecution position and the convictions could not be defended. However, such concessions was deemed to be outwith the gift of the Crown since only the courts could quash a conviction. So he was required to present the case in a way that left the decision to the Court of Appeal - and in return found himself unjustly pilloried for allegedly having tried to sustain indefensible convictions. He found himself defending his reputation almost to the day he died simply because he did not have clear authority to do the right thing and overtly concede the case.
Likewise, it is so important and in the public interest that prosecutors and investigators should have the authority and discretion to come to suitable arrangements that enable effective prosecutions of key players. All too often in the modern world, ordinary members of the public do not have the confidence and/or trust to support the police and such evidence as there may be is held by individuals who have had involvement in the criminality. The time has surely come to revisit the issue on a more realistic basis. If risk of oppression is the justification for resistance, that casts an unwarranted slur on the cohorts of highly experienced defence practitioners who are routinely involved in the sorts of cases where deferred prosecution may be in issue.
It was clear from Jessica de Grazia's report that disclosure is also handled very differently in the US. Their approach may be unduly robust but there must surely be a way of streamlining the process in sophisticated fraud cases (where the defendants are likely to know much more than the investigators about the systems and documentation) and achieve a more proportionate approach that allows prosecutors to concentrate on building focused cases rather than fighting collateral battles.
As to resources, the CPS already struggles with its caseload. Moving the deck chairs will not change that. Nor is it clear that transplanting the the more robust US approach to this jurisdiction would achieve the Holy Grail. Some figures from the Grazia report are illuminating.
According to De Grazia, in 2007 SFO employed 56 staff lawyers and spent an
additional £4,227,000 on external counsel ranging from newly qualified
barristers to Queen’s Counsel. During the five-year period for years 2003-2007,
the SFO prosecuted to conclusion a total of 166 defendants.
In sharp contrast to this, the Manhattan District Attorneys Office Frauds
Bureau which is staffed by only 19 lawyers (slightly less than a third of the
SFO’s permanent legal staff) and does not contract out any aspect of its work to
the external bar, concluded the prosecution of 124 defendants in the same
So I strongly support the idea of a rethink. But it needs to be more than organisational tinkering. it needs to get back to the core of the problem and take account of the huge increase in the prevalence and variety of fraud as well as the ease with which it is now perpetrated on a global basis including through the internet. Nothing short of a reinvigorated and enlarged specialist organisation with adequate powers will suffice. The expansion of fraudulent activity is a threat to the whle of society which, if not addressed, is capable of doing serious economic and societal damage.
I apologise to Joshua and Clare for the length of this response. But thank you for starting a debate which hopefully will continue.
Very humbly, I find myself in agreement on a number of counts with Clare Montgomery.
Firstly, I agree that fraud as a category is too often viewed as an offence of second or third tier seriousness. When this government tried to claim that crime had diminished and they had omitted fraud as a category, a Minister preposterously claimed that fraud was unimportant to the average citizen. In truth in the middle to lower strata of such offences they impact gravely upon the less advantaged. Examples are many.
That is far from my implying that immediate imprisonment should be THE remedy of first or even second resort: true deterrence comes with the likelihood of arrest and conviction.
The US do have a better handle on fraud, no doubt, but I fret still over undue pressure upon defendants being placed under hard to resist pressure to come to terms when they may have arguable defences.
I am certainly with Clare Montgomery, K.C. , who is for jury trial in fraud cases for the reasons she identifies.
But there is more: most if not all governments I have ever observed on this subject dislike intensely the process of trial by jury. Once having leapt on to the proposition of judge only trials for fraud, the pressure would then be renewed for the less serious allegations being removed from the right to jury trial and then for ,very likely, a later government pointing to the illogicality as it might well be argued of retaining that right for middle ranking cases, since very much the same arguments might well be advanced as for fraud trials in MOST categories of cases. For example, for politically sensitive ones it might be argued that it would be better, juster and fairer, and for those potentially posing a danger to jurors. I could go on- and on.
The true reasons for government’s distaste for and dislike of jury trial? They are undeniably expensive; and they may in unwelcome ways reach verdicts embarrassing for government and other elements of the establishment and/or frustrating for the desired and often illiberal direction of travel.
To return to fraud cases for an instant, THE issue for a jury once the cases have through skill been narrowed down to their essentials is as to the honesty or otherwise of the defendant’s intentions and actions.