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31 May 2013

Corker Binning paralegal writes about SFO ‘self-funding’ and government handouts in CrimeLine

Emma Scott article about how ethical and constitutional SFO ‘self-funding’ and government handouts are.

SFO ‘self-funding’ and government handouts: ethical and constitutional?

31st May

Deep cuts to funding of government departments and the continued push to economise and streamline the legal system has highlighted the potential implications of different funding methods for law enforcement agencies.
The Serious Fraud Office (SFO) has seen increased income from assets seized through successful investigations and through controversial special funding arrangements with the Treasury.

The SFO has been able to increase its income through the Treasury’s Asset Recovery Incentivisation Scheme in recent years. In addition, the SFO has also been granted additional ring-fenced funding for specific
investigations, such as the alleged manipulation of LIBOR, and other investigations expected to cost more than £1.5 million.

Whilst recognising the need to fund extra resources required for intensive and time-consuming investigations, two very different, but equally thought-provoking issues come to mind; is ‘self-funding’ through asset seizures
and civil settlements entirely ethical; and is the rule of law undermined by government approval of which investigations ‘deserve’ special attention?

Are financial incentives for investigative and prosecuting bodies ethical?

The SFO, like other prosecuting bodies, is entitled to apply to recover its costs for prosecuting a case from a defendant after obtaining a conviction. In the same way as civil litigation, where the unsuccessful party generally pays the successful party’s legal costs, criminal procedure provides for a prosecuting body to be able to recover the reasonable costs of pursuing a case against a convicted defendant.

However, there is a problem when the SFO appears to be ‘lining its own pocket’ as a result of its own successes. There is a strong argument that this flies in the face of the basic principles of justice, when there is an outward
appearance that government departments and agencies are profiteering from investigating and prosecuting criminal activity. Whilst it is quite right that the SFO plays an important role in tackling serious or complex frauds and corruption, and in order to fulfil its objectives the SFO needs additional support, especially amidst government cutbacks, there is always the risk that the SFO will select cases as ‘easy targets’ based on their
potential economic value to the SFO.

The same can be said for civil settlements. Under the new Director, David Green QC, the SFO has been quick to change the policies developed under the previous Director, Richard Alderman. Most notably, Mr Green has
sought to limit the use of civil settlement powers which were promoted under Mr Alderman for their fast results for the SFO and generation of large settlements. In October 2012, Mr Green put an end to any presumption that
self-reporting would afford those who made a self-report a level of protection from SFO investigation. However, Mr Green reiterated in April 2013 that civil settlement still remains a suitable option in some cases.

In light of the potential income for the SFO to be derived from pursuing companies and individuals who, on the face of it, have the bank balance to support a financial payout, but perhaps lack the bargaining position that might force a drawn-out, costly and unyielding investigation on the SFO, there is a risk that the SFO could target cases based on their economic return and ‘value for money’.

This is compounded by an inherent confusion as to how the SFO is actually funded. Income as a result of successful investigations (by whatever means) which effectively takes property from those committing unlawful or criminal activity and uses this to tackle other offending, is publicly justifiable if, and only if, there is an adequate level of transparency. It is not enough for this money to be ‘put to good use’, if the public does not know how this money is spent and therefore cannot comment on whether this is a good use or not. In order for justice not only to be done, but to be seen to be done, agencies such as the SFO need to break down in a clear,
simple and understandable format, exactly what funding they receive from each source and explain how this money is distributed and used within the agency and beyond.

Is the rule of law being undermined?

Extra resources should be made available to the SFO to pursue investigations in the public interest that are resource intensive, but a clear line needs to be drawn between the independent agency that should be the SFO,
and the government. The ability of the government to effectively decide which cases merit further funding and are ‘worthy’ of being investigated, could call into question the independence of the SFO and raises the question
of political interference in the criminal justice system.

If the SFO, but for a lack of available resources, would have investigated cases within their jurisdiction as a result of exercising their inherent discretion, and it then falls to the government to make the decision to fund certain investigations, but not others, it could be argued that the SFO is acting as the government’s puppet, only taking on big cases when the government tells it to. There is a strong potential that costly and resource intensive
investigations will become politically motivated. This might seem an exaggeration at first sight, but it is only a small step from here to ‘prosecutions to order’.

The SFO cannot afford to damage its reputation and credibility by the perception of being the government’s tool. The risk of reducing public confidence in the legal system at a time when significant legal change is afoot
would be detrimental not only to the future of the SFO, but the standing of the English legal system as a whole. The SFO, like other agencies, needs to work with clarity, openness and true independence in order to justify its
role in society.
Emma Scott, Corker Binning: es@corkerbinning.com 020 7353 6000www.corkerbinning.com

Corker Binning is a law firm specialising in business crime and fraud, regulatory litigation and general
criminal work of all types.