Paul Brehony discusses the latest inspection report encouraging the SFO to introduce an independent disclosure review process after bringing every charge in Thomson Reuters Regulatory Intelligence

By Paul Brehony

Partner Paul Brehony examines an inspection report by HM Crown Prosecution Service Inspectorate (HMCPSI), the independent body tasked with monitoring the Crown Prosecution Service (CPS) and the Serious Fraud Office (SFO), encouraging the SFO to introduce an independent disclosure review process after bringing every charge.

Paul’s article was published in Thomson Reuters Regulatory Intelligence, 22 May 2024, and can be found here

When the UK Serious Fraud Office (SFO) hits the headlines, it is often accompanied by epithets such as “beleaguered” or “troubled”. Most recently, the SFO made news thanks to an inspection report by HM Crown Prosecution Service Inspectorate (HMCPSI), the independent body tasked with monitoring the Crown Prosecution Service (CPS) and the SFO.

Its report on the agency’s case progression was commissioned in the wake of several prominent SFO cases that collapsed because of issues with evidence sharing with the Defence. The HMCPSI report identifies structural weaknesses that hinder the SFO’s effective management of disclosure: staff retention problems, a robust disclosure planning strategy, and effective engagement with the defence.

Notably, it recommends that, after bringing every charge, the SFO should introduce an independent disclosure review process. Although the report acknowledges that the SFO has made some progress in reforming its disclosure procedures, there is a very long way to go to satisfy its critics.

Despite prolonged efforts, the SFO has had consistent difficulty in fulfilling its statutory duty under the Criminal Procedure and Investigations Act 1996 (CPIA) – namely, to disclose all relevant unused material to the defence. For an agency that routinely accumulates enormous volumes of electronic material during its investigations, this disclosure regime has proved impossible to satisfy.

Some commentators suggest that the CPIA regime itself may be part of the problem: if the SFO needs to be reformed, then so does the CPIA regime, they argue. In 2022, the then SFO Director, Lisa Osofsky called for the disclosure regime to be radically overhauled. Although there was plainly some merit in what she said, it unfortunately did perhaps appear to be making excuses given the catalogue of errors made by the SFO has been so extensive.

The need for adequate long-term government funding to help the prosecutor discharge its obligations is a very familiar refrain: its origins stretch as far back as the last Labour government under Gordon Brown. But the SFO’s current staff vacancy rate of 20-25 per cent corroborates the argument that both recommendations should be implemented.

Further recommendations in the HMCPSI report include better incentives for SFO staff to assume disclosure roles and long-term government funding being made available to help the agency discharge its prosecution obligations.

Among various longstanding issues, the SFO has also been grappling with problems relating to its crucial software systems. It is currently reviewing past and present cases to ensure that technology problems in sifting case evidence have not interfered with document searches, which could potentially undermine historic convictions.

Publication of the HMCPSI report comes just over a year after another report authored by the Institute of Economic Affairs’ (IEA) Director of Research, Dr James Forder, who savaged the SFO for its “history of unprofessional behaviour and spectacular prosecutorial failures.” Referring to a “litany of errors”, he noted that the SFO has been “responsible for a series of expensive and high-profile failed prosecutions, unlawful prosecutions and breaches of the Civil Service code” and that its “long record of failure demonstrates the need for reform, which could include abolition and reallocating its powers to other government agencies.”

Justification for such coruscating language can be found in a closer analysis of the SFO’s track record, which points to a systemic failure that has blighted the agency. Egregious examples include the failed prosecution of two former Serco directors when the SFO’s case collapsed, and the Court of Appeal quashing three Unaoil convictions and criticising the SFO over its handling of the case for ‘wholly inappropriate’ contacts with a ‘fixer’. The Unaoil and Serco cases led, respectively, to the Altman and Calvert-Smith reviews, which outlined in excruciating detail the disclosure-related errors of judgment that had been made.

In the past year, prominent examples include the SFO abandoning its prosecution of three former G4S executives, who had allegedly defrauded the Ministry of Justice in relation to contracts for providing electronic monitoring services. Here, failure to disclose all the material that the agency had gathered led to its case being dismissed. We then witnessed the culmination of the ENRC saga last December, which resulted in a High Court ruling that the Kazakh mining group was entitled to damages from the SFO over its decade-long corruption probe that ultimately had to be aborted.

Disclosure obligations are a perennial problem. The HMCPSI chief inspector Anthony Rogers said that delivering them “is a significant undertaking” for the agency. The HMCPSI report notes that disclosure alone amounts to 25 per cent of the SFO’s operational budget and takes up 40 per cent of its staff capacity. Another recent review by Jonathan Fisher KC of Red Lion Chambers found that if the average volume of material in an SFO case were printed, it would stack considerably higher than the Shard. In response to Fisher’s review, the SFO director Nick Ephgrave said that he supports “a disclosure regime that works for the digital age and ultimately speeds up cases outcomes”.

Many, but not all, of the SFO’s problems come down to inadequate resources. Almost without exception, City commentators have long highlighted the need for adequate long-term funding. Peter Binning, a partner at Corker Binning, agrees. He noted that the HMCPSI report “does not shy away from the urgent need for more government funding.” Indeed, the SFO cannot possibly be expected to improve without increased resources being made available for properly trained staff who have the right technology and equipment at their disposal. As elsewhere in the publicly-funded part of our legal system, the government alone is responsible for the lamentable funding failure.

Sue Hawley, executive director of campaign group Spotlight on Corruption, rightly told City A.M. that “the government urgently needs to take heed of the HMCPSI’s recommendation that it come forward with a long-term funding plan for the SFO to ensure it has the resources to tackle disclosure issues.”

She added that disclosure is “not just the SFO’s problem, however, but rather an Achilles heel of the justice system as a whole, particularly prosecutions of complex economic crime.”

As has been argued in relation to the delays and dilution that have affected the audit reform programme, the effectiveness and integrity of the UK’s regulation and law enforcement are critical to UK Plc’s future prosperity.  In reviewing recent events, one point is abundantly clear: disclosure-related, high profile SFO blunders have to stop.

Manifestly, a central part of the requisite process to achieve that is adequate funding. There seems to be obvious merit in reviewing best practice in other better functioning jurisdictions with comparable agencies. The most obvious would be the US Department of Justice (DoJ), which – like the SFO – investigates and prosecutes serious or complex fraud, bribery and corruption. In some areas of its work, the DoJ partly self-funds, recovering costs through fines, enforcement actions, stipulated administrative orders, and settlements.

Given that Airbus had to pay €991 million to the SFO under its DPA (deferred prosecution agreement), the potential for the SFO to benefit directly, rather than the money disappearing into the Treasury’s coffers, is significant. There could be some merit in adopting the DoJ approach here. The SFO may have a long way to go with the reform of its disclosure review process, but a change of tack of this nature might address one of the key core problems.

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