UK Enforcement Trends
1. Glencore Conviction
In June 2022, Glencore Energy UK Ltd. (Glencore) pleaded guilty to multiple counts of bribery, including five substantive charges of paying bribes under s.1 of the UKBA and two counts of the corporate offence of failing to prevent bribery.[1] Glencore admitted to paying bribes, through its employees and agents, of more than $28 million for preferential access to oil across five jurisdictions in West Africa[2] and, moreover, that these bribes were approved by the company.[3] The investigation, announced in December 2019, was conducted in parallel with anFCPA investigation by the United States Department of Justice (US DOJ), as set out in more detail in Chapter 1, and in collaboration with Dutch and Swiss prosecutors, which resulted in a guilty plea and a penalty of approximately $700 million.[4]
Glencore was sentenced to a total penalty of approximately £281 million, comprising a fine of £183 million, a confiscation order of £93.5 million – the largest ever in the UK – and the Serious Fraud Office’s (SFO) legal costs of £4.6 million.
The case represents the first prosecution of a company for the substantive offences of paying bribes and the third prosecution for the corporate offence of failing to prevent bribery. The investigation also involved significant international cooperation, with the SFO working together with the US DOJ as well as the Dutch and Swiss prosecutors to secure a coordinated global resolution.
2. Individual Prosecutions
The SFO has brought several individual prosecutions in 2022. The first trial of the year ended in May 2022, with the conviction of two company directors[5] of Global Forestry Investments (GFI) for their involvement in a fraudulent green energy investment scheme in Brazil that deceived over 2,000 investors and accumulated approximately £37 million. Both were sentenced to 11 years’ imprisonment.[6]
In August 2022, David Ames, chairman of the Harlequin Group of companies, was convicted of three counts of fraud for his role in a £226 million scheme that deceived over 8,000 investors to invest money in unbuilt luxury resorts in the Caribbean.[7] Ames was sentenced to 12 years’ imprisonment and disqualified as a company director for 15 years – the maximum allowed sentence for this offence. Given the severity of the offending and Ames’ senior position in the company, it is perhaps surprising that the SFO did not also seek a corporate prosecution of any companies within the Harlequin Group.
Finally, in August 2022, three individuals were tried in connection with now-collapsed Axiom Legal Financing Fund (Axiom). One individual was convicted of three counts of fraudulent trading, one count of fraud, and one count of transferring criminal property for his role in siphoning off nearly £20 million of investor money for personal expenses.[8] The jury acquitted one other individual and failed to reach a verdict on a third, with a re-trial scheduled for March 2024.[9]
3. Unaoil Individual Convictions Overturned
In 2020 and 2021, the SFO prosecuted three individuals – Ziad Akle, Paul Bond, and Stephen Whiteley – and obtained a guilty plea from a fourth, Basil Al-Jarah, in July 2019 for bribery offences in connection with the agency’s wider corruption investigation into the Unaoil group of companies and its owners, the Ahsani family. It later transpired that the SFO had obtained Al-Jarah’s guilty plea with the assistance of a “fixer” called David Tinsley who was involved in helping the Ahsanis. Tinsley communicated directly with the director of the SFO and other members of the SFO’s senior management team on Al-Jarah’s behalf and had “arguably encouraged” Al-Jarah to plead guilty. The detail of the communications between the SFO and Tinsley was not disclosed to Akle, Bond, and Whiteley in the course of their prosecutions – despite a specific request from Akle’s lawyers. Akle’s conviction was subsequently overturned by the Court of Appeal in December 2021 on the basis that the SFO’s failure to disclose the communications impacted the fairness of his trial. Since then, the convictions of Bond and Whiteley have also been quashed. The SFO’s request for a re-trial of Akle was denied; it then declined to request a re-trial of Bond and did not oppose Whiteley’s application for his conviction to be overturned.
The failings led to the UK Attorney General commissioning an independent review, undertaken by Sir David Calvert-Smith (the Calvert-Smith Review)[10] to investigate the disclosure issues and the broader culture at the SFO (discussed further below).
4. Independent Reviews – Disclosure Failings and Cultural Change
Two separate reviews have been published in 2022 into the SFO’s culture and practices, following high-profile failures relating to disclosure. As discussed above, the Calvert-Smith Review[11] was commissioned by the UK Attorney General in February 2022 to investigate disclosure failings leading to the overturning of the Unaoil executives’ convictions. The second, conducted by Brian Altman KC (the Altman Review),[12] was commissioned by the SFO itself to investigate disclosure failings leading to the collapse of the prosecution of two individuals connected to UK defence, justice, and security company Serco Geografix Ltd (Serco).[13]
The Calvert-Smith Review
Published on 21 July 2022, the Calvert-Smith Review describes a series of failings on the part of the SFO in connection with the handling of its prosecutions of individuals in connection with the Unaoil investigation. In particular, these failings include the SFO’s contact with David Tinsley (the“fixer” who, despite not being a lawyer, apparently acted on behalf of one of the defendants) but also a lack of record-keeping in relation to those meetings. In particular, the director of the SFO met with Tinsley, including spending 30 minutes alone with him, without taking any notes. Similarly, Kevin Davis, the SFO’s then-chief investigator, was apparently in “regular contact” with Tinsley, but did not keep any records. Davis’ mobile phone was also wiped of data on more than one occasion. The extent of both the SFO’s contact with Tinsley and its failure to keep records of that contact came to light only when the Court of Appeal directed the SFO to review the record and provide full disclosure. Notably, the SFO appointed legal technology group Anexsys to handle its disclosure from this point.[14]
The Calvert-Smith Review also throws into sharp focus broader cultural issues within the SFO that contributed to the failings. These include a “damaging culture of distrust between the case team and senior managers”, leading to a breakdown of communication and the case team therefore being unaware of significant developments; the failure, particularly of senior managers, to follow the SFO policies and a question of whether they saw themselves as being “above the guidance”; and as a fundamental lack of resourcing within the agency. Many of the recommendations in the Calvert-Smith Review are simply reminders that the SFO must follow standard investigation and prosecution practices. He also recommended (somewhat inevitability) enhancing the SFO’s resourcing – something that is, to some extent, outside the SFO’s control since it is highly dependent on funding.
The SFO cooperated fully with the Calvert-Smith Review. The director has accepted, “with the benefit of hindsight”, she made a number of “mistakes and misjudgements” and has committed to implementing the recommendations made as a priority.
The Altman Review
The Altman Review was commissioned by the director of the SFO herself following the April 2021 collapse of the prosecution of two individuals, Nicholas Woods and Simon Marshall, in connection with the Serco DPA. The SFO’s failure to disclose a document that transpired to be essential to the defence led to the exposure of a heavily flawed disclosure process. The SFO identified its own failings during the trial and, while it requested an adjournment and an opportunity to remedy the issues, the trial judge refused. The SFO was unable to offer any evidence, and the trial collapsed.
The Altman Review identified several factors that led to the failure of the Serco prosecution, including internal disclosure guidance that was of little real help to reviewers; reviewer errors; the inexperience of the disclosure officer; too much pressure on the case team; and a lack of checks performed on the quality of the disclosure review after 2019. The Altman Review also echoed some of the findings of the Calvert-Smith Review in highlighting “systemic problems of real concern” within the SFO, such as low morale, high staff turnover, concerns with staffing and resourcing, and inadequate technological capabilities.[15]
While arising from different circumstances and focusing on separate issues, there is significant overlap between the issues identified in both the Calvert-Smith Review and the Altman Review. We also note that similar disclosure failings arose in connection with the trial of three individuals in connection with G4S Care and Justice Services (UK) Ltd (another UK defence, justice, and security company that entered into a DPA with the SFO in July 2020 for conduct similar to Serco). The judge ruled it was in the “public interest” to postpone the G4S trial to January 2023 so the case did not collapse,[16] but the delays in the G4S case further demonstrate how widespread the disclosure issues are at the SFO.
Since taking up her post in August 2018, the director has claimed to make cultural change a priority within the organisation;[17] however, the reviews suggest that there is still some way to go. With less than one year left before the director steps down in August 2023,[18] the legal industry, the UK government, and the wider public will be watching keenly to see whether the director takes the criticisms and recommendations on board and drives forward meaningful change within the agency.
5. SFO Engaged in “Bad Faith Opportunism” According to ENRC Ruling
In May, a long-awaited judgment was handed down in the case brought by Eurasian Natural Resources Corporation Limited (ENRC) against its former lawyers, Dechert, and the SFO. The mining company had alleged that Dechert had acted against its interests and without its authority in connection with the SFO’s investigation into ENRC for fraud, bribery, and corruption.[19] ENRC alleged (amongst other things) that former Dechert partner Neil Gerrard had leaked damaging information to the press about ENRC and had unauthorized conversations with the SFO[20] ENRC further accused Gerrard of sending an envelope of confidential and privileged information to the SFO after ENRC had terminated its retainer with Dechert.[21] ENRC also alleged that representatives of the SFO, in turn, were complicit with Gerrard, and that the SFO had induced Gerrard to breach his contract and had committed the tort of misfeasance in public office.[22]
The judge, Justice David Waksman, found that the SFO, through its officials, had induced Gerrard to breach his contract[23] and was in serious breach of its own duties, including by engaging with and taking information from Gerrard, “which was plainly unauthorised and against his client’s interests.”[24] Although Justice Waksman ultimately dismissed a number of the allegations against the SFO, including the tort of misfeasance in public office, the judge commented that the SFO had engaged in “bad faith opportunism.”[25] It is not yet clear what the impact of the case on the SFO’s reputation will be and what it will mean for the SFO’s investigation into ENRC. In August, the court determined that it would not decide whether the SFO owes the mining company potential legal costs until after a trial to determine loss and causation[26], which will be held in March 2023. ENRC is seeking damages of more than $46 million.[27]
A separate but related seven-week trial, due to be heard some time between October and December 2024, will look into ENRC’s allegations that senior SFO officers deliberately leaked confidential information about the ongoing investigation to journalists.[28] ENRC has brought a claim against the SFO, the former case controller of the ENRC probe, and a senior SFO investigator. Amongst the issues to be heard are allegations that SFO officers gave “covert briefings” to journalists in underground car parks in London and via encrypted messaging services.
6. Halting of Airbus Trial
In a further setback for the SFO, in July, the trial against Jeffrey Cook, the former managing director of now-defunct Airbus subsidiary GPT Special Project Management (GPT) and John Mason, the former financial officer at two of GPT’s subcontractors, was halted after the judge abruptly discharged the jurors.[29] The discharge followed almost a week of legal argument but, due to reporting restrictions, no further details have been made public. The SFO had opened its investigation into GPT in 2012 and charged the two individuals in 2020 with corruption related to contracts awarded to GPT in connection to work carried out for the Saudi Arabian National Guard.[30] The trial had been in its tenth week when the judge ruled that it could not continue.[31] The case is now scheduled to be retried in January 2023 and is anticipated to last five months.[32]
Footnotes
[1] SFO, Serious Fraud Office secures Glencore conviction on seven counts of international bribery (21 June 2022), https://www.sfo.gov.uk/2022/06/21/serious-fraud-office-secures-glencore-conviction-on-seven-counts-of-international-bribery/
[2] Id.
[3] Id.
[4] U.S. Department of Justice, Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes (24 May 2022), https://www.justice.gov/opa/pr/glencore-entered-guilty-pleas-foreign-bribery-and-market-manipulation-schemes; SFO, Serious Fraud Office charges Glencore with seven counts of bribery (24 May 2022), https://www.sfo.gov.uk/2022/05/24/serious-fraud-office-charges-glencore-with-seven-counts-of-bribery/
[5] Andrew Nathaniel Skeene and Junie Conrad Omari Bowers were convicted of three counts of conspiracy to defraud and one count of misconduct in the course of winding up a company. SFO, First SFO trial of 2022 results in double conviction (31 May 2022), https://www.sfo.gov.uk/2022/05/31/first-sfo-trial-of-2022-results-in-double-conviction/
[6] SFO, Fraudulent duo each sentenced to 11 years’ imprisonment after successful SFO prosecution (15 June 2022), https://www.sfo.gov.uk/2022/06/15/fraudulent-duo-each-sentenced-to-11-years-imprisonment-after-successful-sfo-prosecution/
[7] SFO, Harlequin resorts boss jailed for 12 years following SFO investigation (30 September 2022), https://www.sfo.gov.uk/2022/09/30/harlequin-resorts-boss-jailed-for-12-years-following-sfo-investigation/
[8] SFO, Axiom Legal Financing Fund, https://www.sfo.gov.uk/cases/axiom-legal-financing-fund/
[9] Richard Crump, Investment Manager Faces Retrial In Legal Fund Fraud Case, Law360 (1 September 2022), https://www.law360.com/articles/1526563/investment-manager-faces-retrial-in-legal-fund-fraud-case
[10] SFO, Publication of Brian Altman QC and Sir David Calvert-Smith reviews (21 July 2022), https://www.sfo.gov.uk/2022/07/21/publication-of-brian-altman-qc-and-sir-david-calvert-smith-reviews/
[11] Ibid
[12] Ibid
[13] Serco entered into a Deferred Prosecution Agreement with the SFO on 4 July 2019 in relation to offences of fraud and false accounting. Nicholas Woods and Simon Marshall, two former Serco directors, were charged with three counts and one count of fraud, respectively, in December 2019. See SFO, SFO completes DPA with Serco Geografix Ltd (4 July 2019), https://www.sfo.gov.uk/2019/07/04/sfo-completes-dpa-with-serco-geografix-ltd/ and SFO, SFO charges former Serco directors with fraud (16 December 2019), https://www.sfo.gov.uk/2019/12/16/sfo-charges-former-serco-directors-with-fraud/
[14] Kate Beioley, SFO outsources disclosure in G4S case after high-profile case failures, Financial Times (28 April 2022), https://www.ft.com/content/25f393ba-b22a-430d-83dd-205efccc2626
[15] Paul Maynard, Serious failings of the SFO undermine the UK’s reputation, The Times (1 July 2022), https://www.thetimes.co.uk/article/serious-failings-of-the-sfo-undermine-the-uks-reputation-ntwnwvtnn
[16] Kate Beioley, SFO granted year-long postponement to G4S trial, Financial Times (21 October 2021), https://www.ft.com/content/6d991bd2-31fd-4321-94d0-c20428149336
[17] In September 2020, the director publicly stated that “work to change our culture for the better so that every SFO colleague feels empowered, valued and enabled to make their best contribution.” See SFO, Lisa Osofsky address to the Cambridge Symposium on Economic Crime (7 September 2020), https://www.sfo.gov.uk/2020/09/07/lisa-osofsky-speaking-at-a-presentation-hosted-by-the-cambridge-symposium-on-economic-crime/
[18] Kate Beioley, SFO Director Lisa Osofsky to depart role next summer (9 November 2022), https://www.ft.com/content/848b3181-4d88-4fcc-9e9a-e7acb4bb1f63
[19] ENRC v. Dechert, LLP et al, Claim No. CL-2017-000583, and ENRC v. The Director of the Serious Fraud Office, CL-2019-000644, (May 16, 2022), Executive Summary ¶ 7, 11.
[20] Executive Summary ¶ 12-13.
[21] Executive Summary ¶ 9, 12.
[22] Executive Summary ¶ 17-18
[23] Executive Summary ¶ 23.
[24] Executive Summary ¶ 23.
[25] Executive Summary ¶ 25.
[26] Alice Johnson, Judge postpones decision on SFO costs in ENRC lawsuit, Global Investigations Review (4 August 2022), https://globalinvestigationsreview.com/article/judge-postpones-decision-sfo-costs-in-enrc-lawsuit
[27] Sam Tobin, Kazakh mining co seeks up to $46 mln damages from Dechert, UK fraud watchdog (20 October 2022), https://www.reuters.com/legal/litigation/kazakh-mining-co-seeks-up-46-mln-damages-dechert-uk-fraud-watchdog-2022-10-20/
[28] Joanne Faulkner, SFO To Face Trial Over ENRC Probe Leaks Claim (24 November 2022), https://www.law360.com/articles/1552521/sfo-to-face-2024-trial-over-enrc-probe-leaks-claims
[29] Richard Crump, Jury Discharged in SFO’s Saudi Bribery Trial, Law 360 (14 July 2022), https://www.law360.com/aerospace/articles/1511137/jury-discharged-in-sfo-s-saudi-bribery-trial
[30] SFO, SFO charges GPT and three individuals following corruption investigation (30 July 2020), https://www.sfo.gov.uk/2022/06/21/serious-fraud-office-secures-glencore-conviction-on-seven-counts-of-international-bribery/
[31] Sam Fry, Trial of Former Executives Halted in Airbus GPT Bribery Case, Global Investigations Review (14 July 2022), https://globalinvestigationsreview.com/article/trial-of-former-executives-halted-in-airbus-gpt-bribery-case
[32] Richard Crump, Former Airbus Unit Exec Faces Retrial in Saudi Bribery Case, Law 360, (26 July 2022), https://www.law360.com/articles/1515076/former-airbus-unit-exec-faces-retrial-in-saudi-bribery-case