Written evidence submitted by Adrian Darbishire QC (FRA0031)

Introduction

I am a barrister in private practice, specialising in representing (and sometimes prosecuting) those suspected of or charged with offences of acquisitive crime.  I am Joint Head of QEB Hollis Whiteman Chambers, a long-established criminal set, pre-eminent in the field of financial crime.  I have specialised in this area for about twenty years.  I regularly defend cases brought by the SFO.  Recent examples include LIBOR (2017); the Tesco fraud case (2018); the Serco fraud trial (2021) and conducting the appeal against conviction of an individual in the SFO Unaoil bribery prosecution (2021).

This submission is made in a personal capacity.  The views expressed are mine alone.

Focus

Rather than attempt any kind of overview, I would simply like to offer two specific thoughts on the broad questions which you are to consider.  The first concerns the treatment of offences of fraud (and other related acquisitive crime) generally.  The second concerns the way in which such offences are handled within the criminal justice system.

Fraud Generally

As is clear from the terms in which you have introduced this Inquiry, fraud is catastrophically under-reported , under-investigated and under-prosecuted.  Despite the fact that almost all fraud is conducted through the means of one or more major financial or commercial enterprises, there exists no effective mechanism for those enterprises to work effectively with the law enforcement authorities to address this endemic offending. 

The consequences of rampant fraud for society are hard to overstate.  It is genuinely corrosive.  And not merely - or even mainly - in its immediate financial consequences for the losers, but in its secondary effects: the invasion, insult and violation felt by victims; their sense of frustration and powerlessness when the inaction and impotence of the relevant institutions becomes clear; the undermining of society which flows from the diversion of often huge sums of money, from those who have earned it lawfully to those who have defrauded them of it.  This last must include consideration also of the diversion of the vast proceeds of fraud to organised crime, hostile states; and to fund political extremism and terrorism.  I do not pretend to be an expert, but of the many tens of billions acquired through fraud each year, it cannot sensibly be in doubt that a significant proportion will end up funding such groups or activities. 

Seen in that light, society’s present response to fraud is hopelessly inadequate.  Its inadequacy cannot be justified, or even explained, by the usual ‘lack of resources’.  As the CJSC itself recognises, the costs of the offending exceed by several orders of magnitude the expense of even the most ambitious effective response. 

The problem, then, is not one of resources.  It is a deep-seated refusal to face the problem; to recognise frankly its extent and its attendant harms; and then to think through, realistically and boldly, the measures needed to address it. 

The Serious Fraud Office

My concerns about the SFO are linked to my concerns about the response to fraud generally.  In essence it is this: the SFO approach to the selection of its cases is skewed to high-profile instances of sharp business practice, or stale cases of overseas bribery.  Whilst there are arguments in favour of some regulatory or enforcement action in most of these cases, bringing large-scale prosecutions of individuals is rarely justified.  And doing so instead of prosecuting the ordinary, everyday, and ever-growing cases of semi-organised crime which makes up a major part of fraud today is inexcusable.

To take some examples.

LIBOR

‘IBOR’ (LIBOR and/or EURIBOR) manipulation was the norm in the City for at least thirty years.  It was widely understood and tolerated.  It had absolutely nothing to do with the 2008 credit crunch or consequent recession.  Thousands were knowingly involved over those decades.  There were no individual losers, and any actual gains or losses were trivial in the context of the market in which the institutions were operating. 

The SFO prosecutions were pursued on a wholly false basis, supported by the entirely false notion that these cases were some sort of response to the events of 2008.  Thus they leveraged a diffuse but intense outrage at the City generally, to create a powerful tailwind for these cases.  When pressed, the line was peddled that the cases were about maintaining standards and preserving the integrity of the markets. 

The reality was that a small number of people were convicted for the kind of conduct which is rightly frowned upon, but which is easily committed in a permissive environment.  Even the worst instances of LIBOR manipulation did not approach the naked and cruel criminality of many of the everyday frauds which remain wholly ignored.  And in some ways, the demonisation of certain individuals (including the imposition at first instance of a sentence of fourteen years’ imprisonment) served to divert attention away from the fact that these offences were all committed with the connivance (at least) of tiers upon tiers of senior managers at the institutions concerned.  The prosecution of individuals did nothing to change the culture of the City.  It was a smokescreen. 

A tell-tale sign, for those interested, was the use of the offence of conspiracy to defraud in the ‘IBOR’ cases.  This permitted prosecutions on no more secure a basis than that the conduct of the defendants was worthy of moral condemnation, irrespective of whether they had broken any law.  Eventually, when the judicial dust has settled, the IBOR cases will come to be recognised as a shameful chapter, akin in their own way to some of the terrorism prosecutions of the 1970s.

Tesco

Tesco plc readily signed up to a Deferred Prosecution Agreement with the SFO, in respect of some poor accounting, the value of which was trivial in the context of that company.  The stock market was not actually misled, despite Tesco making formal admissions to that effect (before seeking to retract them in later civil proceedings).  The value of the mis-accounting was at most a hundred million pounds or so.  At the end of that year, the company identified seven billion pounds of write offs.  Once again, the prosecution of individuals was a nonsense.

Tesco should never have been a criminal case.  The facts merited a very close look at the accountants concerned by the FRC, and a regulatory review of the corporate conduct.  But it was not fraud by any individual.  The SFO could not identify any expected gain on the part of any individual, nor any victim of the fraud.  Again, the integrity of the markets were said to be at risk.  But the issue was really about the quality of the information provided by a major plc and the quality of the internal and external accounting supervision, something which is a reasonable concern for the FRC and stock exchanges.  The idea that this case was “serious fraud” is a nonsense.

Why was it prosecuted?  Because the case was brought to the SFO on a plate by the company.  The evidence was readily available, and the SFO were seduced by the skilled lawyers of a ‘suspect’ which simply wanted a speedy and certain resolution to a messy inherited problem.  The SFO took what it was offered, including the fine, and applied no proper scrutiny to the merits of the case it was prosecuting, let alone any wider justification for doing so.

It was a dismal failure as a prosecution.  The trial judge and the Court of Appeal did not consider there was even a case of fraud fit to go to the jury.  Millions were wasted on the trial in the SFO’s costs.  Many millions more were wasted in defending a wholly unnecessary prosecution.  (Whilst those costs came from insurers and not public funds, it was still perhaps £10m or more which will inevitably be reflected in the premiums charged to UK plc, and so ultimately to consumers).  These are very considerable sums which can and should be put to better use.

Serco

Another DPA.  Another corporate falling over itself to do a deal, on the best basis it could agree, in order to regularise its position with HMG, by far its largest and most important customer.

Again, this was not even an allegation of fraud properly so called.  The conduct was, at worst, sharp business practice.  Absolutely nothing was done for personal gain.  The complaint was a lack of transparency in a contract which was designed to provide transparency, but which in fact failed to require it.  The case revealed unattractive corporate conduct, but not a case of serious fraud.  And again, it failed, hopelessly.  Had the plug not been pulled for ‘disclosure’ reasons by the SFO mid-trial, it would have soon have been thrown out for lacking any basic legal coherence by the trial judge.

Barclays

As it happens, similar observations could be made about the most ambitious case yet prosecuted by the SFO, that against Barclays Bank.  Again, the conduct as charged was sharp practice (one sovereign wealth fund being provided with a misleading impression as to the precise terms upon which another sovereign fund was acquiring shares). Certainly a matter for the consideration of the FCA, perhaps in respect of both some individuals and the bank.  But again, this case lacked from the start the indicators of serious fraud.  To put the matter another way, no outcome of an SFO Barclays trial was ever going to be of the slightest advantage to the people of this country, or any of them.  Perhaps that was what the judge and jury recognised, as the case resulted in acquittals across the board.

Corruption

Another major aspect of the SFO’s recent casework has been overseas corruption, usually having occurred ten or more years ago, in territories where such corruption was commonplace.  That is not to excuse it, or underplay its deleterious local effects.  Very often the conduct concerned was blatant, grave and extremely damaging in its accumulated effects to the societies concerned.  Yet it is also right to register that such cases have no bearing at all on endemic fraud in this country. 

Thus, while the SFO embark on what one director used to delight in calling ‘marquee’ prosecutions, persistent, harmful, domestic fraud goes almost wholly unchecked.  Every day, in every part of the United Kingdom, people are driven to contemplate, and sometimes commit suicide because of their experience of actual fraud.  Lives are destroyed; pensions, nest eggs and family security taken away, on a daily basis.  The sense of security of all of us is corroded, both by the fact of such ubiquitous conduct, and by the impotence of the authorities in addressing it.

Almost none of the cases brought by the SFO touch on this phenomenon.  As discussed above, the SFO seem positively to disdain the prosecution of actual serious fraud, preferring to operate at the margins of commercial malpractice, usually occurring within the reassuring walls of large and compliant commercial enterprises.  The SFO’s failure - perhaps one should say, refusal - to lend its considerable powers and resources to address the kind of frauds which are destroying individuals’ lives here on a daily basis is a national shame.

In 2017, as the SFO was devoting its resources to prosecuting the Tesco three, in a hopeless case at a cost of millions, Thames Valley Police, supported by the CPS, were left to investigate the HBOS Reading frauds, one of the most scandalous and damaging banking frauds ever brought to trial.  And they did so at a huge cost, not only financial, as their resources were so limited that pursuing that case came at the expense of other serious investigations in that area.

HBOS was exactly the kind of case which the SFO should have prosecuted.  And goodness knows, there are plenty more of them; there are thousands of significant but unsexy, domestic frauds, which attract no headlines, but which, as I have noted, destroy lives.  The experience of the victims of them is made many times worse by their perception that no-one seems to care.  And, it seems, they may be right.  Certainly the “world class” SFO has no interest in such cases and nor, it often seems, does anyone else.

These are personal views, and should not be taken as representative of the views of any organisation or other person.

January 2022