Fraud­busters gear up for a del­uge of new cases in the wake of pan­demic

Un­prece­dented amounts of help on of­fer to busi­ness will throw up big is­sues, says Michael O’Dwyer

The Daily Telegraph - Business - - Business -

Bri­tain’s top fraud-bust­ing squad could be fac­ing its tough­est test yet. The Covid pan­demic has sparked a much deeper re­ces­sion than the 2008 cri­sis, which gave rise to block­buster cases such as the rig­ging of the Libor in­ter­est rate bench­mark by staff at the world’s big­gest banks.

Ex­perts warn that an on­slaught of new cases is in­evitable for the Se­ri­ous Fraud Of­fice (SFO).

“I en­vis­age that much more se­ri­ous fraud will be un­cov­ered in the next six to 12 months,” says Sam Tate, a part­ner at law firm RPC who spe­cialises in white col­lar crime and in­ves­ti­ga­tions.

“The SFO will be even more rel­e­vant than it has been be­fore, post pan­demic.”

Un­der its cur­rent direc­tor, Lisa Osof­sky, the SFO has opened only a small num­ber of new in­ves­ti­ga­tions, in­clud­ing into Patis­serie Va­lerie, the cake chain hit by an ac­count­ing scan­dal, and Lon­don Cap­i­tal & Fi­nance, the col­lapsed mini­bond firm.

Osof­sky, a for­mer FBI in­ves­ti­ga­tor, has said that the fresh probes “are go­ing some­where” but her two years at the agency have been as­so­ci­ated more with clos­ing ex­ist­ing cases then pur­su­ing new ones.

The pan­demic could pro­vide the cat­a­lyst for the pros­e­cu­tor to launch more cases and im­prove its mixed per­for­mance dur­ing re­cent months.

A record €991m (£895m) set­tle­ment with Air­bus for “en­demic” bribery was the largest of four such deals in the past year but the ac­quit­tal of all de­fen­dants in a long-run­ning Bar­clays trial was a ma­jor blow.

Cor­po­rate lawyers see dis­putes and in­ves­ti­ga­tions as a counter-cycli­cal busi­ness. When the econ­omy slumps, cases spike. Eco­nomic crashes of­ten lead to pre­vi­ous bad be­hav­iour be­ing un­cov­ered as lawyers, ac­coun­tants and in­sol­vency prac­ti­tion­ers rake through the ashes of failed busi­nesses.

Osof­sky has sig­nalled she is ready to grab pan­demic-re­lated cases with both hands, say­ing she is keen to take on cases where peo­ple have been harmed.

The crash of 2020 has been met with an un­prece­dented wall of pub­lic money in the form of busi­ness loans, grants, wage sup­port and more, of­fer­ing an­other in­cen­tive for fraud­sters to take ad­van­tage.

“A lot of this fraud is go­ing to re­late to the mis­use of our [tax­payer] money so there is a real pub­lic in­ter­est in in­ves­ti­gat­ing those mat­ters and act­ing as a de­ter­rent for fu­ture [mis­use] of bailout funds,” says Tate.

The Depart­ment for Work and Pen­sions es­ti­mates that 7.6pc of the £18.4bn spent on uni­ver­sal credit in 2019-2020 was at­trib­ut­able to fraud­u­lent over­pay­ments.

In ad­di­tion to tack­ling pan­demi­cre­lated fraud, some of which will fall to other agen­cies, the SFO will be ea­ger to get re­sults in ex­ist­ing cases.

The City is rife with spec­u­la­tion that min­ing gi­ant Rio Tinto is near­ing a deal to avoid pros­e­cu­tion over al­leged

‘A lot of this fraud is go­ing to re­late to the mis­use of our [tax­payer] money so there is a real pub­lic in­ter­est here’

bribery in Guinea though nei­ther it nor the SFO has con­firmed this.

Osof­sky will also need to de­cide whether to per­sist with in­quiries into Eurasian Nat­u­ral Re­sources Cor­po­ra­tion (ENRC). The in­ves­ti­ga­tion into the for­mer FTSE 100 miner has been be­set by le­gal chal­lenges since it was an­nounced in 2013.

One City lawyer says the case “has been a s---storm for the SFO”.

The SFO will also have to get to grips with Brexit. With­out an agree­ment be­tween the UK and EU, ex­tra­dit­ing sus­pects from EU coun­tries could be more dif­fi­cult. The Eu­ri­bor in­ves­ti­ga­tion was shut in June af­ter France and Ger­many re­fused to send sus­pects to the UK.

It took a decade for al­leged frauds from the 2008 cri­sis to reach a con­clu­sion. Some, such as the Bar­clays tri­als, ended in painful and very pub­lic de­feat for the pros­e­cu­tors. If it is to avoid a re­peat this time around, the SFO will need to move quickly.

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