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White Collar Crime & Investigations 2020 SFO Enforcement Round-Up: Individuals

Posted on 26 January 2021

This article is intended to serve as a round-up of the Serious Fraud Office's (SFO) investigations into individuals in 2020.

Our forward-looking piece on what can be expected from the SFO in 2021 can be found here. For further information on the SFO's enforcement action against corporates in 2020, please refer to our next article.

New Investigations

There were only two new SFO investigations (or potential investigations) into individuals announced in 2020, all relating to suspected bribery/corruption offences.

Airline Services Ltd entered into a Deferred Prosecution Agreement ("DPA") on 30 October 2020 in connection with bribes paid by an agent of the company (covered in greater detail in our article ​​​​​here). As usual, the DPA expressly states that it does not provide any protection for any present or former officer, director, employee or agent. At this stage, no charges against individuals have been announced, but the Statement of Facts accompanying the DPA includes references to a number of agents and employees, and it is reasonable to assume that at least some of whom are the subject of ongoing investigation.  

The investigation into Bombardier Inc. in connection with suspected bribery offences was announced on 4 November 2020. It is not clear at this stage whether the investigation is focused on the company, individuals, or both, but recent enforcement action suggests that the SFO's preferred approach, when wrongdoing is unearthed, is to pursue a corporate DPA followed by criminal charges against relevant individuals. Bombardier have stated that there are currently no charges laid against the company or the employees and that they are cooperating with the SFO.

Ongoing Investigations

While the investigation into Airbus SE was resolved by way of a high profile DPA and fine worth £830 million in January 2020, the SFO have stated that a number of individuals remain subject to ongoing consideration in respect of suspected bribery/corruption offences.

The investigation into the insurance claims management-company Quindell Plc (now Watchstone Plc) concerns suspected fraud/false accounting offences. The company was informed in April 2020 that it was no longer a suspect in the ongoing investigation however the investigation into individuals is ongoing.

The SFO have been providing periodic updates for investors in respect of its investigation into London Capital & Finance Plc ("LCF") for suspected fraud offences. LCF collapsed after the Financial Conduct Authority (FCA) issued a Supervisory Notice which lead to a VREQ notice that included a condition preventing LCF from dealing with or disposing of any of its assets. In June 2020 the SFO announced that its investigation was to be extended to cover investments made between 2013 and 2018. These investments were sold by Sales Aid Finance (England) Ltd, which subsequently became LCF. In September 2020, the SFO and FCA asked investors in LCF to complete a questionnaire by the end of October to provide information about their investment and potential loss and to be considered as a witness.

Criminal Proceedings

The SFO was involved in nine sets of criminal proceedings against twenty four individuals during the course of 2020, which are set to continue into 2021. Of these proceedings, three are in relation to suspected bribery offences and six are in relation to suspected fraud / false accounting offences.

New charges brought in 2020

The G4S Care and Justice Services (G4S C&J) and Serco cases concern multi-year schemes to defraud the Ministry of Justice through their contracts for the monitoring of offenders. The SFO entered into DPAs with both Serco and G4S C&J,mwhich were approved in July 2019 and July 2020 respectively. On 16 December 2019, the SFO charged two former directors from Serco (Nicholas Woods and Simon Marshall) with fraud by false representation and false accounting, and on 8 September 2020 the SFO charged three former executives of G4S C&J (Richard Morris, Mark Preston and James Jardine) with multiple fraud offences. The Serco trial is set to commence in February 2021 and the trial of the G4S C&J individuals is due to commence in January 2022.

On 30 July 2020, nearly eight years after the investigation opened, the SFO announced it had brought charges against GPT Special Project Management Ltd (GPT) and three individuals in connection with GPT's business in Saudi Arabia. Jeffrey Cook and John Mason were charged with corruption (contrary to section 1 of the Prevention of Corruption Act 1906). Jeffrey Cook was also charged with misconduct in a public office and Terence Dorothy was charged with aiding and abetting that offence. A hearing date has not yet been listed for the trial.

In September and October 2020, five individuals were charged with various fraud offences relating to their carrying on of the Balli Group business with the intention to defraud creditors and various financial institutions. A date has not yet been listed for the trial.

Ongoing Proceedings

An investigation into the collapse of the Axiom Legal Financing Fund was opened by the SFO in July 2014, leading to charges against three individuals for fraud and money laundering offences. All three pleaded not guilty at a hearing on 30 September 2020. A case management hearing is listed for 26 March 2021 and the trial is provisionally listed 21 March 2022. 

On February 2017, David Ames, Chairman of the Harlequin Group, was charged with three counts of fraud by abuse of position. The trial has been provisionally listed for 4 May 2021. 

In February 2019, David Lufkin of Petrofac plead guilty to eleven counts of bribery. It was announced at the time he was to be sentenced at a later date and this has not yet taken place.

In July 2019, the SFO charged of the former directors of Global Forestry Investments with various fraud and insolvency offences. The trial is provisionally listed for 6 April 2021.

Matters Concluded

In January 2020, Anna Machkevitch was found guilty of failing to supply documents to the SFO, pursuant to a Section 2 Notice, in relation to its investigation into ENRC. She was ordered to pay a fine of £800, victim surcharge of £181 and the SFO's full costs.

The SFO were, however, unable to secure convictions against the individuals in two high profile matters prompting widespread criticism of the SFO:

  • On 28 February 2020 the SFO announced that three former Barclays' executives had been acquitted of fraud and conspiracy to commit fraud in the UK’s first trial of bank executives for misconduct during the 2008 financial crisis. Charges against the bank itself had been dismissed in 2018.
  • Following this, on 10 June 2020, the SFO confirmed that it had withdrawn the European Arrest Warrants against four individuals in the Euribor case after a number of failed extradition attempts. The investigations in relation to these individuals are now closed.

In July 2020, two Unaoil Executives, Ziad Akle and Stephen Whiteley, were sentenced to five years' and three years' imprisonment, respectively, for their involvement in the payment of bribes to the South Oil Company in Iraq. They were convicted following a trial at Southwark Crown Court in early 2020, but the Court was unable to reach a verdict on a third defendant, Paul Bond. A fourth individual, Basil Al Jarah, had pleaded guilty to corruption offences in 2019 and was sentenced to three years and four months' imprisonment.

Confiscation and Recovery

Confiscation and civil recovery proceedings were concluded or remain ongoing against a number of individuals following successful convictions. These included:

  • In January 2020, two individuals who were convicted of fraud in 2018. Kenneth Reid and Niall Hastie were ordered to pay back £18,869.93 and £2,759.70, respectively, in compensation to the victims of the fraudulent scheme operated by Manchester-based Solar Energy Savings Limited. Two of their co-conspirators had previously been ordered to pay a combined £413,206.10 in November 2019.
  • In March 2020, Colin Bermingham and Carlo Palombo, who were found guilty of conspiracy to defraud (by manipulating EURIBOR) in 2019, were ordered to pay over £1.2m in confiscation orders and prosecution costs.
  • In July 2020, confiscation orders totally £5.45m were secured against Osman Shahenshah and Shahid Ullah, the former CEO and COO of Afren, following their 2018 convictions for fraud and money laundering. Following a dispute with shareholders regarding their pay, the two men had entered into a side agreement with one of company's Nigerian partners whereby 15% of Afren’s payment to the company would be paid out to a Bermudan shell company controlled by the two men. The two men and staff at the Nigerian partner received $45m from the side agreement.
  • Gerald Smith pleaded guilty to theft and false accounting after he misappropriated over £34m from Izodia Plc and was sentenced in 2006 to eight years' imprisonment. In 2007 he was ordered to pay £40,956,911 within 12 months, however civil recovery is ongoing and the total amount owed by Mr Smith, with interest, is now approximately £70m. The SFO was granted an application to vary its restraint order in July 2020 to include two additional properties. The trial concerning the matter of the competing proprietary claims on the identified realisable assets is provisionally listed for 25 January 2021.
  • In September 2020, the SFO seized £500,000 worth of jewellery using a listed asset order from the former partner of Nisar Azfal, one of those accused of being involved in the Birmingham Mortgage Fraud. This follows the SFO’s use of an account freezing and forfeiture order in March 2019 to seize £1.52 million from the sale of two properties bought with the proceeds of Mr Azfal's crimes. Two individuals were sentenced in June 2011 in connection with the fraud, however Mr Azfal remains outside the jurisdiction. 
  • In November 2020 it was announced that the SFO had secured, by consent, £1.2m from Julio Faerman following an indication that it intended to pursue a civil recovery claim against him. Mr Faerman admitted paying bribes in 2015 in relation to the Petrobras scandal. Following Brazilian criminal proceedings, the SFO opened its own investigation into the UK assets it suspected were purchased with the proceeds of crime. The investigation centred on a £4.25m flat, and in January 2019 the SFO obtained a freezing order and a disclosure order in respect the property.

No developments have been announced in relation to the following ongoing confiscation proceedings:

  • Six individuals connected to Luis Michael Training Ltd, including former Wales international footballer Mark Aizlewood, were found guilty and/or pleaded guilty to conspiracy to commit fraud by false representation (and one of the six individuals was also found guilty of fraud and using a false instrument) in connection with a £5m apprenticeship fraud scheme that targeted colleges, charities, football clubs and sports associations. They were sentenced in 2018, and to date confiscation orders totalling £89,000.71 have been made of which £31,914.04 has been recovered and paid to the victims.
  • Peter Chapman was convicted in May 2016 of making corrupt payments to a foreign official to win contracts for his company Securency PTY Ltd following a joint investigation by the SFO and the Australian Federal Police. His conviction was upheld by the Court of Appeal in March 2017.
Other Matters

In October 2020 the SFO updated its operational handbook to include "comprehensive guidance" on its approach to DPAs. While most of the guidance is of greater relevance to corporations and as such is covered in greater detail in our corporates article, the guidance also codifies a number of principles of relevance to individuals:

  • The naming of linked individuals – Once a DPA has been approved by the Court it must be published alongside the Statement of Facts unless prevented by a court order. Where charges against individuals have been brought or are contemplated, the court may order the postponement or redaction of the Statement of Facts (ordinarily the DPA does not identify individuals) where otherwise it would pose a risk of prejudice to the administration of justice. Prosecutors are also reminded to consider the potential human rights and contempt of court issues which may arise as a result of naming a linked individual.
  • Admissibility of the evidence in the prosecution of linked individuals – There are no restrictions on the use of information obtained by a prosecutors during DPA negotiations in a criminal trial of a linked individuals (subject to the rules of evidence). Where linked individuals are prosecuted following a DPA, the statement of facts and DPA itself may also be admissible.

 

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