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White Collar Crime & Investigations 2021 SFO Enforcement Round-Up: Individuals and Corporates

Posted on 21 December 2021

The past year has proved a tumultuous one for the SFO. In 2021 the SFO targeted areas where it considered deception was at the heart of the alleged offending. The four new investigations announced by the SFO in 2021 all relate to fraud, which marks somewhat of a departure from previous years when the SFO focused heavily on bribery offences.

The SFO's bribery cases tend to involve conduct which has taken place abroad, whereas the SFO's new fraud investigations have a much closer nexus to the UK. It appears that the majority of conduct under the new investigations took place on British soil.

The turn towards domestic fraud, rather than overseas bribery, is perhaps as a result of the pandemic reducing collaboration with overseas agencies - or it may result from the SFO's hesitation to pursue evidence overseas, in light of the Supreme Court's ruling in February 2021 on the limits of the SFO's ability to compel material held in foreign jurisdictions.

In parallel, the Deferred Prosecution Agreements ("DPAs") that the SFO entered into in 2021, concerned bribery offences and not fraud. This is indicative of the SFO's preference to take fraud, rather than bribery, cases to trial; possibly due to the difficulties with gathering and using evidence from overseas.

The SFO did enjoy some victories in 2021, including the successful retrial of a former executive who was found guilty of conspiring to make corrupt payments. The SFO also saw a number of individuals and corporate entities enter guilty pleas to offences of bribery and making corrupt payments.

However, the successes have been overshadowed by the familiar problems that continue to undermine the SFO's performance. A trial of two former Serco executives collapsed as a result of disclosure failures; and the recent decision by the Court of Appeal to quash Ziad Akle's convictions, and refuse a retrial, is the most serious failure to have befallen the SFO under the tenure of its current director Lisa Osofsky. Although the case was overturned on the basis of disclosure failings, the surrounding commentary undermines her credibility and the integrity of the agency that she leads.

New Investigations: Individuals and Corporates

The SFO announced only four new investigations over the course of 2021, the lowest number in the past 10 years. The downward trend of new investigations has been ongoing for many years, and suggests that the pandemic is not to blame.

Following searches of two properties in conjunction with the National Crime Agency and City of London Police, the SFO announced, on 9 April that it was carrying out an investigation into the affairs of the Radex Consortium. The Consortium (which includes PayGo Cars, Buy2Let and Raedex trading as Rent2Own Cars and Wheels4Sure) is suspected of operating fraudulent schemes whereby investors were given an opportunity to invest in cars which would then be leased out. Two individuals have been interviewed (one of whom was arrested); the investigation is ongoing.

The SFO opened an investigation into property entrepreneur Gavin Woodhouse and individuals/companies associated with him. The investigation, announced on 9 August, concerns investments in the building and refurbishment of care homes and hotels between 2013 and 2019. In an attempt to progress the investigation as quickly as possible, the SFO invited any UK-based investors in the suspected fraudulent schemes to complete and return a questionnaire by 30 September 2021.

On 29 September the SFO announced that it was investigating the Alpha and Green Park group of companies for suspected fraud and money laundering. The SFO suspects the Alpha Group of Companies of fraudulently misleading investors into purchasing leaseholds for student accommodation in West Yorkshire, Staffordshire, Leicestershire and Lancashire. The Green Park Group of Companies is suspected of operating a similar scheme in relation to leaseholds for holiday properties in Devon. Individuals from over 50 countries are alleged to have invested an estimated £150 million in these schemes but are said to have stopped receiving returns in 2018.

Although limited in number, the new investigations announced by the SFO in 2021 confirm that the agency remained active, even during the pandemic and the challenges that would have brought. As mentioned above, the apparent shift in focus from bribery to fraud is striking.

Criminal proceedings
Greenergy Fuels Limited

On 25 February the SFO announced that it had charged Gianni Rivera, a former biodiesel trader at Greenergy Fuels Limited, with two counts of fraud by abuse of position and one count of money laundering. The charges arose out of a joint investigation between the SFO and Dutch authorities into Greenergy. The SFO suspects that Mr Rivera received fraudulent payments from Cornelis Bunschoten, a director of a Dutch company called Biodiesel Kampen BV, while he was arranging trades between Biodiesel Kampen BV and Greenergy.The original investigation into Greenergy and a number of third parties had been opened in December 2018. Following the charges against Mr Rivera, the SFO announced that Greenergy was no longer a suspect in the investigation.

GPT

Following an investigation which had been opened in August 2012, GPT Special Project Management Ltd ("GPT"), a former subsidiary of the European Aerospace Group, pleaded guilty at Southwark Crown Court on 28 April to one count of corruption contrary to Section 1 of the Prevention of Corruption Act 1906. The investigation had been opened by the SFO in August 2012 and centred on a £2 Billion contract to supply telecommunications capability to the Saudi Arabian National Guard between 2007 and 2012. In sentencing, the Judge ordered the company to pay a fine of £7,521,920 and costs of £2,200,000. Proceedings remain live however, as Jeffrey Cook the former Managing Director of GPT and John Mason the financial officer and part owner of foreign-registered subcontractors to GPT were also charged with corruption. Mr Cook was also charged with misconduct in public office between 2004 and 2008 in relation to his employment with the Ministry of Defence. Terence Dorothy was charged with aiding and abetting that offence.

Individuals Charged with Bribery and Money Laundering Offences

On 17 August the SFO charged five individuals with bribery and money laundering offences in relation to the alleged payment of bribes to secure contracts in the UK construction industry. Two former senior executives were charged with four counts of bribery and two counts of money laundering. Two others were also charged with receiving bribes and one was charged with two counts of money laundering.  The investigation had been opened in February 2017 and the trial is due to take place at Southwark Crown Court in September 2022.

Petrofac

On 1 October, Petrofac, the international Oil and Gas Company, entered guilty pleas to seven counts of failure to prevent bribery between 2011 and 2017.  The Petrofac Group's former Global Head of Sales, David Lufkin, had previously pleaded guilty to fourteen counts of bribery. The failure to prevent bribery offences to which Petrofac pleaded guilty, arose from Mr Lufkin activities while he was working as Global Head of Sales in the office of a Petrofac subsidiary in Sharjah in the United Arab Emirates. In sentencing, the Judge ordered that Petrofac pay a confiscation sum of £22,836,985, a fine of £47,197,640 and the SFO’s costs of £7 million. Mr Lufkin received a sentence of 2 years imprisonment, suspended for 18 months. The SFO's investigation into the activities of individual suspects continues.

 

Matters Concluded
Single Buoy Moorings Inc.

On 24 February the SFO announced that Paul Bond, a former Single Buoy Moorings Inc. executive, had been found guilty following a retrial, of two counts of a conspiracy to make corrupt payments. The conviction of Mr Bond is the latest in the SFO's bribery investigation into Unaoil. Mr Bond had conspired to bribe public officials in order to obtain lucrative contracts in post-war Iraq. Mr Bond was sentenced to concurrent sentences of three and a half year's imprisonment on each count.

KBR

On 18 March the SFO closed its investigation into the affairs of engineering and construction company KBR Inc.'s UK subsidiaries. The SFO had opened an investigation into the subsidiaries in April 2017 over suspected corruption and bribery offences. However, after nearly four years of investigating the matter, the SFO concluded that the case did not meet the evidential test for prosecution.

The investigation had given rise to a Judicial Review application by KBR's US parent company in respect of a notice to produce documents under section 2 of the Criminal Justice Act 1987 ("section 2"). The notice had required the US company to provide material held in the US to the SFO, despite there being no express statutory wording giving section 2 notices extraterritorial effect.

In February 2021, the Supreme Court handed down its much-anticipated ruling on the matter, unanimously overturning the Divisional Court's decision and confirmed that a section 2 notice does not have extraterritorial application. This decision is significant because it highlights the limitations of the SFO's Section 2 powers where foreign based companies are concerned. A serious blow to the SFO's attempts to exercise powers that can help accelerate the pace of its investigations, in lieu of utilising the far more ponderous process, afforded to it by the mutual legal assistance framework.

Serco

On 26 April the SFO offered no evidence against two former Serco employees; Simon Marshall the former Operations Director of Field Services and Nicholas Woods the former Finance Director.  Mr Marshall had been charged with three counts of fraud and Mr Woods was charged with one count of fraud. All the charges followed a Deferred Prosecution Agreement ("DPA") that Serco had entered into with the SFO in relation to three offences of fraud and false accounting.

The SFO failed to disclose material evidence in the case to the defence and its application to adjourn proceedings was rejected by the Judge after which the SFO offered no evidence. The SFO had previously entered into a DPA with Serco in 2019 under which Serco agreed to pay a financial penalty £19.2 million and the SFO's costs. The collapse of the case against the Serco executives is one of the latest examples of how disclosure failures continue to undermine SFO prosecutions. The agency continues to be undone at trial as result of its failures to comply with its disclosure obligations under the Criminal Procedure and Investigations Act 1996.

Ziad Akle

On 10 December the Court of Appeal quashed the bribery conviction of former Unaoil Executive Ziad Akle. In quashing his conviction the Court found that the SFO failed to comply with its disclosure obligations and that Mr Akle's case had been undermined as a result of this failure. 

The disclosure failures concerned the SFO's dealings with David Tinsely the chairman of private investigative firm, 5 Stones Intelligence. Various officers at the SFO including Lisa Osofsky had been in contact with Mr Tinsely about the case and material relating to this had not been disclosed, only a summary had been provided. The Court found that Mr Akle did not have a fair trial and refused the SFO's request for a retrial. 

The Court of Appeal's ruling in the case of Ziad Akle represents a devastating blow for the SFO.  The ruling also increases pressure on Ms Osofsky after a judge had earlier found that she had left herself "vulnerable" to Mr Tinsely's flattery and called for the SFO's contact with him to be comprehensively reviewed.

The Court found that the SFO's refusal to hand over material that Mr Akle's legal team requested for disclosure purposes represented a "serious failure by the SFO to comply with their duty" of disclosure. The Court found that there had been a "material failure of disclosure which significantly handicapped the defence". This embarrassing and high-profile outcome to the case arguably eclipses some of the success that the SFO had experienced earlier in the year. 

The case is notable because it highlights serious shortcomings by the agency and poor judgement by some of its officers including Ms Osofsky. The attorney general has launched an investigation into the SFO's handling of the case.

 

Deferred Prosecution Agreements

On 2 July the SFO announced that it had entered into a three-year DPA with Amec Foster Wheeler Energy Limited ("Amec Foster Wheeler") in relation to its use of corrupt agents, conspiracy to make corrupt payments and failure to prevent bribery. The DPA sees the end of the SFO's investigation into the historical activities of Amec Foster Wheeler. Under the terms of the DPA, Amec Foster Wheeler agreed to pay a financial penalty and costs totalling £103 million. The £103 million constitutes part of a larger financial settlement that Amec Foster Wheeler entered into with the Ministério Público Federal and Controladoria-Geral da União in Brazil and the Department of Justice/ Securities and Exchange Commission in the US.  

As part of the DPA, Amec Foster Wheeler's parent company, John Wood Group PLC, has undertaken to provide the SFO with annual updates on its Group-wide compliance and ethics programmes.

On 19 July the High Court approved two separate DPA's between the SFO and two unnamed UK registered companies. The two DPA's shared a common statement of facts and under the terms of the DPA the two companies agreed to pay a financial penalty and disgorgement totalling £2,510,065. The DPA also contained undertakings by a parent company to provide compliance reports to the SFO at regular intervals during its two-year duration and to oversee a comprehensive compliance programme.

The Bribery Act

2021 also saw the ten-year anniversary of the Bribery Act 2010. Our comprehensive discussion about the impact of the Bribery Act, a decade on can be found here.

Confiscation

  • In April 2021 GPT was ordered to pay a confiscation order of £20,603,000, following its guilty plea to one count of corruption, contrary to Section 1 of the Prevention of Corruption Act 1906.
  • In June 2021 the SFO obtained an account forfeiture order against Virendra Rastogi. Mr Rastogi, a former director of RBG Resources had been convicted along with two others of operating a fraudulent metal trading scheme that cost banks around the world $700 million. The forfeiture order enabled the SFO to seize £247,911.89 from Virendra Rastogi.
  • In June 2021 the SFO obtained a confiscation order of £402,465.65 against former Unaoil executive Basil Al Jarah. Following his guilty plea to five counts of conspiracy to make corrupt payments of over $17 million in bribes, Mr Al Jarah had been sentenced in October 2020 to three years and four months imprisonment.
  • In August 2021 the SFO obtained increased confiscation orders against Silinder Singh Sidhu and Paul Kent who had been convicted of running a Shropshire based scam involving the awarding of contracts to training providers through the county's Learning Skills Council. The increase comes after the SFO identified a further £140,000 of assets that Mr Singh and Mr Kent have been ordered to hand over.
  • In August 2021 Jolan Saunders was sentenced to nearly nine years imprisonment for failing to pay his confiscation order of £5,262,301.03. The SFO's Proceeds of Crime team had established that Mr Saunders had hidden assets of £4.5 million whilst Mr Saunders had paid only a fraction of this amount.

 

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