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Here Comes The SFO, Part One

The last time we had a serious discussion about the U.K.'s Serious Fraud Office was to report its thrashing in June 2008 by a former American prosecutor. Jessica de Grazia, who'd been an assistant district attorney in Manhattan for 13 years, was hired by the U.K.'s then-attorney general to find out why the SFO couldn't get it right. As the U.K. Times said, her arrival at the SFO sparked panic.

But times change and even the SFO gets a second chance. Earlier this month it brought what may be the first of several cases against British firms for overseas corruption.

Mabey & Johnson pleaded guilty this month to violating the U.N.'s old Iraq sanctions and to an additional ten charges of overseas graft. The BBC reported that the company, which specializes in making temporary bridges, admitted at the Westminster Magistrates Court that it tried to influence officials in Jamaica and Ghana to award it public contracts. It also admitted paying more than £123,000 to the pre-war Iraqi regime in violation of the U.N. sanctions. The company hasn't been sentenced yet.

Reuters said Mabey & Johnson's admissions let to the resignation of Jamaica's junior minister of transport and works after he was linked to the U.K. company's corrupt business practices.

The emergence of an energized Serious Fraud Office, if that's what we're seeing, could mean the start of a lot more anti-corruption enforcement from London. According to the Telegraph, the SFO has spent £22 million investigating breaches by British firms of the oil-for-food program and more prosecutions could follow.

Former SFO director Robert Wardle left his post in April 2008, two months before de Grazia released her report. The U.K. Times' story about de Grazia was called "She came, she saw, she scythed through the SFO." The paper quoted an ex-staffer at the SFO as saying, ?She caused chaos. She called meetings of case controllers and asked them to identify the crap assistant directors. Then she went to the investigators and asked them who was a crap case controller.?

The SFO had often been in hot water because of blown prosecutions. The worst trouble, though, came after its 2006 decision to drop the high-profile investigation of BAE Systems for bribery. It said it had no choice because Saudi Arabia threatened not to buy Typhoon aircraft or continue sharing anti-terrorism intelligence. The High Court in London called the episode an outrage, an abject surrender to threats, and a capitulation. On the government's appeal to the House of Lords, five law lords decided the SFO's action was legal but "extremely distasteful."

In de Grazia's 157-page report, she compared prosecution rates for the Serious Fraud Office with those of her former employer, the New York District Attorney's Office. In 2007, she said, the SFO had about three times more lawyers than the Frauds Bureau at the Manhattan District Attorney's Office. The New York DA's 19 lawyers -- with virtually no outside help -- managed to conclude the prosecution of 124 white collar defendants from 2003 to 2007. During the same period, the SFO's 56 staff lawyers concluded 166 prosecutions, and spent more than £4 million on external counsel. That means the per-lawyer prosecution rate in the New York DA's office was at least double and maybe triple that of the SFO.

Britain's Sunday Times reported that after release of de Grazia's report, dozens of lawyers, accountants and investigators were offered large severance packages to leave the agency.

Download a copy of Jessica de Grazia's June 2008 report here.

Coming up: The SFO meets the DOJ.
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Full post as published by The FCPA Blog on July 23, 2009 (boomark / email).