In recent years, the UK Serious Fraud Office (SFO) may not have been all that vigorous in its investigation of corruption cases involving jurisdictions outside the United Kingdom, but Richard Alderman is determined to inject a new sense of urgency into the organisation “to make it very clear that corporations involved in corruption will not flourish”.
“In many cases, I would like a resolution through the civil and not the criminal courts”
Speaking at a British Chamber of Commerce luncheon on 12 January, the director of the SFO said an increasing number of cases of corruption are coming to light as the recession continues in the UK, and that new legislation in the coming months is designed to fight further corporate misbehaviour.
Chief among new developments, said Alderman, would be the new Bribery Bill, which should be enacted into law before the end of 2010 with two “very significant” changes.
Richard Alderman
Director, Serious Fraud Office
Before joining the SFO in 2008, Alderman—a barrister—was director of national teams and special civil investigations in HM Revenue and Customs, responsible for 3,000 staff carrying out specialised tax investigations. As director of the Revenue’s Special Compliance Office from 2003 to 2005, he was responsible for all criminal investigations by the Inland Revenue.
Married with one daughter, he was the senior lawyer in the Revenue’s Solicitor’s Office, responsible for the conduct of criminal prosecutions, and was invited by the attorney general and the treasury solicitor in 2002 to work with the Home Office to set up the Assets Recovery Agency.
“The first is that there is an offence at the corporate level of failing to prevent bribery”, he said. “Originally, the offence included an ingredient of negligence. This has been taken out. There is, though, a defence where there were adequate procedures in place in order to prevent bribery taking place.
“Of course, what this has meant has been that people want to know what the SFO means by ‘adequate procedures’, and we have given help in the guidelines that were published last July”.
The other key change is the provision to give the SFO jurisdic-tion in some circumstances over foreign corporations involved in bribery elsewhere in the world and that have a business presence in the UK.
“I see this as being a very important provision because it enables the SFO to stand with the very good, ethical corporates that are being undercut by competitors overseas”, he said. “I am looking for cases and I want to send out a very strong message that the SFO is a support to UK businesses and that we shall do everything we can to avoid UK businesses being disadvantaged by foreign businesses that use corruption as a way of obtaining competitive advantage”.
Alderman, aged 57, was visiting Japan at the invitation of his Japanese counterparts. He held a series of meetings during his six-day visit, learning more about how the authorities here handle similar criminal investigations and the changes that have taken place recently with the introduction of the jury system.
As it was Alderman’s first visit to the country — and he was meeting representatives of British businesses here before his Japanese colleagues—he was keen to find out about the issues that concern firms operating in Japan.
The new Japanese government’s openness in its discussions of tax reform was applauded and companies expressed the hope that improved transparency will be carried over into other areas, including local fraud legislation and compliance issues. Others called for equal application of fraud laws to eradicate the impression that larger corporations are able to get away with transgressions while less well-known firms are more often taken to task.
“This topic of overseas corruption is of interest to me and is a big issue within the SFO”, said Alderman. “We need to be able to show that the UK is being very vigorous in dealing with firms involved in corruption”.
That has not, unfortunately, always been the case, he admitted.
“The UK’s record in dealing with overseas corruption has been poor”, he said. “One of my priorities as director has been to transform this. Some of this depends on what we do in the SFO ourselves. We have to get a lot better at the core job of investigating and prosecuting corruption. We have been doing that”.
And while being tougher on corporations that try to circumvent the law is one approach that is paying off — its first corporate conviction was of British bridge-building company Mabey and Johnson, which pleaded guilty to corruption in Ghana and Jamaica last autumn — Alderman simultaneously sets great store in the system of self-referral that he has instituted.
“I want firms to come to us when they become aware that there has been corruption in obtaining business in other countries”, he said. “I want them to use their professional advisers in carrying out an investigation and I want to be able to discuss the results of the investigation with the firms.
“In many cases, I would like a resolution through the civil and not the criminal courts”, he added. “Of course, there will remain some cases where the corruption is so serious, so systematic in the firm, and so engrained in the behaviour of the top level board that we think a prosecution meets the public interest. The vast majority of cases, though, ought to be settled civilly”.
The record of the SFO over the years has been much criticised, partly due to its low conviction rate before Alderman took control. That figure has since grown to 90%.
The SFO has a staff of about 300 lawyers, investigators, accountants, IT professionals and support staff, and Alderman has identified three areas on which the SFO is focusing its efforts:
- Fraud by or against financial institutions
- Overseas corruption
- Mass-market fraud
Alderman’s arrival at the SFO came at a turning point in the global economy. The run on Northern Rock had taken place, but the Lehman Shock had yet to occur. Alderman describes the atmosphere then as “very fragile”. And when catastrophe struck, he was under great pressure to open numerous investigations into the wrongdoings — real or perceived.
He opted for the softly-softly approach—having conversations with people with whom he was acquainted in the City and avoiding headlines that might have been even more damaging to corporations. One area that attracted his keen interest was hedge funds, which the industry had previously assured the SFO contained no risks.
Hindsight has shown us that such assurance was misplaced.
“I would like to stress that I very firmly believe that the SFO has a key role to play as part of the overall governance of the City of London and of UK business”, he said. “No one wants dishonest people to flourish. We want them excluded so that good, ethical businesses and the very honest, ethical and hard-working people who run them can do so while being protected from the activities of the dishonest.
“It is through doing this that we can develop sustainable businesses that will generate long-term value”.
[greybox]Richard Alderman
Director, Serious Fraud Office
Before joining the SFO in 2008, Alderman—a barrister—was director of national teams and special civil investigations in HM Revenue and Customs, responsible for 3,000 staff carrying out specialised tax investigations. As director of the Revenue’s Special Compliance Office from 2003 to 2005, he was responsible for all criminal investigations by the Inland Revenue.
Married with one daughter, he was the senior lawyer in the Revenue’s Solicitor’s Office, responsible for the conduct of criminal prosecutions, and was invited by the attorney general and the treasury solicitor in 2002 to work with the Home Office to set up the Assets Recovery Agency.[/greybox]
