SFO faces a crisis of confidence as old sins haunt Ephgrave’s tenure
The Serious Fraud Office (SFO) is no stranger to bad publicity, but after yet another historic case comes back to haunt it, its reputation takes another battering.
Last week, the country’s headlines were dominated by news that two former City traders convicted of manipulating the London Interbank Offered Rate (Libor) in a scandal that rocked global financial institutions in the early 2010s had their convictions quashed.
Former UBS and Citigroup trader Tom Hayes, along with former Barclays trader Carlo Palombo, were charged by the SFO. Both men were convicted by a jury and sentenced to prison.
However, after a court in the US reversed the convictions of two former US traders for the same issue, the Criminal Cases Review Commission (CCRC) referred Hayes and Palombo for an appeal. Despite losing at the Court of Appeal, the Supreme Court deemed some of the directions given to the jury to be false and called their convictions unsafe.
It is worth noting that the court didn’t say they were innocent (it did note that there was “ample evidence” to convict them) but stated that the jury was given legally inaccurate and unfair information by the judges at the time of their original trial.
As a result, both men’s convictions were quashed, and four other former traders have since come forward to say they will be appealing their convictions on the basis of this ruling.
“The acquittals give rise to questions as to how, and against whom, the SFO chooses to deploy its limited resources,” stated Rachael Gregory, partner at Grosvenor Law.
Back in 2012, when SFO’s power was shifting from Richard Alderman to Sir David Green KC, the anti-fraud agency launched its probe into the Libor scandal. At the time, it was a significant case for the agency, with a probe that ran until 2019, resulting in nine convictions of senior bankers.
However, in present-day Britain, these changes and this investigation aren’t holding up in the court of public opinion in the City. Hayes’ own lawyer argued in Morning Wire that his crime in the Libor case was to be a banker when that was unpopular.
When the US dropped all its criminal charges, it left the UK as the only country to have prosecuted bankers for this scandal. And now the current regime at the SFO, which didn’t open this case, has to pick up the pieces and deal with the fallout.
As Neil Swift, partner at Peters & Peters, stated: “One of the problems that every director of the SFO faces is that they are not in control of their own narrative.”
‘Low-hanging fruit’
When the SFO’s director, Nick Ephgrave, took over the leadership role in September 2023, his presence in itself was different, as he was a former police officer rather than a trained lawyer, like his predecessors.
He launched his first day in the office by taking along the press to a police raid into Axiom Ince, the first SFO case to be launched under his name.
Ever since, there has been careful PR handling at the agency, from selective interviews with members of the press, to catching headlines with calls to ‘pay whistleblowers‘.
Under Ephgrave, the agency has opened eight investigations; however, as many white-collar lawyers in the City have argued to me, these are small, low-hanging fruit, and not the big cases that this type of agency should be pursuing.
However, the impact of legacy cases has damaged its reputation, especially given the slow pace of the UK’s criminal justice system in handling white-collar cases compared to other jurisdictions. Additionally, like many government agencies, the SFO reports being understaffed and lacking an effective internal collaborative system – leaving it in a difficult position.
It also seems to have a focus on being a substantial net contributor to the Treasury, as Swift explains, through corporate settlements.
Meanwhile the agency, along with law firm Dechert, is liable for millions of pounds to cover damages in its ongoing civil dispute with Eurasian Natural Resources Corporation (ENRC) following its failed investigation into the firm.
Just last week, that bill potentially got bigger at the Court of Appeal, which allowed ENRC to argue again for a further $128m in damages stemming from a criminal investigation in which the High Court found serious misconduct and bad faith by both Dechert and senior SFO officials.
With all of this baggage for the agency, Swift noted that “Ephgrave appears to have refocused the SFO on frauds against investors, rather than the grand international corporate corruption cases targeted by his predecessors.”
However, with the introduction of the Failure to Prevent Fraud offence coming into play in September, giving the SFO more powers, it will be difficult for him to not capitalise on this.
At a time when the SFO is called on to be even more aggressive than the US Department of Justice (DOJ) – which has been weakened by the Trump Administration – the real test will be whether Ephgrave can successfully restore the SFO’s reputation; managing historic issues while launching new cases.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.