Michael Cumming-Bruce and Matthew Gale 8 Aug 2019 03:25pm

How effective is the SFO really?

A recent report from Her Majesty’s Crown Prosecution Service Inspectorate appears to confirm that despite recent successes, the Serious Fraud Office (SFO) continues to battle cultural problems which threaten the organisation’s effectiveness

SFO sign
Caption: Despite recent successes, it continues to battle cultural problems

The report, entitled the Serious Fraud Office Leadership Review, followed an investigation by the Chief Inspector of the Crown Prosecution Service, Kevin McGinty, at the request of new SFO Director Lisa Osofsky. In preparing the report, the Chief Inspector interviewed more than 85 staff and reviewed survey responses from over 50% of the organisation’s staff.

Osofsky requested the review in order to understand declining staff engagement scores and to “address some entrenched cultural issues and make the organisation more people-centric and results-focussed”.

However, the report itself appears ambivalent about whether those aspirations are compatible with, or in opposition to, each other. Its summary of findings says that the SFO is facing clear challenges, identifying the central one as being that the organisation’s “sharp focus on delivery of casework” has “driven a culture of delivery which has, in many instances, led to…unacceptable behaviours.” The report, however, offers no specific prescription for dealing with such issues (at least not in the public version) beyond that “leadership needs to develop and communicate a more strategic approach to cultural change”.

If the report, despite its brevity and lack of suggested countermeasures, is taken at face value, it may suggest that the SFO has been struggling to strike the right balance between pushing staff to achieve results while maintaining a good working environment. That is a management issue that is familiar to many law firms and may not come as a surprise in the context of an organisation which is expected to go toe to toe with magic circle firms and consequently produce work product and obtain results akin to those expected of elite City firms.

However, the SFO is unlikely to be able to adopt the approach often favoured in the private sector of increasing remuneration to compensate for a demanding workload and culture. In the context of the recent departures of many senior SFO figures to high-paying roles in private practice (for example, both the former director and former general counsel both joined City firms in September last year), the SFO is likely to be facing some significant challenges around motivating its best people to achieve successful prosecutions, while ensuring that they do not leave for the far better resourced law firms representing those defendants.

Figures published in late July 2019 showed a slump in annual conviction rates to 53%, down from 77% the year before. This may suggest that, for now, the SFO is not winning the battle despite its “sharp focus on the delivery of casework”. This disappointing news follows the acquittal this month of three senior employees of metals company Sarclad, and the high-profile failures of the SFO to successfully prosecute employees of Tesco and Rolls-Royce earlier this year. However, one potential bright spot for the SFO is that in each of the three cases cited above, the SFO had already agreed a deferred prosecution agreement (“DPA”) with the relevant companies before bringing action against individuals.

DPAs, which are deals defendant companies strike with the SFO where, typically, the companies agree to pay fines (and may agree to other conditions) in exchange for non-prosecution have the potential, on paper at least, to deliver justice (and compensation) with the expenditure of less resource than traditional prosecutions.

This is particularly the case if, as has been the case so far, companies under investigation see their interests as better served by working with the SFO towards a DPA, as opposed to contesting everything. As such, they potentially offer the SFO a powerful tool to deliver more with less. However, whether that now changes in light of the SFO’s repeated failure to successfully prosecute alleged wrongdoers at companies with which significant DPA settlements had been reached remains to be seen.

In summary these remain difficult times for the SFO and the problems it faces may run deeper than the cultural problems alluded to in the recent report. Its success moving forward may depend on how effectively it can utilise tools such as DPAs to fulfil its public duties, in addition to the perennial question of how much funding is made available to the SFO by the new government.

Michael Cumming-Bruce and Matthew Gale are senior associates at Cooke, Young & Keidan