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Jessica Tillipman
Senior Editor

Richard L. Cassin
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Elizabeth K. Spahn
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Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
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Bill Steinman
Contributing Editor

A Bit Of An Old Boy’s Club

The U.K.’s Serious Fraud Office was created in 1988 with the mission to investigate and prosecute big-time fraud and corruption — the misdeeds, as Teddy Roosevelt would have said, of the wealthy criminal class. But things at the SFO haven’t gone well, and Britain’s Sunday Times is reporting that dozens of lawyers, accountants and investigators are being offered up to three times their annual salaries to leave their jobs.

The SFO has often been in hot water because of blown prosecutions. But the worst trouble came after its 2006 decision to stop investigating BAE Systems for bribery. It said it had to drop the case because Saudi Arabia threatened not to buy Typhoon aircraft or continue sharing anti-terrorism intelligence. The High Court called the episode an outrage, an abject surrender to threats, and a capitulation.

After the BAE debacle, the U.K.’s then-attorney general, Lord Goldsmith, hired a former New York City prosecutor to find out why the SFO couldn’t get it right. Jessica de Grazia had been an assistant district attorney in Manhattan for 13 years before she took the job. As the Times said, her arrival at the SFO sparked panic.

What de Grazia found, among other things, was that in 2007, the Serious Fraud Office had about three times more lawyers than the Frauds Bureau at the Manhattan District Attorneys 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, however, the SFO’s 56 staff lawyers concluded 166 prosecutions, even though the SFO spent more than £4 million on external counsel, ranging from newly qualified barristers to Queen’s Counsel. In other words, the per-lawyer prosecution rate in the New York DA’s office was at least double and maybe triple that of the SFO.

De Grazia also found huge discrepancies in conviction rates. During the 2003-2007 period, the SFO’s average conviction rate for serious and complex white collar crimes was just 61%; the Frauds Bureau in New York had a 92% conviction rate for the same type of offenses. And at the federal prosecutor’s office in New York City, the conviction rate was a nearly perfect 97%.

What’s the problem in the SFO? De Grazia cited “a commingling of external and internal factors.” External factors, she said, were the laws, government policy, and legal professional rules and practices. The big problem within the SFO’s control, she said, was “insufficient innovation.” The Times newspaper wasn’t so polite. Cronyism and incompetence, it said, and “a bit of an old boy’s club.”

Former SFO director Robert Wardle left his post in April 2008, two months before de Grazia released her report. “She caused chaos,” one of her eventual victims recalled last week. The Times report said, “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.”

More changes at the SFO are probably ahead. The Times says de Grazia has just delivered another report — this one highly confidential — to Britain’s new attorney general, Baroness Scotland. The new report, the Times says, is far more blunt than the June ’08 version released to the public. It calls the SFO “a demoralised and underperforming agency” where the work of many dedicated and competent employees was “ blocked by inadequate management and leadership.”

Our thanks to a friend, now in Paris, for sending us the Times stories this weekend.

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

Listen to this podcast here.
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