The sole purpose of the UK’s Serious Fraud Office (SFO) is to investigate and prosecute individuals and corporates in cases of serious financial wrongdoing. So, the prosecution of senior executives from Barclays, the only criminal case to arise from the 2008 financial crash, was bound to be a high-profile test. With the recent acquittal of those executives, after barely a day of jury deliberations, some are raising questions about the SFO’s very existence.
The background to the case is that in 2008, while other UK banks were bailed out by the UK Treasury, Barclays instead obtained investment from various sources, including entities associated with the Qatari government. Although the commissions it paid in return for those investments were set, on paper, at 1.5%, the Qataris were insistent on receiving 3.25%, and Barclays’ bargaining position was poor. Paying a commission at that level would have alarmed the markets and required it to pay the same commission to other investors.
Instead of that, Barclays’ executives negotiated, and a committee of its board then signed off, two agreements by which it would pay the Qataris large additional sums in return for broadly described services. The SFO said that those agreements were dishonest, on the basis that there were no such services, and that this fact was known to the executives who negotiated the deal.
One of the recurring issues with SFO prosecutions is the difficulty with ascribing guilt under English law to corporations. After a controversial flirtation with civil settlements, the SFO shifted its sights to lobbying for new laws to broaden corporate liability, and the use of Deferred Prosecution Agreements (DPAs). So, it was striking that in this case, with Barclays’ denial of wrongdoing ruling out a DPA, the SFO chose to prosecute not only the executives but also the company itself.
That decision resulted in the SFO’s first defeat in this case, as the trial judge ruled that the company had no case to answer, even on the facts as the SFO alleged. The problem was that, while the executives had been given the authority to negotiate the agreements, it was not they but the committee, about whom the SFO had no complaints, that had had the authority to conclude them. That meant that the executives were not the “directing mind and will” of Barclays for these purposes, and so the company could not be convicted by reference to their state of mind.
Further legal wrangles ensued, the net result of which was that the case was dismissed against one of the executives for lack of evidence of dishonesty. But the SFO ploughed on with its case against the others. Along the way, there were numerous expressions of judicial scepticism about the strength of the SFO’s case, which also shifted significantly even during the course of the trial. One of the recurring issues was its position on the Qataris, who it declined to say were dishonest. Another was the role of Barclays’ lawyers, who had effectively approved the agreements, subject only to an assumption that the Qataris were providing services of some value. Both issues served to make it difficult for the SFO to tell a clear story of dishonesty on the part of those executives who remained in the dock.
The result, after years of work and months in court, was perhaps surprising only in the sheer speed with which the jury returned not guilty verdicts. How, they might have asked, could it be right to send these men to prison for negotiating agreements with legitimate counterparties, on which lawyers had advised, and which Barclays had institutionally approved?
The fact that the SFO nevertheless persisted might be seen as a positive, in that they independently pursued a noble cause, notwithstanding the difficulties. Certainly, it would not be easy to imagine another enforcement agency managing a better job in such a case, and the value of specialists in this area should not be underestimated – though, as has often been observed, it is forced to work with very limited resources.
An alternative view, of course, is that the result suggests the SFO might usefully have paid more attention to those judicial comments and setbacks earlier in the case, and that its dogged pursuit of these men might betray a measure of institutional hubris. While that may be unduly harsh, there are certainly lessons to be learned from this case. For good or ill, it certainly reflects an agency whose reach seems perpetually to exceed its grasp.
John Binns and Harry Travers are partners in the Business Crime team at BCL Solicitors in London.
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