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2 January 2019

R(AL) v SFO heard around the fraud world

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Peter Bowles Oct 2018 web

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

cb-web__0006_david-corker_6541_final-jpg

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

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Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

By Sangeeta Bedi

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

cb-web__0006_david-corker_6541_final-jpg

Categories: Blog, Business crime & fraud, Financial Crime, General Crime,

In R(AL) v SFO [2018] EWHC 856 the Admin Court was invited by a defendant charged with bribery by the SFO to intervene in the trial process. The applicant defendant was aggrieved at what he perceived was a failure of the prosecutor to pursue disclosure of unused material in the possession of a third party. Before seeking a public law remedy the Defendant had sought but failed to obtain from the Crown Court trial judge an order compelling the SFO to obtain this material.

The disclosure regime in criminal proceedings is a complex corpus of interwoven statutory and non-statutory powers and duties. It is clear that Parliament, via the Criminal Procedure and Investigations Act 1996, intended that disputes about disclosure should not be resolved by the High Court on a JR but by the Crown Court trial judge. In this case Holroyde L.J. and Green J therefore unsurprisingly dismissed the claim for a judicial review. However, freed from the responsibility of delivering a judgment on the merits, these judges then delivered an obiter judgment spanning 125 paragraphs. They wished to make various observations all critical of the SFO’s conduct in not making greater efforts to obtain disclosure from the recalcitrant third party.

This article concerns the ramifications of this judicial criticism upon the conduct of internal investigations and related SFO conduct.  On one level, the Admin Court’s opinion, delivered in April 2018, is otiose because it is  based on the law of LPP as determined in the ENRC litigation by Andrews J in May 2017. In September 2018, the Court of Appeal in ENRC wholly overruled Andrews J. In essence it reversed this Judge’s finding that privilege does not attach to a solicitor’s notes of their interview of a witness in the context of an internal investigation where there is inter alia suspected criminality. In AL, however, the Admin Court applied that finding in order to hold that the SFO should have made greater effort to obtain notes of interviews made in that context.

In order to understand why AL remains significant notwithstanding the Court of Appeal’s judgment in ENRC, it is necessary to fathom why the two judges in AL devoted so much effort to writing their judgment. Why it would be mistaken to regard their composition as analogous to that sermon written by Father McKenzie which,  according to the Beatles, no one will hear.

At the root of the judgment is a distaste that a company which has secured for itself the commercially advantageous outcome of a DPA, principally on its assertion of its full co-operation with the SFO and its promise to maintain this if its erstwhile employees or others are prosecuted, should be entitled obdurately to deny the SFO access to its solicitors’ notes of their witness interviews. In AL, the company had self-reported suspected bribery within its own organisation to the SFO. Its motive in so doing was to obtain a DPA. It promised its full co-operation with the consequent SFO inquiry. The SFO asked it to turn over its lawyers’ detailed interview notes of individuals who appeared complicit. The company resisted and only agreed to disclose a short oral summary of them, arguing, somewhat incongruously bearing in mind its offer of a summary, that these notes were the subject of its LPP. The SFO did not press harder and agreed a DPA despite the company’s stance. With the DPA obtained, the SFO moved onto an investigation and then prosecution for bribery of those individuals. In order to secure a fair trial, it sought full disclosure of the lawyers’ notes but predictably the company remained obdurate. This stance as the judges apprehended could derail the criminal trial; the non-disclosure of such cogent material could found a successful abuse application by the accused. Hence the judicial impulse to intervene, facilitated by the then-law on privilege.

The kernel of the judgment is that where a company has sought a DPA the SFO ordinarily should not prosecute an individual who has been interviewed at length by the company’s solicitors unless it has taken possession of the records of their interview. That, as the prospect of a DPA enables the SFO to insist on gaining such possession, it should do so.

Notwithstanding the subsequent change in the law which would on the facts of AL have justified the SFO in not obtaining those records, the SFO has since sought to apply this judgment. It now appears that its policy is that whenever a company approaches it with a self-report and seeks approval to continue its internal investigation, the SFO demands that any forthcoming significant witness interview to be conducted by its solicitors should be audio recorded and the recording thereafter promptly disclosed to it. This insistence neatly sidesteps potential objections concerned with the lawyer’s notes disclosing their musings or, as US attorneys claim, their “mental impressions” of the witness which could now since the Court of Appeal’s ENRC judgment found a valid assertion of privilege. If the company objects to this measure, the SFO can adduce the AL judgment as justification.

AL is therefore likely to introduce a level of formality and added significance into the conduct of internal investigations where a DPA is in contemplation. Formality because many witnesses are more likely to be careful in their replies having been warned where the recording of their words will end up. So also will the lawyers asking the questions who will also feel that their performance will be scrutinised. Added significance because if the interviewee were to be prosecuted then such an unassailable record of what they contended is likely, if relevant, to be relied upon as evidence either by the SFO or by a hostile co-accused. Furthermore, with the relaxation of the rules against the admission of hearsay evidence in criminal trials, the recording may be adduced in many situations where the interviewee is otherwise unavailable. Evidence adduced in a criminal trial has entered the public domain and so any attempt to control the usage of the recordings is generally futile.

These considerations may end up frustrating the internal investigation in that unsurprisingly people become less willing to talk or to be helpful to the company’s lawyers. That includes those who consider that they have acted unlawfully. Whilst in my experience few interviewees understand the Upjohn warning, they are far more likely to appreciate the potential significance of an audio recording. This will militate against them believing that what they reveal will be treated confidentially; that somehow they can speak freely “off the record”.

For those advising an individual client in peril of being prosecuted, the vista is unattractive. If their employer’s instruction to them to co-operate with its investigation and therefore answer questions is not motivated by a desire to investigate suspected criminality then PACE with its array of protections does not apply. A caution for example would be inapposite. Moreover, assuming the threat of dismissal for refusal to co-operate does not amount to oppression or improper inducement pursuant to s76 of PACE, then probably if the interview constituted a confession by the interviewee it would be admissible in their subsequent trial. Finally, neither s78 of PACE nor an abuse submission would ordinarily result in the interview being excluded.

Audio recordings of this kind have the potential to destroy a suspect’s right of silence. Exercise of this right in a SFO caution interview may be vitiated by the SFO being able anyway to adduce the recording of their internal or employer’s interview. The client properly advised may well have to defy their employer’s instruction and face the disciplinary consequences. On the other hand, the employer may not want to have a consequent unfair dismissal claim on its hands where it is alleged that it colluded with the SFO to destroy the erstwhile employee’s basic protections or civil rights.

The effects of AL are likely to resound in the criminal fraud world, both for those conducting internal interviews and those representing their subjects.

This article was published in CrimeLine and can be accessed here

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