The new director of the Serious Fraud Office (SFO) faces a herculean task in rebuilding the agency’s reputation after a number of failures over the last few years, top City lawyers have warned.
Earlier this month Nick Ephgrave, the former assistant commissioner of the Metropolitan Police, was appointed as the next director of the agency taking over from outgoing chief Lisa Osofsky.
During her time at the top, outgoing director Lisa Osofsky oversaw a number errors.
Osofsky was forced to apologise in parliament last year after it emerged that shortly after starting as director in late 2018 she met with a representative of the founding family of oil industry services firm Unaoil, which was being investigated for suspected bribery and corruption at the time, who sought to influence the outcome of the investigation.
The incident contributed to three convictions from the bribery case being overturned.
The agency was also embarrassed when the fraud trial of two former Serco executives collapsed in April 2021 after the SFO failed to disclose evidence to the defendants’ lawyers.
“Disclosure, as Nick Ephgrave must know by now, is a problem that the agency has continued to struggle with, leading to failed prosecutions,” Aziz Rahman, a senior partner at law firm Rahman Ravelli, told City A.M. “This is arguably one of the most pressing matters that he has to address.”
“Ephgrave is coming to an agency that has received plenty of criticism for a range of shortcomings. Reversing this trend will be a huge undertaking,” Rahman said.
But there are other problems he will be forced to tackle.
“There is a massive mountain to climb for the new director,” Barry Vitou, a partner at law firm HFW, told City A.M. “This includes increasing morale, filling the vacancies, and in the eyes of the public and corporate boards being a credible deterrent.”
Without a tough enforcer, Vitou said there was a risk that companies and individuals could “exploit a benign enforcement environment”.
“The long and the short of it is the SFO has got major work to do to get match fit,” Vitou said.
But not all of these problems are of the SFO’s own doing.
Anti-corruption campaigners have long pointed out the SFO is under-resourced, which has constrained its ability to open probes and offer more attractive salaries to compete with the private sector to help fill some of those vacancies.
As well as moving on from these issues, Ephgrave starts the job with a full inbox.
“His first test will be how he deals with challenges like the ENRC litigation and a number of charging decisions,” Sam Tate, head of white-collar crime at law firm RPC, told City A.M.
The SFO has been locked in a lengthy legal battle with Kazak mining company ENRC, since it opened an investigation into the company for suspected bribery and corruption over a decade ago.
In the latest twist in the case, ENRC is seeking over £21m in costs from the agency, law firm Dechert, and one of its former partners Neil Gerrard, after it was revealed the lawyer had leaked information to the SFO while he was working on an internal investigation at the firm.
Tate noted, however, that Ephgrave will be helped by incoming changes to UK anti-corruption laws, with parliament planning to make it easier to prosecute large companies and companies of any size that fail to prevent fraud.
Ephgrave is also the first non-lawyer to take the top job at the agency, which is responsible for both investigating and prosecuting top-level bribery and fraud.
But his background, as a former investigator, has prompted lawyers to believe he will focus on opening more investigations – something the agency hasn’t done as much of under Osofsky.
“The recently published SFO annual report and accounts disclose that in financial year ended March 31 2023 the SFO opened just one case and closed five. Presently the SFO has 39 open criminal cases, less than half the number of open criminal cases five years ago,” Vitou said. “Against a backdrop of a reported fraud explosion the SFO appears to have become a little bit gun shy.”
A SFO spokesperson told City A.M. that improving staffing and recruitment is one of the agency’s “main priorities for the year ahead”, alongside pushing for disclosure reform, adding that “progress has been made” on the issue since the government committed to a review of the disclosure regime in its new fraud strategy.
The SFO was also keen to highlight a number of significant milestones, including the conviction of Glencore, which pleaded guilty to bribery and was fined £281m, and that this year alone it confiscated £95m in illicit assets – its best year ever for proceeds of crime recovery.
The agency, however, pushed back on comments about the number of investigations falling, with the spokesperson saying that “caseloads fluctuate” and are not directly comparable year-on-year.