U.K. Serious Fraud Chief Walks Away From Agency in Flux

Richard Alderman, the director of the U.K.’s Serious Fraud Office, steps down today after a four- year term in which ambitious reforms to combat bribery were hampered by a dwindling budget and a depleted staff.

Alderman has championed a system of negotiating corruption settlements with companies rather than prosecutions since joining the SFO as director in 2008. He was criticized for taking on several high-profile investigations, including American International Group Inc.’s Financial Products unit and convicted swindler Bernard Madoff’s London operations, only to close them later citing a lack of evidence.

He’s also faced a shrinking budget amid government austerity measures, a year-long fight with the Home Office to save the SFO from dissolution, judicial criticism of the agency’s handling of cases, and a staff exodus to law and accounting firms.

“With very severe cutbacks in our budget, we’ve taken less time to take cases to court, and we’re taking on more cases than ever before and being more successful with them,” Alderman, 59, said in an interview on April 11. The SFO is “pushing the boundaries” on global settlements in corruption investigations.

Alderman, who said he intends to stay involved in anti- corruption work when he leaves the SFO, has won some plaudits for his efforts.

‘Novel Approach’

“Alderman has attempted to modernize the SFO and he has been successful in part,” said Neill Blundell, a lawyer at Eversheds LLP in London. “His approach was novel and regardless of budgetary cuts he leaves the SFO in a better place than it was in 2008.”

Still, David Green, a barrister who led the Revenue and Customs Prosecutions Office for five years until it was folded into the Crown Prosecution Service, will inherit an agency in flux when he takes over on April 23.

The SFO’s chief executive officer, general counsel, chief investigator, head of anti-corruption and proceeds-of-crime units, head of fraud, and a senior policy adviser have all left.

David Green will inherit a more open organization but one desperate to prove its worth,” Blundell said. “Green’s first task will be to build up a new senior management team capable of dealing with the complex issues that the SFO faces on a day-to- day basis.”

Alderman has defended his record at the SFO, saying the agency is “unrecognizable compared to what it was four years ago.” He’s improved morale and the public perception of the SFO despite severe cutbacks in its budget, he said. Its resources have shrunk from 52 million pounds ($83.7 million) in 2008 to about 37 million pounds.

AIG, Madoff

On the AIG and Madoff case closures, the SFO “followed the investigations through and regularly reviewed them,” Alderman said. “We took the view that we were unlikely to satisfy that very high bar to prosecute. We have to prove dishonesty, and get witnesses who are willing to talk to us about their losses.”

With a diminished budget, Alderman “pioneered alternative arrangements for resolving criminal allegations, and the use of civil recovery orders,” said David Corker, a fraud lawyer at Corker Binning in London. “Now he’s done about 10 to 15 of those, and that’s a novel thing that he introduced. He’s been a new thinker, he’s brought new ideas into the way things have been resolved.”

Foreign Corruption

His approach has attracted criticism. The Organization for Economic Cooperation and Development said last month that the SFO uses too many secret settlements in foreign corruption cases that require less oversight from courts and aren’t as transparent as criminal plea agreements.

The Paris-based think tank said it’s “equally concerning that the SFO has in some cases entered into confidentiality agreements with defendants that prevent the disclosure of key information after cases are settled.”

Judge John Laugharne Thomas also chided the SFO for entering into a joint plea bargain agreement in 2010 with fuel- additives maker Innospec Inc. for paying bribes overseas. Alderman “had no power to enter into the arrangements and no such arrangements should be made again,” the judge ruled.

Lawyers say Green may prefer to take cases to court to prosecute, whereas Alderman encouraged companies to self-report instances of corruption and negotiate a settlement, a tactic that allowed the agency to handle some cases on a tight budget.

Tax Litigation

“Alderman comes from a background of tax litigation being compromised out of court in almost all instances,” Corker said. “Green comes from a background of bringing and defending cases in court.”

Corker said Green is “an excellent candidate” for the position based on his tenure as the director of revenue and customs prosecution.

“He did a marvellous job improving its conviction rate and improving its asset forfeitures,” Corker said. He lifted morale “tremendously” at the Revenue and Customs Prosecutions Office “so he’s got an impressive track record.”

Green took over at the RCPO in 2005 and led the agency until it was merged with the Crown Prosecution Service in 2010. He stayed on at CPS as the director of its fraud group until a year ago, when he returned to private practice at 6 King’s Bench Walk chambers.

Green “is a strong advocate and the SFO staff will respond positively to his leadership style,” said Keith McCarthy, the SFO’s former chief investigator, who is now a director at PricewaterhouseCoopers LLP. The two worked together at Her Majesty’s Revenue and Customs.

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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