Tesco fraud case saw prosecutors fail to clear evidence bar, senior SFO official admits
04 Jun 2019 12:00 am by Annie Robertson
The recent prosecution of three former Tesco executives collapsed because the Serious Fraud Office didn’t set its evidence bar high enough, a senior agency executive has told MLex in an interview, adding that it must learn lessons from the fiasco.
Hannah von Dadelszen, the SFO's joint head of fraud, assessed how the agency’s charges against the trio failed, despite a plea deal that Tesco agreed, which laid the blame for an accounting black hole at the UK supermarket chain at its own door.
In April 2017, the UK supermarket chain agreed to pay 129 million pounds ($165 million) to the SFO, to settle allegations of fraud linked to the company’s admission that it had overstated its profits by 263 million pounds in 2014.
Last December, the criminal trial of two of the executives collapsed after Judge John Royce at Southwark Crown Court ruled the case against them was “so weak it should not be left for a jury’s consideration.” The SFO subsequently dropped all charges against the third defendant in January.
In the wake of that, Tesco’s deferred prosecution agreement from 2017 was published, showing that the company and the SFO had agreed a “statement of facts,” including that the trio had "dishonestly" altered accounting records and "failed" to report the issue.
What went wrong?
The failed prosecution “has really focused our attention on cases where we’re reliant on inferences” of guilt to prove charges, Von Dadelszen told MLex. “We obviously didn’t have what the court was looking for, which was the written document of the piece of irrefutable evidence of the dishonest mindset.”
The SFO is “not at all critical” of the judge’s decision to throw out the charges, she said. “But equally, there are challenges around prosecuting fraud. It’s not always the case that you’ve got that smoking gun e-mail that says, ‘come on guys, let’s dishonestly agree to defraud shareholders.’ ”
But the SFO is eager to “learn a lesson” from the outcome to ensure it doesn’t fall into the same traps in the future, Von Dadelszen said. “We have to really reflect about how high we have to set the bar in terms of laying out the full package of evidence.”
While the SFO “[won’t] always have evidence of what’s going on in a defendant’s mind,” she added, “it’s really caused us to [ask] whether, actually, have we got enough to satisfy a judge at half-time — and ultimately a jury — that there is a case there?
Von Dadelszen also addressed difficulties faced by the SFO in holding companies to account for wrongdoing, warning that the UK’s corporate-liability laws “remain a challenging environment.”
At present, a company can be successfully prosecuted for fraud and money-laundering offenses only if it can be proved that they were committed by a “controlling mind” of the business — typically its most senior directors.
But this is often difficult to prove in large corporations due to the complex management structures at play. This is in contrast with the US, where it is far easier to hold companies to account for corporate wrongdoing by use of criminal charges, regulatory penalties and large fines.
“In recent years, though, we have seen more significant penalties in the UK in relation to wrongdoing … so I think maybe some of that balance is shifting, but it’s not there in terms of money laundering,” Von Dadelszen said.
The UK government issued a call for evidence in January 2017 on legislative proposals to toughen the liability laws, but since then there has been little advance. Lawmakers have pledged to publish a response this year.
Von Dadelszen said she saw the proposed reforms as a “positive development in the law,” but acknowledged anxiety over how they might be implemented. “I really recognize lots of the concerns that businesses have about increased regulation, or what is perceived as red tape,” she said.
“I know they’re really worried about that, but as with the Bribery Act, it’s not ‘one size fits all.’ You look at the size of the company … and you adapt your approach accordingly."
05 Jan 2021 12:00 am by Robert ThomasonProposed US cryptocurrency regulations for virtual currencies has generated comments from users who say they're impractical and an assault on their rights.
Canada’s export credit agency, provided a credit facility of up to $135 million to help finance a deal where Bombardier allegedly paid bribes to win business in Indonesia.
04 Nov 2020 10:18 am by Martin CoyleThe marathon Italian prosecution of Royal Dutch Shell & Eni on charges of paying $1 billion in bribes in Nigeria is now finally in the home stretch.