U.K. Probe of Gupta’s GFG a Big Test for Beleaguered SFO

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May 16 2021, 9:30 AMMay 16 2021, 10:30 AMMay 16 2021, 9:30 AMMay 16 2021, 10:30 AM

(Bloomberg) -- The Serious Fraud Office will start a criminal probe into Sanjeev Gupta’s GFG Alliance just as the beleaguered British prosecutor faces intense criticism for its inability to secure a high-profile conviction.

The SFO has struggled to prosecute individuals after securing settlements with companies. In recent weeks, it dropped its probe into former Airbus SE directors and was dealt a humiliating setback after its trial against two former Serco Group Plc directors fell apart because it failed to disclose evidence.

The investigation into suspected fraud and money laundering in relation to GFG and its financing agreements with Greensill Capital may well be its biggest probe in years and much is riding on it. There’s pressure from lawmakers for the prosecutor to investigate Gupta’s empire and its dealings with Greensill.

“The SFO could have faced potential oblivion if they hadn’t taken steps on this,” said Susan Hawley, director at Spotlight on Corruption, a U.K. transparency group. “There has been an increasing drip-feed of dissatisfaction with the SFO and it was looking increasingly irrelevant. This is a level of ambition one expects from them.”

The area that’s garnered most criticism is the SFO’s use of a U.S.-style settlement process known as a deferred prosecution agreement. It was introduced in 2014 as a way to avoid long and costly trials. A DPA allows companies being investigated to avoid prosecution as long as they pay a fine and co-operate with future cases against individuals.

But seven years after their inception, the SFO has never been able to prosecute a company executive despite securing such an agreement with a firm.

Doubts have been raised about the prosecutor’s ability to successfully target individuals caught up in global bribery and corruption scandals and whether the regime allows them to walk away with no repercussions.

An SFO spokesperson said that “through DPAs, we are able to compel offending companies to cooperate with the SFO, repay the proceeds of crime, pay a fine and demonstrate changes to prevent any further wrongdoing.”

The GFG probe is a much-needed case for an organization where confidence levels “can’t be that high,” according to Tim Thomas, a former attorney at the FCA and white collar crime lawyer at Richardson Lissack.

One issue the SFO will have to grapple with is the political dimension of the case, as the scandal over Greensill widens. Former Prime Minister David Cameron was questioned by two U.K. Parliamentary committees this week over his intensive lobbying on behalf of the collapsed financial firm.

The high-profile probe may have to rely on evidence from government departments, said Hawley. But the prosecutor’s recent track record will mean it has to work extra hard to bring a prosecution, and GFG may not be inclined to cooperate, she said.

“Any individuals involved will look at their rate of convictions and will think do I cooperate with this or if I hold out I might be in a stronger position to get off all together,” said Hawley.