The Serious Fraud Office (SFO) is trying to shed its reputation as unwieldy, expensive and blundering. In doing so, it is about to undertake the difficult task of cutting the amount it spends on barristers and train staff to do the advocacy work instead.

This balance between how much advocacy should come from within and how much should be outsourced is one director Richard Alderman is very wary of tipping. But turning around the fortunes of the SFO was never going to be a simple task.

A barrister and former tax investigator, Alderman took over as director in April from Robert Wardle in the aftermath of a scathing High Court ruling that the SFO had acted unlawfully in dropping its BAE-Saudi arms corruption investigation. Three months later the decision was overturned by the Law Lords. This has put a lid on the affair, but Alderman points out there is still plenty of BAE-related work on the pile – Tanzania, South Africa, Romania and the Czech Republic all remain under the microscope. BAE said it continues to support the SFO in its enquiries, with access to people, information and premises when requested. A spokesperson added: ‘[We] wholeheartedly support a rigorous approach, in the hope that it brings to a conclusion enquiries now in their fifth year.’

One long-running investigation he is keen to pursue is Operation Holbein. The contested case against five companies, an alleged NHS drugs fraud, is one of the SFO’s most expensive and the High Court decided the action should be stopped in July. However, at the beginning of October Alderman authorised an appeal to the Court of Appeal on Mr Justice Pitchford’s High Court decision.

Also in the news of late has been the prospect of an SFO investigation into BBC business editor Robert Peston’s string of super-scoops – such as his revelation that HBOS was to merge with Lloyds TSB, with the government’s blessing. But Alderman says he does not have jurisdiction to act. ‘Allegations of market abuse are questions for the FSA,’ he says.

So now, seven months after his appointment, Alderman has had time to get into his stride. The BAE saga and the Holbein investigation were inherited, while the Peston case was easily discarded. What Alderman will be judged on is whether he can revitalise the SFO. This will involve implementing the changes suggested in the report on reforming the SFO by former New York City prosecutor Jessica de Grazia – and in doing so, he is turning his attention to his own staff.

American themeDe Grazia compared the SFO with US fraud prosecutors and concluded that it spent too much money on outsourcing – especially advocacy. With the caveat that the SFO model is ‘very different’ to the US model, Alderman says his reorganisation of the SFO will lead to more advocacy work being done by SFO staff, while the bar will be called in only for the most complex cases. This must surely mean a fair few more SFO staffers being trained up to solicitor-advocate level, but Alderman is careful not to commit himself.

‘I’m moving quite carefully on this because I don’t want to destabilise the bar,’ he says. ‘An independent bar is crucial to us. However, it may be possible, over time, for some of our staff to be able to take on the simpler aspects of a case from start to finish – including the associated advocacy work.’

On this point, Alderman tips his hat to Sir Ken Macdonald, former Director of Public Prosecutions. One of Macdonald’s key drives was in getting CPS employees to do more advocacy work in the courts. Since he initiated the change, the number of discontinued cases has dropped by 24% and guilty pleas have risen by 30%.

But there are limits to what SFO staff will be required to do. ‘Realistically, I cannot see one of our people as the lead counsel in a six-month trial,’ he says. ‘We’re bound to want to outsource that to someone from the bar.’ He also says these changes will be rung without extra resources – the SFO has not applied for budgetary increases and does not intend to bring in extra staff. What will have to go in return is still in the realm of speculation.

This departure from the norm signals a move towards the model of ‘case ownership’ that de Grazia was keen for the SFO to import from the US. Traditionally, when the SFO took on a big case a number of private parties – such as accountants, specialist investigators and barristers – were automatically brought in to assist. The SFO’s grip on the case as a whole was therefore loose.

‘I can understand why they did that,’ Alderman says, ‘but looking after the process of investigation and prosecution should be the core skill of SFO staff.’

It all comes down to the way Alderman, drawing influence from de Grazia, believes the SFO should be organised. ‘We’re setting up a flexible model so we have a pool of skilled resources we can deploy immediately on any case that meets our criteria,’ he says. ‘If, for instance, we got a phone call and were asked to put 100 investigators into a case, starting tomorrow, then we should just about be able to do that.

But we can only do so by working in different ways on cases that don’t require as great an input of manpower.’

Alderman has not felt constrained by the UK’s borders as he works to reshape the SFO. He has just returned from a week of fact-finding in the US, gleaning ‘lots of ideas’ from top anti-fraud enforcers across the pond. The World Bank, Department of Justice, FBI and New York District Attorney’s office all hosted him. ‘Those were the offices referred to by Jessica,’ he says. ‘I wanted to meet the people involved to get a better feel for the US system.’

But the main reason for the trip was to explore the methods used by US prosecutors in running their offices. Alderman says the US Department of Justice’s system for monitoring companies’ compliance with its edicts sparked his interest, as did the New York District Attorney’s approach to communicating with the public. ‘They have an open-door policy that allows members of the public to go in and make complaints,’ he says. ‘I would like us to mirror that.’ In the same vein, the FBI’s community outreach programme – whereby the FBI sends its officers into schools and communities – drew interest.

Pre-emptive approachIf he applies these lessons alongside de Grazia’s recommendations, the traditional SFO ‘prosecute and be damned’ approach will cease to exist. Instead, Alderman insists on a pre-emptive approach to reduce the number of cases reaching court and associated expense.

‘We are trying to build up people’s resistance to fraud and their ability to protect themselves,’ he says. Discussions with the Serious Organised Crime Agency and the National Fraud Strategic Authority are under way, though he says they are in the early stages. ‘We’re trying to get an understanding of how the fraudsters work out who the potential victims are, so we can focus on these victims and warn them they might be subjected to an attack.’

Representative organisations – such as Age Concern, the Rotary Club and chambers of commerce – are being tapped in a bid to contact the most vulnerable. ‘If people are able to resist a fraud then that’s a much better result than putting the fraudster in jail after many years,’ he says. ‘This is something I feel very strongly about, because I want people to be able to defend themselves from the misery that fraudsters cause.’

Aside from educating at grassroots level, Alderman wants to track and disrupt the fraudsters. ‘A lot of fraudsters have been around for a long time and some, I understand, have been starting new frauds when they’re sitting in the dock being prosecuted by us for a different fraud,’ he says. ‘This is their business, their lifeblood, so they carry on.’

Real-time monitoring is the answer, he adds. ‘It’s fairly intrusive stuff, involving lots of powers Parliament has given to law enforcement officers. Some of it we will do, some of it is for the police.’

The pre-emptive fraud-tackling strategy has yet to be fully tested, but the infancy of this approach has not stopped Alderman tinkering with new methods – ‘tools’, he calls them – in an attempt to settle matters early and avoid protracted court actions.

Most recently, construction company Balfour Beatty contacted the SFO voluntarily after spotting financial irregularities on its books. Following an SFO investigation Balfour Beatty accepted a £2.25m fine in the High Court – marking the first use of a civil recovery order by the SFO. ‘It sends out a very good message about the willingness of the SFO to engage with corporates in appropriate circumstances, talk to them about what they’ve been doing, and get full disclosure from them,’ says Alderman. ‘Then we can discuss a package of measures on how they will comply in the future, and whether they require culture change at the organisation.

‘When we open an investigation, we want to engage the party there and then and say: "If you want to talk to us about sensible pleas or alternatives, we’re ready to listen. If you don’t, we will investigate and prosecute, and it will only get tougher for you.’"

Full publication of a company’s unlawful conduct, even if voluntarily disclosed, looks set to become a common feature. ‘I say to the corporates: "There are no deals in private with the SFO." If they reach agreement on anything with us it becomes public. It has to be the subject of a public statement because I want to send out a strong message, not just about the new ways the SFO is doing business, but more importantly about the readiness of corporates to come in and tell us when they discover fraud or corruption, unprompted.

‘One of the things that came out of Balfour Beatty was positive coverage, applauding the company and how they faced up to their problem. There’s actually a business benefit in doing what they did.’

The use of serious crime prevention orders (SCPO) to slap restrictions on career fraudsters is another option – and favoured by Alderman because of their pre-emptive nature. ‘Crime prosecutions do have some deterrent effect, but they happen so long after the relevant event that people think it’s all moved on,’ he says. ‘Something like an SCPO, that we obtain now, when the wrongdoing is carrying on, will put a stop to unlawful actions straight away.’ He says he wants to try using one as soon as possible, though no suitable case has yet arisen.

But whichever tools he uses, Alderman says the public interest will determine what sanction is necessary in each case. ‘We are adopting a different approach for a case coming up before Christmas,’ he says. ‘We think the public interest requires criminal convictions, so we must take the matter to court.’

Not quite the end of high-profile legal battles for the SFO, then.

Alderman biography

  • Richard Alderman, 55-year-old director of the Serious Fraud Office. Replaced Robert Wardle in April 2008. Married with one daughter.
  • Before joining the SFO, he worked as director of national teams and special civil investigations at HM Revenue & Customs, overseeing tax investigations.
  • From 2003 to 2005, Alderman was director of the Inland Revenue’s special compliance office, with responsibility for all criminal investigations.
  • In 2002, the Attorney General and Treasury Solicitor invited him to work with the Home Office in setting up the Assets Recovery Agency, of which he became the first legal director.
  • From 1996-2003 he was principal assistant solicitor at the Revenue.