UK fraud office faces hefty bill after court finds wrongdoing led to ENRC bribery probe
The Serious Fraud Office (SFO) faces a possible multi-million pound legal bill after the High Court ruled today that the agency would not have opened an investigation into a Kazakh mining firm but for the wrongdoing of its officers.
The SFO launched its investigation into alleged bribery and corruption by Eurasian Natural Resources Corporation (ENRC) in 2013.
But ENRC soon made several allegations about how the probe was handled and filed multiple lawsuits against its former lawyer Neil Gerrard, the former head of white-collar crime at Dechert, the law firm itself and the SFO.
The claims relate to allegations that Gerrard breached his professional obligations by leaking information from an internal investigation his firm was conducting at ENRC to the SFO.
A judge ruled last year that Gerrard had breached his duties and that SFO officials had acted “recklessly” and engaged in “bad faith opportunism” by accepting leaked documents from the Dechert lawyer.
Today, Justice David Waksman found that the SFO would not have commenced the criminal investigation into ENRC but for Gerrard’s breaches of his legal duties.
Waksman found that SFO’s wrongdoings had a “sufficiently causal connection” to ENRC’s losses stemming from the agency’s probe and Dechert’s internal investigation.
However, the total financial losses claimed by ENRC as a result of the SFO’s probe and conduct will be assessed by the court early next year.
Dechert has already paid ENRC the amount for which it said it is liable, totalling £9m, but the firm could be forced to pay even more following today’s ruling.
A final trial linked to the matter, set for October next year, will look at the losses arising out of additional litigation with the SFO related to the agency’s corruption investigation.
ENRC’s lawyer, Michael Roberts, said: “Today’s judgment is a testament to ENRC’s determination to clear its name in the face of dogged and baseless denials of wrongdoing by both Dechert and the SFO.”
Roberts, who is a partner at Hogan Lovells, added: “Everyone is entitled to expect much better from a leading firm of solicitors and a government law enforcement authority. This landmark judgment sends a clear message that the use by law enforcement of defence lawyers as covert informants against their clients is unlawful and will not be tolerated.”
A spokesperson for the SFO said: “While these proceedings are about conduct by former SFO staff which took place over 10 years ago, we are disappointed by the Commercial Court’s findings and are carefully considering this complex judgment”.
The SFO was forced to formally close its investigation into ENRC this August, after it said it had “insufficient admissible evidence to prosecute”.
Dechert also said it will be carefully considering today’s judgment and wanted to resolve the damages issues resulting from the ruling “as soon as possible”.
“This judgment brings us a step closer to the resolution of these proceedings,” the firm said in a statement.