In what was to be a key test of prosecutors’ vigor and effectiveness, one of Britain’s largest corruption prosecutions went down in flames on Tuesday, marking yet another reversal for the beleaguered Serious Fraud Office in London.
A month after the trial began, the economic crimes agency told a judge at Southwark Crown Court that it could offer no evidence against the Anglo-Canadian billionaire Victor P.M. Dahdaleh, who had been charged with funneling tens of millions of dollars in bribes to officials in Bahrain between 2001 and 2006.
The alleged bribes were primarily offered on behalf of the American company Alcoa, Inc., the world’s third-largest producer of aluminum.The failed prosecution denied the SFO a much-needed banner success to help cement its reputation as a tough law enforcement agency. A success could also have reassured counterparts at the U.S. Justice Department, where foreign bribery is routinely prosecuted and which counts on the SFO as a partner in fighting transnational corruption.
In a statement to the news media, the SFO said Bruce A. Hall, a key witness who had also pleaded guilty to a charge of conspiracy to corrupt, had unexpectedly changed his tune in the witness box. In addition, two American attorneys, whom British authorities tapped to assist in the investigation, were unwilling to face-cross examination by the defense.
“That impacts on the fairness of trial as well as the prospects of conviction,” the SFO said in its statement signaling the end of its prosecution. Judge Nicholas Loraine-Smith instructed jurors to return verdicts of “not guilty” on all counts.
A high-flying mover and shaker, Dahdaleh, 70, is a both donor to the William J. Clinton Foundation and to Britain’s Labor Party.The calamitous end to the trial, which involved the award of $3 billion in alumina contracts, was only the latest stunning turn in a case that had seen Dahdaleh’s bail briefly revoked amid allegations of witness tampering, resulting in the embarrassed resignation of defense attorneys from Allen & Overy, one of London’s five so-called “Magic Circle” law firms.
But it was also the latest black eye for the SFO, which has been pilloried by lawmakers and critics for a string of reversals. The agency is facing hundreds of millions of dollars in civil damages after dropping a 15-month investigation into the real estate baron and Conservative party donor Vincent Tchenguiz, in which the SFO sought to quash its own search warrant.
The Metropolitan Police are also looking into some $1.5 million in secret severance payments made by the anti-fraud agency’s former director Richard Alderman, who was skewered by British lawmakers in March over the payments. Alderman allegedly approved the payments to three departing employees without the approval of the Cabinet Office or the Treasury. A Crown Prosecution Service review in 2012 found that under Alderman, the agency lacked direction and produced poor quality work.
David Green, the current director, took office in 2012 with a brief of ending the agency’s bumbling. But the SFO was forced to admit in August this year that it had accidentally misplaced 32,000 pages and 81 audio tapes, along with electronic recordings collected as evidence in an investigation of the British defense giant BAE Systems PLC.
Today’s developments will have compounded Green’s difficulties at an agency seen as demoralized, inept and underfunded.“We really need a Serious Fraud Office in the U.K. that people can have confidence in,” Emily Thornberry, shadow Attorney General for the opposition Labor Party and a member of Parliament, told 100Reporters.
“White-collar criminals should be afraid of the Serious Fraud Office and the Serious Fraud Office should be able to prosecute them,” Thornberry said.The failed prosecution had “obviously cost the British tax payer a huge amount of money,” she said, adding, “It’s dreadful.”
According to news media accounts, Loraine-Smith, the judge, told jurors that an SFO case officer had told the court that the agency had delegated investigations in Bahrain, where the bribes were allegedly paid, to attorneys from the U.S. law firm Akin, Gump, Strauss, Hauer & Feld LLP.
However Akin Gump is also representing the state aluminum smelter Aluminum Bahrain BSC, or Alba, whose officials received the alleged bribes, in a federal lawsuit against Dahdaleh in Pennsylvania, thereby calling the firm’s impartiality into question.
The Akin Gump attorneys nevertheless refused to submit to cross-examination in London, possibly prejudicing Dahdaleh’s defense.Citing “a little bit of a conflict of interest” for Akin Gump, Thornberry said, “It’s extraordinary they were given the contract.” She added that if British investigators “subcontract part of their work to Akin Gump, then they need to be sure that they are going to be able to give evidence in court.”
Mark J. MacDougall, a partner at Akin Gump and lead attorney in Alba’s lawsuit against Dahdaleh, did not return a call seeking comment.However, in a subsequent statement, the SFO said it had “framed specific questions” to Akin Gump to receive documents collected in Bahrain.
“No aspect of this investigation was outsourced,” the SFO said.
Alcoa settled with Alba last year for $85 million to resolve Alba’s civil racketeering allegations that Alcoa had used bribery to cause Alba to accept inflated prices for aluminum oxide, which is used in making commercial aluminum.
However Dahdaleh remains a defendant in that case, which has paused pending the outcome of his trial in London.
Alcoa is also in settlement talks with the U.S. Justice Department and Securities and Exchange Commission to resolve allegations of bribery in Bahrain. So far, the agencies have not accepted offers totaling more than $160 million, according to securities filings.
Jonathan Pickworth, an attorney specializing in corruption compliance at Dechert LLP in London, said the SFO’s defeat had to be seen in context.
Pickworth noted that the SFO takes on only the most “serious and complex cases,” with no “easy wins.” Many involved evidence from overseas.
“Clearly there is a risk with those cases that they don’t succeed,” Pickworth said, adding that he did not expect the collapse of the Dahdaleh case “to cause them to pull back from pursuing other cases.”
In a policy review in June, Thornberry depicted the office as unable to attract fresh young talent, in part due to its “forlorn” reputation.
This was particularly true in light of budget cuts for the agency, she said.
“What I want to know as Shadow AG is what the hell are the government doing about this?” she said. “If they keep cutting back — I think the cuts are about 25% at the moment — then the SFO is not going to be able to do its job.”
“I am a critical friend. I want them to do well,” Thornberry said. “I so want them to do well.”
Douglas Gillison
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