It takes a special kind of criminal to try to steal from the head of the
Serious Fraud Office. Yet Richard Alderman, who has just been appointed to
run the government agency that fights fraud in cases involving more than
£1million, has been duped twice.
On the first occasion, the 55-year-old barrister found that a fraudster had
used his bank details, which showed up as an odd item on his monthly
statement. The second time, he received a letter in the post, supposedly
handwritten by an African girl pleading for a small amount of money to help
her to start secondary school.
“It was very, very convincing and it really made me pause,” Mr Alderman said.
“She had written that she only wanted a modest sum and that she was
desperate to carry on her education after primary school. The whole thing
was convincing and it was only with a moment's pause that I thought: 'Hang
on a minute. If I send a donation, I'm sending a cheque, and then they have
my bank details.' I still don't know for sure that it was fraud, but in all
probability it was.”
Mr Alderman's experience sits at the core of his strategy for tackling the
vast amount of fraud in Britain that is left uninvestigated. “Boiler-room
scams and mass-marketing fraud claim thousands and thousands of victims,” he
said. “It is estimated that fraud costs us about £14 billion to £16 billion
a year, and there are far more cases out there that we are not looking at.”
Mr Alderman, who was appointed director of the Serious Fraud Office (SFO) in
April, has his work cut out. Apart from the legions of fraudsters devising
ever more sneaky ways of tapping into our bank accounts and scamming us over
the phone, the SFO is seeking to put the most turbulent period of its
20-year history behind it.
Mr Alderman took over in a storm at the SFO. His predecessor Robert Wardle had
quit after the Government forced the SFO to drop its investigation into
whether BAE Systems, the defence group, had bribed Saudi officials in order
to secure an arms deal. Tony Blair had compelled the SFO to drop the case
for fear of damaging relations with Saudi Arabia, Britain's most important
and powerful ally in the Middle East.
The controversy got worse. A judicial review was launched and by April this
year the High Court had issued one of its most damning attacks on a
government action, condemning the way in which ministers had buckled after
blatant threats that Saudi co-operation in the fight against terror would
end unless the investigation was dropped. The High Court ruled that the SFO
had acted unlawfully in dropping the case, a judgment that was overturned in
July. BAE is now being chased by authorities in the United States.
As if the BAE debacle were not bad enough, the SFO has also been at pains to
lay to rest its old reputation of incompetence, built up in the 1980s and
early 1990s. Successive flops in fraud cases against Roger Levitt, George
Walker and the Maxwell brothers led to the SFO being dubbed “the Seriously
Flawed Office”. Others, in reference to its address in Central London,
called it “the Nightmare on Elm Street”.
Even though the SFO has done much in recent years to shake off its image as
the bumbling Inspector Clouseau of agencies, boasting, rightfully, that it
tends to win convictions in more than 70 per cent of cases, Mr Alderman has
set to work changing the agency's culture, which had stagnated for 20 years.
“It used to take us six months just to decide whether to take a case on,”
the former tax barrister said. “We've already managed to cut that down to
just a month.”
Furthermore, he is building a new, closer relationship with American
regulators. Last week, in Washington and New York, he met officials from the
Securities and Exchange Commission, the FBI and the Department of Justice
(DoJ) and, crucially, Andrew Cuomo, the New York attorney-general. Indeed,
he plans to model the SFO on the American regulatory system, in which
companies agree to settlement talks with regulators, agree to change their
ways under supervision and pay fines.
Traditionally, the SFO has spent months working out whether to investigate a
company and then whether to prosecute, a process that, by Mr Alderman's
admission, “can take years”. “I just cannot understand why we did that,” he
said. “The DoJ model seems to be the right one.
“The DoJ has been very successful at encouraging corporates to tell the DoJ
what they have been doing and, once they do that, to agree appropriate
penalties.”
The proposal is neither as naive nor as civilised as it sounds. In some cases,
companies discover fraud in newly acquired subsidiaries that pre-dated their
takeover and they panic at the prospect of a long and public trial and the
effect of such uncertainty on their share price.
Mr Alderman said: “I want them to ring us up, say they have discovered a
problem, say they have cleared out the guilty people and then talk to us
about restitution. In the US, where this approach is widely used, the time
taken to investigate is less and the conviction rate much higher. It is not
due to different systems; it is due to having a different focus. I don't
think we use our people well. We have very laborious processes and I do not
believe we are as effective as we should be.”
The American way of doing things must seem very attractive to the
mild-mannered Mr Alderman, whose agency's annual budget runs to about £40
million. This summer, Mr Cuomo managed to extract agreements from the
world's biggest banks to settle allegations that they had missold auction
rate securities to individuals and local authorities. In total they agreed
to buy back at least $55 billion of the assets and pay $165 million in
fines.
Yet although Mr Alderman is trying to shake up the SFO and make it faster and
more effective at chasing more fraudsters, it may be that the credit crisis
will be the making of him. The SFO and the American authorities are working
on co-ordinated investigations into fraud believed to have been committed
during the credit crisis over the past year.
“During times of market turmoil, lots of things are uncovered that would not
be seen in much better times,” Mr Alderman said. “If credit dries up, some
companies may be tempted to resort to fraud, and if cash dries up, accounts
that have been flattered in the past come under sharp focus.”
Although Mr Alderman declined to name companies that were being investigated,
he said that “it is not just the banks” that he was looking at. “We have not
gone public on this because the market is so fragile,” he said.
“You have to be careful. Something like this would have the capacity to move
markets so we are keeping a low profile, but we are making our inquiries.”
Q&A
If you could change one thing in the financial and commercial environment,
what would it be?
More financial education for people
Who is your mentor?
A lot of people have influenced me in different ways
Does money motivate you?
No
What was the most important event in your working life?
Becoming Director of the Serious Fraud Office
What gadget must you have?
A BlackBerry
What does leadership mean to you?
Getting the best out of people
Which person do you most admire?
Jeremy Bentham (the liberal English philosopher and legal and social reformer
of the 18th and 19th centuries, known as a leading advocate of
utilitarianism)
How do you relax?
Walking
