A TOUGH US-style approach to big-money City fraudsters, including sharp increases in prison sentences and a national fraud squad, will be announced by the Government today.

The plans, aimed at cutting the economy’s annual £14 billion fraud bill, include pleabargaining, whereby lesser defendants are offered lenient sentences or witness immunity in return for vital evidence against a “Mr Big”. Such tactics were cited by the “NatWest Three” as unfair in their unsuccessful fight to resist extradition to the US to face charges related to the Enron scandal.

The authorities believe that such measures are essential if the British criminal justice system is to stand any chance of curbing the rising levels of high-finance fraud.

Robert Wardle, head of the Serious Fraud Office, has told The Times that the incidence of fraud far outstrips the number of cases investigated. “The justice gap must be narrowed,” Mr Wardle says in an interview to be published tomorrow.

He is strongly in favour of longer jail terms for fraudsters, including a sharp increase in the maximum term for theft, which was recently reduced from ten years to seven.

The present system of fighting financial crime involves costly, cumbersome and lengthy fraud trials, which regularly collapse. The aim of the overhaul of fraud cases to be announced by Lord Goldsmith, QC, the Attorney-General, is to shorten trials by focusing on key suspects. Less important offenders will be asked to become witnesses in exchange for lighter penalties, and in the most complex trials, juries would be scrapped.

Last week John Reid, the Home Secretary, announced his intention to revive controversial proposals for judge-only trials in fraud cases. The measure is on the statute book but was rejected when it came before Parliament for the approval needed to bring it into force.

The reform package is the outcome of a Whitehall review, expected to propose a unified strategy. At present fraud is tackled across various agencies, such as the Serious Fraud Office, the Crown Prosecution Service, HM Revenue & Customs and the Serious Organised Crime Agency. Lord Goldsmith is expected to announce that the City of London Police economic crime unit will have overall responsibility for investigating fraud across England and Wales.

Greater police resources will be recommended: now more than 10,000 officials are investigating fiscal and benefit fraud, yet there are only about 400 officers in police fraud squads, plus 120 in the City. There will be a national reporting centre, enabling agencies to share intelligence.

The fraud review has been impressed by America’s pragmatic approach, aiming for the few big-league criminals rather than spreading the net and seeing everyone escape.

Prosecutors working with the Serious Organised Crime Agency have been given powers to plea-bargain with defendants and to offer witness immunity. Such deals are likely to be accompanied by wider use of moves to remove the proceeds of fraud from the defendant.

Lord Goldsmith said when announcing the fraud review last autumn: “Every year fraud costs the economy the equivalent of £230 for every person in the UK. It cuts across multinational corporations and is embedded in terrorism, human trafficking and drug smuggling. It affects individuals through credit card fraud and ID theft.”

David Corker, a specialist fraud lawyer from Corker Binning, the London law firm, said: “I would welcome a move to concentrate on the Mr Bigs, with plea-bargains for the rest and profit-stripping. The problem, though, is that tabloid newspapers might find it hard to accept that someone who is guilty should not be banged up or is getting a light sentence.”

Plea bargains, deals with lesser witnesses to catch bigger fish and tougher sentences are all key to the US system of prosecuting fraud, with convincing results. Kenneth Lay, the Enron chief who died recently, had been convicted on several counts of fraud, conspiracy and bank fraud, and was awaiting sentence. He could have spent the rest of his life in jail.

Lay insisted that the only fraud at Enron was committed by underlings, and maintained that Andrew S. Fastow, who had been chief financial officer, bore most of the responsibility. Fastow pleaded guilty to conspiracy and agreed to serve ten years in jail, other charges being dropped in exchange for his co-operation with prosecutors and testimony in the trials of Lay and Jeffrey Skilling.

James D. Zirin, a litigator in New York who knows the US and British trial systems, said: “The purpose of public prosecutions is to make examples of people. So we do tend to focus on the Mr Bigs. Fraud cases are generally made through co-operating co-conspirators who strike a plea bargain with the prosecutor. There is no better way to make a case. Who else could they call as a witness to fraud — the Archbishop of Canterbury?”

PAYING A HIGH PRICE FOR JUSTICE

The Guinness fraud trials of 1990-93 cost some £30 million and ended with the acquittal of Thomas Ward on a theft charge. Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes were convicted, Roger Seelig and Lord Spens were acquitted and charges against David Mayhew, a takeover consultant, did not go to trial

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