UK's Serious Fraud Office (SFO) review by Sir David Calvert–Smith – analysis and key lessons

The UK's Serious Fraud Office ("SFO") has publicised significant victories recently, including the successful prosecution of the Axiom Legal Financing Fund. However any attempt to trumpet its successes has been overshadowed by the failings of its investigation into Unaoil, one of the SFO's highest-profile and most significant cases of recent times. These failings resulted in the overturning of the convictions of several individuals including Ziad Akle, which we reported on here. The allegations raised in Akle's appeal to the Court of Appeal led to the Attorney General appointing Sir David Calvert-Smith to conduct a full review of the SFO's conduct of the Unaoil investigation (the "Review"), including the actions of Lisa Osofsky, the Director of the SFO ("DSFO"), herself. The Review lays bare the culture at the SFO, and so contains lessons not just for the SFO and other prosecutors but also for any organisation focussed on promoting a healthy culture. 

The Unaoil investigation and overturned convictions

The Unaoil group of companies were based in Monaco and the SFO alleged that Akle had conspired with the people controlling Unaoil (Ata Ahsani, and his sons Cyrus and Saman Ahsani) to bribe officials in Iraq to influence the terms and allocations of oil pipeline contracts in the period after the overthrow of Saddam Hussein in 2003. He had allegedly done this via an individual in Iraq named Basil Al Jarah ("BAJ"), who had already pleaded guilty to corruption charges and been convicted. However it emerged that BAJ's plea and conviction had been obtained with the assistance of David Tinsley of 5 Stones Intelligence, an intelligence and investigative company based in the US. Whilst not a lawyer, Tinsley was actively involved in helping the Ahsanis, including communicating directly with the DSFO and other members of the SFO's senior management team.

When prosecuting Akle, the SFO failed to disclose the detail of its communications with Tinsley until directed to do so by the Court of Appeal. Upon reviewing those communications, the Court of Appeal determined that the documents which the SFO sought not to disclose, and were only disclosed at the direction of the Court of Appeal, were "clearly capable of lending significant force to the defence argument". It concluded that "Tinsley was certainly enabled, and arguably encouraged, to convey to BAJ – behind the backs of his legal representatives – an indication that if he pleaded guilty to the charges on the indictment the SFO might "take a view" about other potential charges."¹ If Akle had had these underlying documents, rather than the (occasionally inadequate) summaries contained in the disclosure schedules, Akle would have been able to present his case in its best light.

As a result, the Court of Appeal was "satisfied that there was a material failure of disclosure which significantly handicapped [Akle's] defence in arguing that the evidence of BAJ's convictions should be excluded", as the documents would have shown that "Tinsley was deliberately operating behind the backs of BAJ's lawyers, and that Tinsley wanted to control whom BAJ spoke to".² Importantly, this meant that "the defence were denied the stronger position to which they were entitled. In consequence, through no fault of the judge, Akle did not have a fair trial."³

The Court of Appeal was therefore satisfied that Akle's convictions were not safe and that his "convictions must therefore be quashed."⁴

Subsequently the convictions of Paul Bond and Stephen Whiteley, who had also been convicted for their roles in Unaoil's alleged corruption, were overturned due to the SFO's disclosure failings.

The conduct of SFO staff

In light of the issues raised by the overturning of Akle's conviction, the Attorney General asked Sir David Calvert-Smith, a former Director of Public Prosecution, to review the conduct of the SFO - though his Review was asked to go further than the courts had, to consider other matters "including as to the SFO's policies, practices, procedures and related culture."⁵ Sir David noted that the SFO had "cooperated fully with [the] Review."⁶ This cooperation included the SFO providing Sir David and his team with all material in the Akle appeal, as well as privileged material such as advice from independent counsel, and written answers from the SFO personnel involved in the Unaoil investigation – up to and including the DSFO herself.

The DFSO
It is the DSFO's conduct that has generated the headlines. She met Tinsley shortly after she was appointed, in August 2018, following a recommendation from a former FBI agent whom the DSFO knew. She consulted members of her senior management team, the Chief Operating Officer Mark Thompson and the Chief Investigator Kevin Davis – they advised her to take the meeting and then hand contact with Tinsley over to Davis. The DSFO did not, however, consult the SFO's General Counsel. Ultimately she held a meeting with Tinsley, with no one else present for half an hour, and kept no notes. Both before and after the meeting the DSFO and Tinsley communicated via the DSFO's personal mobile phone.

From the start, senior SFO management were aware that Tinsley was acting for one of the Ahsanis, Saman Ahsani, who was at that point a defendant in an ongoing SFO prosecution and who had separate legal representation. This therefore gave rise to – or ought to have given rise to – a concern to deal cautiously with Tinsley whilst being mindful of any disclosure obligations which likely would arise given his client was being prosecuted. Despite this, it appears the DSFO spoke further with Tinsley on the phone, and again no notes were kept. Following some more text exchanges, Tinsley was eventually informed by the DSFO's chief of staff that there should be "no communication with the DSFO on any channel."⁷

Other SFO personnel dealing with Tinsley
According to the Review, Tinsley would communicate regularly with Davis and explained that he believed he could obtain guilty pleas from BAJ and Akle, with Saman Ahsani potentially acting as a prosecution witness. Davis stated the SFO would only entertain this if Saman was to "plead [guilty] to the charges". However as the Review notes, any approach by Tinsley to co-defendants such as Akle and BAJ would be "fraught with risk."⁸ This risk materialised when Davis spoke with Tinsley who told him he was looking to "flip" another defendant and that "his attorney doesn't know this" – a comment Davis communicated to the DSFO. As the Review states, the "news that a non-legal representative was approaching defendants behind their lawyers' back should have provoked immediate action" because "leaving this unchallenged created at least an impression that the SFO encouraged, or acquiesced in, such a course of action."⁹

Davis was the person at the SFO who "retained ultimate control over contact with" Tinsley.¹⁰ The Review details the regular communications that took place between Davis and Tinsley, including calls, meetings and dinners. However Davis did not retain records of most of these communications – despite there being, as the Review noted, a "legal obligation, for all contact to be properly recorded and promptly shared with the case team to be reviewed for disclosure."¹¹ Further, the data on Davis' SFO mobile phone was wiped, an event which happened more than once.¹² This meant all the texts and details of calls Davis had with Tinsley were deleted and could not be retrieved – but as the Review noted this was compounded by the fact that did Davis not maintain written records in his 'daybook' as required.¹³

That such communications were inappropriate was demonstrated when Davis went on leave and his colleague identified as 'D' in the Review took over for that period as the principal SFO contact for Tinsley. D was concerned that Tinsley – who, after all, was acting for a defendant the SFO was investigating but was not his lawyer – wanted to speak to the SFO's Unaoil case team. D rightly refused to allow this and explained that as Akle and BAJ were represented by UK lawyers, it was only proper that the SFO communicate via those lawyers.¹⁴

As the Review observed, if the SFO had followed the approach D set out, it "would have prevented the series of events which eventually resulted in the decision of the [Court of Appeal] in December 2021 [to overturn Akle's conviction] and the subsequent decision to commission [the] Review."¹⁵

The serial failures in communicating with Tinsley
The 'series of events' the Review refers to was the failure of the SFO to comply with its disclosure obligations. Specifically, it failed to disclose the communications between the SFO and Tinsley, despite a specific request from Akle's lawyers, until the Court of Appeal directed it to do so. These communications showed that D's advice (that Tinsley not be permitted to speak with the case team) was not followed. In fact the case team engaged in communications with Tinsley about him seeking to persuade BAJ to plead guilty – even though Tinsley was not acting for BAJ, and the SFO knew that.¹⁶ Members of the SFO case team also spoke with Tinsley about the potential pleas of other defendants.

These communications with Tinsley should not have happened; once they had happened, the Review notes that the SFO should "arguably have reported [these] to BAJ's legal team."¹⁷ However, in a statement that exposed the cultural issues at the SFO (discussed further below), one of the case team expressed regret in communicating with Tinsley but "felt powerless in view of the pressure from above."¹⁸

The Review states that the SFO mis-handled communications with Tinsley at every level – but that many of the problems stem from contact with Tinsley being funnelled through Davis, a member of the SFO's senior management, with very limited involvement of the case team. The effect was that Tinsley "was given, or was perceived by the case team to have been given, the 'seal of approval' of the DSFO and the whole senior management team."¹⁹ When the case team did become involved, it was "faced with, and unprepared for, a very difficult situation."²⁰ Ultimately, however, "the discussions developed in a way which was wholly inappropriate, in so far as it related to other defendants and attempts by [Tinsley] to contact and/or influence those defendants, whom he did not work for and with whom there was a clear potential conflict of interest."²¹

Notwithstanding the mis-handling of the communications with Tinsley, it was only when the SFO was directed by the Court of Appeal to examine the record and provide full disclosure, as it should have from the start, that the full extent of both the contact with Tinsley and the missing records of that contact became clear. As the Review states, "[p]roper record keeping by [Davis] and [the DSFO] or her Private Office would have allowed for a more structured and detailed investigation in relation to the defence disclosure requests, and should have revealed this before trial."²² Such a basic failure of record-keeping by a prosecutor with onerous disclosure obligations indicates deep-seated problems in the broader organisation.

The underlying problems at the SFO

Multiple reviews of the SFO, in 2016 and in 2019, by Her Majesty's Crown Prosecution Inspectorate ("HMCPSI") had identified several key areas in which the SFO needed to improve. In 2019 HMCPSI had produced two reports, one into the SFO's leadership and one into case progression at the SFO. As we noted in a previous article, available here, the review into the SFO's leadership was particularly critical of the SFO, noting that a "culture of delivery" in many cases led to "tolerance of neglectful approaches to management or, in some cases, of unacceptable behaviours". Whilst in 2020 the SFO responded by introducing a three year "Culture Change Programme" and a new "People Strategy", the Review lays bare the negative practical consequences of the poor culture HMCPSI had already identified at the SFO.

The problems leading to the SFO's breach of disclosure obligations in the Unaoil investigation clearly flow from the poor judgment exhibited by SFO personnel, whether the case team or at the highest level, in the form of the DSFO herself and other members of the senior management. As the Review states, the DSFO "made a number of mistakes and misjudgments which, with the benefit of hindsight, she now accepts."²³ However, the Review lays bare the organisational issues that also contributed: the disconnect between senior management and the case team; the failure to follow the SFO's own policies and procedures; and the lack of resourcing at the SFO.

Disconnect between senior management and the case team – different priorities
As already discussed, the case team – or at least one member of the case team – felt there was "pressure from above", i.e. the senior management, in relation to dealing with Tinsley. The Review identifies a fundamental disconnect between the motivations of the case team on the one hand and the senior management on the other: the "case team were working towards being ready for trial, whereas the senior management's priority was fixing the damaged relationship with the US [Department of Justice ("DOJ")] and developing new cases."²⁴

Relations between the SFO and the DOJ had deteriorated due to a disagreement over whether the Ahsanis, who all held British passports, should be prosecuted in the UK or the US. Although the SFO opened an investigation and sought the extradition of the Ahsanis to the UK, this was abandoned following the DOJ agreeing a plea deal with the Ahsanis. Subsequently, the SFO felt it was no longer in the public interest to pursue the Ahsanis. There were also allegations made by the DOJ that the first SFO Case Controller of the Unaoil investigation (since dismissed) had insulted an FBI official whilst having drinks with the DOJ and the FBI in London, albeit a formal complaint about this conduct was only raised two years after the incident was alleged to have taken place.²⁵

Further, the contact and relationship Tinsley had with the DSFO and Davis "clearly exacerbated this level of distrust in the mindset of the case team."²⁶ The case team was clear that the SFO should not be dealing with Tinsley, who was a non-legal representative of a defendant. Due to the influence that Tinsley had over Davis, the case team felt their dealings with Tinsley would be reported back to Davis "and that there would be a degree of pressure applied to them from above."²⁷ However, "no one in the case team had the authority or seniority to 'call this out'"²⁸ – there was no "independent level of scrutiny or control.²⁹

These events led to what the Review described as "a damaging culture of distrust between the case team and senior managers."³⁰ Critically, this led to confusion over the best strategy for the Unaoil investigation – the case team wanted to bring the Ahsanis to the UK to prosecute them, whereas senior management were focused on repairing the relationship with the DOJ, whilst ensuring the Ahsanis faced justice in the US and cooperated with the SFO. One member of the case team told the Review that there was a feeling the case team was perceived by senior management as "difficult and problematic" for questioning the rationale of the senior management's decisions.³¹

Thompson, the Chief Operating Officer, told the Review that a "fundamental issue was the inability [of the case team] to take a wider perspective on the interests of the SFO at the time."³² However the case team was obliged to prosecute the case which had been opened with the approval of the DSFO, against defendants where charges had been brought with the approval of the Attorney General. In this context, the views expressed by members of the case team to the Review about the disconnect with senior management are perhaps understandable.

Failure to follow the SFO's own policies and procedures
The Review observed that the SFO's policies were often not followed, particularly by senior managers and, noted that "there is a question whether, even with guidance, some key players [at the SFO] saw themselves as being 'above the guidance'".³³

We have already highlighted some of the key examples the Review identifies, namely the DSFO using her personal phone and failing to take notes of meetings and conversations; and the Chief Investigator (Davis) failing to maintain "complete and proper records" of his communications with Tinsley and promptly sharing these with the case team. The Review also flagged that a Head of Division at the SFO did not undertake formal case assurance processes, designed to ensure that a case is being managed properly and effectively; and that the case team did not maintain an up-to-date disclosure strategy document.³⁴

Damningly the Review concludes that it was not a lack of policy or guidance which caused the issues in the Unaoil investigation "it was the fact that some individuals were willing and able to ignore it."³⁵

Lack of resourcing at the SFO
The Unaoil investigation was one of the biggest the SFO had on. However many of those working on it had other cases to deal with and so had to prioritise their workload meaning that the "case team came to the disclosure process late". The Review noted many of the emails Sir David and his team reviewed were sent late at night, that key members of the case team worked whilst on annual leave and, in one case, while unwell.³⁶

The conduct of the SFO senior management added to the case team's difficulties – when Akle's defence team applied for disclosure of the SFO's dealings with Tinsley, "the resources then needed to deal with the fallout of the SFO's engagement with [Tinsley] exacerbated an already difficult situation."³⁷

The lack of resourcing impacted on the ability of the case team in often fundamental ways. The disclosure officer, responsible for the efficient management of the disclosure of documents, was also the principal investigative lawyer, who was therefore dealing with other complex legal issues which demanded their attention. This contributed to Akle's trial having to be postponed by 8 months (from April 2019) as the SFO had not completed the disclosure process – indeed, at that point 1,325,480 documents were still "in bags awaiting processing" since December 2017, as well as 218,634 (presumably electronic) documents still to be reviewed following the application of search terms.³⁸

Conclusion – lessons to learn

The Review contains an analysis of various specific events that occurred in the Unaoil case, assessing whether these were: events which were unavoidable; events which, with the benefit of hindsight, should not be repeated, if possible; or events which involved fault on the part of the SFO or particular individuals within it.³⁹ There had been considerable speculation before the Review was published that the DSFO would have to resign – but this approach taken by the Review seems to have relieved that pressure. The Review was also published at a time when the DSFO had only one year of her tenure left to run, which may have been a factor, but questions still remain about the effectiveness of the SFO in combatting complex fraud and corruption.

Regardless, broad lessons for the SFO and indeed any organisation can be drawn from the Review in relation to culture and resourcing.

The Review makes it clear that the culture at the SFO – or at least the culture between the senior management and the case team – was poor and actively contributed to (if not caused) the failings detailed in the Review. This, despite the public statement by the DSFO in September 2020 that the SFO continued its "work to change our culture for the better so that every SFO colleague feels empowered, valued and enabled to make their best contribution."⁴⁰ However it is clear from the Review that this was not the case.

There are lessons here for any organisation seeking to create a healthy sustainable culture. The following are of critical importance.

1. A consistent 'tone from the top'
   This is a much used phrase – particularly amongst regulators and prosecutors. In essence, leadership must demonstrate that they:
   • understand their organisation's prevailing culture – and keep this under regular review;
   • maintain a consistent and visible support for ethics and compliance-related issues ;
   • "do as they say", not "do as they want to do";
   • reward and recognise good behaviour – and act upon poor behaviour at whatever level found within the organisation;
   • maintain an open and transparent culture; and
   • embed systems and processes to support all the above.

   The directive given by the SFO's senior management was wholly inconsistent with the resources and support that was given to the case team; the case team therefore not only felt a disconnect between the management's priorities and theirs, but that their concerns were dismissed when they were raised. This example undermines the SFO's statement in its 2022-23 Business Plan that it is "[c]reating an environment where staff feel safe to question and challenge, [and] empowered to deliver".⁴¹
   

2. Ensuring that a Company's code and policies are mandatory – for everyone
   Everyone in the organisation , particularly the people responsible for setting and approving the internal policies and procedures must comply with them. Nobody – including the CEO or, in this case, the DSFO – is 'above' the 'policies and procedures. After all the policies and procedures are implemented in order to protect the corporate and its employees, no matter the seniority or experience of an employee.
3. A genuine 'speak up' culture
   Staff must feel that they can make suggestions, constructively criticise, be open about mistakes and safely raise concerns including about the actions of the most senior person at the organisation without fear of negative consequences. This was identified as one of the key principles in the 2015 "Freedom To Speak Up" Report into the NHS, which states at Principle 2 that "raising concerns should be part of the normal routine of any well-led … organisation".⁴² Whilst this Report analysed the culture in the NHS, it is equally applicable to any organisation promoting a healthy culture. However, in this instance the Review found that the SFO case team felt their concerns about Tinsley were not taken seriously and that Tinsley had essentially been given the 'seal of approval' by senior management regardless of their (correct) concerns and so could not "shut off conversations with him."⁴³
4. The importance of review and assurance
   An organisation's policies and procedures must be regularly subjected to full and independent review, monitoring and assurance. The Review was clear that policies and procedures did exist at the SFO, including to ensure that people were tasked with appropriate roles and responsibilities, but no one (e.g. an internal audit function) was asking the right questions to ensure that these were being followed.
5. Adequate resources
   There must be sufficient resources – both in terms of budget and technical competence – to meet the organisation's stated mission, and to maintain good governance and fundamental risk management processes. As the Review identified, a lack of resourcing (including of any internal assurance function) can mean that important work can be missed as attention is focused on other issues that are deemed a greater priority. This undermines not only both the effectiveness of the organisation and staff morale, but can result in policies and procedures not being followed, or being short-cut, in an attempt to save money – particularly if this is combined with an under-resourced assurance function. This reflects the conclusion reached by Spotlight on Corruption that while “the causes of weak performance are complex, they would appear to be directly linked to resourcing issues, particularly with regards to the ability of law enforcement agencies to recruit, retain and provide competitive pay to staff.”⁴⁴

The irony is of course that as part of any investigation into a corporate the SFO is charged with determining whether corporates have an appropriate culture that satisfies all these requirements – so as to satisfy the statutory defences of having "adequate procedures" and "reasonable procedures" in place to the offences of, respectively,  failing to prevent bribery and failing to prevent tax evasion.

Boards of corporates should learn from the Review, recognising the importance of culture in managing risk for all organisations. The 'tone', including following policies and procedures, is set by the board and the senior management team. The board must follow the rules that they set; there must be an independent internal function which holds them to account if they do not; and governance and risk management requires investment. Whilst failing to properly embed culture may appear to save money in the immediate term, this can result in huge and costly issues for a corporate in the longer term – as the SFO has itself found out.

¹ R v Akle and Bond [2021] EWCA Crim 1879, paragraph 101.
² Ibid, paragraph 105.
³ Ibid, paragraph 106.
⁴ Ibid, paragraph 108.
⁵ Review, Chapter 1, paragraph 7.
⁶ Review, Chapter 1, paragraph 9.
⁷ Review, Chapter 7, paragraph 52.
⁸ Review, Chapter 7, paragraph 24.
⁹ Review, Chapter 7, paragraph 25.
¹⁰ Review, Chapter 7, paragraph 57.
¹¹ Review, Chapter 7, paragraph 45.
¹² Review, Chapter 8, paragraph 86.
¹³ Review, Chapter 7, paragraph 20.
¹⁴ Review, Chapter 7, paragraph 79.
¹⁵ Review, Chapter 7, paragraph 79.
¹⁶ Tinsley set out his position in written submissions to Sir David – at paragraph 113 the Review noted that Tinsley "told this Review that he did not approach BAJ or [Akle]. He describes any statement that he operated without the knowledge of the legal teams of BAJ or [Akle] as "false". He has said that [Akle] contacted him. He believed that [Akle] shared any discussions they had with his legal team."
¹⁷ Review, Chapter 7, paragraph 111.
¹⁸ Review, Chapter 7, paragraph 112.
¹⁹ Review, Chapter 9, paragraph 26.
²⁰ Review, Chapter 7, paragraph 120.
²¹ Review, Chapter 7, paragraph 119.
²² Review, Chapter 8, paragraph 84.
²³ Review, Chapter 6, paragraph 24.
²⁴ Review, Chapter 9, paragraph 5.
²⁵ Review, Chapter 4.
²⁶ Review, Chapter 9, paragraph 18.
²⁷ Review, Chapter 9, paragraph 29.
²⁸ Review, Chapter 9, paragraph 30.
²⁹ Review, Chapter 9, paragraph 30.
³⁰ Review, Chapter 9, paragraph 16.
³¹ Review, Chapter 9, paragraph 19.
³² Review, Chapter 9, paragraph 21.
³³ Review, Chapter 9, paragraph 13.
³⁴ Review, Chapter 9, paragraph 14.
³⁵ Review, Chapter 9, paragraph 15.
³⁶ Review, Chapter 9, paragraph 6.
³⁷ Review, Chapter 9, paragraph 9.
³⁸ Review, Chapter 8, paragraph 30.
³⁹ Review, Chapter 10, paragraph 5.
⁴⁰ DSFO's speech to the Cambridge Symposium on Economic Crime, 7 September 2020, https://www.sfo.gov.uk/2020/09/07/lisa-osofsky-speaking-at-a-presentation-hosted-by-the-cambridge-symposium-on-economic-crime/
⁴¹ SFO Business Plan 2022-23, https://www.sfo.gov.uk/download/sfo-business-plan-2022-23/. 
⁴² "Freedom To Speak Up" Report by Sir Robert Francis, http://freedomtospeakup.org.uk/wp-content/uploads/2014/07/F2SU_web.pdf.
⁴³ Review, Chapter 9, paragraph 27.
⁴⁴ Spotlight on Corruption, “Closing the UK’s economic crime enforcement gap”, page 12, https://drive.google.com/file/d/1UzymaDZZSVF8By1WYGtahRN-gvBI2R-_/view