The financial crisis was a catalyst for numerous high-profile white collar criminal cases from Bernie Madoff in the US to the Tchenguiz brothers in the UK. Along with investigations into individuals there have been a multitude of criminal and civil investigations into institutions from Wall Street to the City of London.
The difficulty and complexity of prosecuting white collar criminal cases and pursuing civil regulatory investigations is not lost on the bodies that pursue them such as the Serious Fraud Office in the UK and the US equivalent, the Securities and Exchange Commission. However, when these cases go wrong or they are brought on flawed premises, the damage that they can inflict upon individuals and businesses can be catastrophic despite their innocence.
The recent civil damages settlement between the Serious Fraud Office and the millionaire property developer Vincent Tchenguiz ends a controversial chapter in litigation arising from the collapse of the Icelandic Bank Kaupthing. Tchenguiz is to receive a payment of £6m from the Serious Fraud Office, made up of £3m in compensation and £3m in legal costs, following his arrest and the use of unlawful search warrants to raid his home in 2011.
A judicial review in 2012 by the High Court made clear the “sheer incompetence” of the Serious Fraud Office following its admission that it had kept no clear record of the information used to obtain the warrants for arrest. Both Vincent Tchenguiz and his brother, Robert Tchenguiz, had been arrested. Robert Tchenguiz’s separate claim remains unsettled following his continued claim for £100m in damages.
The Serious Fraud Office is an independent government department responsible for the investigation and prosecution of serious and complex fraud, bribery and corruption. It exercises its powers of arrest and search warrant under the Criminal Justice Act 1987 and under the superintendence of the Attorney General for England and Wales.
The warrants were issued and the arrests made on the basis that substantial amounts of funds had flowed out of Kaupthing mere days before its collapse in 2008, during the midst of the financial crisis. Vincent Tchenguiz had borrowed £100m from the Icelandic bank just prior to its collapse. Both he and his brother, Robert Tchenguiz, have continually denied any wrongdoing. The arrests were made as part of a series of targeted and coordinated arrests on Kaupthing’s former bankers.
The Tchenguiz brothers are Iranian-born British entrepreneurs, whose financial operations include property development and securities trading. Vincent Tchenguiz, whose property investment vehicle is known as Consensus Business Group, maintained that the arrests have severely damaged their business interests and reputation.
As part of the settlement, David Green CB QC, Head of the Serious Fraud Office, apologised on behalf of the organisation and made clear that the Serious Fraud Office would learn important lessons from “errors” made in the initial investigation. Vincent Tchenguiz made clear that he treats the decision and apology as a “total vindication”.
Underwritten by the Treasury, the settlement will be paid out of the £19m of emergency funding the Serious Fraud Office had received earlier this year in order to cover the costs of, amongst other things and the Tchenguiz claims, funding for costly investigations into Libor rigging and Barclays’ fundraising during the financial crisis.
White collar criminal cases are damaging to organisations and devastating to individuals professionally, financially and emotionally. Attending to misconceived investigations at an early stage increases the prospects of resolving matters before they get out of hand. For more information or urgent advice contact David Wheeler.
For business legal advice and more information on civil fraud and disputes with investigations and claims of corporate fraud and disputes, contact us online or call us on 020 7353 1770.
