Profile: Richard Alderman, director of the Serious Fraud Office

Richard Alderman may yet turn out to be a victim of his own success. Just a
year in office and already the director is overseeing a considerable rise in
fraud suspicions reported and the largest number of active cases in the history
of the Serious Fraud
Office.

Despite his baptism of fire as the new director last year, at a time of heavy
criticism of the SFO, he is now presiding over the highest conviction rate – at
80%, compared to 61% the previous year.

When Alderman joined last April, the SFO had faced a High court ruling that
it acted unlawfully by halting its investigation into a BAE Systems’ arms deals
with Saudi Arabia. The House of Lords later upheld an appeal by the SFO against
the ruling.

Despite the pressure, Alderman says that observing the case’s progress has,
so far, been one of the highlights of his time in office.

‘What counsel were able to do was to explain more about what the SFO had
done, and the lengths it had gone to to be satisfied about the security
assessment.’

Since the ruling, Alderman has been busy radically overhauling the anti-fraud
office’s structure and approach to fighting fraud. He has shaped the
organisation to be more proactive in investigating and convicting fraud in an
effort to speed up the process.

He has also been responsible for modernising the ‘out-of-date’ structure,
where each division was managed by a lawyer, effectively closing off promotion
to other professionals. Recently, Alderman broke with tradition and appointed an
accountant to lead one of the divisions.

It’s not the only tradition he has broken with. Last year he used a Civil
Recovery Order to recover £2.25m worth of unlawful proceeds from Balfour Beatty,
the UK construction company.

It’s the first time the order – a tool that allows the SFO to seize property
obtained by unlawful conduct without going through a criminal prosecution – has
been used against a British company.

In March, the SFO launched its ‘Call Us – because you don’t want us calling
you’ campaign. The paid-for advertising, targeting accountants and lawyers,
works to reinforce the new strategy. By focusing on those closest to management
– professional advisers – it opens up another channel of communication to
business and reminds accountants of their responsibilities.

Key roles

‘Accountants are in a good position to know what’s going on. They play a key
role in protecting the public because of their status and expertise. I want to
help to raise their awareness about what’s happening in fraud and corruption, so
that they can help protect their clients and society,’ says Alderman.

In return, the SFO director says the relationship will be two way by
providing support and advice to the profession. One thing that struck Alderman
when he joined the SFO last year was the lack of information sharing between key
professions such as lawyers and accountants in the fight against fraud.

‘The SFO didn’t really engage with the accountancy profession as a
profession. We’ve got a lot of information here that we can tell people to warn
them. There’s been a definite shift in focus,’ he says.

The increased willingness of businesses to approach regulators to disclose
details of wrongdoing is a sign of the times, but the new approach will take
time to embed itself.

Will Keynon, a forensic accountant and partner at
PricewaterhouseCoopers,
says: ‘The one thing that will be critical to both the SFO and companies is
trust and confidence. The thing the SFO will want to get comfortable with is
that they are being given an accurate picture. From the companies’ point of view
it’s almost a mirror image of those concerns. It’s early days yet.’

Being proactive

It’s not just its openness to dialogue and negotiation that has changed,
either. Alderman has shifted the SFO away from its traditional approach of
waiting for crimes to be reported to it, to actively going out and understanding
where the risks are in order to respond more quickly. ‘Instead of waiting years
to get involved in these cases we go on to them straight away. It’s a very new
approach. I’m pleased with the way people at the SFO have taken to the
approach,’ he says.

An example of the regulator’s new stance is its early involvement this year
in the Madoff affair. The SFO opened an investigation into Bernard Madoff’s UK
business operations in January following receipt of an interim report given to
them by Grant
Thornton, provisional liquidators in the UK.

Another tenet in Alderman’s strategy is to work more closely with his
international counterparts. One of the downsides to economic globalisation is
that crime has gone global too. So, with this in mind, there is much to be
gained, he says, by working with authorities in other countries.

‘There are international implications for virtually every case that we do and
I have met senior representatives in over 100 different countries over the
course of the past year. Building up those relationships in various
jurisdictions is very important,’ he says.

Still, he has not escaped criticism for the shift in focus onto prosecuting
more consumer frauds. His critics argue that the SFO’s budget and resources are
finite and should be targeted towards ‘serious’ fraud, as its name implies.

Alderman argues: ‘People said the SFO is there for big corporate fraud.
That’s right but, if people say it isn’t there for cases with masses of victims,
then I disagree.

‘We will always operate at the top of the market, but there could be cases
with lots of victims – it’s the size of the case that decides it.’

Public service

After years of failed prosecutions, what is important for Alderman is that
the SFO is seen to be returning assets to victims of fraud, as well as securing
convictions.

He says: ‘I want us to be very effective in what we’re doing so that
fraudsters are frightened of us and deterred from committing offences. I want
victims to know that the SFO cares very much about them and is doing everything
it can to get justice for them.’

To these ends Alderman says the SFO is looking at adopting US-style tactics,
such as plea bargaining, to speed up the process of investigation and
prosecution and ‘get results much more quickly’.

It’s unclear whether the rise in suspected fraud reported to the SFO over the
past 12 months is a reflection of its new strategy or a side-effect of the
recessionary times. Typically, incidents of fraud rise during an economic
downturn, as companies struggle to cut costs and individuals are put under
increasing amounts of pressure.

Alderman puts it down to the SFO’s work. ‘The message is getting through. I’m
pleased people are talking to us early.’

It’s difficult to say whether or not the public will remain on message,
though. In the past, corporate fraud has often been viewed as a victimless
crime. TV programmes and films continue to glamorise corporate crime,
reinforcing the widely-held belief that only the con artists get hurt. We only
have to look at the victims of the Maxwell pensions’ scandal to know this is not
the case.

The challenge for the SFO will be to gauge whether behaviour patterns have
changed when the good times return and adjust its model accordingly. It will be
interesting to see how Alderman’s new strategy unfolds over his time in office.

Recent successes

• Last year Balfour Beatty, the UK construction group, was forced to surrender
  £2.25m in unlawful proceeds after an SFO investigation found inaccurate
  accounting practices at an Egyptian joint venture. Balfour Beatty reported the
  irregularities to the SFO and accepted that unlawful conduct took place in its
  subsidiary, which has since been disbanded.
• In April, Newcastle Crown Court jailed five directors of a property
  investment group for defrauding investors of millions of pounds via The
  Practical Property Portfolio companies of Gateshead, which handled buy-to-let
  investments of around £80m.
• The final confiscation order was made in February in the Independent
  Insurance fraud. Philip Condon was ordered to pay £1,280,896.
• Mark Atherton, of St Ives, Cambridgeshire, was sentenced to one year’s
  imprisonment in January at Ipswich Crown Court for his part in a large scale
  boiler room fraud being prosecuted by the Serious Fraud Office.