Profile: Richard Alderman, director of the Serious Fraud Office

Richard Alderman, Serious Fraud Office director

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He has also been responsible for modernising the ‘out-of-date’ structure, where each division was managed by a lawyer, effectively closing off promotion to other professionals.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.