Pressure Is on Serious Fraud Office to Raise Its Game in the Credit Crunch; Is America Better Than UK at Cracking Down on Fraud? US Federal Agents with Handcuffed Former Bear Stearns Hedge Fund Manager Matthew Tannin, Centre, Who Was Accused of Securities Fraud in the Wake of the Collapse of the Subprime Mortgage Market in June

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THE dramatic impact of the financial crisis hitting banks and mortgage companies may still be rapidly unfolding, but already the lawyers are busy. The latest Kroll Global Fraud Report published this week shows that the average company loss to fraud has shot up 22% "largely driven by the credit crunch and tough economic climate".

Blake Coppotelli, senior managing director in Kroll's business intelligence and investigations division, warned: "We expect to see this increase further as conditions become tougher for business and the full impact of the credit crunch unfolds." There has been a sharp contrast in the ways the UK and US financial authorities have responded to the crisis in the credit markets. And so it has proved with law enforcement, too.

Britain's Serious Fraud Office (SFO) "uses significantly more resources per case than its New York counterparts and achieves significantly less for its efforts". So said Jessica de Grazia, a former New York senior prosecutor, in a report commissioned by the SFO and the Attorney General.

De Grazia found the comparison "startling".

For example, in a joint US/UK conspiracy prosecution, the District Attorney's office in New York used a team of eight to convict 14 defendants in a third of the time that it took for an SFO team totalling 31 to prosecute four defendants, three of whom were convicted after an eight-month trial.

An important factor contributing to the SFO's low productivity was the English law of disclosure, which de Grazia described as "unfit for purpose". Teams of defence lawyers are tied up for months or even years assessing evidence not needed by the prosecution.

By contrast, New York prosecutors simply hand over the "key to the warehouse door".

De Grazia recommended in June that "serious consideration" should be given in England and Wales to reinstating this policy, scrapped after 1996 to reduce defence costs and thus the legal aid budget. But the idea was immediately rejected by the Attorney General, Baroness Scotland.

Kevin Roberts, a London-based partner in the US firm Morrison & Foerster, says the current disclosure regime is simply not suited to large fraud cases.

"It results in delay, overburdens the SFO and potentially prejudices the defendant. …


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