Cooperating witnesses and flipping informants - Can the UK's Serious Fraud Office provide a panacea from prosecution?

The Director Nick Ephgrave's latest comments on whistleblowers and cooperating witnesses might give those with knowledge of or implicated in serious fraud, bribery and corruption pause for thought. Suzanne Gallagher from our white-collar defence and investigations team takes a closer look at what might be on offer when it comes to cooperation and immunity. 

Is the Supergrass always Greener?

In October, the Serious Fraud Office's Director Nick Ephgrave sat down with the Guardian newspaper in what made for a candid and wide-ranging interview to mark the end of his first year in office. In the interview, he made a disclosure: the SFO has granted immunity from prosecution to an individual who assisted the agency in one of its investigations. Assisting a prosecuting agency in this way is formally described as providing "King's evidence". Colloquially, they are often known as a supergrass. 

Covert Surveillance and Flipping Defendants

Mr. Ephgrave went on to outline the SFO use of 'covert means to gather evidence on someone' to then offer them 'a lesser charge or even immunity from prosecution in return for their assistance'. The goal in doing so is 'gathering evidence that can help secure other convictions.'

Later in the discussion, he describes how incentivising individuals by way of 'US style' payments to informants that provide 'smoking gun' evidence would be attractive if it was within his gift. He believes if he had these powers, the quality of evidence available would only serve to speed up investigations.

In a more recent interview with the Times, Nick Ephgrave made it clear that his view that 'informants should receive financial rewards for information that leads to a conviction for economic crime.' In considering the approach to be taken, he suggested looking to the US. He described in detail the nature of such cooperation, how it is 'helpful to have someone on the inside' who knows 'where the nuggets are hidden.'

In a LinkedIn Post from the Serious Fraud Office page published as a follow up to the Times article, the agency's social media team describe how incentivising whistleblowers would create a 'virtuous circle' with more guilty pleas and less fraud. According to the post, since 2012, more than 700 UK whistleblowers have worked with law enforcement authorities in the United States.

Surveillance Tools

The current SFO director is not the first in office with grand ambitions when it comes to intelligence gathering and offering immunity. One year into her tenure as Director, his predecessor Lisa Osofsky described her own desire to give cooperating offenders two stark options: 'spend 20 years in jail for what you did or wear a wire and work with us.'

When it comes to existing powers, what the SFO Directors (both past and present) are referring to is the use of surveillance to gather intelligence that will then assist with the recruitment of informants. The suggestion is that immunity from prosecution might be on the table if the informant were to assist with the SFO investigation. 

The SFO has at its disposal the ability to gather information on a target using specific covert surveillance techniques. The agency's power, and the limitations on that power, to engage with these types of investigative techniques can be found primarily in the Regulation of Investigatory Powers Act 2000 ('RIPA'). Other relevant pieces of legislation are the Police Act 1997 and the Investigatory Powers Act 2016. 

Directed surveillance is the most common form used by law enforcement bodies for the detection of crime, and subsequently as evidence. Directed surveillance takes place within a public or quasi-public space, or where the tools used for surveillance are remote from the physical location of the suspect. Directed surveillance can only be authorised if it is both necessary and proportionate. Authorisation for this type of surveillance within the SFO can be given by 'designated members of the Senior Civil Service', normally a case controller.

Surveillance is deemed intrusive if it takes place either in a residential premises or in any private vehicle, or if it either involves the presence of an individual on the premises or is carried out by means of a surveillance device. Intrusive surveillance can only be authorised by the Secretary of State or a senior authorising officer. The list of senior authorising officers is detailed at section 32(6) of RIPA and includes the director of the SFO. In authorising intrusive surveillance, the SFO Director must also take into account whether the intrusive surveillance is both necessary and proportionate. To be necessary, the surveillance must be in the interests of national security, preventing or detecting crime or the economic well-being of the UK.

'Wear a wire and work with us'

The definition of a Covert Human Intelligence Sources (CHIS) includes a suspect who has been incentivised to wear a wire or other recording/surveillance device in order to gather intelligence that will assist investigators. The SFO is one of over 30 authorities capable of authorising a CHIS but can only do so in strict conditions in what can be described as a two-stage process with judicial oversight. The authorisations do not take effect until a relevant judicial authority (a justice of the peace in England and Wales) has approved the grant of the authorisation. This approval can only succeed where the judicial authority is satisfied that: -

1. At the time of the grant, there were reasonable grounds for believing that the requirements for the original authorisation were satisfied in relation to the authorisation, and the relevant conditions were satisfied; and
2. At the time when the judicial authority is considering the matter, there remain reasonable grounds for believing that requirements for the original authorisation were satisfied in relation to the authorisation.

'I can actually…. authorise immunity from prosecution'

Immunity for cooperation is possible with the application of the provisions set out in section 71, Serious Organised Crime and Police Act 2005 ('SOCPA') which allows for specified prosecutors to offer immunity notices.   If a person is given an immunity notice, no proceedings for an offence of a description specified in the notice may be brought against that person in England and Wales or Northern Ireland except in circumstances specified in the notice. For an immunity notice to be in contemplation, an informant must provide nothing short of a full confession. In what is described as the cleansing process, undertaken by way of an interview under caution, they are expected to make a full admission of guilt.  They will also be asked to provide all information available to them and waive privilege in respect of matters under investigation.  

The cooperation will be continuous and run through to the conclusion of proceedings. It may include giving evidence under cross examination at trial; this will be a long and protracted process given the endemic delays in the criminal justice system. A chronic shortage of judges coupled with an underfunded system means some defendants facing charges brought by the SFO are waiting three years for their case to be heard.

Known unknowns

Cooperation and financial reward for whistleblowing is par for the course across the pond. In his commentary to the Guardian and the Times, Nick Ephgrave is likely to be referencing  the Dodd Franks Act which makes a whistleblower eligible to claim between 10-30% of a fine if it is original information that leads to successful enforcement action and a fine of over $1 million USD. 

What makes coming forward as a whistleblower in the US potentially unattractive is the uncertainty around whether payment will be forthcoming and when it will come. In 2019, only eight of the 5,212 SEC whistleblowers received any reward. A reward scheme based on securing successful outcomes is not a quick fix, with contested prosecutions often taking years to come before the courts on both sides of the Atlantic.

What makes immunity under SOCPA unattractive is the devastating consequences that come with a perceived failure to commit fully to this process. If something comes out in the wash that was not disclosed in interview, there are serious repercussions for the informant which may include the revocation of the immunity notice and prosecution for what has been admitted. What was once a shield can become a weapon. 

Furthermore, where there is a multi-jurisdictional element to the investigation, an SFO immunity notice does not provide immediate protection from prosecution overseas. A cooperating suspect can ask enforcement agencies elsewhere to recognise the immunity notice, thereby relying on the principle of autrefois convict, ne bis in idem. Such protection is not guaranteed and seeking support from the SFO in securing separate agreements with its counterpart agencies where they may open parallel investigations is essential. 

Getting off scot-free

What cooperating suspects must also consider is how they will feel if their co-accused are not charged or, if charged, are ultimately acquitted. There is precedent in the UK of the cooperating suspect ending up being the only person left on the hook for the crime. In the case of R v Snee, Mr Snee cooperated with the Competition and Markets Authority, pleaded guilty to a cartel offence, gave evidence at trial against two co-accused and received a suspended sentence. His two co-defendants were however acquitted at trial. It was Mr Snee who had to live with all the adverse consequences that follow a conviction, including serving a suspended sentence with conditions, reputational harm, potential barriers obtaining future employment and visas to travel overseas.

'US-style' payments 

The SFO director anticipates that the introduction of whistleblower incentives would expedite matters for his prosecutors. Those who are implicated may conclude 'I’m a dead duck' and choose to offer an early guilty plea.  

On 1 August 2024, the U.S. Department of Justice ('DOJ') launched a new pilot whistleblower programme. Under that programme, whistleblowers can receive up to 30% of the first $100 million in net proceeds, forfeited as a result of the tip, as well as up to 5% of any net proceeds forfeited between $100 million and $500 million.  A whistleblower is not eligible for this program where they meaningfully participated in the subject criminal activity. The DoJ have confirmed that this means if the whistleblower orchestrated, executed, led, or knowingly profited from the criminal activity. If a whistleblower reports and is subsequently found to be implicated in the alleged criminality, they face similar risks of prosecution with no financial reward or protection.

Benefits for the SFO

SFO prosecutions inevitably involve the interpretation of a wealth of complex material. Piecing together what happened based on documents, email trails and transactional data leaves gaps that can be interrogated by defence counsel, often leaving a jury with that kernel of doubt that is enough to secure a not guilty verdict. 

For Nick Ephgrave, whistleblowers and informants might offer assistance in bringing these two-dimensional documents to life. What he is banking on is fraudsters sharing their illegal activities with innocent bystanders, not only their co-conspirators. What he might find is that the whistleblower ends up being interrogated by defence counsel on how they came to know of this information, and the prospect of receiving attractive financial rewards where their evidence to secure a conviction. Whether a British jury will be convinced following this scrutiny under cross examination remains to be seen. 

The challenges the SFO face in securing convictions against individuals are well documented. To date, the SFO have been unable to secure the conviction of any individual following the approval of Deferred Prosecution Agreements ('DPA') between the SFO and a corporate entity. The SFO director's view is the carrot and stick of a financial reward for cooperation and immunity from prosecution should be considered. If such incentives are adopted, engaging with the SFO will require careful consideration given the inevitable risks and potential rewards associated with such a tempting offer. The road to hell is paved with good intentions.