The Serious Fraud Office faces a £70m claim for damages by Kazakh mining company ENRC on Monday, at the start of a court case that puts the agency back in the spotlight following a series of high-profile failures.
ENRC claims the watchdog mishandled a long-running investigation into alleged corruption at the company and encouraged a lawyer, hired by the company, to break his contract.
The former FTSE 100 miner, which was taken private in 2013 following the allegations of corruption, is suing the SFO for misfeasance in public office and inducing a breach of fiduciary duty, for encouraging the alleged misconduct of Neil Gerrard, a former lawyer at Dechert.
The court will also hear ENRC’s claims that Gerrard cooked up a plan with the SFO to expand the remit of the internal investigation he was leading into a whistleblower’s allegations of corruption, to generate more in legal fees. Gerrard and Dechert are also being sued for breach of their fiduciary duty to the mining company.
The SFO, Gerrard and Dechert all deny the allegations and in their defence have responded with allegations of their own against ENRC, including fraud, bribery and corruption.
The trial is the culmination of a three-year barrage of legal salvos from ENRC as it awaits a charging decision from the SFO, which started its probe in 2013.
ENRC’s claim for £70m in damages from the SFO far exceeds the anti-fraud watchdog’s annual budget although lawyers said an award of that size would be unusual. In 2014, the SFO was ordered to pay property tycoon Robert Tchenguiz £1.5m in damages over a bungled dawn raid at his home, far less than the record £300m in damages he had sought.
The reputational damage for the SFO, were it to lose, could be severe. The agency was dealt a blow last month when its case collapsed against two former executives at Serco, the public services provider — one of a series of high-profile setbacks it has suffered in recent years.
In 2019, a judge threw out the SFO’s case against the last of three Tesco executives, after the other two were cleared in similar circumstances the previous year. Early last year, the SFO lost its case against four Barclays bankers, dating back to the financial crisis, with the final three acquitted early last year.
ENRC’s allegations against Gerrard date as far back as 2010 when he was hired by the company to conduct an internal investigation into the whistleblower’s claims about alleged corruption at one of its mines.
According to the ENRC’s court filings, Gerrard expanded the probe beyond his remit, including by leaking damaging and confidential information to individuals he was close to at the SFO, in order to boost his billings.
Dechert claimed in its court filings that ENRC’s “real complaint” was that Gerrard and the firm “were too successful uncovering wrongdoing by certain of ENRC’s senior officers and executives, and those of its subsidiaries, including corrupt payments to senior government officials in Africa.”
The law firm said Gerrard was duty bound to co-operate with the SFO and to fully investigate evidence of corruption extending into ENRC’s acquisitions of assets in Africa.
In its court filings, the SFO rejected ENRC’s accusations that it built up an investigation on leaked and confidential materials, or that its former director Richard Alderman conducted improper phone calls and meetings with Gerrard.
The SFO said: “We regard ENRC’s case as without merit and will robustly defend our actions.”
Dechert said in a statement: “We stand by the work we did and reject any suggestion that there was any unauthorised disclosure of information to the SFO.”
ENRC declined to comment.
