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Costly

3 July 2014

The Serious Fraud Office (SFO) has agreed to a £3m settlement with the business tycoon Vincent Tchenguiz and apologised over the way it raided his properties. It is a high-value reminder that the authorities do make mistakes – and that shrewd legal challenges can obtain justice.

Costly

When the Tchenguiz brothers were raided in 2011, there were no half measures. The SFO believed its investigation was a thorough one and successfully obtained warrants for raids on Tchenguiz properties that involved 135 police officers.

And then things stopped going to plan for the SFO. The investigations were dropped and in judicial review proceedings two years ago, the High Court overturned the search warrants used by the SFO to seize documents and files. The warrants, the court ruled, had been improperly obtained as the SFO had used misrepresentation when applying for them. In court, the SFO received a very public and embarrassing dressing down. It conceded that “serious mistakes were made in connection with the application for search warrants in this case.’’ At that point, it did not look as if the Tchenguiz episode could become any worse for the SFO. But it did.

Vincent Tchenguiz began an action for hundreds of millions of pounds in damages against the SFO. The action included allegations of trespass and false imprisonment and the claim that he suffered significant business losses as a result of the SFO’s conduct towards him. His brother Robert brought a similar action.

In Vincent Tchenguiz’s case at least – Robert is still pursuing the SFO - the matter has been resolved. The SFO has agreed to pay him £3M and a further £3m towards the legal costs of the case. After this, the SFO may be heaving a sigh of relief that they never had to pay the hundreds of millions that Vincent Tchenguiz was originally seeking. But this has been a far from perfect resolution to a chain of events that started when the SFO began looking at his affairs as part of an investigation into the collapse of the Icelandic bank Kaupthing.

The SFO now says that it "deeply regrets" the errors in its handling of the case and has given assurances that they will not happen again. SFO director David Green has commented on his pleasure at avoiding a costly trial, which is understandable, but the fact that his agency has had to make such an expensive and public apology to Vincent Tchenguiz is no cause for celebration.

The SFO had been looking at why huge amounts of money flooded out of the Kaupthing bank just days before it failed in 2008. Vincent Tchenguiz had borrowed £100m from Kaupthing just before its collapse. He and his brother have always denied any wrongdoing and yet the SFO was convinced they could prosecute them. This has proved to be a spectacular misjudgement.

No one can deny that it has ended awfully for the SFO. Many would actually argue that this was the only possible way it could end. Yet if the SFO can learn one thing from this saga it is this: if the authorities do not plan and execute their activities in complete accordance with the relevant law then they can be made to feel the consequences.

This is a principle familiar to defence solicitors – and one certainly not unique to the SFO. It does not matter which agency plans it, a raid is planned and carried out to find material that can assist their investigation. They have, under law, considerable powers when it comes to carrying out raids and taking paperwork, computers and any other material deemed relevant to their investigation. What this latest twist in the Tchenguiz case has emphasised, however, is just how vital it can be for the person or organisation being raided to know what their rights are and what legal limits exist regarding the raiders’ activities during a raid.

Such knowledge is essential if, like Vincent Tchenguiz, you challenge the raiders’ ability to act in the way they did.

In the UK, the majority of search warrants are issued under the terms of the Police and Criminal Evidence Act 1984 (PACE). Raiders’ activities during searches are limited by PACE’s Code of Practice B. The raiding authority must have reasonable grounds for believing an offence has been committed and that there is potential evidence relating to this on the premises they are seeking to raid.

At Rahman Ravelli, our experience in such cases has seen us emphasise to clients that they need to take expert advice and be fully briefed and prepared if they have been given notice (or suspect) that they are about to be raided. Being in a position where a company’s senior figures - including management, computing and accounting staff and heads of security – are fully aware of the legal situation is the ultimate protection against raiders being able to take more from the premises than they are entitled to. Without such awareness, anyone being raided can find themselves both trying to defend their integrity and run their organisation with little or none of the documentation that they need.

If a company wants to prevent this, it needs to be on the front foot from the first moment. From the instant it knows it is to be raided, it needs to be able to check whether the organisation conducting the raid has the legal authority to do so. Swift, early legal challenges are the best way for anyone being raided to hold on to what is theirs. Checking that the search warrant has been issued properly, that it relates to that specific premises and those exact people carrying out the raid are all possible approaches that can prevent any raid going “over the top’’ in terms of how it is carried out. This was seen in R (Cook) V Serious Organised Crime Agency 2011, where the taking of computers and documents by SOCA raiders was unlawful because raiders did not leave schedules to the warrant at the premises, as they should have done.

It may be the case that however well briefed senior staff members have been they may still become flustered when a raid is upon them. In that case, it is a perfectly valid tactic to ask the raiders to wait a short time until the organisation being raided can have its legal representative on site. This can not only provide precious time to gather thoughts and focus on what is happening, it also ensures that a relevant legal expert is on hand to fight the battles for those being raided.

Copying documents that are about to be taken, making notes of questions asked and shadowing the raiders as they go about their work are essential practices that can give those being raided the strongest possible defence against any future charges. Only a legal expert can make clear to raiders what materials – such as confidential communications between a client and their lawyer - are legally privileged and, therefore, off limits to raiders.

Legal battles can be fought and won to reclaim materials taken by raiders that should never have been allowed to leave the premises. But it would be a more efficient use of time if the raiders were told clearly when they tried to take the materials that they had no legal grounds on which to do so. The best tactic that can be used by anyone about to be raided is the simplest one – to use the law effectively and as early as possible to prevent anything being taken that should not be taken. Otherwise, any raided individual, company or organisation will find it incredibly difficult to function normally.

This article has explained why seeking informed, expert legal advice at the earliest possible stage is the surest method of preventing raiders overstepping the mark.  Such advice can prevent abuses or, at least, put them right. Vincent Tchenguiz would surely agree. The law is there to be used to protect such abuses and this most recent, high-profile case is testament to that.

There are many out there in similar situations to that which the Tchenguiz brothers found themselves in. Not every case may be quite so dramatic or involve such large sums. But the principle of using the law to defend what is yours in a raid remains the same in any case, no matter how high or low the amounts of monies involved.


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