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ENRC's challenge to the Serious Fraud Office

The SFO's new director Lisa Osofsky must resolve the issue appropriately, says Alistair Graham, partner and head of white collar crime at global law firm Mayer Brown.

Kazakh mining group ENRC, which has been under investigation by the Serious Fraud Office (SFO) since 2013, has launched a fresh bid to halt corruption charges brought against the company.

Attempting to frustrate a criminal investigation of alleged corruption in its African business, the former FTSE-100 company has applied to the High Court for a judicial review aiming to force the SFO to reinstate an independent review of its investigation.

The SFO announced it was dropping the independent investigation earlier this year following claims that it had been made redundant by civil court action.

ENRC, which mines aluminium, copper and cobalt in the  Democratic Republic of  Congo (DRC), de-listed from the FTSE in 2013 following allegations of poor corporate governance – around the same time that the SFO opened a criminal investigation into  the company over allegations that ENRC paid bribes to acquire African mining rights.

The SFO will have been expecting ENRC’s application for a judicial review  –  or at least something similar to that effect –  following warning letters received by ENRC’s lawyers. The order that has been sought by ENRC also prevents the SFO from bringing corruption charges before the independent inquiry reveals its findings.

Specifically, it was alleged that the SFO had unsuitably collected evidence upon its investigation into ENRC – now privately held by three Kazakh tycoons – with regards to “allegations of fraud, bribery and corruption around the acquisition of substantial mineral assets”.

In its claim for judicial review, ENRC explained: “It would be unlawful for the SFO investigation team to take any charging decisions arising from or in relation to criminal investigation  without  getting to the bottom  of  the serious concerns of wrongdoing”.

The independent inquiry halted in June this year, when the agency was sued for £70m by ENRC for compensation for legal costs which were amassed as a result of the original SFO investigation.

The argument put forward by ENRC centered around allegations that the SFO was guilty of various breaches of process and in particular that they did not respect ENRC’s right to legal professional privilege.

In  addition to  this, ENRC alleged  that  the organisation had failed to act in good faith; that it did not act objectively or independently; and nor did it even attempt to preserve the evidence.

The SFO’s view was that with all the ongoing civil proceedings, it would further stretch public resources unnecessarily if they were  to conduct an independent inquiry alongside it.

ENRC has been embroiled in a string of investigations recently, including making an application for discovery alleging that former deputy prime minister Nick Clegg, requested a briefing on a probe into the mining company shortly before his wife’s old law firm began working with the firm.

It was understood that ENRC was trying to ascertain whether one of the partners at the law firm had abused his alleged relationship with Mr Clegg with respect to ENRC.

Earlier this summer, ENRC brought proceedings against Akezhan Kazhegeldin, who used to be prime minister of Kazakhstan, accusing him of acquiring confidential and privileged information regarding the mining company before disclosing it to the firm’s adversaries – including the SFO.

It was alleged that Mr Kazhegeldin had a business agreement in place with a computer forensics expert who had once  been  contracted  with  ENRC on IT (including collecting forensic  data)  matters. It was alleged that during said business engagement, the  IT expert had gained  access  to a large amount  of confidential  information from ENRC’s computers and retained it unlawfully after the IT expert’s assignment was completed.

There were further allegations that Kazhegeldin had a hand in encouraging the SFO to continue its probe into the mining company.

ENRC has been embroiled in a number of litigation proceedings lately, and it will be a test of endurance for the SFO’s new director, Lisa Osofsky, as to how she will deal with the allegations that keep coming up against the SFO. As the SFO’s resources continue to be tied up in the ENRC saga, Ms Osofsky will to resolve this matter which has been ongoing for some years.




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