Former DPP attacks Serious Fraud Office over Tchenguiz brothers

The Serious Fraud Office was accused today by a former prosecutions chief of “blatantly untrue misrepresentations” to a judge when it applied for search warrants of the Tchenguiz brothers’ premises.

Lord Macdonald of River Glaven, former Director of Public Prosecutions, said that the SFO was guilty of presenting a completely false picture when it obtained warrants for its dawn raids on premises of the Tchenguiz brothers.

The QC, who is acting for Robert Tchenguiz, said that the SFO had alleged that nearly £1 billion had been taken out of the collapsed Icelandic bank, Kaupthing, and put into their hands — although the SFO investigation had failed to identify any evidence for the transfer.

He said: “This was a startling misrepresentation which was completely untrue and for which the SFO had no evidence whatsover.

“It was an unforgiveable assertion in the context of the... proceedings [at which the brothers were not represented],” he added.

Lord Macdonald was speaking on the second day of a judicial review challenge by the brothers against the SFO over the arrest warrants which they want declared unlawful and quashed.

The agency has admitted that it made “substantial errors” and acted unlawfully over the warrants, and on Monday announced that it was reviewing its criminal investigation into Vincent Tchenguiz although that against Robert is still continuing.

The former DPP went on to accuse the SFO of a series of failures to disclose material to Judge Worsley when it obtained arrest warrants last year.

One involved a meeting between Richard Alderman, then SFO director, and lawyers from Burton Copeland, making clear that Mr Tchenguiz was offering co-operation in any investigation, Lord Macdonald said.

That meeting, in the presence of Ian Burton, a leading fraud solicitor and another solicitor, was something that the judge would obviously want to have known about — and it was “unfathomable” that it was not, he said.

No explanation had been given for non-disclosure, other than that Mr Tchenguiz had not formally instructed Mr Burton at that stage, But he had indicated that he would do so — and indeed did — if he formally became a suspect.

“This was material non-disclosure,” Lord Macdonald told Sir John Thomas, president of the Queen’s Bench Division, who is sitting with Mr Justice Silber.

“And the director of the SFO must have been aware that his personal face-to-face meeting with Mr Burton had not been revealed.”

Despite the duties on the SFO to check the accuracy of the material placed before the judge to secure the warrants, the facts were not checked, he said, which “beggars belief”.

As a result, the judge was presented with a document that contained “inaccuracies, misrepresentations and outright falsehoods”.

Fourteen months after Mr Tchenguiz’s arrest it has emerged in court this week that the entrepreneur was being investigated for “basic theft” of assets from Iceland’s now collapsed Icelandic bank.

The SFO obtained search warrants on the basis of allegations that Mr Tchenguiz had replaced valuable assets, used to secure 36 money market loans totalling £343 million, with payment-in-kind notes that were “virtually worthless” days after the collapse of the bank.

The SFO also claimed that before the bank’s collapse in 2008 a £46 million bad debt owed by a company controlled by Mr Tchenguiz was “concealed by a dishonest accounting device”. It also alleged that a £639 million overdraft facility from the bank was lent against Mr Tchenguiz’s “Oscatello” vehicle — a group of companies — “even though Kaupthing officials knew that the structure was insolvent”.

The SFO’s claims against Mr Tchenguiz, who has kept a much lower profile throughout this fight to clear his name than his brother Vincent Tchenguiz, were revealed on the first day of a judicial review hearing into the conduct of the fraud agency.

Lord Macdonald said that all claims against the entrepreneur had been entirely miscast, misrepresented and were “demonstrably inaccurate”.

He said that many of the actions under investigation, which have been attributed to Mr Tchenguiz, had in fact been carried out by Investec, an independent trustee of the Tchenguiz Discretionary Trust whose ultimate beneficiary is Robert Tchenguiz.

Lord Macdonald asserted that the role of Investec had not been fully understood by the SFO, which believed it was “a fig leaf trust conducting fig leaf functions” at the behest of Mr Tchenguiz and for his financial benefit.

He also said Investec’s role in the transfer of collateral was also not made clear to the judge who originally granted the search warrants last year.

“Investec was airbrushed out of it as if it was not independent and all its actions ascribed to Mr Tchenguiz, which had a slurring effect,” he said.