Serious Fraud Office Report
| Date | 01 January 1997 |
| DOI | https://doi.org/10.1108/eb025782 |
| Published date | 01 January 1997 |
| Pages | 232-234 |
| Author | Michael Chan |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 4 No. 3 — Investigations
Serious Fraud Office Report
Michael Chan
The Serious Fraud Office (SFO) has received a
larger number of cases for the third consecutive
year. This perhaps reflects the increasingly
common affliction of fraud in England. 1995-96
has provided the SFO with a number of high-
profile cases such as the Barings collapse and the
Guinness appeal. The Barings collapse is still
under investigation.
The Guinness case originated in 1986 when
Guinness plc took over Distillers plc. Part of the
takeover relied upon a share exchange, making
share prices very significant. During the takeover
bid, the Guinness share price rose dramatically.
This was later discovered to be the result of an
unlawful share support option. This option meant
that share support was 'bought' in the form of
indemnities and success fees; using money from
the Guinness fund without Board authority.
Gerald Ronson was such a supporter, purchasing
£25m worth of shares after a promise from Ernest
Saunders of an indemnity and a success fee of
£5m. Ronson had been recruited by Anthony
Parnes who in turn had received a success fee of
£3.35m, arranged by Jack Lyons. Parnes had also
enrolled the support of Ephraim Margulies (chair-
man of S&W Berisford plc).
At trial Saunders denied all knowledge of the
share support operation, while Ronson declared to
the DTI inspectors that he did not realise that his
actions were illegal. Meanwhile Parnes claimed
that he was not acting dishonestly and Lyons
denied being involved in the matter. Saunders,
Ronson and Parnes were all convicted, and in May
1991 appealed against their convictions. The
appeals failed except for one count of conspiracy
against Saunders.
In December 1994 the Home Secretary referred
all four appeals to the Court of Appeal on the
grounds that certain materials were not disclosed
to the defence which may have affected the out-
come of the trial. The materials were with regard
to TWH, a licensed firm of dealers which was
granted indemnities by Henry Ansbacher and Co.
(a merchant bank) of whom Lord Spens was a
director. The TWH material was disclosed to Lord
Spens and Roger Seelig during their trial but not
to the defence counsel of Saunders, Parnes or
Ronson. The appeals were heard in October 1995
and were dismissed in November 1995 except for
count 14 in Lyons's case. The appellants claimed
an abuse of process but the Court of Appeal dis-
missed this, stating that there was nothing in the
circumstances of this case that would render the
use of evidence from the DTI inquiry unfair. It
was further held that the continued use of DTI
inspectors until the police were brought in was not
improper since they were independent of the pros-
ecuting authority. Consequently, they could and
did carry out their interviews without prejudice.
Although it was found that the TWH material
should have been disclosed, this was of no con-
sequence as the defendants would not have
suf-
fered any prejudice. The reason was that the
material would not have produced any credible
evidence that the Guinness arrangements were
accepted or acceptable in the market conditions.
The English legal profession has been described
as one of the most trustworthy in the world.
Indeed, many transactions may partially rely upon
the integrity and honesty of
lawyers.
This integrity,
however, was damaged by Charles Deacon.
Deacon along with James Fuller and an American,
John Savage, were responsible for a fraud of $19m.
His operation lasted four years, covering a number
of European countries. A large part of the money,
$14m, has yet to be recovered.
All the victims required money loans. Deacon
and the other defendants claimed that they had
access to vast sums made available by the US Gov-
ernment. The interest rates offered were extremely
low and no security was required. The only
requirement would be that the first year's interest
be paid in advance. It was claimed that this money
would be kept in Deacon's solicitors client account
and would not be withdrawn until the loan was
made. However, in reality such money was used
almost immediately either for the defendants' per-
sonal use or to repay earlier victims who were
threatening to report Deacon to the Law Society.
The victims were from a wide variety of European
countries such as Germany, Denmark, Finland and
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