Partner Richard Cannon explores Nick Ephgrave’s first probe as SFO Director in Thomson Reuters Regulatory Intelligence

Partner Richard Cannon explores the Serious Fraud Office’s probe into Safe Hands Plans limited, and discusses the significance of this investigation as the first of Director Nick Ephgrave’s tenure.

Richard’s article was published in Thomson Reuters Regulatory Intelligence, 3 November 2023, and can be found here.

News that the UK’s Serious Fraud Office (SFO) has launched a criminal investigation into collapsed funeral provider Safe Hands Plans Limited marks a key moment for its new director, Nick Ephgrave. As the first such probe of his tenure, having been appointed to head the agency last month, Ephgrave needs the investigation to deliver robust results in order to prove that his organisation has moved on from its inauspicious recent history and learned from its mistakes.

Nick Ephgrave succeeded Lisa Osofsky as SFO director in late September, after his predecessor finally fell on her sword following a string of high-profile prosecutorial failings. The catalogue of recent failures includes the 2021 trial of two former Serco executives, which collapsed when the SFO failed to disclose evidence to the defendants. Last October, following the SFO’s mishandling of the Unaoil prosecution which resulted in three quashed convictions, Osofsky had to apologise to MPs on the justice committee over her inappropriate behaviour after she held a private meeting with a middleman employed by Unaoil’s founding family. A report into the Unaoil failings by former director of public prosecutions Sir David Calvert-Smith identified a “damaging culture of distrust” between SFO investigators and senior managers.

Most recently, in March 2023, the SFO dropped charges against three former G4S executives following a ten-year investigation. All three were acquitted after the SFO failed to offer evidence against them and stopped the case because ‘it was no longer in the public interest’.

Given the scrutiny the SFO has faced in recent years as a result of such procedural missteps, Ephgrave will want to demonstrate that he can usher in serious change for the better, and to show that recent calls to increase the resources and manpower of the organisation are justified.

Safe Hands and its parent company SHP Capital Holdings Limited have been under scrutiny ever since the funeral provider entered into administration in March 2022, with up to 46,000 plan holders at risk of losing most of the funds they paid in to cover the cost of their funerals. Subsequent investigations by administrators led to the firm’s former owner being sued for allegedly selling the business in a deal involving customer funds, in what was described in court documents as an “inherently dishonest” scheme. That deal, along with other suspected fraudulent activity, is under the SFO’s spotlight as well, as investigators seek evidence to build a case.

Despite the SFO’s announcement of its criminal probe into the firm, there remains scepticism over the amount of time it took regulators to eventually act despite having been worried about Safe Hands’ operations as early as eight years before its collapse. A month after the company’s formation in 2014, the Financial Conduct Authority (FCA) engaged with Safe Hands’ directors over “concerns about the operations” of the trust in which customers’ funds were held.

The regulators were eventually satisfied by directors’ promises to make changes to the structure and running of the business, which led the FCA to conclude – disastrously as it turned out – that the firm was fit to operate outside the FCA’s regulatory framework. As a result of the company’s eventual implosion, customers are thought to be owed around £70.6 million, but are estimated to only receive around £9 million following the administration.

Administrators have alleged that customers’ money was invested in “high-risk, illiquid” funds in the Cayman Islands, while the trust handling client funds also lent money to a film called, ironically, The Chelsea Cowboy.

With the launch of the criminal investigation into Safe Hands and SHP Capital Holdings, the SFO will use its array of investigative powers to seek further information from banks, stockbrokers and financial institutions with links to the companies, with the intention of bringing a criminal prosecution should the evidence prove strong enough.

Given the timing of the SFO’s announcement, so soon after Ephgrave took up his role, it is likely that the agency were already working in the background on the case. It is also worth noting that this case has been selected as the first announced after the new Director took up his role, given the political sensitivity during the SFO’s transition period after Osofsky’s disastrous reign.

With this new leadership, one of the key issues at the organisation that needs to be addressed is the time taken to conclude investigations; there are a host of reasons the SFO can use for the sometimes eye watering length of time investigations can take until a charging decision is made. Of course, one needs to factor in the extraordinary Crown Court backlog of cases meaning a case is likely to take at least two years to come to trial once charges are brought. However, as a deterrent enforcement agency, the risk is that the longer it takes for investigations to conclude the greater the disconnect between the misconduct alleged and the enforcement action is, and therefore the less effective the agency appears in curbing such behaviour.

Rather than evaluating just Ephgrave’s role in relation to individual cases such as Safe Hands, or whether he proceeds with or drops certain legacy investigations, the whole of the SFO must be judged on how investigations are conducted and whether the procedural failings seen in highly publicised cases in recent years continue under this new leadership. It is vital that the organisation address these concerns if it is to accomplish the Herculean task of trying to restore its credibility as a prosecutor and, as the first challenge of his tenure as Director, the probe into Safe Hands may set the tone for Ephgrave’s SFO.

The cultural failures of the past must be put right, and fast, to inspire confidence that the SFO is fit for purpose.