Property tycoons launch legal action which could trigger biggest payout in SFO’s history
The Tchenguiz brothers are suing the Serious Fraud Office for more than £200m following the agency’s botched investigation into their role in the collapse of Iceland’s banks.
Robert and Vincent Tchenguiz, who once owned 1% of all the residential property in Britain but lost out heavily in the financial crisis, were arrested in dawn raids on their homes in March 2011. But the SFO was forced to drop its three-year investigation into the pair’s involvement in the collapse of Icelandic bank Kaupthing after it admitted to serious failings.
The brothers on Monday began legal action demanding the SFO pay damages estimated at up to £200m each. If they win the case, which is scheduled for trial at the high court in January 2014, it will trigger the biggest payout in the SFO’s 25-year history and increase the pressure on the agency’s former boss, Richard Alderman.
Vincent Tchenguiz is claiming £200m compensation for having to sack 60 staff and scale back his business interests after his “very public arrest”. He has also submitted a claim for trespass and is considering filing for malicious prosecution, human rights infringements and a claim for “misfeasance in a public office” against the SFO.
After the pre-trial hearing at the high court on Monday he said: “My reputation suffered serious damage during the 15 months between my arrest and the SFO conceding that they had no grounds for holding me as a suspect. Significant financial loss can be proved to have occurred as a result of the reckless actions of the former director of the SFO.”
Robert Tchenguiz has filed for false imprisonment and damages to his business empire. The value of his claim is unknown, but it is understood to be smaller than the £200m claimed by his brother. He declined to comment after the hearing.
The SFO was forced to abandon the UK’s biggest-ever fraud inquiry in October after it admitted to a series of blunders. This summer a high court judge accused the SFO of “sheer incompetence” after it admitted it had “no clear record” of the information it used to obtain warrants to search Vincent Tchenguiz’s home.
At one stage the SFO discussed sending an undercover officer to infiltrate his favourite Mayfair nightclub, Annabel’s, to gather evidence.
The SFO has already been ordered to pay the brothers’ legal fees connected to their successful challenge against the dawn raids.
The agency’s sprawling inquiry into Kaupthing had been dogged by concerns about complexity and cost since intelligence officers started preliminary work on the case almost five years ago. It was the largest, most complex criminal investigation into a financial institution since the SFO examined the 1991 collapse of the Bank of Credit and Commerce International.
Vincent Tchenguiz said the damages should not be paid by the taxpayer alone and added that the “intervention of third parties in this unlawful process warrants further assessment”.
This is understood to be a reference to the role accountants Grant Thornton played in supplying much of the information the SFO relied on for its investigation. In a letter included in evidence filed at the court, lawyers claimed that Grant Thornton made “unfounded allegations of fraud against Vincent Tchenguiz” in “misleading information” the accountants provided to the SFO. The letter added that there was a “serious question” as to whether Grant Thornton “succumbed to a conflict of interest and may have improperly misled the SFO in order to advance their own and their clients’ commercial interests”.
Grant Thornton declined to comment.