"The Serious Fraud Office confirms that nothing has emerged which would justify a full criminal investigation in to the affairs of the Equitable Life Assurance Society.” (DN 51)

2. What has emerged should be disclosed. This implies that the SFO is not doing a full criminal investigation of Equitable Life because crimes were not committed. But the Vetting Note indicates that the SFO thinks that crimes were committed:

“93. The Penrose report is very critical of the regulators. The relevance to SFO is that in very many cases transactions, activities and representations which might be considered to be criminal offences were known to the regulators. It is, therefore, likely that potential defendants would raise many defences based on having disclosed what they were doing to the regulators and having received their approval, or at least not received their disapproval.”

3. This is saying the SFO should not carry out a full criminal investigation because ”transactions, activities and representations which might be considered to be criminal offences were known to the regulators” and the regulators are above the law, so there is really no possibility of convictions:

“15. I believe there is no realistic prospect of obtaining any convictions in this matter”

4. Although this is not one of the criteria specified on the website of the SFO:

“The key factors we consider before taking on a case are:

Does the value of the alleged fraud exceed £1 million?
Is there a significant international dimension?
Is the case likely to be of widespread public concern?
Does the case require highly specialised knowledge, e.g. of financial markets?
Is there a need to use the SFO's special powers, such as Section 2 of the Criminal Justice Act?"

www.sfo.gov.uk/about-us/our-policies-and-publications/does-the-fraud-fit-sfo-criteria.aspx.

5. The regulators are not above the law if they act in bad faith. The Financial Services and Markets Act (2000) says:

"291 (1) A recognised body and its officers and staff are not to be liable in damages for anything done or omitted in the discharge of the recognised body’s regulatory functions unless it is shown that the act or omission was in bad faith."

6. Paragraph 49 of the Decision Notice is being used to exclude me from having all information apart from the Vetting Note:

“49. The Commissioner recognises the importance of a public authority such as the SFO being able to secure cooperation with its investigations and accepts that there is at least some likelihood of it becoming more difficult to secure such cooperation if the parties from whom cooperation is sought are concerned that information recording the investigation may be disclosed into the public domain. The Commissioner considers that this is a factor of significant weight in favour of maintenance of the exemption in this case.”

7. This is a new argument, not used in correspondence by the SFO. If crimes were not committed, then I claim this does not apply to any of the information, not only the Vetting Note. It is like an investigative journalist such as Heather Brooke saying she cannot publish her findings because people might not give her information in future. It is sufficient for her not to disclose her sources of information. The Vetting Note was produced internally, rather than coming from "parties from whom cooperation is sought".

8. The SFO should disclose information, without giving sources, if crimes were not committed, but not if crimes were committed, in which case it should do a full criminal investigation. What is wrong is both not providing information and not doing an investigation.

9. The SFO seems to be completely unaccountable about which cases it investigates:

“As public servants, criminal justice professionals must be answerable for their exercise of public power and the expenditure of public resources. Moreover, it is vital for the maintenance of the rule of law in a liberal society that no public or private person is above the law, or seen to be so, in the sense that they can inflict harm without penalty.”

http://etheses.nottingham.ac.uk/545/1/viewpdf.pdf

10. At present they have it both ways, saying we are not going to carry out “a full criminal investigation” because there is no evidence of crime, but we are keeping information confidential because we might prosecute. They can only prosecute after doing a full criminal investigation, which they have decided not to do.

11. In the opinion of the Tribunal have crimes been committed or not? Or to be more exact, is there sufficient evidence of crime to warrant investigation by the SFO?  If I win this case, this implies the Tribunal considers that crimes have not been committed, in which case I should receive the information. If I lose, the Tribunal thinks that crimes have been committed, in which case the SFO should carry out a full criminal investigation.

12. At least the SFO is subject to the Freedom of Informaton Act unlike the Pensions Regulator. An article in the Financial Times (23/05/2011) Regulating the Pensions Regulator says:

"The regulator can become transparent and accountable only if the law is changed to make it subject to the Freedom of Information Act, with a "public interest" argument for releasing details of key decisions."

13. Similarly the Vetting Note is details of a key decision and should not have had to be dragged out of the SFO by the ICO. The decision was made in 2005. So we have had to wait six years for the details. Before it was elected, the Conservative Party pledged to make quangos more accountable. This is an opportunity. The SFO should publish vetting votes, and make available information about the corresponding cases which do not result in a "full criminal investigation".

B. Commission - the reinsurance treaty

14. Equitable policyholders perceive various different kinds of fraud such as:

http://boards.fool.co.uk/definition-of-fraud-8322514.aspx

The reinsurance treaty stands out because it is stated to be bogus by the Parliamentary Ombudsman, and it is commission rather than omission of an act. It prompted my Freedom of Information request. I asked the SFO about this in a letter of 26 January 2010. As I had not received a reply, I made a Freedom of Information on 2 October 2010 asking about how this was progressing (and two other cases):

www.whatdotheyknow.com/request/how_are_my_three_cases_progressi

15. with a reply on 5 October 2010:

“After consideration of the information you have provided to us, we have concluded that this is not a matter which is appropriate for investigation by the SFO. Accordingly, no further action will be taken by us ..”

16. My letters of 26 January and 2 October quoted from the 2008 Parliamentary Ombudsman report about Equitable Life (paragraph 450 in the chapter Findings of fact):

“It follows that the treaty did not constitute reinsurance and therefore could not be taken into account in determining the Society’s long term liabilities."

17. The paragraph continues:

“I consider that the Society should not have been permitted to take any credit for this arrangement in any of its returns for 1998, 1999 and 2000.”

This paragraph says that the reinsurance treaty was bogus and should not have been taken into account in Equitable Life accounts.

18. As I did not get an adequate reply from the SFO, I expanded my request into a Freedom of Information Request for all information, in my letter of 19 October 2010. This expansion has been beneficial, because I obtained the Vetting Note. But this leaves the topic of the reinsurance treaty unresolved. The Vetting Note explains why the SFO did not carry out a full criminal investigation of Equitable Life in general.

19. But I am interested in the specific example of the reinsurance treaty since it is so clearly fraudulent and therefore should have been investigated by the SFO. The Vetting Note discusses the reinsurance treaty in paragraphs 77-81. Since the treaty is bogus, whether or not the side letter was disclosed to the regulator (paragraph 78 and 80) is surely meaningless. It also says “it could also be argued that“:

“80. .. In other words the regulator can not have been deceived by the agreement since they did not understand it.”

20. But they did understand it. The Findings of fact says:

30. This was despite the fact that GAD had identified the potential problems with the proposed financial reinsurance arrangement and had informed the FSA of those problems, recognising that this arrangement had little or no value for the purposes of the determination of the Society’s solvency position.

21. The Treasury Select Committee said in 2001:

“28. Equitable Life told us that the reinsurance treaty was negotiated after full discussion with GAD and "was accepted by them for the purpose intended". .. Sir Howard said that the FSA, which had access to the terms of the reinsurance contract, had also "accepted it". “

www.publications.parliament.uk/pa/cm200001/cmselect/cmtreasy/272/27206.htm

C. Omission - doing nothing

22. The Vetting Note says:

"103. It appears to me, as a layman, that there has been almost complete regulatory failure.”

The problem has been “light-touch” regulation which means the regulators and the SFO doing nothing. The SFO will continue to do nothing as it will never investigate, even though in the Vetting Note it says, as quoted above:

“93. .. in very many cases transactions, activities and representatives which might be considered criminal offences ..”

23. The ICO has prompted the SFO into doing something, that is publish the Vetting Note. The SFO should not be permitted to fall back to sleep, but have to produce further information.

There have been a series of disasters as the result of regulatory inaction in addition to Equitable Life. The largest is the RBS near insolvency. The FSA’s RBS report promised for March has not been published. Nor have reports yet been published into the HBOS takeover by Lloyds and the Bradford & Bingley insolvency in 2008. This is similar to the non-investigation of Equitable Life by the SFO.

24. I claim there is a reason for these non-investigations and non-publications, that is the government is introducing “a new approach to financial regulation” and the industry wants to retain control of the regulators. Proper investigations and publication of reports might result in real reform. Discussion of this topic would take us too far afield. But I will be glad to provide further details. I submitted evidence to the Treasury about this to their consultation about the new approach. This was published together with the other evidence. The 2008 report of the Parliamentary Ombudsman into Equitable Life said:

“The root cause of the problem, in my view, is the failure of the authorities to establish at the outset a single inquiry with terms of reference covering all aspects of the Equitable Life affair, “

25. Why did the government not set up such an enquiry into the RBS bailout? Vince Cable said on television: "I argued in opposition that what we needed was a proper investigation into what were very serious matters." (Sky News on 15/12/10) So now he is in government why has he not set up an enquiry?

news.sky.com/skynews/Home/Business/City-Watchdog-To-Publish-Its-Report-On-Near-Collapse-Of-RBS-In-March/Article/201012315855954?f=rss

26. He was asked twice: “Is the FSA the right body to look into this? Shouldn't we get someone else to do it?" (Channel 4 on 15/12/10) But he did not reply. So his inaction extends to not even answering questions on television, even though in the same interview he said: “I campaigned for openness in opposition and again in government.“

www.channel4.com/news/rbs-collapse-no-blow-by-blow-account

27. The RBS report may be published as the result of a Freedom of Information request:

www.whatdotheyknow.com/request/rbs_report

D. The Response from the ICO (16/5/11)

28. Mr Thorogood makes it clear that the “incorrectly withheld” information in the Decision Notice refers only to the Vetting Note. He says in paragraph 24 that a ground for appeal is that the Information Commissioner ought to have exercised his discretion differently. He should have been firmer and requested all the information. Otherwise information is being withheld by the SFO indefinite for a court case which never takes place because according to the Vetting Note there are unlikely to be any convictions. As time passes there are even less likely to be convictions.

29. I did not say that I wanted to see information about the reinsurance treaty written by the SFO and no other information about the reinsurance treaty, as claimed by Mr Thorogood in paragraph 23 of his letter. In my request of 1 November 2009 I said:

I therefore ask for all written information you have about the Equitable Life collapse, which is not already public, especially anything about the reinsurance treaty and written by the SFO.

"Especially" is not a request for information, excluding other information. I was only trying to be helpful by saying which information most interests me. I would also like to receive information about the reinsurance treaty not written by the SFO, and any other information relating to the Equitable Life collapse.

E. Conclusion

30. I have received the Vetting Note which is official confirmation of ("might be considered") fraud. I am grateful for this, but what happens now? Is this to be left uninvestigated? The next step seems to me to be to obtain information about the reinsurance treaty. I would be grateful for further help from the ICO. Perhaps the SFO could be asked to provide a further vetting note explaining why it is not investigating the reinsurance treaty? The reasons given in the Vetting Note mentioned in paragraph 19 above are I claim invalid.

31. This is an open letter. It has been posted on the Motley Fool website on the Equitable Life discussion board at:

http://boards.fool.co.uk/the-letter-slightly-changed-is-at-12264847.aspx

Yours sincerely,

Stephen Wynn