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Eversheds

OCTOBER 2013

The Olympus case:

predicting the prosecution

By Mark Surguy, Partner, Fraud & Investigations Group at Eversheds

The announcement by the Serious Fraud Office (SFO) that it is to prosecute not only the Japanese holding company (Olympus Corporation) but also its UK subsidiary (Gyrus Group Ltd) raises an interesting question as to whether predictive coding technology might be at work behind the scenes in cases of this kind.

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iven that this is a criminal prosecution and not a civil case, the Jackson reforms (with their emphasis on getting on top of the documentary evidence early in civil litigation) will not

apply. But could predictive coding change the way that prosecutions like this are carried out? A prosecution can involve just as much, and often more, documentary evidence than a civil case.

The Olympus case concerns a decision by the parent company’s board of directors to cause its UK subsidiary to make substantial payments to entities in the Cayman Islands. The payments were disguised as advisors’ fees but they related to an altogether different purpose. The allegation is that the scheme resulted in two years’ accounts being mis-stated.

vestigation have co-operated with the prosecuting authorities. This undoubtedly means that large volumes of data have been retrieved and handed over (voluntarily or under compulsion), creating the familiar challenge for any investigator or prosecutor of having to wade through ever increasing volumes of information, most likely to have been created and stored in electronic format. One cannot entirely rule out the existence and relevance of paper records (particularly where there has been, as here, an allegation of concealment) and it may well be necessary in the preparation of the prosecution case (and indeed the on-going investigations) for paper records to be scanned into an electronic repository and searched as if they were electronic documents.

It is the false accounting

misdemeanours which have generated the prosecution. The prosecution is under

the

Companies Act 2006 s.501 which creates an offence where false information is passed to the company’s auditors.

SFo Gets on the case The case was referred to the SFO by a whistle blower who handed over some incriminating doc- uments. Once it was decided that an investigation was justified, the SFO would probably have exer- cised its statutory power to call for documents and information. In this case, the companies under in-

The start of an investigation will also have led to the SFO exercising its powers to request mutual legal assistance from overseas’ agencies to obtain evidence in their jurisdictions. One assumes that this would include the Japanese prosecuting authorities who themselves indicted three board members earlier this year. There must have been an investigation taking place in Japan at the same time that the SFO was conducting its investigation.

The investigation will no doubt see the SFO exercising its powers to request mutual legal assistance in the Cayman Islands (where the fraudulent payments were made) and probably in several other jurisdictions as well . This usually takes