By Estelle Shirbon
LONDON (Reuters) - One of Britain's biggest corruption trials in years came to an abrupt halt on Tuesday when the Serious Fraud Office (SFO) called off the prosecution of businessman Victor Dahdaleh in a further setback for its already tarnished reputation.
The SFO had accused Dahdaleh of paying some $67 million in bribes to former managers of Aluminium Bahrain (Alba)
The case had involved allegations of corruption at senior levels of government and business in Bahrain, a sensitive issue at a time of political unrest in the secretive Gulf kingdom.
But the SFO's lead counsel told a London court there was no longer a realistic prospect of conviction after a key witness changed his evidence and two U.S. lawyers who had played a crucial role in the case refused to testify in court.
The sudden collapse of Dahdaleh's trial, which began on November 5 and had been expected to run into 2014, followed costly blunders by the SFO in other high-profile cases that had piled pressure on the agency to deliver notable convictions.
"After careful consideration of all the circumstances of this case, the SFO has concluded that there is no longer a realistic prospect of conviction," Philip Shears, lead counsel for the prosecution, told Southwark Crown Court.
With the SFO not presenting any evidence, the judge instructed the jury to return verdicts of not guilty on all eight charges. The jury was then discharged.
Addressing the jurors before discharging them, Judge Nicholas Loraine-Smith said he had asked the SFO to reconsider its position on Thursday after becoming concerned about a particular aspect of the case.
He reminded them that an SFO witness, case officer Sasi-Kanth Mallela, had told the court that the agency had effectively delegated its investigative duties in Bahrain to lawyers from the U.S. firm Akin Gump, which acts for Alba.
CONFLICT OF INTEREST
The judge said these lawyers were representing Alba in a "hotly contested" U.S. civil lawsuit against Dahdaleh, raising a potential conflict of interest between their assistance to the SFO and their own interests in the U.S. legal action.
Shears said Dahdaleh's defense in the British criminal trial had called their motives into question and it was therefore essential to the fairness of the trial that they should make themselves available for cross-examination by Dahdaleh's team.
"Their refusal to attend creates a situation where the trial process cannot remedy the position," Shears said, adding that SFO Director David Green had personally called the chair of Akin Gump to try and secure their attendance, to no avail.
Emails and telephone messages from Reuters seeking comment from Akin Gump were not immediately answered.
Shears said the other main reason for the SFO's decision was that Bruce Hall, a former CEO of Alba who had pleaded guilty to a conspiracy to corrupt with Dahdaleh, significantly changed his evidence in court compared with what he had said in his witness statements to the SFO.
Outside court, Dahdaleh's lawyer Neil O'May told reporters it was an emotional day for the 70-year-old businessman, who was "overwhelmed and relieved" by the not-guilty verdicts.
"He is concerned, and wishes those who have a supervisory role, within the SFO and outside, to consider how it was that part of the investigation was outsourced to a firm of American lawyers who refused to attend court to give a full account of their involvement," O'May said.
Dahdaleh admitted making payments to Alba managers but pleaded not guilty, citing "principal's consent", a defense available under Britain's Prevention of Corruption Act 1906.
In essence, his defense was that the payments were known of and approved by those in authority at Alba and in the Bahraini government and were part of Bahraini custom and practice.
Dahdaleh was charged under that old law because the alleged offences pre-dated the Bribery Act 2010, under which the "principal's consent" defense is no longer available.
The collapse of the trial comes at a critical time for the SFO director. Green, who joined the demoralized and underfunded agency with high hopes in April 2012, knows he needs big convictions to cement his reputation and help instill faith in a government agency that has faced calls for abolition.