RETURN ON INVESTMENT: Making litigation pay its way – the IFG philosophy

“Among the global firsts achieved by the International Fraud Group was the development of its R.O.I. approach to asset recovery, first deployed in the late 70’s when instructed by Citibank to recover fraud losses emerging out of their Asian business. This philosophy lies at the heart of everything the IFG does and distinguishes us from any other asset recovery professionals” writes Gary Miller.

The International Fraud Group (IFG) is nearly 30 years old. Starting with just a handful of member firms in London, the Isle of Man, Jersey, Guernsey, the British Virgin Islands and the Cayman Islands, today it has more than 30 members operating in 51 countries, including some of the most challenging jurisdictions.

“In spite of our growth” continues Nuno Santos Costa of Collas Crill, “the group remains a collegiate organisation highly valued for its ability to react within hours in multiple jurisdictions, to freeze and ultimately recover stolen or concealed assets. We’re basically a group of mates, who really enjoy what we do.”

Our origins can be traced back to a significant fraud case in the late 1970’s in which Gary Miller acted for Citibank in Hong Kong. As a result of the success of that case Gary was retained by Citibank and many other banks and insurers when he returned to the UK in the early 90’s. Citibank then asked Gary to bring together a group of international lawyers who shared the R.O.I. approach to asset recovery and understood how to get things done quickly and cost effectively.

What was important to Citibank was the fact that the lawyers were fraud and asset recovery specialists who shared the same approach. The fact that they had a long list of panel lawyers who they used for their day to day work was of little use to the bank as they simply didn’t have the right expertise.

Since then, the IFG has made hundreds of referrals between members, valued at many tens of millions of pounds. Our number includes some of the world’s best international fraud lawyers and a wide range of fraud specialists many of whom have acted for the largest global corporations in some of the most complex cases. By focusing on the economics of asset recovery and the pre-emptive ways of ensuring that there are ample assets secured at the outset of a case to satisfy any judgment obtained, we have changed the way in which fraud claims are litigated and funded.

This novel approach to asset recovery having been deployed successfully in the banking and finance industry was then successfully deployed for Microsoft in the Anti Counterfeiting arena.  Microsoft was facing counterfeiters who were making hundreds of millions of pounds physically replicating Microsoft’s software using machines that were cheap to acquire and located in places where they were either virtually impossible to find or where law enforcement was poor. If these machines were seized or destroyed the same or different gangs would start up business almost immediately as if nothing had happened.

“We persuaded the Anti-Counterfeiting Group in Microsoft to take a totally fresh approach to fighting this type of fraud,” writes Arun Chandrasekharan of Des Gouttes & Associes “which by this time was organised crime’s preferred method of generating cash – even compared to drug trafficking.  We suggested that they focus on the distributors who were making the most money out of importing and distributing the illegal software and who were based in countries where the law was an effective deterrent. We also recommended pursuing the money made by these distributors rather than simply seizing the illegal software which is what their existing lawyers were doing.

“We explained to Microsoft that the only way to stop fraud is to make it uneconomical for the crooks to continue doing it. By using the injunctive tools that we had already developed in acting for banks like Citibank and applying rigorous commercial discipline in the way we litigated, we soon turned the losses made by the company into substantial profits, exceeding the costs of litigation by sometimes as much as 20:1. At the same time we had succeeded in eradicating the illegal counterfeiting activity by destroying the financial resources of the counterfeiters and making it uneconomic for them to continue business.”

In those days the term “litigation funding” didn’t exist and the only way corporates like Microsoft and Citibank could generate the funding required to tackle fraud and asset recovery cases was to ensure that they were creating a pool of money from their asset recovery exercises which they could then use to finance new cases. Both Citibank and Microsoft’s in house investigation groups became independent profit centres for their organisations.

The reason the Litigation Funding Industry has already developed into a multi billion dollar sector and is destined to grow exponentially over the next few years is that the financial services sector realises that litigation and arbitration claims are an extremely valuable asset class.  When professionally and expertly managed, these claims can produce ROI’s which no other asset class can compare with at the moment.

The IFG is actually the only asset recovery network whose mantra is ROI and in these unpredictable markets where huge losses are made in the blink of any eye the IFG is very well placed to provide creative solutions to clients and funders alike.

Gary Miller is the Chair and co-founder of IFG and a partner at Mishcon de Reya

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