THE Serious Fraud Office is facing a bill for up to £7 million after being humiliated at the hands of a High Court judge over a botched prosecution against a Caerphilly-based firm.

Mr Justice Hickinbottom slammed the SFO for its 'improper' and 'simply not acceptable' handling of a major fraud case against Celtic Energy Ltd.

Former Cardiff City FC chief executive, Alan Whiteley, and others had been accused of conspiracy to defraud in relation to the sale of four open cast mining sites.

But Mr Whiteley, business colleague, Leighton Humphreys, and lawyers who advised them - including a top QC - were all cleared last year before the prosecution even got off the ground.

In a damning decision, the judge said the SFO's case against them had 'blown with the wind' and was based on inadequate legal analysis.

Describing the case as "quite exceptional", he said the mishandling of the prosecution could not simply be put down to an error of judgment.

The SFO, he added, had 'acted improperly' in continuing to pursue the charges once it became clear that the prosecution was 'fraught with difficulties'.

The charges related to an alleged plot to defraud Neath Port Talbot, Bridgend and Powys Councils, as well as the Coal Authority.

Mr Whiteley, managing director of Caerphilly-based Celtic Energy Ltd, and Leighton Humphreys, its finance director, were prosecuted along with three solicitors and a top barrister.

At the heart of the SFO's case were accusations that the councils' ability effectively to enforce obligations to restore the open cast mining sites to open countryside or agriculture had been deliberately and dishonestly prejudiced by transferring the open cast mining sites to British Virgin Island companies.

All six defendants vehemently denied any wrong-doing and, following lengthy and costly hearings in February and November last year, the prosecution collapsed.

Today, Mr Justice Hickinbottom took the very rare step of ordering the SFO to pay the massive legal costs run up by five of the defendants, including Mr Whiteley and Mr Humphreys.

They estimate their bills at a total of around £7 million, although the precise sums which the SFO must pay have yet to be finally assessed.

Mr Justice Hickinbottom said the SFO's decisions to investigate the matter and bring charges were not themselves 'improper'.

However its refusal to cave in once the fundamental problems in the prosecution case became apparent was.

He added: "It is incumbent upon any prosecutor to mount a charge upon a clear basis, to which the defendant can respond.

"The legal analysis by the SFO throughout this case was inadequate".

"The case presented ...changed with the wind", said the judge, who added that the SFO had sought to maintain the prosecution 'through a number of fundamental changes'.

"It is simply not acceptable for the SFO to pursue a substantial prosecution wihtout having properly tested the legal basis upon which that prosecution is brought".

When the defendants applied for the charges to be dismissed, the SFO had 'acted improperly' in the way it contested their application.

And the judge concluded: "This is a quite exceptional case. This was not simply an error of judgment".