James Moore: Pursuit of the Phoenix Four is a diversion

Outlook: Nearly a decade ago, John Towers was hailed as a hero as he entered stage left with a bold promise to save Rover as a mass-market UK car maker, something BMW, which knows a thing or two about the motor industry, had conspicuously failed to do.

Ministers duly queued up to shake his hand, only for him and his mates to take the company for every penny they could leaving little more than scraps for the Chinese to pick over.

Now those same politicians want revenge. Unfortunately, it's not proving as easy as they thought. Yesterday it was the Serious Fraud Office that acted as the party pooper by refusing to take action against Towers and the other three members of the "Phoenix Four" who ran Rover into the ground and made a fortune from doing so. The SFO is not an organisation known for being fleet of foot, but it made this decision in less than a month.

It's not hard to see why. What the four did was basically an amoral exercise in asset stripping. As BMW, which handed MG Rover a £427m dowry in return for the four taking it off their hands, said when their egregious seven-figure salaries were made public, they were the unacceptable face of capitalism. Like children handed the keys to a sweet shop, they stuffed their faces. But, sadly, it's hard to see in what respect what they did was illegal.

Not that this inconvenient fact seems to have bothered Peter Mandelson too much. Having failed to persuade the SFO to take action, the de facto deputy prime minister's Department for Business Innovation and Skills (BIS) has now taken the wheel and will try to disqualify them as directors.

Of course, it's worth noting that the BIS used to be the Department of Trade and Industry (DTI) whose inspectors didn't exactly have a great record when pursuing City miscreants. Remember the Mirrorgate share ramping scandal? That investigation took six years to bring two financial journalists to book. Hardly great scalps.

And so successful was the DTI at prosecuting cases of insider trading that the Financial Services Authority had to be handed the baton under a civil regime that allowed it to levy unlimited fines if wrongdoing could be proved "on the balance of probabilities" rather than the criminal regime of "beyond all reasonable doubt".

Given that the case against the Phoenix Four seems to be that they are not very nice, greedy and we don't like them very much, the chances of this lot successfully getting them disqualified does not appear to be terribly high. But what a marvellous way to waste an awful lot of money and keep favoured civil servants and lawyers in jobs.

Disqualification is punishment of a sort, of course. But the four have made their millions. The horses have bolted just as they had when Sir Fred Goodwin was handed that incredible pension under the nose of the City minister, Paul Myners. Of course, the whole thing is little more than a gigantic smoke screen to divert attention from the fact that the Government allowed the Phoenix Four to get away with it in the first place.

Normal commercial judgement was thrown out of the window in favour of a fantasy that said Britain could still have a home-owned domestic car maker. One can only think that this is perhaps exactly what the DTI-commissioned independent report into MG Rover's will say when it gets published.

Lessons need to be learned from this episode, particularly given that the Government is now once again owning businesses thanks to the nationalisation of the banks.

Perhaps we need to look again at a legal system that lets people get away with this sort of thing so often and so easily. That won't be easy, though, and Mr Mandelson seem to think it's preferable to blow as much smoke as he can in the hope of using it to disguise the Government's failings. In the midst of all the sound and fury there is a lesson here for those people calling for more direct government involvement in commerce and industry: be careful what you wish for.