Prosecuting UK companies for bribery worldwide

02 / 02 / 2016

The US Department of Justice (DOJ) say that they make $18 for every $1 spent investigating and pursuing breaches of the US Foreign Corrupt Practices Act (FCPA). Having virtually ignored the FCPA for years, the DOJ finally worked out how to monetise its enforcement. The all-time top 10 company FCPA fines and settlements alone brought the US Treasury $4 billion, mostly through deferred prosecution settlements. It is worth noting in passing that of those top 10 companies, 7 were European.

The UK Serious Fraud Office (SFO), in comparison, is a minnow. But it is a minnow with growing confidence and potentially quite sharp teeth. While the FCPA only applies to the bribing of foreign “officials”, the 2010 UK Bribery Act (UKBA) applies to the bribing by a UK connected company of virtually anyone, anywhere.

The beauty of the UKBA, from the SFO’s point of view, is that the SFO does not have to prove that the company ordered, condoned or turned a blind eye the act of bribery. They just have to show that the bribery took place.  The company will then be in breach under the UKBA, unless it can show that it had in place appropriate measures to prevent bribery. Under the old laws before UKBA, to convict a company, the SFO had to prove that someone of sufficient seniority within the organisation could be regarded as ‘a directing mind and will’ for the purposes of the corrupt actions. In other words that bribery went right to the heart of the directing mind of the organisation. This was usually very hard to prove.

Two recent cases show the SFO’s progress, the first under the UKBA and the second under the old rules.

Under the UKBA

  • Late 2015 saw the UK’s first Deferred Prosecution Agreement (DPA) for failure to prevent bribery.
  • The case involved bribery of officials in Tanzania under an agreement entered into by the local subsidiary of Standard Bank. Standard Bank reported themselves to the UK SFO as soon as they became aware of the bribe. Despite their openness and co-operation with the SFO, the aggregated cost to the bank under the DPA was over $32M in addition to other onerous penalties including submitting to and paying for an independent report by PWC.
  • The offence by the bank was not the actual paying of the bribes but of failing to have adequate systems in place to prevent associated persons from bribing.
  • DPAs, familiar in the US, are new to the UK. For further details see ‘UK’s First Deferred Prosecution Agreement reached following a failure to prevent bribery under Section 7 Bribery Act 2010’ below.

Under the old Prevention of Corruption Act 1906 (PCA 1906)

  • A specialist security printing company called Smith and Ouzman Ltd, was recently ordered to pay fines of £2.2m after conviction for making corrupt payments to public officials for business contracts in Kenya and Mauritania. The company’s former chairman and sales director had themselves been convicted at an earlier trial and given prison sentences.
  • The SFO began an investigation, following allegations that the company had won contracts in four African countries (Kenya, Mauritania, Ghana and Somaliland) as a result of paying bribes to public officials between 2006 and 2010.
  • In 2014, the former chairman, sales director and the company agent were all convicted of making corrupt payments totalling £395,074 to officials in Kenya and Mauritania, contrary to the (PCA 1906. The evidence showed emails between the sales director and the company’s agents using the word “chicken” which was said to be code for bribes. Examples included:

‘…they are desperate for the chicken…’

‘…the chickens will fly straight away…’

‘…we will keep our chickens for now…’

  • The former chairman received 18 months’ imprisonment (suspended for two years) and the sales director got three years’ imprisonment.
  • The question was, could a conviction be obtained against the company itself? UKBA did not apply because the alleged offences took place before it came into force. The SFO had to show that the “controlling mind” of the company was involved in some way in the criminal activity. On the evidence, the SFO succeeded. The company was fined £1,316,799, was subject to a confiscation order of £881,158 and required to pay costs of £25,000.

Lessons

  • The SFO is highly motivated to bring UK prosecutions for bribery committed anywhere worldwide by UK companies and by foreign companies with a presence in the UK. They will use the UKBA for offences committed after 2010, which will make prosecutions much easier. For offences committed before UKBA, they have shown that, despite the evidential challenges, they are willing to prosecute both individuals and companies.
  • Companies, particularly those operating in multiple jurisdictions, should take great care to comply with the Act. Your only defence in the face of a possible prosecution will be that you had in place “adequate procedures” to prevent bribery.

iGlobal Law advises global companies on employment and compliance law worldwide.  It is a specialist subsidiary of Wedlake Bell.