After his March foray to the Russian Steppes, leading the SFO Light Cavalry into the Corruption Valley of Death that is the Russian Business Sector, The Man In The White Hat, Richard Alderman, has yet again saddled up and headed West this time for the Badlands of er… Washington DC.
The March trip was all about announcing “The British are Coming” to a Russian business community that were surprisingly receptive if the chatter on the Internet is to be believed. Russia and the CIS seem to be showing a far greater interest in the multi-jurisdictional reach of the UKBA than countries closer to home. I get a lot of correspondence on Social Media from that part of the world asking some very searching questions, which so far I have been answering for free!
Some might say that they have to be more interested, but at least the message is getting home to them.
Not so, much closer to home perhaps. One question I picked up, after the announcement of the Munir Patel prosecution, from a UK business journalist working in India was:
“The SFO and UK government has spent significant resources telling firms in Asia that they’ll be pursuing firms for bribes paid or received. This case (Patel) should not cause sleepless nights for execs at too many non-UK firms – the prosecution is neither commercial, nor extra-territorial. How do you convince firms to prioritise setting aside resources for policies, procedures and their implementation?”
A string of comments followed, effectively pointing out how Section 7 in particular could be used to prosecute foreign corporates with a business presence in UK who had used bribery to secure overseas contracts in competition with UK companies.
That elicited this response from the original source:
“The public interest test will be the one to watch here. Why would the prosecution of a firm across the globe for an act committed in another jurisdiction be in the interest of the UK tax payer?”
My heart sank.
ANSWER: Because the risk of prosecution in the UK courts, (involving confiscation under POCA, class actions by shareholders of losing companies etc etc) would be very likely to deter foreign corporates from using Bribery to secure business in competition with UK companies overseas. (Yes there IS an echo in here.)
So what did our intrepid man with the lasso have to say to the huddled masses once he had cleared Ellis Island? (Am I flogging a dead horse here?)
Well first up was the Trace International Forum at the St Regis Hotel ($400 – $900 per night).
Having (rightly) complimented Trace International for its work in fighting Corruption, he then went on to deliver an update on the SFO’s current position.
80 Frontline staff dealing with a resource of $7.5m, although that “resource” is flexible and he can draft in staff from other areas if needed.
Current anti-corruption work (50 cases) dominated by pre-Bribery Act cases. (We will all please remember that it is NOT retrospective, and can’t be used to prosecute acts of Bribery committed before 1st July this year.)
SFO have to work harder than DoJ on investigations because all have to be fully trial prepared rather than just aiming for Deferred Prosecution Agreements. (But see below for exciting news.)
Good news is that self reporting is on the up, thereby involving less work, (and if MacMillan Publishing is anything to go by, the company pays for the investigation as well as the resulting civil penalty of which the SFO get up to 35%.)
He took the time to point out that our old laws, (still current for pre July 1st offences) have a highly restrictive test for prosecuting corporations. The company is only liable if the most senior members (the directing mind) were involved in criminal activity.
He didn’t go on to deal with jurisdictional issues partly dealt with by the Anti Terrorism Crime and Security Act 2001 Sec 109, so nor will I.
Nowadays, rather than having to prove the Directing Mind test, Section 7 only requires a failure to prevent and/or the turning of a blind eye by an individual.(and so does Section 14 where individual directors are in the frame)
There is a rueful remark about the ability of NGO’s or “interested parties” to play at being awkward squad, such as where impertinent attempts were made to try to force the continuation of the Al Yamamah case, a problem not encountered by the DoJ’s posse in the USA. (and yes, the word “proportionate” makes yet another appearance in this context, for which Teresa May will be most grateful.)
But there was some positive stuff too.
In all three talks, on the 4th (TRACE) and the 5th, (Covington & Burling LLP) & Risk Advisory Dinner (Hay Adams Hotel $465 to $2,695!) he was keen to talk about the Demand side as well as the Supply side approach, which I take to mean, Going After Those Asking For Bribes. (Section 2) – Blame Uncle Sam for the jargon not me, – and this is an SFO joke not a reference to anyone American. (Sorry Tom I’ve done it again, – but there will be a prize for the first person who posts an explanation in the comment section.)
Essentially the SFO are promoting the idea that corporates who experience problems, specifically in terms of requests for Facilitation Payments overseas, should share experiences and anecdotes so as to assist the SFO in a concerted approach to the foreign government concerned.
On a rather different tack, he also homed in on Section 14, which has not had a great deal of air time since the Act came into force.
Offences under sections 1, 2 and 6 by bodies corporate etc.
(1)This section applies if an offence under section 1, 2 or 6 is committed by a body corporate or a Scottish partnership.
If the offence is proved to have been committed with the consent or connivance of—
(a)a senior officer of the body corporate or Scottish partnership, or
(b)a person purporting to act in such a capacity,
the senior officer or person (as well as the body corporate or partnership) is guilty of the offence and liable to be proceeded against and punished accordingly.
(3)But subsection (2) does not apply, in the case of an offence which is committed under section 1, 2 or 6 by virtue of section 12(2) to (4), to a senior officer or person purporting to act in such a capacity unless the senior officer or person has a close connection with the United Kingdom (within the meaning given by section 12(4)).
(4)In this section—
- “director”, in relation to a body corporate whose affairs are managed by its members, means a member of the body corporate,
- “senior officer” means—
- (a) in relation to a body corporate, a director, manager, secretary or other similar officer of the body corporate,
What he had to say was this:
“Let me turn, to the question of personal liability. I know that this is exercising the minds of a number of people. The Bribery Act creates an offence of consenting to or conniving at bribery in respect of senior officers. It is an offence I am very interested in. I want to see suitable senior executives brought to a criminal trial where they know about bribery and have permitted it to continue.
Some have asked me what this means for Directors more generally and indeed non-executive Directors. What does it mean, for example, for US citizens based in the UK who are Directors or non-executive Directors of corporations based in some very difficult countries? Will the Act apply to them? What about UK based senior executives of US corporations? What is their exposure? The Act says that they are within the scope of the offence if they have a close connection with the UK (for example, if they are UK citizens or ordinarily resident in the UK)
These individuals need to consider their own personal liability in respect of what their corporations do. Ultimately, I believe that this is absolutely right. They are responsible individually and with their fellow Directors for the ethical conduct of the corporation. If they are unhappy then they need to consider their position. If they cannot change the corporation’s approach then they may have to resign. If they continue then they run the serious risk of committing a criminal offence under the Bribery Act.”
This will make uncomfortable reading for many and could be construed as growing confidence on the part of the SFO to tackle the bigger fish overseas.
Mergers & Acquisitions, linked as they are to the Private Equity lobby came in for some interesting words of comfort though.
What happens if your Due Diligence unearths a “bribery nasty” lurking in the target company’s books?
“I believe that it is very strongly in the public interest if good ethical corporations take over those with corruption problems and sort out those issues. We all benefit from this. What I want to hear about from the corporation is the work that has taken place to identify the issue and what they propose to do about it if the deal goes ahead. I want to be in a position to give assurance about the approach of the SFO if the corporation does carry out the programme of work that it tells me about. I have found that there has been a lot of recognition of the constructive nature of these discussions”
Not such cheery news on the FACILITATION PAYMENTS front. Legal up to a point under FCPA, but certainly not in the UK.
“Let me turn now to some examples of how the SFO is working with corporations. A lot of this at present concerns facilitation payments. This is something that has been developing in interesting ways and US corporations need to be aware of this. You cannot take comfort from the FCPA exemption and take the view that you do not have a problem if in fact you come under the UK Bribery Act. These payments are illegal under our law and have always been illegal.”
This is the interesting jurisdictional conundrum.
FP’s have always been illegal in UK law. They are Bribes pure and simple.
Under FCPA, payments to govt officials to speed up that official’s duties, “grease payments” are not illegal.
The crunch will come if the SFO seek to prosecute a US Corporate with a UK business presence, if it has paid FP’s to give it a business advantage over a UK company in the context of a foreign contractual negotiation.
It will be no answer in the UK courts for the USA corporate to say, “what I was doing was entirely legal in my own country, and I was not doing it in your country.”
Thankfully he had nothing to say about Corporate Hospitality, (I should think not looking at the cost of rooms in the hotels he stayed in) - so nor will I.
On prosecution policy, we had this definitive statement, particularly in relation to Section 7.
“We are, therefore, looking for cases in which to apply the new law. I have said publicly that a high priority for us will be to find a foreign corporation with a UK business presence that has got involved in corruption in another country and has undermined a good ethical UK corporation. Those corporations have been within the SFO’s reach since July 1st as a result of the new Bribery Act. An English jury will take the view that there is a very clear UK public interest in bringing such corporations to a criminal court. It is a high priority for us.”
“The British are Coming!”
IN OTHER NEWS:
On the 6th October, the Solicitor General Edward Garnier QC suddenly popped up with this. The Government are considering introducing Deferred prosecution Agreements, which the SFO have been crying out for ever since Innospec, BAe Tanzania, and a host of other attempts at plea bargains that went belly up before some very unimpressed judges.
Here is an extract from what he had to say:
¨ The introduction of deferred prosecution agreements (DPAs), similar to those in the US, would provide a more effective approach to dealing with corporate crime in some cases. The attorney general and I are currently engaging with the Ministry of Justice, the Home Office and others in order thoroughly to explore the question.
¨ DPAs are an established part of the US response to corporate crime, encouraging companies to self-report to the Department of Justice. The DoJ typically agrees with a company to suspend or ‘defer’ any prosecution in return for payment of a substantial financial penalty, payment of compensation to victims and the imposition of a regime of corporate monitoring (at the company’s expense) for a period of two or three years.
¨ These are the usual terms of the agreement, but there may be others allowing the prosecutor to keep its flexibility about what is required. If the company complies, the prosecution is eventually dropped at the end of the period. The Treasury benefits, the company can start again and the deterrent effect is significant.
That’s it for now, I shall be delivering a seminar with Dominic Connolly in Chambers at 5 St Andrews Hill on Thursday 20th. Me on the Act and Dom on POCA and FSA Civil Recovery.
I will look soon in more detail at GPT/EADS, The Final Settlement of BAe Tanzania and the Select Committee hearings for which certain people needed very thick cushions, and I will finally get round to some detailed reviewing of Eoin O’Shea’s excellent book on the Act. (Sorry Eoin, I’ve actually been busy in court for once.)