Time to Stand Up for the Little Guys (& Girls)

Avid readers of this Blog, (aka gluttons for punishment) will remember my outburst last year. “Government Declares Bribery Not an Offence!”

The tenor of that little tome was to the effect that however sexy the Bribery Act 2010 might have been, it was not perceived as having much relevance, or bite, to the average Jo.

A well respected criminal QC, and good friend of mine, has described it in an article last year as a “Toothless Wonder.”

Much of the cynicism has arisen as a result of the common perception that the SFO being the principal prosecuting authority under the act, has a) no interest in, and b) no budget for, prosecuting anything but the most headline grabbing, stone cold bonkers cases that they can’t possibly lose.

There were dark mutterings from the departing Director that they were hot on the tails of a number of cases, but for now, Mum’s the word. We all await developments on that, especially in the light of the new Director’s protestations that the future of the SFO is secure, and, by implication perhaps, prosecutions are just around the corner. (So’s my Taxi apparently)

To be fair to David Green QC, as a lot of people have been pointing out, it takes time for any substantial case to be detected and investigated to the point of charge, and not being retrospective, the Bribery Act 2010 cannot apply to any act of Bribery committed before July 1st 2011.

The one single exception was the case of Munir Patel. Small Bribery if ever there was. Requests for the effecting of an improper performance of his function at £500 per time, most of which had occurred before the act came into force, but it gave the opportunity for the DPP, (NB, not the SFO) to flex his muscles and launch the very first Bribery Act prosecution.

What has happened since? Nothing but a deafening silence.

Are we to believe that no single act of Bribery, by way of offer nor request, has occurred anywhere under the jurisdiction of the Act since July 1st 2011?

Of course they have. Probably every day, but none that any public body has seen fit to investigate or prosecute. a) because they are not interested, and b) because they don’t have the money.

And yet every day of every week, in one small or not so small way, large numbers of people are suffering from the effects of bribery in circumstances that prosecutors should be taking action to protect them.

If a small shopkeeper catches someone shoplifting, and has a cctv film to prove it, then any police officer or CPS lawyer would be hard put to argue that they could not be bothered to prosecute. The public, and small shopkeepers deserve to be protected from petty criminals, which is a very important reason for the existence of the Theft Act 1968. If such offences were ignored by the authorities, a lot of small businesses would go out of business.

At least you can insure against Theft or Burglary from your premises.

So why does the same not apply to the Bribery Act?

There cannot have been a day in the months since last July when some small business has not lost a contract to a competitor as a result of behaviour by that competitor which contravened the Act.

Pundits at the time, (including the MoJ) were only too ready to declare that everyday hospitality would not offend against the act, with a whopping great hint that any hospitality would have to be well over the top before attracting the SFO’s attention. Multi Million pound “commissions” for securing Infrastructure or Armaments contracts at the very least.

So it’s one law for the rich, and no law for everyone else.

Not everyone really gives a Tuppeny Tortilla about what WalMart have been up to in Mexico, it is quite literally half a world away, yet it has grabbed all the corruption headlines here and in the USA.

Consider the fate of Average Joe with his small family firm, producing Widgets in his home town, employing as he does, a significant number of the local population. They rely on their jobs to pay their mortgages. Other local businesses in turn rely on them to spend their wages locally, to support each other.

There are bigger companies up the scale producing similar widgets, who are better placed financially to secure contracts to supply them to a customer, not because they necessarily produce a better product, but because they have more resources to “promote” them.

Having more money to pay more talented salesmen is one thing, but using more money to grease palms by whatever means, is quite another. Over lavish promotional parties or gifts, the Mulberry Pens on the table for the promotional event etc. Where is the line to be drawn?

There could be a very simple test. Suppose Average Joe does not win the supply contract. A month or so later he’s at a function attended by the purchasing manager of the firm who did not buy his widgets. Joe asks straight out why he lost the deal. Purchasing manager replies, “well your widgets were just as good. In the end my wife was particularly pleased with the Louis Vuitton bag they sent her for Christmas, Frankly that’s what swung it.”

The widgets contract was lost. Joe had to lay off half his workforce through lack of orders. The laid off employees had to sell their homes, and some local businesses suffered such a drop in trade that they had to close.

Joe goes to the police and complains. They say, “It was only a handbag, we’re not going to prosecute for that. It’s not in the public interest.” Well as we have seen, it WAS in the interest of quite a few members of the public in Joe’s home town.

A small local family building firm could have exactly the same problem. A larger contractor gets work by similar means, nothing too expensive but just enough to swing the decision. Family firm and employees out of work and homes.

To my certain knowledge, from discussions with professionals after seminars I have delivered, larger firms of surveyors are elbowing out smaller or single practitioner outfits, by means that would not bear scrutiny from a prosecuting lawyer familiar with the Act.

All of the above and still no mention of “Referral Fees.” A kickback by any other name that can secure the illegal awarding of a contract to the financial detriment of the innocent.

Now imagine what happens if a sole practitioner local Chartered Surveyor walks into his village police station and says he wants to make an allegation of Bribery against a competitor who has filched a contract from under his nose by paying a referral fee not on the basis of his own merit as a surveyor, but as the highest bidder.

“Not a police matter sir, that’s one for the civil courts,” says PC Pilate.

Well. No it isn’t, or it shouldn’t be. Why should there not be a prosecution, in just the same way as if the same competitor had broken into your office and stolen cash from the safe? It amounts to the same thing in the end, and you can’t get insurance against losing a contract by Bribery, as you could against losing money via theft.

———-

Well. I’m happy to say, now there CAN be a prosecution.

A week or so I picked up a link on Twitter to this site.

http://www.emmlegal.com/

They can explain far better than I who they are and what they do, but in a nutshell:

They are real lawyers with high level experience of fraud and related prosecutions.

They have investigative resources in depth, on tap.

Rather than flounder through the civil courts on your own or with your friendly family high street solicitor, trying to claw back what you have lost which maybe difficult or impossible to prove, if you lose out to a competitor who has used bribery to win a contract you can bring a private criminal prosecution under the Act.

You will need cogent evidence of course, or know in which direction to point a trained investigator.

It would also require the approval of the DPP or the SFO Director, but if it is being handled by such responsible lawyers, known to and trusted by both Departments, this should be no obstacle.

If the prosecution is successful, then the court can order confiscation of the defendants’ proceeds of the bribe, which will be the full revenue value of that contract, and further it can order that the part of confiscation sum that represents your loss can be paid direct to you, as well as ordering that defendant to pay your costs of that prosecution.

Nobody has thought of this before. My own guess is that the CPS and/or DPP will be very happy for them to take on this work, thus relieving their own hard pressed resources and funds from a task they simply are not geared up to perform.

Certainly those to whom I have spoken in the last year who feel the Act is toothless might have good cause to think again. With a facility to investigate and prosecute bribery at all levels, and not just the headline grabbers, the Bribery Act might just be about to start snapping at the heels of the complacent after all.

I never thought I’d find myself quoting Ken Clarke with any form of approbation, but he did begin the preface to the Section 9 Guidance with these words. “Bribery Blights Lives.” Well it does, and here’s a way to stop it

Watch this space

UP TO THEIR NECKS IN CRUDD

Yes I’ve been away for a while, working as it happens, but woke up this morning to news of something that merits the attention of our esteemed Director of Public Prosecutions.

If he can manage to tear himself away from the exhausting task of “improving the quality” of the prosecution product that he promotes, (i.e. slashing staff and destroying in-house morale),  he might just like to open a copy of the Bribery Act (Section 2 is the bit you need Keir) and have it handy while he’s poring over the Peter Cruddas story in today’s papers.
This is NOT one for the SFO, but fairly and squarely, one for him.
He needs to look at some law, and so do we:
Section 2:

Offences relating to being bribed
(1) A person (“R”) is guilty of an offence if any of the following cases applies.
(2) Case 3 is where R requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).
And then this:
(6) In cases 3 to 6 it does not matter—
(a) whether R requests, agrees to receive or accepts (or is to request, agree to receive or accept) the advantage directly or through a third party,
(b) whether the advantage is (or is to be) for the benefit of R or another person.

And he also needs to look at what Cruddas said, – as do we.
http://www.bbc.co.uk/news/uk-politics-17503116

(this link may need cntrl-click)

“What you would get, we’d get you at the Cameron and Osborne dinners.”

“If you’re unhappy about something, we’ll listen to you and put it into the policy committee at Number 10”
“Some of our bigger donors have been for dinner in Number 10 Downing Street in the PM’s private apartments….. “

“Things will open up for you… but you need to go in with a bit of, you know, it’s no good scratching around with ‘it’s ten grand now and five grand then’, …minimum hundred grand, but the nearer you can get to two hundred grand, and hold back for the events, … it’ll be awesome for your business”

So what does Section 2 have to say about the above?
Well he’s not “agreeing to receive” money, in the sense of accepting a financial advantage that has been offered, because from what we can see on the video, nothing has been proactively offered.
It follows that nothing has been “accepted” either.
The issue hinges on whether or not anything he says amounts to “asking” for a financial advantage.
He doesn’t need to receive anything, the offence being complete merely by the making of the request.
What he did not say was, “Please give the party some money.” It is evident however, that this was a meeting between the party co-treasurer and two prospective donors.

We do not know at whose instigation this meeting took place, or what discussions preceded it.
From Cruddas’ point of view, he was faced with people who were considering donating, and wanted to know what, if any, advantages a donation might bring.

Again we don’t see the entire conversation, but we DO see Cruddas effectively setting out a “tariff” of benefits. The more you give, the more you get.

Does Section 2 require a specific request for a financial advantage, in order for the person making that request, to commit an offence?

Your humble blogger would submit that the answer to that question must be “No.”

To conclude otherwise would mean that any broad hint, or “nudge and a wink” would fall outside the act, both in terms of asking for a bribe (Sec2) or offering one (Sec1)

In other words, telling someone that if they happened to be kind enough to place a brown envelope stuffed with cash in your briefcase, after which they might just happen to get an invite to dip their snouts in the Number 10 Pig Tough, would not be an offence, whereas coming straight out with “Gissa Bung,” would be.

If the DPP ducks the issue by saying that there was no direct request for payment, then the whole act is dead in the water. (pun intended.)

As one of Her Majesty’s Counsel, learned in the law, Keir Starmer has to face up to the fact that here is a senior Tory Party official who has given a clear intimation to a potential donor, that in return for, and on condition of, the payment of a large sum of cash, that donor would be given direct access to the Prime Minister, the Chancellor of the Exchequer, and influence in the Number 10 policy committee, for an “awesome” business advantage, not enjoyed by others.

This would amount to the effecting of an improper performance of the function of the person compiling the guest list, to invite someone to a dinner specifically in return for cash, to secure a business advantage not on the basis of need or merit, but “wedge.”

That improper performance would be effected in breach of the relevant expectation of you or me, (See sections 4 & 5) that political parties would not dish out favours for cash. (I did type that with a straight face, honest.)

Section 2 Subs 6 (b) makes it clear that the cash does not have to be for Cruddas’ advantage.

Or as we lawyers say, “you’re nicked sonny.”

That’s all for now, but as I always say, “Watch this Space.”

THE BRIBERY ACT. MUNIR PATEL AND WHAT YOU NEED TO KNOW ABOUT HIS DAY IN COURT.

THE BRIBERY ACT. MUNIR PATEL AND WHAT YOU NEED TO KNOW ABOUT HIS DAY IN COURT.

First of all, contrary to what some “experts” have been blaring today, he was NOT sentenced to six years for Bribery. (which may come as some comfort to a few suits out there!)

On Count 1, an offence under the Bribery Act, he was sentenced to three years imprisonment. He had pleaded guilty, and was told that had he fought the case, the sentence would have been between four and five years. The maximum is ten years.

He also pleaded guilty to Count 2 a common law offence of Misconduct in a Public Office. He was sentenced to six years to be served concurrently with Count 1. The maximum is life imprisonment.

As the Judge said

“… this indictment represents misconduct which lasted for well over a year and involved at least 53 cases in which you manipulated the process in order to save offenders from the consequences of their offending.”

The full transcript of sentencing remarks is here:

http://www.judiciary.gov.uk/Resources/JCO/Documents/Judgments/munir-patel-sentencing-remarks.pdf

BUT…. and it’s a very big but, the sentence reflecting conduct lasting well over a year, can only have applied to Count 2, because Count 1 could only relate to bribes accepted after July 1st. In other words a comparatively small proportion of the time involved.

They ARE two separate offences. Accepting, or even asking for a bribe, is an offence in itself, even if he then did nothing.

What he did was to ask for and accept bribes, AND THEN go on to falsify the DVLA records by not entering details of motoring convictions which was his job. It could even be argued that he was lucky to have escaped a consecutive sentence.

What else? Well it is said that he was asking £500 a time to do this. 53 cases at £500 a time would mean about £26,000 in his back pocket. When police examined his bank accounts, (yes he paid the money into his bank….) they found credits of £96,000 unaccounted for. He earned about £25k per year.

So what does this all tell us?

On his own admission, to the court and on the secret video filmed by that bastion of rectitude, The Sun, he had been well at it for over a year.

http://www.bbc.co.uk/news/uk-england-london-15310150

The judge had this to say about the effect of his actions on the Judicial system:

By doing what you did, you created a danger not only to the integrity of the process but also to public confidence in it. A justice system in which officials are prepared to take bribes in order to allow offenders to escape the proper consequences of their offending is inherently corrupt and is one which deserves no public respect and  which will attract none.”

This was far from a simple breach of trust, and cannot be judged in simple monetary terms against such cases.

SO…. if three years on a plea for a Bribery Act offence under Section 2 by a public servant is a guideline, then how much further up the scale will the suits have to crane their necks?

Only time will tell, but I leave you with two further thoughts.

IN the joint prosecution guidelines produced earlier this year by the SFO and the CPS (remember them?) they stated:

The Act takes a robust approach to tackling commercial bribery, which is one of its principal objectives. The offences are not, however, limited to commercial bribery. There may be many examples outside the commercial sphere where individuals attempt to influence the application of rules, regulations and normal procedures. Examples would include attempts to influence decisions by local authorities, regulatory bodies or elected representatives on matters such as planning consent, school admission procedures or driving test

So it isn’t just the suits who need to keep looking over their shoulders. The CPS are alive to lower level bribery too.

And finally, when can we expect to see 53 arrests and prosecutions for those who bribed Munir Patel?

THE BRIBERY ACT. RICHARD ALDERMAN GOES WEST.

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.

14

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.

(2)

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.)

The Bribery Act: “Government Keen To Accept Bribes”

****STOP PRESS. OFFICIALLY ENDORSED BY BLACKADDER HIMSELF****

(See Comment below from theBriberyact.com)

There was I bemoaning the fact in the last bungblog that the Bribery Act was the preserve only of the rich and famous, and along comes news of a prosecution by the CPS involving an allegation of a bribe of £500
We will not go into any of the details, which might of themselves explain a little more behind this decision, but is it really possible that we might end up following the Indian lead on Bribery, (popular that is rather than political) and see this as the acorn of the cultural change the OECD have been advocating for years?

Small bribery can be just as insidious as Big Bribery, but it is much less likely to be prosecuted for one very good and compelling reason, which I will turn to in a minute.

The first important point to notice is that this prosecution was brought by the CPS and not the SFO.

Both are able to prosecute offences under the act, but neither can institute proceedings without the approval of their respective heads, the DPP Keir Starmer QC, or the Director of the SFO, Richard Alderman.

At the time the section 9 guidance on “Adequate Procedures for Preventing Bribery” was issued, those two bodies issued a joint document setting out the guidance that they themselves would follow in making the decision on whether or not to prosecute.

http://www.cps.gov.uk/legal/a_to_c/bribery_act_2010/

When you read it, you begin to realise that in fact we do have a two tier approach, in much the same way as we do with fraud. Big fraud to SFO, small fraud to CPS, or at least that’s how it looks on paper, together with a bifurcation (!) between domestic Bribery and International Bribery.

Let’s look at a short passage from the introduction:

“Scope of the Act

The Act takes a robust approach to tackling commercial bribery, which is one of its principal objectives. The offences are not, however, limited to commercial bribery. There may be many examples outside the commercial sphere where individuals attempt to influence the application of rules, regulations and normal procedures. Examples would include attempts to influence decisions by local authorities, regulatory bodies or elected representatives on matters such as planning consent, school admission procedures or driving tests.”

And then this:

Bribery is a serious offence. There is an inherent public interest in bribery being prosecuted in order to give practical effect to Parliament’s criminalisation of such behaviour.

It then launches into the jargon of “The Full Code Test” and the “Public Interest Test.”

So should we really be at all surprised that a CPS prosecution has been brought in relation to what is an apparently minor offence, (I mean in terms of the amount involved)?

Highly respected commentators of a Transatlantic persuasion have already been turning their noses up at such an apparently lacklustre opening act in the brand new theatre that is the Bribery Act.

BUT as the erudite and interesting thebriberyact.com has pointed out:

(this) misses a fundamental but important difference between the US FCPA (Foreign Corrupt Practices Act) and the Bribery Act.

The UK Bribery Act covers domestic bribery AND foreign bribery.  The US FCPA only covers foreign bribery.

Broadly speaking foreign bribery cases are likely to be more complicated from an evidential perspective.  They will, as a result, take longer to investigate and prove. (and cost a lot more, – that was me.)

This is the raison d’etre for the Serious Fraud Office in the UK.

http://thebriberyact.com/2011/09/01/a-golden-rule-in-litigation-never-underestimate-your-opponent-or-why-it-is-a-mistake-to-pooh-pooh/

(Although AA Milne was never an authority on the Act. That  should be poo-poo, Richard and Barry)
****CONTROVERSY NOW RAGES – SEE COMMENT BELOW FROM thebriberyact.com****

———–

So if the CPS will prosecute someone for bribing a member of a council planning committee, a headteacher for selecting a dunce who is the child of rich parents, or a driving instructor for passing Mr. Toad, (very English joke Tom, see Wind in the Willows), then maybe the act will achieve that which the bare words of the statute intend.

After all, we should not forget for a minute the Provisions of Schedule 2.

You have  forgotten the provisions of Schedule 2 haven’t you?

Schedule 2 contains a list of all the old Acts of parliament which are repealed on the passing of the Bribery Act, including:

Public Bodies Corrupt Practices Act 1889

Prevention of Corruption Act 1906

Prevention of Corruption Act 1916

Anti Terrorism Crime and Security Act Sec 108 – 110

(Section 109 dealt with Bribery and Corruption committed outside UK)

To save you looking them up, they effectively comprise all the previous anti corruption legislation, although we still retain Common Law offences such as Misconduct in a Public Office, which could apply to public officials accepting bribes, but not private individuals.

Which means in the absence of The Bribery Act, such small bribes are not an offence.

———–

Which brings me wobbling back to sort of where I started at the beginning of last week’s blog.

Small bribes involving excessive hospitality, facilitation payments, (Grease is the word, if you are in the USA), the fashion journalists tale, (last week) and what about the rampant corruption in the hotel and leisure industry? Tips for good service are fine, but £50 to turf someone off a better restaurant table, or £100 to grab someone else’s superior hotel room? (Concierges cringing the world over hopefully.) If they are given cash to persuade them to effect an improper performance of their function, i.e. bumping someone from a room that they had booked and paid for, that’s a bribe.

Yes of course there is the old argument that such people are traditionally poorly paid because they are expected to make extra dosh in that way. Well that is where the concept of culture change comes in. If India can think the unthinkable, with the inspiration of Anna Hazare, then so can we.

In a recent seminar given by a senior officer of the SFO, we heard this, particularly in relation to Facilitation Payments:

“The SFO look also at the effect of small payments. They can have a corrosive effect, and are often part of schemes orchestrated at higher level by people into whose pocket a proportion of payments go.

Once you have someone in your pocket by means of small payments, just like blackmail, there is nowhere for it to stop. It perpetuates a culture of corruption within an organisation.

In some parts of world, it is not possible to avoid them, so we consider the public interest in prosecuting

  • We consider amount of payment concerned
  • Was it systemic, one off or one of many?
  • What steps have company taken to reduce payment of this sum?
  • Were there any special sector considerations.
  • No prosecution if payment at the end of a gun or risk to life and limb.”

So the SFO, and the vast majority of comment and publicity about the Act has really been focused on International Corruption.

They will not prosecute the “Low hanging fruit.” But why should not the police and the CPS do exactly that, because if they don’t prosecute the bent planning officer or the driving examiner, who will?

———-

I said earlier that I would get to the reason in a minute why it is that I think there are likely to be very few prosecutions for Bribery by the SFO, initially. Well unless you are a very fast reader it has probably taken you a little longer than that. Sorry, maybe I got carried away.

BUT HERE IT IS.

The clue lies in two factors. Firstly the abysmal budget allocated to them for investigating and prosecuting Bribery Act offences. Second, the Proceeds of Crime Act 2002.

My own personal view, although you could call it an educated guess, is simply this.

A successful prosecution of a large corporation for Bribery, or a successful Civil Recovery action in the event of self-reporting (remember the pink fluffy handcuffs?) will result in potentially a huge amount of money confiscated from the offending company.

A proportion of those funds will be directed towards compensating those who have suffered loss as a result of the offender’s actions, but some of the money will be ploughed back into resources needed for further investigations.

To what degree I cannot say, (as I said I am guessing) but does there not exist the very real possibility that at least in the early stages, prosecution policy of Bribery Act offences will be influenced if not governed by the Cost-Benefit analysis?

If you prosecute a company for sending someone on an over-luxurious glee club trip to Tierra del Fuego, the investigative costs of an international investigation could be not inconsiderable. The proceeds of such a crime might be pathetically small. Am I barking up the right tree here? I think so.

On the other hand, if there is a concentration on Big Bribery at the start, then the coffers will be swelled that much sooner, and the whole process might well snowball into a situation where the Prosecuting Authorities  are sufficiently flush not to have to risk picking only the fruit at the very top of the tree.

They might even turn it into a flourishing industry.

Hence… “Government Keen To Accept Bribes!”

Got there in the end.

———-

The above is subject to the usual old tosh about all views being my own etc etc, but if anyone else wants to express a view (including Elm Street) then just hit the comment button below. But be warned, I have the power of moderation!

———–

IN OTHER NEWS:

If you are in the Construction industry and are near Bristol, I shall be spouting forth to members of the RICS Bristol on 13th September. You have to get the guff from them but I’d be delighted to meet followers there. It’s near the big RAC thingy on the M5.

IN EVEN OTHER NEWS

thebungblog now has its own Group on LinkedIn, for news, view, comments and a cup of tea, (iced if you are of the transatlantic persuasion)

Join now

UK BRIBERY ACT 2010 thebungblog SPEAKEASY

IN OTHER REALLY BIG NEWS:

If you are reading this blog, then you are bound to have heard of @charonqc http://charonqc.wordpress.com/

There’s a link to it in my blogroll as well.

ANYWAY…. every week the eponymous blogger produces a podcast of a discussion with some distinguished lawyer or other on a topic of the day.

In a surprise break with that tradition of distinguished lawyers, this coming week it will be …. me!

So watch his space.

————

AND FINALLY:

An esteemed and highly respected blogger from “overseas” who specialises on the FCPA in particular, has had the temerity to suggest that the brand of humour promulgated on this modest little blog, just might not translate into American.

Views please!

TheBungBlog

Official. Government declares Bribery is NOT an Offence!

***NEWS JUST IN. VERY FIRST PROSECUTION UNDER THE BRIBERY ACT, AND IT’S A BRIBE OF JUST £500!!***

http://blog.cps.gov.uk/2011/08/court-employee-faces-first-prosecution-under-bribery-act.html

If I walk into Tescbury’s, pick up a bottle of water costing £1, and walk out without paying, I have stolen it. It is an offence under Section 1 of the Theft Act 1968. No argument.

If caught, I would be charged and taken to court. If convicted, subjected to whatever penalty, and have a criminal record against my name. (also in my case probably lose my career.)

If instead of that, I take a solicitor friend to dinner, and at the end of the meal, I offer to pay for the whole thing if he will send me a brief in a three month fraud, which I know he has, although I also know he’s planning to give it to another barrister more qualified than I, I have also committed a criminal offence under Section 1 of the Bribery Act 2010.

It doesn’t matter if he politely declines my offer. The making of an offer or promise, (let alone the actual giving) of a “financial or other advantage” to effect the improper performance of a relevant function or activity, (solicitor choosing best barrister for his lay client’s defence) is a crime. No argument.

And you can’t say this was a victimless crime. If the solicitor was sufficiently impressed by my offer to send me that brief, the barrister who missed out has lost tens of thousands of pounds.

“Bribery Blights Lives.” The opening words of Ken Clarke’s Foreword to the Section 9 Guidance. Well yes it does, but not just on a meganational scale.

Paragraph 26 says, “Bona Fide……promotional …..expenditure… is recognised as an established and important part of doing business.”

Well should it be? Or is the reality that in the Bribery Act, we have a law that is only applied where the government wants it to be?

Offences under the Act cannot be prosecuted without the authority of The DPP or the Director of the SFO. They are to apply what is politically described as a “public interest test.” As we shall see it’s far more a question of “public purse interest.”

Normally when offences call for the approval of a law officer or Director prior to prosecution, the function of that individual is to determine in cases of very serious crime, (e.g. perjury) whether or not an offence has actually been committed, rather than whether or not it is in the public interest to prosecute. You don’t want to prosecute someone for a very serious offence where none has in fact been committed.

With the Bribery Act, if you report me to the SFO for blagging a good trial brief on the strength of a bit of posh nosh, they cannot escape the fact that an offence has been committed, but they wont prosecute because it is not in the public interest. I would constitute what the SFO Director recently described as “low hanging fruit.”

IS THAT RIGHT?

Before you start thinking that the bunglbog is off on an insane rant of his own, (perish the thought) I should tell you that this blogpost was inspired by two discrete, and practising lawyer sources.

After my very first blogpost, a colleague in chambers who will remain nameless but he knows who he is, expressed disgust that he was having to pay for other people’s corporate hospitality, through the price of goods that he purchased. His rationale was that if a corporate has a budget for entertaining, then that budget must be built into the price of their goods which he has to pay out of his miserable legal aid stipend. (I’m not getting into an argument on the cost of advertising here.)

And then very recently a colleague in my former chambers, the highly esteemed “Pink Tape” (see blogroll on right) sent me a copy of an article from a “National Newspaper” which used to be a broadsheet but now cannot afford the paper, written anonymously by a well known fashion journalist. (Has to be an oxymoron in there somewhere?)

The article was headed, “I DIDN’T PAY FOR 80% OF MY WARDROBE.” She goes on to describe how she never has to worry about the bill in restaurants, has a £1200 handbag on a £30k salary, £15,000 holidays for free, and so on.

PR’s send editors freebies, and more often than not expect to see their products in the magazine.”

Now before we get too excited, we have to remember that bit about “effecting an improper performance.” Nothing wrong with puffing a product if it genuinely is the best. If on the other hand it’s just a bit of tat, (which is why I am not mentioning any of the products by name that she refers to) and she promotes it as the best, as a means of ensuring more freebies, then she has committed an offence if she asks for it, as does the PR if she is given it with that in mind.

Again, this is not a victimless crime.

The Government argument on Big Bribery is clear. If a UK company loses a big overseas defence or infrastructure contract, then that company, it’s employees and shareholders will be the victims. Workers may lose jobs, homes etc. Worse, Banks might lose their investment!

So what of small bribery? Suppose that a small cottage industry company is trying to break into the luxury handbag market with a superbly designed and crafted product. A megacorp, (we shall call it “Whortleberry” because I live in Devon- and I can spell it!) gives a very firm nod to the magazine editor who is going to review it, that her new “Whortlesack” will only be forthcoming if she reviews it favourably, and trashes the parvenu product.

That’s Bribery, and there is a victim. But that is not going to be prosecuted.

And we are not just talking about the fashion industry here either.

Travel writers, and many are perfectly honest about this, will state somewhere in an article, that they stayed in a particular hotel for free, so you can factor that into your judgement of what they write.

But if they don’t mention it, and give the place a massive plug when what it really deserved was a rechristening as “Fawlty Towers,” then again the Act is potentially in play.

I think the point that I am gently rambling towards is this:

If it all a question of degree as it appears to be:

  1. Where do you draw the line? And
  2. Who has the authority to draw that line.

If parliament has passed an act saying that Bribery is an offence, which it has, but has not said, “It’s only an offence if it’s Big Bribery,” then whence cometh the authority to say otherwise.

When I was a comparatively baby barrister, a provision was introduced into the Criminal Damage act, by Parliament, so that offences involving damage costing less than £200 could only be tried in the Magistrates Court.

There have been suggestions since that something similar should be applied to theft, by way of example.

But there is absolutely nothing in law that says that a line is to be drawn under serious bribery (and therefore to be prosecuted), at a certain level, below which it becomes presumably humorous bribery, and not prosecuted.

And before anyone starts pointing me towards what Ken Clarke has to say in the section 9 guidance, I will say this.

He had no business saying a lot of the things that he did in that guidance.

Section 9 (1) only provides that: “The SofS must publish guidance about procedures that relevant commercial organisations can pt in place to prevent persons associated with them from being bribed…”

It says not a word about the SofS including in that guidance what government policy is, or how the government thinks the act should be interpreted, but that is exactly what he did do.

This of course had absolutely nothing whatever to do with articles published in another broadsheet, which stillcan afford the paper, published in the early spring, which attempted to bring huge pressure on the government ahead of the guidance, and whose appearance was entirely coincidental in time with the delaying of the issuing of said guidance. Ahem.

So pardon me for being a fussy lawyer, but just exactly why is it that parliament has created criminal offences that can only be prosecuted on the say so of politicians, in circumstances that they themselves prescribe?

Can it have anything remotely to do with the size of the SFO’s annual budget to investigate and prosecute Bribery Act cases? (magnifying glasses supplied on request.)

I have heard, and I invite correction if wrong, that said budget is in the region of £3m pa. I have also read recently that the DWP’s budget for investigating and prosecuting benefit fraud is £58m.

I don’t pretend to know the answer to how this situation has been allowed to arise, but it jars the nerves of any lawyer to think that any criminal offence is somehow subject to the whim of the politician. *Wedge* *end* *thin* etc.

—————–

And before we go, let us not forget what is being achieved in a vast country, allegedly far more corrupt than the UK.

Anna Hazare has just finished a 12 day hunger strike to persuade the Indian Government to pass a bill introducing tougher anti-corruption laws. He appears to have succeeded. That government is to introduce a corruption ombudsman. Corruption is said to be endemic in every level of Indian life, and I for one would not argue with that. But if India can take such a radical step against apparently overwhelming odds, should our own government be seen to do nothing more than tinker at the edges?

http://www.bbc.co.uk/news/world-south-asia-14698071

And this just in from the Wall Street Journal Blog

http://blogs.wsj.com/indiarealtime/2011/08/29/what-they-said-hazare-ends-his-fast/?KEYWORDS=corruption

Maybe we should introduce a website inthe UK similar to that in India which has helped to set the ball rolling.http://ipaidabribe.com/

The SFO have suggested whistleblowing via Twitter, what better than to set up a website devoted to it?

Hasta luego, (in the hope that someone will fund a freebie trip to Spain for me…)

*STOP PRESS*  Coming very soonish, I will be presenting four seminars, two in London, and two in Bristol (RICS anyone?), so do keep your eyes peeled, AND

I shall be reviewing what I am told is an excellent book on the Act, in post from publishers as I type..

The Bribery Act 2010, Self Reporting part 3, Carrot and Stick, Thumbscrews or Pink Fluffy Handcuffs?

Welcome back!

Sorry, I know I said “next week” last month, but the day job got in the way. Anyway some of it may have taken a little digesting.

What I was talking about was “Self-Reporting,” – the good bits and the possibly bad bits.

Neither Willis, nor MacMillan initiated investigations by self reporting, although one of the telling factors in their favour in each case, was that once the balloon had gone up, rather than try to cover their tracks, they co-operated fully with the FSA and SFO respectively. This was subsequently to count very much in their favour as we have seen.

Drawing from those examples, we need to look at the questions to be asked if and when a corporate, having conducted a “risk analysis” and implemented “adequate procedures” to prevent bribery, discovers during the course of its “constant monitoring” of those procedures, (enough buzzwords yet?) that bribery has taken place, or may have.

You don’t need a lawyer to tell you that you need a lawyer. The reality is, as a corporate of any significant size, (but don’t forget that SME’s are not immune) you will have your own in-house legal department. “General Counsel” even, if you are really “cutting edge”.

Detailed considerations of what to do next are for another blog, or rather, series of blogs. This is not to be treated lightly nor will it be.

A crucial factor to bear in mind from the outset, is that of Legal Professional Privilege. Without an exhaustive (and exhausting) definition of LPP, the principal point to consider is this.

Any correspondence between the corporate and external legal advisers should attract LPP, whereas thelikelihood is that internal communications with in-house counsel will not.

** For a discussion on the question of LPP and In-house counsel, see comments section below.**

What kind words of comfort and reassurance do the SFO have for us at the initial stage, as the balloon slips gracefully from its moorings?

A key question for the corporate and its advisers will be the timing of an approach to us. We appreciate that a corporate will not want to approach us unless it had decided, following advice and a degree of investigation by its professional advisers, that there is a real issue and that remedial action is necessary. There may also be earlier engagement between the advisers and us in order to obtain an early indication where appropriate (and subject to a detailed review of the facts) of our approach. We would find that helpful but we appreciate that this is for the corporate and its advisers to consider. We would also take the view that the timing of an approach to the US Department of Justice is also relevant. If the case is also within our jurisdiction we would expect to be notified at the same time as the Department of Justice.”

So there is an acknowledgment of the fact that a company needs to take advice first.

Specialist external counsel will be in a position to ask a lot of preliminary questions of the company officers to identify the issues which need to be addressed, one of which might just be that a director needs ring-fencing from the investigation if he/she is implicated.

Much will depend upon whether the act of bribery alleged has emerged as a result of your own investigations and systems monitoring, or because of some outside factor such as a whistleblower. This will drastically affect the timing of your response.

For present purposes let us assume that we are dealing with self-discovery and self-reporting.

The other pressing question that needs answering is that of whether or not there is a USA dimension to the problem. Again I am not going to delve into the minutia of the FCPA for present purposes. Suffice it to say that if there is such an element, then as the SFO point out, you will need to consider approaching the SEC and/or DoJ.

All I would say at this point is that the DoJ have infinitely greater resources to investigate Corruption worldwide, and levels of sentence imposed by US courts, particularly corporate fines and directorial prison sentences are eyewatering, even by comparison with the powers of the UK courts under the Bribery Act and Proceeds of Crime Act. (See 25th July Blog).

So going out on a limb for a minute, and subject to the usual disclaimer of personal liability for anything whatsoever at all, a first and timely approach to the SFO is likely to reap dividends in the future, particularly if there is any question of liability in both jurisdictions. No guarantees though! It is still perfectly possible for the DoJ to investigate under the FCPA, secure a Grand Jury indictment against a UK corporate and/or its officers, and apply for extradition from under the SFO’s noses. (See Jeffery Tesler 25th July Blog)

Assuming that you and your legal advisers have come to the certain conclusion that bribery has taken place for which you are liable, either because your company has been responsible for bribing, (section 1) or an “associate” (individual or corporate) did it and you failed to prevent it, (section 7), what next?

Two options:

  1. Brush it under the carpet?
  2. Hands up Job?

For the three reasons I set out on the 25th July Blog, the chances of not being found out are getting slimmer by the day.

Covering up and getting found out will inevitably lead to prosecution, whereas owning up and co-operating carries with it at least the reasonable prospect of a Civil Settlement under part 5 of the Proceeds of Crime Act, thus avoiding all the dire consequences of a criminal prosecution.

So how will the SFO decide between the thumbscrews or the pink fluffy handcuffs?

Time to use “cut & paste” again for the Elm Street criteria:

You will probably gather that the words in Italics are not “official” – the others are.

  • is the Board of the corporate genuinely committed to resolving the issue and moving to a better corporate culture?
    • Bit cheesy but you get the idea
  • is the corporate prepared to work with us on the scope and handling of any additional investigation we consider to be necessary?
    • Will you give them the keys to your filing cabinet, network server, backups, inside leg measurement? (say “yes”)
  • at the end of the investigation (and assuming acknowledgement of a problem) will the corporate be prepared to discuss resolution of the issue on the basis, for example, of restitution through civil recovery, a programme of training and culture change, appropriate action where necessary against individuals and at least in some cases external monitoring in a proportionate manner?
    • Are you prepared to cough up to the full extent of what they calculate to have been your company’s “benefit” as well as retraining your relevant staff, and implementing those adequate procedures that you only read about on some blog or other? (say “yes”)
  • does the corporate understand that any resolution must satisfy the public interest and must be transparent? This will almost invariably involve a public statement although the terms of this will be discussed and agreed by the corporate and us.
    • We will draft a statement of apology to go on our website, and yours and be published in the press and your trade journals, which you will disagree with at your peril. (say “yes.” Plea Bargain agreements with the DoJ are much worse. You have to waive your right of appeal against whatever sentence you get!)
  • will the corporate want us, where possible, to work with regulators and criminal enforcement authorities, both in theUKand abroad, in order to reach a global settlement?
    • Would you like us to try to persuade the DoJ not to prosecute you in the US as well? (Pope, Red Dress, Bears, Woods etc etc.)

———–

Anyone in their right mind would have the next question bursting from their lips by now. “If I do all this can you guarantee that I will not be prosecuted?”

As you would expect, the answer is “not necessarily.”

Bearing in mind the ear-bashing the SFO received from Thomas LJ in Innospec, (see 29th July), all options are left open;

but…. they have said that they want to settle self-referral cases that satisfy the above criteria “wherever possible.”

Flies in that ointment, (effectively following what Thomas LJ said) would include:

  • Board member personally involved in corruption
  • Board member benefiting personally from corruption.
  • Public interest.

———-

So, if we are talking thumbscrews rather than pink fluffy handcuffs, where to next?

“We would in those circumstances be looking for co-operation from the corporate and would be prepared to enter into plea negotiation discussions with the context of the AG’s Framework for plea negotiations.”

This is especially important in the event that the DoJ are sniffing around, in order to avoid any possibility of double jeopardy issues.

What specific factors are relevant to the decision as to whether or not to prosecute individuals within the company?

  • how involved were the individuals in the corruption (whether actively or through failure of oversight)?
  • what action has the company taken?
  • did the individuals benefit financially and, if so, do they still enjoy the benefit?
  • if they are professionals should we be working with the appropriate Disciplinary Bodies?
  • should we be looking for Directors’ Disqualification Orders?
  • should we think about a Serious Crime Prevention Order?

All these are self explanatory, except perhaps for the last one. An SCPO is an order that a court can make, preventing a convicted person from having the opportunity to do it again, by placing all sorts of restrictions on his/her future activities. Examples are set out in Section 5 of the Serious Crime Act 2007.

http://www.legislation.gov.uk/ukpga/2007/27/section/5

(Can’t find the Humorous Crime Act)

Also important to note is the confidentiality of such communication with the SFO. They will regard it as being equivalent to information received by them pursuant to their powers under Section 2 of the Criminal Justice Act 1987, and only to be used in accordance with that act. (Compulsory powers of questioning, the answers to which cannot be used in court on a prosecution for the offence enquired into)

———–

Let us look on the bright side though, and examine what happens next should we find ourselves in pink fluffy handcuffs.

The SFO will look at what needs to be investigated further. Wherever possible it will be carried out by the company’s own professional advisers. The Company she pays though! (Albeit within limits the SFO assess to be reasonable.)

They also undertake to ensure that material, (and in particular electronic material, is preserved.

So once the investigation is concluded, what next? – Settlement Discussions.

What’s important here?

  • restitution by way of civil recovery to include the amount of the unlawful property, interest and our costs
    • Part 5 of The Proceeds of Crime Act
    • in some cases monitoring by an independent, well qualified individual nominated by the corporate and accepted by us. The scope of the monitoring will be agreed with us. We undertake that if monitoring is going to be needed, it will be proportionate to the issues involved.
    • a programme of culture change and training agreed with us.
    • discussion, where necessary, and to the extent appropriate, about individuals.
      • Who’s getting the sack.

All this, and a “Public Statement so as to provide Transparency to the er… public.” (See above.)

…. And the offer of assistance when negotiating with overseas (i.e. USA) authorities. (Potentially of vital importance)

And there are future promises, when they have been finalised, of offers of assistance in the fields of Mergers and Acquisitions and Private Equity.

This is a topic for another blog in the not too distant future, for which I am hoping to draw on the expertise of contacts in the field. (Contributions always welcome Ian).

In essence the problem lies in “ticking time bombs” – bribery issues lurking in the past of companies subject to acquisitions by other companies, which either did not emerge during the ordinary Due Diligence process, or did, and the acquiring company wants to know what to do next, without incurring a section 7 liability.

Confidentiality is offered again, particularly where price sensitivity is an issue, which it very likely will be.

————

Thus far I have tried to outline in some detail, the Carrot dangled by the SFO to encourage self-reporting. There is of course an accompanying stick. It is set out thus:

WHAT HAPPENS IF THERE IS NO SELF REFERRAL?

Self referral together with action by the corporate to remedy the problem of corruption will reduce the likelihood that we may discover the corruption ourselves through other means. If this happens we would regard the failure to self report as a negative factor. The prospects of a criminal investigation followed by prosecution and a confiscation order are much greater, particularly if the corporate was aware of the problem and had decided not to self report.

 

Corporates will need to be aware of the length and expense of an investigation by the SFO. There will inevitably be considerable publicity and disruption to the business of the corporate. We will be making use of all tools at our disposal such as those under the Regulation of Investigatory Powers Act. Professional advisers will need to advise their corporate clients about the impact of these investigations. There is also a serious prospect that we will learn about the corruption issue from another agency in the UK or elsewhere, a whistleblower or a statutory report such as a Suspicious Activity Report. We will assume in those circumstances that the corporate has chosen not to self report. The chances of a criminal investigation leading to prosecution are therefore high.

The underlining is mine, but the message is clear.

A little further reading:

Bribery Act 2010: Joint Prosecution Guidance of The Director of the Serious Fraud Office and The Director of Public Prosecutions

http://www.cps.gov.uk/legal/a_to_c/bribery_act_2010/

—————

And lest the FSA was feeling left out, I have added links to their Consultation Paper (including explanatory newsletter) all of which will reward further reading by in house counsel.

http://www.fsa.gov.uk/pages/Library/Policy/CP/2011/11_12.shtml

The Consultation Paper (CP) on the proposed Financial crime: a

guide for firms (the Guide) is important to all financial-services

firms and their advisers as it explains steps that firms can take

to reduce the risk of being used to further financial crime and by

doing so help themselves to meet relevant legal obligations.

This CP is targeted at firms and will be of limited relevance to

consumers. Some consumers or consumer groups may be interested

in the guidance we propose to give to firms about their systems and

controls to prevent fraud on or by their customers.

———

How can I compete with such limpid prose?

Back soon…. well sooner than I was this time anyway.

The bungblog.