Wednesday, September 15, 2010

World Bribery & Corruption Compliance Forum - Comments By U.K. Officials

Day one of the World Bribery & Corruption Compliance Forum in London featured addresses by Dominic Grieve (the U.K. Attorney General) and Robert Amaee (Head of Anti-Corruption U.K. Serious Fraud Office). This post provides a summary overview of their comments.

Tomorrow's post will provide a summary overview of comments made by Charles Duross (Deputy Chief - Fraud Section, DOJ) and Thierry Olivier Desmet (Assistant Regional Director, FCPA Unit, SEC).

Before turning to Grieve and Amaee's remarks, the U.K. Ministry of Justice yesterday (see here) officially launched the consultation process to "gather the views of interested parties" on the Bribery Act that "will help shape guidance about procedures which commercial organisations can put in place to prevent bribery." In connection with the launch, the Ministry of Justice released this 35 page document which contains statements of various officials, draft guidance, and draft illustrative scenarios. Interested persons are encouraged to make their views known (see here).

Remarks of Attorney General Grieve

Attorney Grieve began by noting the "pernicious" effects of bribery and that tackling bribery requires an effective law - something he firmly believes the U.K. Bribery Act (with implementation slated for April 2011- see here for a prior post) will do. Attorney Grieve noted that the Bribery Act takes the U.K.'s antiquated bribery laws and modernizes these laws into a modern statute.

However, Attorney Grieve noted that one would be wrong to assume that the U.K. was ignoring bribery issues prior to passage of the Bribery Act. Indeed, he stated that even under the U.K.'s existing law strong enforcement has taken place and that it was "pleasing" that the U.K.'s recent enforcement actions were recognized in Transparency International's recent report (see here for a prior post on the subject).

Attorney Grieve provided a brief overview of the Bribery Act's offenses (see here for the Act itself), including, most notably the Section 7 offense for "failure to prevent bribery."

Attorney Grieve noted that while "it has been suggested that Section 7 creates a strict liability offense" he emphatically stated that "it does not." He drew upon his prior experience as a health and safety prosecutor and stated that the practice of having an occurrence of an event "and then reversing the burden of proof" is a "perfectly acceptable tool within [the U.K.] legal system." Regarding adequate procedures which indeed are a defense under Section 7, Attorney Grieve noted that "any company small or large" that puts into place a system of adequate procedures "has nothing to fear" when an employee or agent "goes off the rails" and makes a bribe payment.

Speaking of the Bribery Act more generally, Attorney Grieves said that "it is not a bad thing" that the Bribery Act views bribery broadly because in practice bribery can "take many forms" and the Bribery Act "needs to take account of that."

Attorney Grieve spent a few minutes talking about corporate hospitality. He said that the starting point is that corporate hospitality is "not illegal" and that the Bribery Act is "not intended to clamp down" on acceptable corporate hospitality. He did caution however that lavish hospitality "can be used as a bribe" and that the Bribery Act "must be capable of penalizing such conduct."

Attorney Grieve referenced a recent article in the Financial Times "Mining and Oil Groups Dig In For Bribery Act." The article notes concern by the mining industry over an example of a company arranging to fly a local Chilean mayor to a remote region of the country to view the company's production facilities and that during the trip, food and lodging would also be provided by the company. Attorney Grieve said he "found it difficult" how any "sensible person" could think that this was bribery. He contrasted this example with a company paying for a foreign public official to stay at the Ritz in Paris with "go-go girls" also provided.

In concluding his remarks on this issue, Attorney Grieve said that "common sense" needs to be taken into account when providing corporate hospitality.

Returning to the issue of adequate procedures, Attorney Grieve said that a company should have nothing to fear if it is "walking the walk, and talking the talk" when a rogue employee makes an improper payment. On the other hand, Attorney Grieve stated that that "those who don’t heed the warnings and don’t take the necessary steps have something to fear."

Remarks of Robert Amaee

Amaee began by stating that the SFO "welcomes the opportunity [delay of the Bribery Act] provides for business to digest and implement remedial actions" to put them in compliance with the new Bribery Act.

Amaee spoke of the "main problem" confronting SFO prosecutors under existing U.K. law and that is the "concept of a controlling mind" - in other words, to indict a case today, the SFO needs to show that "at least one controlling mind (a person at the board level or close to such a position) knew of and participated in the conduct at issue. Given the nature of the modern multinational corporation - where decision making is often made on a regional basis, Amaee said that this standard is difficult to meet.

Amaee noted that "Section 7 sweeps away that whole requirement" and establishes the new corporate offense of failing to prevent bribery. Under Section 7, Amaee explained that a corporate can be criminally liable if its employees or agents made improper payments - something he described as a shift in U.K. law and a new and "novel offense for U.K. law."

Amaee also commented how the Bribery Act will "significantly extend" the SFO's jurisdictional reach in prosecuting bribery offenses. He noted that if a company is registered anywhere in the world, but conducts some business in the U.K., that company can be prosecuted for failing to prevent bribery wherever in the world that bribe was paid.

Even with the new offense, Amaee stressed that the Bribery Act does provide some "comfort in the form of a defense" and that is the defense of adequate procedures.

Amaee also touched upon certain risk areas that he is often asked about.

The first is intermediaries. He noted that the SFO clearly recognizes that intermediaries serve a useful purpose by opening up doors in foreign markets, but that "in the past, some companies have chosen not to ask too many questions" of the intermediary or that companies have in the past "ignored clear warning signs" as to the intermediary. He noted that under the Bribery Act - neither of these past practices "will do" and that corporates should think about re-vetting their entire intermediary base. Amaee stated - "a board should always ask - where are we doing business and how, and that if the board doesn't like the answers it receives, it should be prepared to take the business elsewhere."

The second area of risk is joint venture. Amaee acknowledged that in certain sectors joint ventures are routine. However, he cautioned that companies should be mindful of not partnering up with a company that is not "willing to be open and transparent or not willing to demonstrate that its code of conduct does not match your own."

Like Attorney Grieve, Amaee also spoke of corporate hospitality. He noted that during passage of the Bribery Act, assurance was provided that the U.K. government will not seek to penalize legitimate corporate hospitality. He stated however that "lavish corporate hospitality can be used to secure an advantage and that the Bribery Act must be wide enough to cover it."

Amaee next spoke of the SFO's approach to combating bribery. He spoke of two strands - active engagement to assist companies improve its corporate culture and to maintain high standards and vigorous enforcement when dealing with corporates who believe in using corruption and thus put others at a disadvantage.

Amaee stated that the "criminal courts are the right place for the right defendants," but he also noted that criminal prosecution is not the "only means of effective enforcement."

He stated that the SFO has discretion to consider non-criminal resolutions such as civil sanctions and listed the following factors as relevant to the issue of resolution: sufficiency of the evidence, public interest considerations, concurrent jurisdiction issues, and potential debarement issues.

Amaee also spent a few minutes talking about the SFO's approach to individuals and he noted that the Bribery Act contains several sections under which individuals may be prosecuted - both rogue employees who bypass a company's adequate procedures and high-ranking corporate executives who consent or condone the improper conduct. Amaee stated that with the Bribery Act, the "stakes are higher than ever before for senior officers within a company" and that under the Bribery Act "it is no longer possible" for senior executives "to bury their head in the sand and look the other way."

During a panel discussion about self disclosure, Amaee was asked when a corporate should consider making the voluntary disclosure decision. In summary fashion, he said that the SFO's preference is "as soon as possible" because this allows the SFO a much better chance for it to tell the company what the SFO is thinking and that if the company self-reports early in the investigative process the company can actually end up saving money because the SFO may suggest a more limited scope of investigation than the company perhaps was considering.

1 comment:

  1. This article makes some interesting points about how corruption can be stopped: