Friday, October 15, 2010

The SFO Speaks

Today's post is devoted to the U.K. Serious Fraud Office (SFO), specificaly a recent speech by Richard Alderman (Director of the SFO) on the Bribery Act and a recent webcast delivered by Vivian Robinson QC (General Counsel for the SFO) on the Bribery Act.

Bribery Act 2010 - A New Beginning

Earlier this week, Alderman gave a speech "Bribery Act 2010 - A New Beginning" (see here).

[See here for my recent Q&A with Mr. Alderman on the Bribery Act and other topics].

Below are some excerpted highlights.

"Those corporates and individuals that ignore recent developments in this jurisdiction concerning bribery legislation and the enforcement of the law do so very much at their peril. The UK will soon have the toughest bribery legislation in the world and it will be vigorously enforced by the Serious Fraud Office. In the meanwhile, the work of the SFO in enforcing the current law has been widely praised. Indeed as a result of what we have been doing the OECD, Transparency International and TRACE International have put the UK very much in the lead after the US in enforcing anti-corruption legislation. I have been very pleased to see this. The UK is regarded as an active enforcer of bribery legislation. This is exactly where we need to be."

"We want to encourage corporates that identify a problem to come and talk to us at an early stage. The incentive for them is that a self report could potentially lead to a civil resolution through a Civil Recovery Order. We have done this in two cases that are in the public domain and we currently have some other cases that are being dealt with in this way." [Those two cases are Balfour Beatty Plc (here) and AMEC Plc (here)]

"The sentencing remarks by Lord Justice Thomas in the Innospec case [see here for a prior post] have been regarded as casting some doubt on this. In that case, Lord Justice Thomas stressed the importance of dealing with corruption and the need for very significant sentences when individuals and corporates are brought before the Criminal Courts. He also discussed civil recovery and said that the public would expect suitable cases of corruption to go to the Criminal Courts. I entirely accept this guidance. There will be cases where we shall decide, in accordance with the Code for Crown Prosecutors and the Guidance for Corporate Prosecutions, which because of the nature and seriousness of what is alleged we must prosecute. For example, it is likely that cases involving systemic failings at Board level would be prosecuted. However, there maybe cases where we are unable to prosecute and we consider that a civil recovery order is appropriate. This is a civil remedy. We have given detailed guidance on these issues in the context of corporate prosecutions. There is also Attorney General's guidance on the Use of Civil Recovery."

"While I am talking about guidance from the courts, let me also refer briefly to the comments in the Innospec and Dougall cases concerning documents agreed by the SFO and the corporate when a case comes to a criminal court. The Judge took the view that the SFO had gone too far in these cases in recommending or commenting on the sentence that the Judge should impose. I accept these criticisms. Plea negotiations of this nature are new and there is a lot for us all to learn. We have had other cases where the Judge has been satisfied with the agreed documentation as a basis for sentence. This is what we shall need to aspire to in all of these cases."

"Let me now turn to the subject of the Bribery Act because there are a number of issues here that I would like to talk you through. First of all, I very much welcome the Bribery Act. The SFO has been working with colleagues in Government on proposals for changes in the legislation for a number of years and I am delighted to see the Bribery Act. It is a very tough piece of legislation. It is tougher than the FCPA because it also deals with private sector bribery as well as bribery of public officials and it gives no exemption for small facilitation payments. So it is a tough piece of legislation."

"The offence at the corporate level that you will need to know all about is the provision that makes it an offence for a corporate if it fails to prevent bribery. There is a defence to this if the corporate had adequate procedures to prevent bribery."

"I have heard some people say that this offence is one of strict liability. I do not agree. No offence will have been committed if there were adequate procedures. I have also heard people say that the fact of bribery might mean that there were inadequate procedures by definition and so the defence can never be made out. Again, I do not agree. In the real world there may be occasional lapses despite adequate procedures rigorously enforced. The issue ultimately for the Judge and jury (and for the SFO in deciding on a prosecution) will be - were those procedures adequate?"

"I have mentioned the corporate offence but, of course, the Act goes wider that. There are offences of giving and receiving bribes and there is an offence of bribing a foreign public official. There is also an offence targeted at senior officers of a corporate who consent to, or connive at, bribery."

"The Act also looks at issues of jurisdiction. For the first time non UK corporates will be brought within the jurisdiction of the SFO if they have some business presence in the UK. What this will mean is that a foreign corporate that is involved in corruption anywhere in the world will be within the SFO's jurisdiction if it has a business presence here even if the corruption has no connection with that business presence. This is a very important provision for us. I believe that foreign corporates are waking up to the significance of this."

"Let me comment on two particular issues arising from the Bribery Act because I know that they have caused a lot of concern to the corporate sector. These issues concern promotional expenditure and small facilitation payments. It may be helpful if I comment on both of those issues. In doing this I shall follow an important speech given by the UK's Attorney General, The Rt Honourable Dominic Grieve QC MP, to the World Bribery Forum on 14 September. [See here for my coverage of these remarks]. This speech is available on the Attorney General's website and is particularly important."

"First of all promotional expenditure. There are some who have said that the effect of the Bribery Act is to outlaw all promotional expenditure. I do not agree. Sensible, proportionate expenditure is not unlawful under the Act. But, of course, once the expenditure starts to be on a more lavish scale and is intended to influence decision makers in awarding contracts, then we do get into the area of criminal offences. The Act seems to me to take a very sensible approach. And so the message from me is that sensible proportionate promotional expenditure remains perfectly lawful."

"The other issue that causes difficulty concerns small facilitation payments. I appreciate the difficulties because of the realities of doing business in many parts of the world. I also bear in mind that the US Foreign Corrupt Practices Act exempts these payments from criminal offences in certain circumstances."

"There is a lot of focus on small facilitation payments these days. Just before Christmas the OECD published a paper talking about the corrosive impact that these payments have on societies and calling on Governments to take more vigorous action in order to penalise them. This is an important message to all of us."

"Let us be clear. Small facilitation payments are bribes and they are unlawful under our current law. That will not change and they will be unlawful under the Bribery Act. Nevertheless, I have said in public that the chances of the SFO prosecuting a small (say $50) one off facilitation payment that is picked up and remedied by a corporate's internal processes are remote. That does not mean though that corporates can decide that it is acceptable to have a number of so called one off payments provided that in total they do not exceed shall we say $20 million a year. That is certainly a view that has been put to me. I said that I strongly disagreed. I also said that I could not understand how payments amounting to $20 million a year could be regarded as small one off facilitation payments. They are a course of business that is approved by the corporate. The chances of a criminal investigation and prosecution, where that is company policy, would be high."

"There are two other points I would like to make."

"First, do not under-estimate the scale of the co-operation between the SFO and law enforcement authorities in other countries. This is very extensive particularly with my colleagues in the US Department of Justice but also with other countries such as Australia. It is something that means a lot to us. We discuss cases, intelligence leads, policies and risks. There is a lot of discussion that goes on behind the scenes."

"Finally, there is an invitation from the SFO to approach us to discuss these issues, either directly or through professional advisers. We can discuss your company's policies and we can discuss the issues that you are finding in practice. We find this very beneficial ourselves and I know that corporates do as well. We are very ready to have these discussions with you."

Bribery Act - What Does it Mean?

In a 30 minute webcast (here) Robinson speaks on a variety of topics.

Among other things:

Robinson says that it is right to describe the Bribery Act as the most "draconian" anti-corruption measure in the world.

As to the adequate procedures defense, Robinson says that because of the defense "there is every reason to be optimistic that we won't get as a result of the Act and this particular section a huge expanse in the number of prosecutions of corporates."

As to self-reporting, Robinson says that the SFO will not sit back and wait for cases to come to it. He mentions that there is increased information sharing, greater cross-border cooperation, that the SFO's investigations have dramatically increased, and that more information is coming from whistleblowers. He stated that "companies are at greater risk than ever before that SFO will discover matters on its own." He stated that "self-reporting makes absolute sense [and that the SFO is] encouraging it as strongly as we possibly can."

As to small to medium size companies, Robinson says that smaller organizations are not absolved from liability under the Bribery Act. but that the SFO "would not expect the same from a small or medium size company that we would expect from one of the larger ones." He said that the SFO will take "into consideration the extent to which a small, medium size operation can put in place the same sort of procedures as a larger organiztion with much greater resources." As to due diligence, Robinson says that small to medium size companies "should carry out as much due dilignce as they reasonably can, but what they reasonably can do in that way may not be as much as a large corporate can reasonably be expected to do."


A good weekend to all.

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