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Prosecution Policy and Trends


05.02.2013

Prosecutions under the Bribery Act

So far there have only been two prosecutions under the Bribery Act, both against individuals.

The first prosecution was against Munir Patel, a court clerk at Redbridge Magistrates Court, who was filmed accepting a cash payment in return for omitting to put an offender’s traffic summons on the court database.  Mr Patel was charged under section 2 of the Act (i.e. requesting, agreeing to receive or accepting a bribe), in addition to the offence of misconduct in public office.  He was sentenced to three years’ imprisonment under the Act and six years’ for misconduct in public office, the sentences to be served concurrently.  On appeal, his sentence was reduced to four years’ imprisonment. See our LawNow.

The second prosecution was against Mawia Mustaq, who was charged under section 1 of the Act (i.e. offering, promising or giving a bribe), for offering money to a licensing officer from Oldham Council in return for a private hire taxi licence.  Mr Mustaq was sentenced to two month’s imprisonment, suspended for two years and given a two month curfew. See our LawNow.

Although of interest, neither case has assisted in providing guidance on the meaning of the more complex provisions within the Act (including the weight the courts may give to the Ministry of Justice’s guidance on “adequate procedures”), which is only likely to come when a corporate is prosecuted in connection with bribery under the extraterritorial jurisdiction provided by the legislation.

Increased prosecutions under the old anti-bribery laws

The Bribery Act does not have retrospective effect and the SFO has reported that, on average, it takes 19 months for it to investigate allegations and bring a case to charge.  It is therefore unsurprising that there have been only two prosecutions under the Act so far.  However, since the initial proposals for legislative reform were published in 2008, we have seen a huge increase in prosecutions for bribery under the previous anti-bribery regime, with more than 20 bribery-related cases passing through the courts.  In the years prior to this, there were very few individual prosecutions and no corporate prosecutions.

A full record of all bribery or bribery-related prosecutions since 2008 can be found here.

Since 2008, there have been a number of notable firsts:

Tobiasen (September 2008) First conviction for bribery of a foreign public official.

Neils Tobiasen (a Danish national and head of CRBN Team Ltd – a British security company) made five payments (amounting to £83,000) to public officials in Uganda in order to win six contacts (worth £500,000) to supply training and equipment to guard the commonwealth meeting in Kampala.  He pleaded guilty and was handed a suspended sentence of five months’ imprisonment.

Balfour Beatty (October 2008) - First self-reported case resulting in a non-criminal sanction (i.e. a civil recovery order).

Balfour Beatty self-reported to the SFO in relation to “inaccurate accounting” and “payment irregularities” in a joint venture between a subsidiary and an Egyptian company to secure contracts worth £22.5m to construct the Alexandria Biblioteca in Egypt.  The SFO obtained a civil recovery order of £2.25m against Balfour Beatty.

Mabey & Johnson (September 2009) – First conviction of a corporate for overseas corruption.

Mabey & Johnson self-reported to the SFO that it paid a £100,000 bribe to a Jamaican official to win contracts worth £16m.  The company also paid £470,792 in bribes to officials in Ghana to secure contracts worth £26m.  In addition, the company entered into a contract under the UN Oil-For-Food Programme to supply 13 steel modular bridges.  Illegal payments of over €420,000 secured the contract with the Iraqi government, representing 10% of the total contract value.

On conviction, the corporate paid £6.6m, including fines and reparations to the relevant foreign governments.  In addition, two directors and a sales manager were individually prosecuted.

For further information:

See the sentencing remarks of Judge Rivlin QC.

Innospec (March 2010) – First joint settlement with US and UK prosecuting authorities.

Following an investigation by the US and UK authorities, as part of a joint plea agreement with those authorities, Innospec Ltd pleaded guilty to conspiracy to corrupt. The offence related to the payment of bribes of around $8 million to public officials of the Government of Indonesia between 2002 and 2006 to secure contracts (worth some $160 million) for the supply of an anti-knock fuel additive TEL, which was banned almost throughout the world because of its health and environmental impact.  Some of the corrupt payments were also made to delay the banning of the additive in Indonesia.

The settlement terms agreed with the authorities included, amongst other measures, Innospec and its US parent agreeing to pay a total of approximately $40 million in fines, the UK portion of this being $12.7 million.  At the sentencing hearing Lord Justice Thomas very reluctantly approved the terms of the agreed settlement but concluded that the SFO “had no power to enter into the arrangements made and no such arrangements should be made again” (the plea agreement had been very prescriptive as to the penalty that should be imposed by the court and the split of the global settlement amount between the UK & US authorities; however, sentencing questions are entirely in the discretion of the court).

In addition to the corporate prosecution, four individuals, including two former CEOs, the global sales and marketing director and a regional sales director have been convicted and are awaiting sentencing.

For more detailed discussion of the judgment and its potential implications:

Read our LawNow.

See Lord Justice Tomas’ sentencing remarks.

Dougall (April 2010) – First conviction of a UK national for overseas corruption.

John Dougall, a former director of marketing and business development for DePuy International Limited ("DPI"), an orthopaedic products manufacturer, pleaded guilty to conspiracy to corrupt doctors in the Greek public healthcare system, between February 2002 and December 2005.  He was the first British citizen to be convicted in this country of a corruption offence for overseas corruption of foreign public officials.
Although Mr Dougall provided significant help to the SFO in its investigation of DPI under an assistance agreement, resulting in the SFO seeking a lenient non-custodial (i.e. suspended) sentence for his involvement, the Judge decided the minimum sentence should involve a term of imprisonment.

On appeal, Mr Dougall's sentence was reduced to a suspended sentence for reasons specific to the facts of the case.  However, the Court of Appeal criticised the SFO's attempt to prescribe a non-custodial sentence and rejected its arguments that the only realistic incentive for “white-collar” offenders to cooperate with prosecutors was the chance to avoid an immediate custodial sentence and that the first person to co-operate with investigating authorities should receive the most favourable sentencing outcome.  This decision cast a further shadow over the SFO's efforts to persuade businesses to self-report corruption in return for more lenient treatment.

Further information:

Read our LawNow on the original sentencing.

Read our LawNow on the appeal.

See the judgment.

BAE Systems (December 2010) – Largest criminal penalty imposed on a corporate (£30m).

Following almost six years of investigations into allegations of bribery in a number of deals that BAE had concluded in the Czech Republic, Romania, South Africa and Tanzania, BAE pleaded guilty, as part of a plea agreement with the SFO, to an accounting offence under the Companies Act 1985 in relation to conduct in Tanzania – there was no acknowledgment of any corrupt acts nor of any wrongdoing in any of the other jurisdictions.  BAE agreed to make a £29.5m ex gratia payment for the benefit of the people of Tanzania and was fined £500,000.  Separately, BAE settled with the US authorities in connection with its activities in Saudi Arabia.  In that settlement, BAE pleaded guilty to conspiring to make false statements to the US government and agreed a settlement sum of $400m.

Further information:

Read our LawNow.

See the sentencing remarks of Mr Justice Bean.

Macmillan Publishers (July 2011) – Largest civil recovery order agreed (£11.2m).

Macmillan made improper payments in an unsuccessful bidding process for an education project supported by a World Bank-managed fund in order to supply textbooks to south Sudan. 

The City of London police started its investigation after the World Bank reported that an agent acting on Macmillan’s behalf unsuccessfully attempted to bribe key officials to win the tender in Sudan.

In March 2010, Macmillan self-reported to the SFO, who required Macmillan to instruct external counsel to investigate the matter.  The scope of the external counsel’s investigations was extended to three other jurisdictions, Rwanda, Uganda and Zambia and it was concluded that the company could not guarantee that business secured in these countries were not the result of bribes.

A civil recovery order of £11.2m was agreed, representing the estimated amount earned as a result of the bribe.  Separately, Macmillian was also debarred from World Bank funded tenders for three years.

Further information:

See the civil recovery order.

Mabey Engineering (Holdings) Ltd (January 2012) – First civil recovery order against a parent company for dividends representing unlawful gains.

In January 2012, Mabey & Johnson’s parent company, Mabey Engineering (Holdings) Ltd, agreed to a civil recovery order of £131,201, representing the dividends which the parent company collected from the contracts at the centre of the UN Sanctions prosecutions referred to above.  This was the first time that the SFO had sought to recover paid dividends from a parent company in receipt of unlawful gains from their subsidiary.  The former SFO director, Richard Alderman, gave a stark warning to shareholders and investors, saying that he considered that they: “are obliged to satisfy themselves with the business practices of the companies they invest in... The SFO intends to use the civil recovery process to pursue investors who have benefited from illegal activity.  Where issues arise, we will be much less sympathetic to institutional investors whose due diligence has clearly been lax in this respect.”  Mr Alderman subsequently clarified that this was applicable to shareholders and investors that realistically could exert influence over the companies in which they invest, which generally would include major shareholders and institutional investors, as opposed to merely anyone in receipt of a dividend.

For further information:

Read of our LawNow.

Prosecution conclusions

Over recent years, judicial attitudes to bribery have hardened, with more cases than ever before being heard by the courts.  This could be due to a heightened awareness of bribery issues for both the public and prosecutors, resulting from the Bribery Act coming into force.  Quite apart from the cases identified above, the SFO has reported that they have 18 live investigations in this area, some of which would, if prosecuted, fall under the Bribery Act regime. 

The financial penalties (whether criminal or civil) for corporate defendants have also significantly increased with each passing case.  Judges deciding these cases have made ever more ominous pronouncements about appropriate sentencing, none more so that Lord Justice Thomas in R v Innospec, who said that “the level of fines in cartel cases is…measured in tens of millions.  It is self-evident that corruption is much more serious” and that “…unless I had been satisfied that the new management… would not engage in similar conduct in the future, I would not have assented to a fine… that would have enabled the continuing survival of this company.”  Increasingly we have seen the SFO dealing with corporate cases of bribery through civil recovery orders.  While this approach has been criticised by the courts (particularly Lord Justice Thomas in R v Innospec, who said it would rarely be appropriate to punish criminal conduct by civil sanctions), absent an attractive alternative, the SFO appears to have favoured this route as a quick and cost effective way of penalising corporates who cooperate with them in investigations. This approach may, however, be changing since the David Green became the Director of the SFO and it is likely to change furthere following the introduction of deferred prosecution agreements in 2014/2015.  (Read our LawNow on deferred prosecution agreements here.)

For further information, please contact:
Omar Qureshi Omar Qureshi
London
+44 (0) 20 7367 2573
View my CV
Shuna Mason Shuna Mason
London
+44 (0) 20 7367 2300
View my CV
Amy Smart Amy Smart
London
+44 (0) 207 367 3335

Lisa Fox Lisa Fox
London
+44 (0) 20 7367 2377

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