Court Cases, Financial Services - Written by on Tuesday, October 26, 2010 11:02 - 0 Comments

BREAKING Messent bribery sentence: Prison + large fine = senior executives take note

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Today Julian Messent, former CEO of PWS Insurance was sentenced to 21 months imprisonment by HHJ Rivlin QC The Honourable Recorder of Westminster. He was also ordered to pay £100,000 in compensation within 28 days or face an additional period of 12 months imprisonment in default and was disqualified from being a company director for 5 years.

The SFO press release issued today provides some background.  In addition we have learnt additional information from sources close to the case.

Facts

The corruption involved 41 payments to three officials in Costa Rica amounting to approximately US$2 million. The officials being involved with Costa Rica’s state insurance company Nacional de Seguros and the telecoms provider Instituto Constarricense de Electtricidad.  PWS acted as insurance brokers for both Costa Rican companies. The payments were concealed by use of accounts in Panama and the US.

Substantial discount for co-operation with the SFO

While we await the final written judgment sources close to the case have informed us that when sentencing HHJ Rivlin QC made clear that he was applying a substantial reduction to the sentence that he had decided upon because of the Plea Agreement reached between Mr Messent and the SFO, due to the co-operation shown by Mr Messent with the enquires into the offence.

This is important as many commentators have questioned the use of so-called plea agreements in the UK where, unlike the US, there is no such thing as a “plea bargain”.  Instead, irrespective of any deal struck judges maintain complete discretion over sentencing power.

Nevertheless, HHJ Rivlin QC made clear that the sentence he would have passed would have been in the region of 4 to 5 years imprisonment but for the co-operation with the SFO.

No coporate prosecution

The SFO decided that in this case it was not appropriate to prosecute PWS as it is in administration (a UK bankruptcy proceeding) and the business has subsequently been sold.  While this was no bar to prosecution the reality was that the inevitable financial penalty levied upon the corporate would have paced a disproportionate burden upon the company which was already struggling with a substantial deficit in its pension fund.  In other words a fine would only punish innocent pensioners and not the wrongdoers.

Individuals will be held accountable

The punishment also reinforces another principle that runs through the various statements made by the SFO.  While there may be circumstances where an organisation may not be prosecuted for bribery (as in this case, or for example under the new Bribery Act if the defence of Adequate Procedures is available) the courts will show no mercy when it comes to culpable individuals.  As the SFO is fond of saying the new Bribery Act takes criminal liability for violating the anti-bribery laws straight into the Boardroom.  Senior executives take note.

This was a case where the corrupt practice was ‘inherited’ by Mr Messent in his capacity as ‘Head of Property (Americas) Division. The payments were made to retain existing contracts. Mr Messenet went on to become CEO, resigning when the SFO began their enquiries.

HHJ Rivlin QC emphasised the words of Thomas LJ. from R v Innospec, stating that it was no mitigation to say that others pay bribes to get business in the industry or that is the way that business is done.

International co-operation

As a continued sign of the extending reach and levels of co-operation of the SFO they made clear that proceedings in Costa Rica are already underway against the officials concerned.

We have been told directly by the SFO that they are actively seeking greater flexibility in the area of ‘plea deals’ to enable them to have similar latitude to that enjoyed by the DoJ in the US. Even without such additional powers this case is a clear example of the value in real terms of engaging with the SFO. In this case Mr Messent took had the advantage of the mechanism of the “Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud”.

What this means for the future

The Bribery Act comes into force in April 2011 and it will catch corporate corruption in all its forms. The Act removes the ‘mental element’ requirement, enabling the SFO to secure a conviction where the corporate fails to prevent corruption.

Importantly the scene is being set by the SFO with this case, building on the foundations of Innospec.  We shall post a link to the written judgment as soon as it becomes available.

In the meantime, it is clear that the SFO mean business.

Our plea to organisations today.  Ensure that if a problem does occur that you are in a position to take advantage of the defence of Adequate Procedures under the new Bribery Act.  Sign up for our newsletter (on our homepage) & our free Anti-Bribery & Corruption Masterclass in January!  In the words of one of our favourite TV shows “Hey, let’s be careful out there”.

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