Adequate Procedures, Corporate hospitality - Written by on Monday, June 27, 2011 23:27 - 0 Comments

Hospitality, Wimbledon finals & bribery arrests?

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The Wimbledon Semi finals are on July 1st this week the same day the Bribery Act enters into force.

For those going:  rest assured.

We predict that there will be no arrests under the Bribery Act for those in attendance.

This is so notwithstanding that ticket prices for the Mens Final on Sunday are, at the time of writing on Sunday afternoon, just over £2,500 per ticket.

Corporate hospitality is a huge feature of Wimbledon and every other major sporting event.

As a result we do not consider that it will ever be the case that corporate hospitality for a major sporting event, whether it be for the Wimbledon finals, or for a ticket at the Olympics for the mens 100 metre finals, will be illegal.

But, while in our view it will not be the case that corporate hospitality is simply outlawed at any of the major sporting events, it is possible that bribery could be inferred.

It is all a question at looking at the particular circumstances and assessing whether what is proposed is reasonable and proportionate.

Alive to this risk we have seen prudent organisations using their corporate hospitality procedures before lucky guests are offered or accept their invitation.

While tickets to events like Wimbledon could be problematic – companies take the view that provided that they consider and reasonably satisfy themselves that it is appropriate, reasonable and proportionate that the relevant guest attends, then it is perfectly acceptable.

We agree with this approach and recommend that the decision is recorded too.

Last week, the Director of the SFO had this to say on the subject of corporate hospitality:

“…Corporate hospitality is a feature of doing business. It is one of the ways in which you build up and refresh relationships, and relationships are key to doing business. Some were saying before the Guidance was published that there will be a complete bar on any hospitality whatsoever. Some of what was being said seemed to me to lack any sense of proportion. I was being asked for instance, whether or not the SFO would prosecute if an extra bottle of wine or a rather better bottle of wine was supplied at a dinner.

I recognise that these concerns were very genuinely held. I recognise as well that it was very important that people involved in commercial activities should not be in doubt about the scope of the law. I found it very helpful therefore when the Justice Secretary, Ken Clarke injected a very strong note of realism into this whole debate. He said that there is no question of people being prosecuted for taking clients to Wimbledon or anything of that nature. He stressed…that the overall question was whether or not the expenditure was sensible and proportionate. This is the principle that we have adopted. We find in our discussions with companies that by and large they know what the answers are to these questions and they know whether or not they can justify these payments. They have their shareholders to worry about as well as their senior management and auditors. They know as well whether they would like to see details of the expenditure on the front-page of newspapers, always a very good test.”

He went on to say that the levels of corporate hospitality could legitimately vary from industry to industry.  Speaking to the audience who were members of the Private Equity industry he said:

“It has occurred to me that your industry may be rather different here because of the nature of the individuals that you might wish to entertain and their leading role in major sources of funds. These could be senior investment officers in very large pension funds or indeed Sovereign Wealth Funds. This well may be an issue that is felt acutely therefore by private equity. Let me try and give you some guidance.

What is sensible and proportionate will need to be judged by reference to who you are talking about and what is generally regarded as acceptable and safe practice. When we are talking about senior individuals in large pension funds or Sovereign Wealth Funds, then you would not expect to put them up at very modest hotels after travelling Economy. It is not how it is done.

However, I would not expect you to agree that the individual should come for a month or a couple of months to stay at the most expensive hotel in London together with very many members of their family and for all of them to be given large amounts of spending money to be used whilst they are in London.

I would not expect you also to arrange a business trip of a few days for these individuals, followed by a month at your private island somewhere, which has a warm climate and excellent golf and fishing.

These examples do not seem to me sensible and proportionate, particularly if shortly after the end of the hospitality, the official awards you a billion dollar contract. Indeed perhaps more importantly, I doubt very much if a jury of 12 ordinary people from the streets of London would regard it as being sensible and proportionate.”

He also went on to say that if organisations were concerned as to whether what was being proposed was problematic they could approach the SFO.  This is a potential solution for many of those who worry what the position will be in relation to the Olympics where some of the sponsorship packages are very expensive. He said:

I appreciate that there is obviously a degree of judgment to be used here but I would suggest that if you are in doubt, then you come and talk to us. Companies are doing this and they are talking through with us what they do and their policy on entertainment. We generally find that they know the answer and what they need from the SFO is reassurance.”

This can all be summed up in two words.  Common sense.

We would add this.  In our view, corporate hospitality is unlikely, on its own, to trigger a prosecution for a Bribery Act offence.

This is not to say it will never feature in a prosecution.

We expect that corporate hospitality will feature in prosecutions but that it will be an additional feature to a host of other examples of alleged bribery.

We also expect that corporate hospitality will be a powerful piece of evidence.  On a cold and wet February morning in Southwark Crown Court pictures of laughing guests, clinking chilled champagne glasses in the sun before their paid for helicopter flight over Niagara Falls, will be an image that will stick in the minds of the jurors as they consider their verdict…

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