Sectors - Written by Barry & Richard on Thursday, October 6, 2011 3:17 - 0 Comments
Newsletter: Back to school the Autumn Term
Earlier this year we ran a survey and asked the question:
Would you report a company to the Serious Fraud Office for bribing if your company lost business as a result of it?
30 people took the survey. The answer, even from this small number surveyed, was emphatic.
28 out of 30 said that they would shop a competitor if they find out they used bribery.
This highlights an important enforcement risk for organisations. The mortgage industry press recently reported an example where competitors attempted to use the Bribery Act against a competitor. In that example there was no bribery and regulators dismissed the claims. Next time may be different…
Congratulations to Stephen Byrom whose name was drawn from the hat and is the winner of our survey ipod shuffle…
Join us on October 17th for breakfast. We shall be hosting a discussion about proposals for UK Deferred Prosecution Agreements in Pinsent Masons’ London office. We shall be joined by the Solicitor General, Edward Garnier QC of the Attorney General’s Office, and Richard Alderman, Director of the Serious Fraud Office.
They are seeking views from practitioners, corporates and others on the government’s consideration of introducing a form of Deferred Prosecution Agreement to the UK. The Solicitor General and the Director of the SFO will explain the proposals under consideration and the reasons for considering change. The floor will then be thrown open for discussion.
We have been arguing for some time for the UK system to adopt a more US style of plea bargain and Deferred Prosecution Agreement. In cases which merit prosecution under the present UK system (the situation is different if a Civil Settlement would suffice), even in circumstances where both the prosecutor and the corporate have reached agreement, the courts have discretion on penalties.
The result: since there is no possibility of knowing what the penalty will be, corporates are discouraged from Self Reporting, co-operating in investigations or pleading guilty.
Worse, the present system leads to ‘enforcement arbitrage’. Once a Deferred Prosecution Agreement is entered into in the US the UK system is trumped through double jeopardy rules for the same matters.
The fact that corporates are incentivised to resolve criminal investigations in the United States speaks for itself.
This debate is as important as that which surrounded the Bribery Act. If you would like to feed into this important consultation please register your interest to attend by contacting Barry via email on firstname.lastname@example.org.
Places will be limited and are going fast.
Targeting the City
There are various indications that the City will be targeted in anti-bribery enforcement.
One development this year is the focus on ethical shareholders by the SFO. The initiative has been seized upon by Transparency International which issued specific guidance for due diligence on investment and mergers and acquisition transactions.
Earlier in the year the SFO’s settlement with MW Kellogg set a precedent. The SFO which used a Pt 5 POCA Civil Recovery Order to recover £7 million of dividends representing profits from corrupt contracts of MW Kellogg’s parent company. The SFO press release said:
“The SFO recognised that MWKL took no part in the criminal activity which generated the funds. The funds due to MWKL are share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by MWKL’s parent company and others. The agreement will lead to the payment of £7,028,077 within fourteen days in full and final settlement of the case. This sum represents the share dividends due and the interest which has accrued on these sums.”
While there may be other cases, like Kellogg, where a civil recovery order is appropriate the use of Pt 5 of the Proceeds of Crime Act, others will not be. Each case will need to be looked at carefully and there are complex legal hurdles to get over to use this sanction. We shall be watching developments in this area closely.
Investors, those involved in M&A and shareholders should be aware that irrespective of legal arguments there is heightened enforcement risk.
Save the date – Tuesday 29 November – our Christmas Special in London
Worried about what to buy for Christmas?
Come to our Bribery Christmas special at our London offices.
Following on from the success of our summer Bribery shows presentations and panel sessions we’re proposing another Christmas themed session on Tuesday November 29.
We’ll have a look back at the first five months of the Bribery Act and give some predictions for the next year.
More importantly we’ll also give you some special tips for Christmas gifts ensuring that you can enjoy the festivities in the bosom of your family and friends…instead of somewhere else less convivial.
Hear about our experience over the last several months and in dealing with the regulators since the Act entered into force and join us for a little festive fun too.
Corporate hospitality – SFO issues further guidance in run up to the Olympics
The SFO have told us that they will be looking at five factors when considering corporate hospitality in the context of the Bribery Act.
We published those factors on our website back in July. Did your policy get updated to include them?
In case you missed them here is what the SFO told us.
“Where the SFO is considering whether any particular case of corporate expenditure appears to fall outside the bounds of reasonable and proportionate hospitality, it will be looking to see whether:
1. the company has a clear issued policy regarding gifts and hospitality,
2. the scale of the expenditure in question fell within the confines of such policy and if not, whether special permission for it had been sought at a high level within the organisation,
3. the expenditure was proportionate with regard to the recipient,
4. there is evidence that such expenditure had been recorded by the Company,
5. the recipient was entitled to receive the hospitality under the law of the recipient’s country.
The inference that the expenditure was intended as a bribe would be strengthened if it should transpire
(a) that there had been any unjustifiable ‘add-ons’, for example with regard to travel or accommodation, or
(b) that that the expenditure in question could be related in time to some actual or anticipated business with the recipient, particularly in a competitive context.”
You should consider your gifts and hospitality policy in light of this additional guidance from the SFO and if it does not reflect the general principles alluded to then now is the time to amend the policy.
Some of you who access our website using a phone will have noticed that we have developed a mobile app to make content easy to access on the go. Try it out and please feedback any comments we’re always interested to hear from you and will try to accommodate any suggestions.
We’ll be returning before Christmas with our year end quiz a look back at the first year of the Bribery Act and our predictions for 2012. Until then…