Richard Alderman, Director of the Serious Fraud Office has today welcomed what will be seen as the final act in the Mabey & Johnson case, in which the shareholder Mabey Engineering (Holdings) Limited is to pay back dividends gained as a result of Iraq bridge-building contracts.  He hailed it as “the final act in an exemplary model of corporate self-reporting and co-operative resolution”.

Importantly, while the SFO Mabey case itself has been in the public domain for some time, this “final act” is a novel example of the SFO delivering on its ethical shareholding initiative, which we have written about before.  Earlier this year the Richard Alderman said:

“…[what is] your responsibility if any of the companies that you own pays bribes. You might at first think that this is nothing to do with you as the owners of the company. It might be that as portfolio owners you are not committing an offence of failing to prevent bribery. But it does not end there. First of all we will be looking at money laundering in order to see what money has been laundered as a result of the criminal conduct and to whom it has gone. It may be indeed that the owners have some knowledge of the contract that was obtained through bribery…”

Speaking today Richard Alderman, the Director of the SFO had two things to say about shareholder responsibilities. In doing so, he took the opportunity to fire a warning a shot across the bows of institutional shareholders and the higher standards the SFO will expect of them:

“There are two key messages I would like to highlight.

First, shareholders who receive the proceeds of crime can expect civil action against them to recover the money.  The SFO will pursue this approach vigorously.

In this particular case, however, the shareholder was totally unaware of any inappropriate behaviour. The company and the various stakeholders across the group have worked very constructively with the SFO to resolve the situation, and we are very happy to acknowledge this.

The second, broader point is that shareholders and investors in companies are obliged to satisfy themselves with the business practices of the companies they invest in.  This is very important and we cannot emphasise it enough.  It is particularly so for institutional investors who have the knowledge and expertise to do it. The SFO intends to use the civil recovery process to pursue investors who have benefitted 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.”

Mabey leading the way in ethical business

Noting the steps Mabey & Johnson took Mr Alderman went on to say:  “Finally, we would like to acknowledge the Mabey Group for its cooperation throughout this process. We have been very impressed by its attitude and the clear commitment of the new management to ethical trading. We get regular updates from the independent monitor about the business’s ethics and controls and it appears that in many ways the Mabey group is now leading the way in implementing controls and procedures to ensure that it is able to trade ethically in high-risk jurisdictions.”

Peter Lloyd, CEO for Mabey said:

“Today’s settlement represents the final chapter in our diligent and painstaking work to root out historic unlawful practices. It represents the culmination of almost four years of close co-operation with the prosecution authorities following our self-referral in 2008.

“We now have a strong Group with over 1,000 employees worldwide, new management and rigorous anti-bribery and corruption procedures in place that we believe set the standards that other companies will now have to follow. It means that we, our partners, and our customers can trade with confidence about the ethical nature of the way we do business in sometimes difficult and complex international markets.”

He added:

“We welcome the endorsement of the SFO for the rigorous approach we have taken to this major issue of ethical trading and of our conduct in the self reporting process. Self-referral in these circumstances is not an easy path to take, but, from our experience, it is beyond doubt the right one.”