News & what's on - Written by Barry & Richard on Sunday, January 10, 2016 7:49 - 0 Comments
BREAKING: Chickens Come Home to Roost – Smith & Ouzman Ltd sentence and confiscation judgment handed down
Reporting by James Tryfonos, Trainee Solicitor at Pinsent Masons (James.Tryfonos@pinsentmasons.com)
The final chapter of the ‘chicken bribes’ scandal concluded on Friday. We will be following up with a more detailed post looking into some of the interesting aspects of the decision. In the meantime…
As previously reported on thebriberyact.com, father and son directors at Smith & Ouzman had bribed foreign public officials in Kenya and Mauritania to obtain lucrative printing contracts under the guise of calling bribes “chickens”.
With father and son, Christopher and Nicholas Smith sentenced nearly a year ago, today saw the remaining matters dealt with: the conviction of the corporate entity, Smith & Ouzman; the confiscation order against all three convicted parties; and the Crown’s costs.
Here we detail in summary the ruling of Mr Recorder Mitchell QC, with a full comment & opinion to follow in due course.
Smith & Ouzman sentencing
The first matter to be dealt with was compensation. As there were no formal requests from the victims (the Kenyan and Mauritanian governments) for the order, and because the Judge could not be certain that the sums would be returned to the appropriate persons, the company was ‘spared’ there being any compensation order. (With the UK authorities free to continue to seek to repatriate confiscation monies through other channels.) [Ed: we look at this in more detail in our subsequent post]
RESULT: No Compensation order.
So far as confiscation is concerned, the benefit obtained under the contracts via criminal means was held to be £881,158. This figure was reached by identifying the gross profit gained on the contracts, plus the value of the bribe and indexed at printing sector rates to account for inflation.
RESULT: Confiscation order – £881,858
Applying the sentencing guidelines which apply to the Bribery Act 2010 (despite the conviction being under the 1906 legislation), the fine was calculated as a 300% multiplier of the value of the bribes, £1,316,799. This reflected the high degree of culpability on the company in using its dominant market position to bribe foreign government officials, for substantial gain over a sustained period.
With a view to enabling the company to continue trading however, Smith & Ouzman will have a period of 60 months to pay this penalty, and on a bi-annual, rather than monthly instalment basis.
RESULT: Fine – £1,316,799 payable in instalments bi-annually over a 60 month period
As the company’s role at trial was limited (given the conviction of the company ultimately followed that of Christopher and Nicholas Smith – as the directors and therefore the controlling minds of the company) costs against Smith & Ouzman Ltd was calculated as being a third of that ordered against the individuals.
RESULT: Costs – £25,000, to be paid in six months’ time
Looking at the totality of the order, the judge held it to be proportionate – which, reflecting on comments made earlier during the sentencing hearing, aimed to hit the balance between keeping the company afloat and making the sentence sufficiently “painful”.
Messrs Smith confiscation order
The guilty directors’ benefit from the bribery was calculated on the following basis. First, the company had received an advantage from the bribery and that advantage was the contracts on which bribes were paid. Those contracts can be expressed as a percentage of the value of the company’s total income, and it is that percentage which should be applied to Messrs Smith’s own individual income as directors (by dividends, bonuses or salary) to calculate the value of their benefit.
For Nicholas Smith, this amounted to £18,693 (indexed), and for Christopher Smith, it was agreed that the final figure be £4,500. The judge declined to deduct from this benefit the cost of any taxes paid on the basis that the low sums of the benefit would not make it disproportionate to do so. It does, however, leave the issue open as to whether the argument may be run with more success in other cases.
Finally, costs against each individual were effectively agreed between the parties and approved at £75,000.