News & what's on - Written by Barry & Richard on Monday, January 11, 2016 9:48 - 0 Comments
Picking over the bones of the Chickengate sentencing: The analysis
Over the weekend we promised to pick over the bones of the Chickengate sentencing.
The first SFO successful prosecution of a company for bribery of foreign public officials came to its conclusion Friday with the order of fines and confiscation against Smith & Ouzman Ltd.
We promised some more analysis of James’ Hot off the Press post. Today we pick over the bones.
First, some readers have been in contact!!! We like this.
Some Points of Order:
1. Under the Proceeds of Crime Act compensation takes priority and so if there had been a compensation order it would have normally flowed from the sum to be confiscated unless there were sufficient funds to meet both a compensation order and a confiscation order, so while there is no compensation order, the chances are if there was one it would have come out of the confiscation. The free to ‘repatriate’ part is in fact referring to the confiscated sum or parts of it, should there be a compensation claim.
2. The new sentencing guidelines apply to organisations sentenced after 01.10.14 regardless of the date of offence.
3. The 300% multiplier does indeed reflect the ‘culpability’ of the company. The Judge must also assess the ‘harm’ caused by the culpable behaviour: the 300% reflects the combined degree of ‘culpability’ and ‘harm’.
Now that’s sorted and thanks readers for getting in touch we think there are two important points highlighted by this case, quite apart from the sentences imposed.
Unless you have experience of how things actually work, it is often hard to understand how long an investigation can take from first report to conclusion. After-all, most companies finding themselves in a situation of risk want to quickly get to the point either of quantifying the damage, so that it can be dealt with or conclude that there is in fact no real problem, everything has ’moved on’ and business as usual. There is a natural tension between the need for certainty of outcome in order to run a business and complex nature of a corruption enquiry.
Smith & Ouzman Ltd
Whenever it may have been that the SFO were first told about the activities of Smith & Ouzman concerning their methods of acquiring certain contracts here are the facts:
The case was accepted by the SFO for investigation in October 2010.
Individuals and the company were charged on the 30th August 2013.
In October 2013 they first appeared in Court.
The trial at the Crown Court started 10th November 2014 and concluded with verdicts on the 22 December 2014.
The company was sentenced on 8th January 2016.
So, 3 years from the formal opening of investigation to charge and 5 years to sentence. This time scale is not unusual as we are seeing Rolls Royce, ERNC and Alstrom to name but 3.
Intelligence and co-operation
The second important point to note is buried away in the ‘Notes for the Editor’ in an earlier SFO Press Release.
The authorities of Kenya, Ghana and Switzerland were specifically thanked for their assistance. This case was accepted for investigation by Richard Alderman, the former Director of the SFO. David Green QC, the current Director took over the enquiry in April 2012 and one of the first things he stressed was his intention to boost the ‘intelligence’ capability of the SFO, both through its own resource and more importantly given budgetary constraints, through intelligence sharing. This is a theme that has been repeatedly stressed by the Director, for instance in his speech at the Cambridge Symposium in September 2015 which we reported here (link) (definitely worth reading on the subject of how long things take and why). He stresses the fact that SFO has developed its intelligence capabilities and there is evidence emerging from a number of ongoing matters that we see that he is right. Closer links with other international investigators is a common-sense way of getting around the difficulty of a limited budget. It looks as if the current Director is firmly putting a tick in that box.
Friday 8th January 2016, the conclusion of the Smith & Ouzman Ltd matter.
As reported previously the prosecution under the Prevention of Corruption Act 1906 resulted in the conviction of the Company, conviction of the Chairman who received a suspended sentence of 18 months imprisonment and 250 hours of unpaid work with a curfew for 3 months and conviction of the Sales and Marketing Director who was sent to prison for 3 years .
The case concerned corrupt payments totalling £395,074 made to public officials in Kenya and Mauratania to secure contracts for the provision of ballot papers for elections.
A confiscation order of £881,158 was made against the company. The confiscation order under the Proceeds of Crime Act is of course dealing with the gross benefit which accrued to the company.
It was also fined just in excess of £1.3m. The fine is of course separate and distinct from the confiscation order.
The level of a fine is subject to the principals set out in the ‘Definitive Guidelines on Sentencing for Fraud, Bribery and Money Laundering’.
The start point being the gross profit for the contracts obtained by bribing a public official multiplied by, depending on the facts, between 20% and 400% in the worst cases.
The level of fine here may well be of significance for the future as a reference point, this being corruption involving public officials with no reduction available for a plea of guilty as the case was fought by the company.
Clearly the cumulative effect of the financial orders and the potentially dire consequences of having to pay were recognised by the Court as whilst the confiscation order is to be satisfied within 8 weeks the fine is to be paid in instalments every 6 months.
This sentencing is a post-Christmas hangover that Smith & Ouzman will be feeling for a few Christmases to come.
On the other hand it is welcome closure after a (not unusually) protracted investigation and prosecution.
Pint glass half full: The company can at last draw a line under this episode with certainty and move on. That sounds, at long last, like good news to us.
Happy New Year!