Bribery Act & Proceeds of Crime - Written by on Wednesday, January 18, 2017 5:30 - 0 Comments

Opinion: As Rolls resolution confirms DPA’s on the menu without Self Report we argue (again) for bigger discounts for companies who Self Report.

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A fan of a rolls royce engine of Airbus A350-800Rolls Royce DPA with the SFO is the right result.

Rolls can draw a line under the matter and move on.  The SFO can be applauded for what is a very significant enforcement resolution in its favour.

The SFO Press Release records serious misconduct, namely,  “…12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery….[spanning] three decades and involves Rolls-Royce’s Civil Aerospace and Defence Aerospace businesses and its former Energy business and relates to the sale of aero engines, energy systems and related services. The conduct covered by the UK DPA took place across seven jurisdictions: Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.”

In his judgment Sir Brian Leveson recorded:

“My reaction when first considering these papers was that if Rolls-Royce were not to be prosecuted in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequentially, even greater profits, then it was difficult to see when any company would be prosecuted. A possible exception could be the corporate vehicle for fraud, set up for that purpose and, in the public interest, requiring dissolution (although that also might be achieved in different ways). As for the non-penal consequences of conviction, the purpose of the procurement rules is specifically to discourage corruption and they should not be circumvented.”

That said, taking into account numerous factors Sir Brian concludes:

“In the circumstances, subject to the terms being fair, reasonable and proportionate, I have come to the conclusion that it is in the interests of justice that the conduct of Rolls-Royce be resolved through the mechanism of a DPA.”

This is the correct result.

As David Green, Director of the SFO once said the key to a DPA is Co-operation, co-operation, co-operation.  It would be unfair and arbitrary that the availability of whether or not a business could garner a DPA could come down to a timing issue, namely whether the SFO found out about it first.

Rolls Royce’ DPA confirms that DPA’s will be on the table, in appropriate circumstances, whether or not a company has Self Reported (which Rolls Royce did not).

With extensive reference to co-operation a DPA has been agreed and on top of that an additional discount of 16.7% on top of the standard 33.3%  (available in the context of an early guilty plea) was provided.

All this is sensible stuff while at the same time a very substantial penalty and disgorgement has been meted out, instantly catapulting the Rolls bribery enforcement resolution into the top five of ‘FCPA’ settlements of all time;if not the top three.

Opinion

A core goal of the DPA regime has always been to encourage Self Reporting.

Rolls DPA blows out of the water the SFO the argument that absent a Self Report a DPA is not on the table.

As a result, the courts will need to do more to incentivise corporate Self Reporting (we have long been arguing for this).

What incentives a Board to Self Report misconduct in circumstances where it is still possible to obtain a DPA and obtain a 50% discount without doing so?

The answer: companies who Self Report should received much bigger discounts.

We consider that the UK should follow the US lead (again) and offer a discount of up to and including 100% off of a penalty/fine.  Disgorgement orders would still be made.

If Boards are to seriously consider Self Reporting they must have a clear economic choice in front of them.

That choice needs to be that the cost of not Self Reporting could, if the conduct is uncovered, be substantially more than if the Company Self Reports, taking into account all attendant costs and expenses.

Faced with this choice the Board of Directors would need to consider whether they were properly performing their fiduciary duty to the Company in gambling on not getting caught in light of the relative additional economic downside to the corporate if the company is caught out.

The risk of class action law suits against Directors personally in circumstances where they took a decision not to Self Report which subsequently resulted in significant extra cost to a corporate would focus the mind and create a meaningful topic for debate at the highest level.

 

 

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