All you need to know about self reporting, Construction, Financial Services, Long arm jurisdiction - are you subject to the law?, Manufacturing, Medical (incl. medical device & pharma), MENA (Middle East & North Africa) - Written by on Sunday, December 12, 2010 16:15 - 0 Comments

Our predictions for 2011 & a round up (our end of year newsletter)

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Front page news

The last 18 months has been a busy one for corruption in the UK and all this activity has resulted in corruption making front page news. From corporate corruption through to allegations swirling around the FIFA world cup, threats from WikiLeaks to expose corporate corruption to seemingly almost endless press coverage on the Bribery Act and uncertainty around its application. Even cartoon characters got in on the story. Our personal favourite, Alex in the Daily Telegraph is up to his usual tricks.

Finally, while on the subject of the news perhaps the most pivotal development of the year, hatched.

The SFO ups the ante

From what was almost a standing start the UK’s Serious Fraud Office (SFO) successfully prosecuted two corporations, Innospec and Mabey & Johnson and obtained a civil recovery order in respect from AMEC (following an earlier civil recovery order from Balfour Beatty in 2008).

The SFO turned up the heat on individuals too. Mr. Dougall a senior executive and Mr Messent former CEO were both jailed for their part in corrupt activity.

Ending the year with a bang BAe also pleaded guilty to charges relating accounting irregularities at the end of November ending the controversial and long running saga which marked the joint UK and US investigation. A date for sentencing has been set for 20th December. Observers are keen to see the outcome given the critical comments in Innospec by Lord Justice Thomas about plea agreements and sentencing deals.

In the words of Richard Alderman, Director of the SFO in a speech given on 9 December 2010:

“ [the SFO has] become very vigourous in our enforcement of bribery legislation in respect of corporates and individuals”.

Government gets it act together

The Bribery Bill became an Act and it is slated to enter into force in April 2011 to give corporates plenty of time to comply with it. At the time of writing guidance for compliance with the new law and for prosecutors in enforcing it remains outstanding and is expected to be published in early 2011.

Our predictions for next year

In September we identified our key enforcement trends. Unsurprisingly our predictions for 2011 tie into these.

A more joined up approach

In November, we posted on the strength and level of co-operation between the UK and the US enforcement agencies a number of times. In November we attended the 24th Annual US Foreign & Corrupt Practices Act (FCPA) conference. If there was any doubt about the level of co-operation between the two countries Lanny Breuer’s speech dispelled it.

The US and the UK are not the only jurisdictions working together. Countries around the world are taking a more joined up approach. To take a couple of examples, Germany was heavily involved in the joint investigation into Siemens and as recently as September the UK undertook co-ordinated searches in a combined investigation with jurisdictions as far flung as Australia, Malaysia and Spain.

More cases

In the UK 10 people are awaiting trial and they are expected to take place next year.

More corporations and individuals are being looked at with a view to seeing whether they can be prosecuted for corruption. Many of these are not yet in the public domain.

Compounding the increase of activity the Bribery Act will enter into force. The SFO has embarked on an unprecedented and sustained campaign to warn organisations about the tough new law and its intention to enforce it.

And they really mean it. As Richard Alderman recently said:

“Anyone who thinks that they can bribe and continue to bribe without being caught and punished thinks this at their peril.”

Sector investigations

While there is no specific policy in the UK of undertaking investigations into sectors the US is undertaking a number of such investigations. However, the SFO has made no secret that it will piggy back off of these investigations.

As we reported at the beginning of November Richard Alderman warned delegates at a Pharmaceutical Industry conference (the pharmaceutical industry is the subject of a well publicised US investigation) do not “underestimate the amount of information sharing that goes on between us and the DOJ and the SEC about all of these issues”.

In other words, organisations should assume a sector investigation in the US will have knock on consequences in the UK.

Bigger fines

To date the size of fines in the UK has been relatively tiny when compares to the fines levied in the US with the maximum fine in the region of £10 million. However, the courts have given the clearest signal that this approach will no longer be taken with Lord Justice Thomas in Innospec saying that in his view a fine comparable with that imposed in the US is the starting point separate from and in addition to depriving wrongdoers of the benefits of the crime.

More self reporting

The SFO are pushing the benefits of self reporting corruption very hard with the carrot of the chance of more lenient treatment (a possible civil settlement for the corporate) and more control over the investigation. The DOJ are taking a similar approach.

There has been some debate over the benefits of self reporting. However in the US many corporations have done so and Balfour Beatty and AMEC have done so in the UK. More are in the pipeline.

There is another compelling reason for considering self reporting, the Proceeds of Crime Act or as we referred to it in our post in September, the sting in the tail.

Richard Alderman put it this way:

“I could give you a number of reasons why I think [keeping quiet] would be wrong. Let me though just give you one. Which of you would like to go and visit your CEO and CFO in a police station where they are being held following arrest on money laundering charges. Those charges will be based upon decisions by the CEO and CFO on your advice that disclosure will not be made to the SFO and that the benefit of the corruption will therefore be retained within the corporate. I can imagine some difficult discussions.”

Merry Christmas!

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