International - Written by on Saturday, October 26, 2013 6:27 - 0 Comments

SFO to target UK PLC in corporate crackdown – it’s still all about the money

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david-bioIn response to criticism that the SFO does not go after a sufficient number of corporates David Green made clear that there is no “fear” within the SFO to do so in the appropriate case.

The announcement last week (which we reported here) that the SFO has charged Smith and Ouzman Limited over alleged bribery and corruption underscores the point.

Barriers – two nations divided by a common language

One of the difficulties facing the SFO is the way in which corporate liability is determined in the UK.

The UK’s ‘directing mind’ principle has to be satisfied.

Put another way, broadly speaking in the UK the prosecutor needs to finger someone very senior in the Company for criminal liability to be attributed to the corporate.

In broad terms the UK position is the opposite of the Respondeat Superior principle in the US.

In the US the DoJ have the benefit of the US law which establishes corporate liability vicariously for the actions of their employees in wide circumstances.  This is called ‘Respondeat Superior’. The ‘directing mind’ requirement is not in the US lexicon.

David Green was clear in his rejection of the fairness of comparisons as between the SFO and the DoJ in this area.

To be fair.  He has a point.

It’s all about the evidence

Back to the UK, the evidence to prove the directing mind principle is often hard to find.  The SFO Director has (somewhat cynically!) feigned his ‘surprise’ on a number of occasions that the email chain runs out before you get to the main board.

Of course, there is another side of that coin. In large global corporations with diverse business operations operating all over the world it is no surprise that the Board of Directors in London are ignorant of what, say, a salesman in Bangalore is doing. The result.  Individuals lower down the corporate chain can be exposed to prosecution with no evidential link to the ‘directing minds’ of the corporate under investigation.

Change the law

An answer posed by David Green is simply, change the law and bring it into line with the US.  In a UK context Mr. Green is suggesting putting in place a Failure to Prevent Fraud offence in line with the new Failure to Prevent Bribery offence contained in Section 7. of the Bribery Act.

Some argue that this would be very complicated.

But. The truth is, not really.

Bribery is only a form of fraud and Section 7 of the Bribery Act exists today.

The real question is whether UK voters want it.

Judging by the newspapers everyday in the UK a move to make it easier to prosecute corporates would be welcomed by voters.  There is daily criticism that no corporate heads have rolled for any of the recent corporate scandals.

Opinion – the Americanisation of English law

There will be a fierce business lobby against any changes to the law to make it easier to prosecute corporations.  Truckloads of very good reasons to maintain the status quo in the UK will be deployed.

And yet. In the US where it is much simpler life goes on.

Against a backdrop where we have a UK FCPA (the Bribery Act), Deferred Prosecution Agreements are coming to a cinema near you and the UK government is looking to cookie cut US whistleblowing laws a move to introduce US style corporate crime laws to make it easier to prosecute UK PLC looks a logical next step.

Business will lobby against, the public voters will be in favour and the Politicians will decide. 

In the final analysis, much like it is deeply unattractive to argue that bribery should be legal, it is likewise hard to argue that corporate fraud should be without any real prospect of punishment because of a legal technicality.


Opinion – it’s still all about the money

But the real question in all of this is not so much the law, but how much money government will give law enforcement to enforce it.



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