How will the SFO treat companies in the future?
03 Oct 2012
New SFO Director signals changes in how the agency will treat companies in the future
The Serious Fraud Office has withdrawn its guidance to companies that discover and report corrupt conduct in order to avoid prosecution. The guidance, which had been based upon the US model, was issued in July 2009 by former SFO Director Richard Alderman.
In the three years it was promoted, the guidance lead to a number of self-reports, five of which have concluded. Four of these cases resulted in a non-penal outcome, by way of civil recovery order. In the other, which concerned Mabey & Johnson Ltd, both the company and its directors were prosecuted for corruption. The company paid fines of £3m, made reparations of just over £1.4m and had a confiscation order of £1.1m imposed. This is in addition to paying £350,000 towards the SFO’s costs and £250,000 towards the cost of an independent monitor. The directors were sentenced to prison terms of 21 months and 8 months respectively and were disqualified from being company directors. One of the employees, who became a co-operating witness, received a prison sentence of 8 months suspended for 2 years.
Self-reporting under new anti-bribery powers
The SFO is reappraising its approach to dealing with corporate hospitality, facilitation payments and self-reporting under anti-bribery powers it was granted last year. Whilst this means continued uncertainty for companies in terms of prosecution policy, there is a lot of other industry specific guidance around upon which policies can be based so as to be proportionate and properly focussed. As long as appropriate measures are taken to assess the risk of corruption, and policies and training are tailored to deal with that risk, companies should not have too much to fear from the withdrawal of the SFO’s guidance. It is still a safe bet that companies will not be prosecuted for technical infringements of the Bribery Act. Indeed, although less in the public spotlight than his predecessor, new director of the SFO David Green has said “We are interested in hearing that a large company has mysteriously come second in bidding for a big contract. The sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne. We are not the “serious champagne office”.’
Interestingly though, in the guidance that is now being reviewed, the SFO said it would not prosecute facilitation payments (small payments to public officials to encourage them to carry out functions they should ordinarily do, but more quickly) as long as companies followed certain procedures. It was tacitly recognised that these payments were difficult to eradicate overnight and that in certain countries companies have difficulty doing business without occasionally paying them. This has now gone and companies will be left wondering how best to deal with this aspect and whether it is now safe to turn to the SFO for guidance or whether this will now mean a greater likelihood of prosecution if they do.
What does the future hold for prosecution in bribery and corruption cases?
It appears to signify a re-grouping by the SFO, stung recently by criticisms in Tchenguiz about the quality of their resources and decision making, and it also signals a shift towards more prosecutions in future, in tune with comments made by Lord Justice Thomas in R v Innospec that it would “rarely be appropriate for criminal conduct by a corrupt company to be dealt with by means of a civil recovery order”. David Green is thought to be of the ‘old school’ in terms of prosecutions; if cases fulfil the public interest test for prosecution he is the man who will now prosecute them. He is also turning the spotlight away from bribery and on to typical city frauds of which we have seen a rash in recent months. He has hired former Judge Geoffrey Rivlin QC to help him bring cases to court, and this latest move to withdraw guidance chimes with a new approach at the agency.
More prosecutions and fewer deals seems to be the message. This makes for a difficult decision for a company that finds that corruption has taken place. It is more uncertain than ever that self-reporting will guarantee the right result and arguably now it might mean a greater likelihood that the company will face criminal proceedings with all the attendant reputational issues and expense attached to protracted proceedings. The decision what to do in those circumstances has never carried more responsibility and companies need expert advice to establish the facts and to advise on whether to make a self-report.
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