Bribe payments by Scottish oil and gas company result in USD 8.9 penalty Reply

Recent Enforcement Developments

Scottish oil and gas services company agrees to civil settlement. On 23 November 2012, Abbot Group Ltd. agreed to a civil settlement of GBP 5.6 million (USD 8.9 million) with the Crown Office and Procurator Fiscal Service. The penalty, which will be invested in programs to foster youth employability, healthy lifestyles, and reduced recidivism among Scottish youth, represents the profit obtained from a 2006 contract between an overseas subsidiary of Abbot and an unidentified oil and gas company, resulting in improper payments by Abbot in 2007.  The authorities did not disclose the location or the identity of the individuals and subsidiaries involved, pending a criminal investigation of the transaction. This is the first instance of a Scottish company entering into such an agreement under the Proceeds of Crime Act.  The complete Compendium summary for this case may be accessed here.

The UK Serious Fraud Office reveals new approach to corruption offenses 1

The Bribery Box, 8 King Street Bristol

The UK Serious Fraud Office issued a press release this morning announcing a revised policy on facilitation payments, business expenses and corporate self-reporting.  The guidance was issued in order to ensure consistency throughout the various prosecuting authorities, to meet OECD recommendations, and to re-emphasize the SFO’s role as investigator of serious fraud and corruption.  The press release indicates that the only significant change between the previous and the new guidance consists in the removal of the SFO’s policy on self-reporting.

The SFO states that it “encourages corporate self-reporting, and will always listen to what a corporate body has to say about its past conduct,” but that this is no guarantee that a prosecution will not ensue.  It is not, as stated in the SFO’s Questions and Answers, the role of that office to provide companies with advice on their future conduct.  The SFO further explains that “for a self-report to be taken into consideration as a public interest factor tending against prosecution, it must form part of a ‘genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice.’ Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.”

The guidance on facilitation payments leaves no room for doubt that under UK law, a facilitation payment is a bribe:  they were illegal before the Bribery Act came into being, and they remain illegal.  However, individuals and companies will be prosecuted for making facilitation payments if it is in the public interest to prosecute, and there is a reasonable prospect of conviction.  Undoubtedly, this represents a change from previous policy, as the SFO will, it appears, no longer take into consideration the policies and practices a company has in place regarding such payments.

The new statement restates the UK outlook, that hospitality is part of doing business, and that there is nothing criminal about bona fide promotional expenses.  Disguising bribes as business expenses is illegal under the Bribery Act, and it will be up to the SFO to decide whether to prosecute.  The SFO will prosecute if “(a) the case is a serious or complex one that falls within the SFO’s remit and (b) the SFO concludes, applying the Full Code Test, that there is an alleged offender that should be prosecuted.”  This also represents something of a departure from previous guidance, as, again, the SFO will no longer weigh a company’s standing rules about gifts and entertainment.  As in the case of facilitation payments, the SFO has the option of pursuing recovery of benefits that have been illegally bestowed, by using the Proceeds of Crime Act of 2002.

A decision to prosecute must be based on The Code for Crown Prosecutors and on the Guidance on Corporate Prosecutions.  The former, repeating an oft-cited statement made by former UK attorney general Sir Hartley Shawcross in 1951, instructs that “there should be a prosecution ‘wherever it appears that the offense of the circumstances of its commission is or are of such a character that a prosecution in respect thereof is required in the public interest.’”  A number of factors to be weighed by prosecutors in reaching a decision whether to prosecute are listed in the Guidance.

In recent months, the SFO has come under criticism for not prosecuting aggressively enough under the UK Bribery Act (in this blog as well), and for failing to provide clear guidance on prosecution and penalties.  Now it seems that the SFO is getting serious about corruption.

Oxford University Press consents to pay over £1,900,000 in corruption settlement Reply

Recent Enforcement Developments

Oxford University Press settles corruption allegations in East Africa.  On 3 July 2012, the UK Serious Fraud Office and the World Bank announced that a settlement had been reached with Oxford Publishing Ltd (“OPL”), a wholly owned subsidiary of Oxford University Press (“OUP”).  Oxford University Press, a department of the University of Oxford, is the largest university press in the world, with sales of £649 million in 2010-2011.

The Civil Recovery Order entered between the SFO and OPL describes improper payments made directly and through intermediaries, by Oxford University Press East Africa (“OUPEA”), based in Kenya, and Oxford University Press Tanzania (“OUPT”), for the purpose of securing government contracts for the supply of textbooks and other educational materials.  The Civil Recovery Order, entered 3 July 2012, requires the payment of £1,895,435 plus the costs of pursuing the order, £12,500, and imposes an independent monitor.  The monitor must be independent of OUP and its subsidiaries, must be appointed within 120 days, and must submit a report within 12 months.

Two of the contracts for which the OUP subsidiaries paid bribes to government officials were supported by World Bank Group grants.  The World Bank announced, also on 3 July 2012, a Negotiated Resolution Agreement involving three components:  (1) debarment of OUPEA and OUPT for a period of three years, cross-debarment of these entities by other development banks, with conditional non-debarment for OUP; (2) payment by OUP of USD 500,000 to the WB, and; (3) a commitment by all three entities to cooperate with the World Bank’s Integrity Vice Presidency and to continue to improve their internal compliance programs.

The complete Compendium summary for this case may be accessed here.

Looking up to the UK SFO from Down Under Reply

In a recent press statement, the UK Serious Fraud Office touted its accomplishments for the 2011-2012 prosecution season.  Drawing on data from the newly released SFO Year in Review 2011-12, outgoing SFO Director Richard Alderman noted that his office was “convicting more fraudsters, for longer periods, at an ever-lower cost to the public purse, “ adding that “most important of all, we’re recovering more money for the people who really matter:  victims.”

It seems that Mr. Alderman has good reason to be proud of the SFO’s accomplishments.  During the course of the year, over GBP 50 million of assets were recovered, and 73% of the defendants prosecuted by the SFO were convicted.  And the time it took for the organization to investigate a case and issue charging documents was reduced by more than half.

The report mentions the efficacy (at least from the perspective of the enforcement authorities) of corporate self-reporting in the context of the Mabey & Johnson case.  And, comparing the SFO’s practices to those of the U.S. Department of Justice, the report points to the novelty of its settlement with BAE, whereby the company agreed to a GBP 29.5 million ex-gratia payment to the nation of Tanzania (here and here).  “The money will be used to buy textbooks for 8.3 million children at all the 16,000 primary schools in the country.  While BAE also agreed [to] payments with the US authorities, that money just went to the US taxpayer – not to the real victims, as was the case with the payment we agreed for Tanzania.  We feel this is a more just and sophisticated approach.”    We save for another day a debate about the pros and cons of returning money to a country that ranks 100 (out of 183 countries) on Transparency International’s Corruption Perceptions Index.  Certainly it provides food for thought for those of us in the U.S. compliance community.

But it is that other former colony way Down Under that might benefit the most from emulating UK practices.  Just two days before the SFO report was issued, Australian journalists Ayesha de Kretser and Patrick Durkin complained that Australia has no dedicated corruption enforcement regulator, and that the Australian Securities and Investments Commission (ASIC) is facing AUD 8 million in budget cuts.  While ASIC can audit companies, it does not play a proactive role in investigating suspicions of bribery.  De Kretser and Durkin lament the lack of guidance from ASIC, and the failure of ASIC and the Australian Federal Police to work together to prosecute crimes.  They also note that several Australian companies are under investigation abroad.

Budget cuts?  The SFO says, “Bring ‘em on.”  The SFO’s budget has decreased in each of the last five years.  And not only does the SFO’s report demonstrate a significant reduction in the average cost of each investigation; it also claims to be saving the British taxpayer GPB 4.3 million by offering to move to less expensive premises in 2012.

We note that the OECD has not been as generous in its praise of the SFO as has Mr. Alderman (here); but their differences will have to wait for another blog post.