uk bribery digest specialedition - ernst & · pdf fileuk bribery digest special edition uk...

February 2016

Fraud Investigation & Dispute Services

UK Bribery DigestSpecial Edition

“After more than four years of debate, speculation and expectation since the Bribery Act came into force, Section 7 has been cited in three completed cases in the second half of 2015. While none of these cases provide extensive precedents of how Section 7 will be applied by the courts, the question of whether the Bribery Act has teeth is answered.”

Jonathan Middup, UK Head of Anti-Bribery and Corruption, EY

Contents

Introduction ..............................................................................02

Interview with the Serious Organised Crime

Division and Civil Recovery Unit in Scotland ...............................04

Case write-ups:

Cases in the second half of 2015 .............................................08

The first half of 2015 .............................................................. 19

The second half of 2014 ..........................................................22

The first half of 2014 ..............................................................27

The second half of 2013 ..........................................................31

Cases in prior periods .............................................................34

Abbreviations ...........................................................................51

Table of cases ...........................................................................52

UK Bribery Digest Special Edition 1UK Bribery Digest Special Edition

Introduction

Whilst we normally limit our comment to UK cases, it would be remiss not to mention recent developments in the US. In November 2015 the US Department of Justice (“DOJ”) announced that Alstom S.A., a French power and transportation company, had been sentenced to pay a US$772 million fine to resolve criminal charges under the FCPA. The sentence is the largest criminal fine ever imposed by the DOJ in an FCPA case and the second largest FCPA fine overall, reflecting a number of factors including Alstom’s failure to voluntarily disclose the misconduct and its refusal to fully cooperate with the department’s investigation for several years.

As usual, we include the updated table of UK bribery and corruption cases since April 2008. As we have now reached a landmark of 50 reported cases, we also include for ease of reference our commentary on all of those earlier cases too.

We hope you find the Bribery Digest useful and informative in your work.

Welcome to the latest edition of our Bribery Digest in which we comment on cases and developments in the sphere of anti-bribery and corruption over the past six months.

We will be examining the role of self-reporting in these cases and the effect that it has had on the progress and outcome of each case.

In this edition of the Bribery Digest we also focus on the self-reporting regime in Scotland, which could affect organisations beyond Scotland’s borders. We are delighted to have had the opportunity to gather the views of two of Scotland’s senior anti-bribery and corruption officials. We took from the conversation some subtle but notable differences in approach between the Scottish authorities and the SFO.

After more than four years of debate, speculation and expectation since the Bribery Act came into force, Section 7 has been cited in three completed cases in the second half of 2015. While none of these cases provide extensive precedents of how Section 7 will be applied by the courts, the question of whether the Bribery Act has teeth is answered.

The completion of the first DPA by the SFO has also been anticipated with interest. A significant feature of the November 2015 case was the rapid self-reporting of the matter by the bank and its subsequent cooperation with the SFO.

There have been seven completed cases in the second half of 2015 and we note a number of milestones:

• The first case, in September 2015, to cite a breach of Section 7 of the UK Bribery Act (the controversial ‘failure of commercial organisations to prevent bribery’ offence)1 being a civil settlement by the Civil Recovery Unit (“CRU”) in Scotland.

• In November 2015, the first completed Deferred Prosecution Agreement (“DPA”) led by the Serious Fraud Office (“SFO”), which also cited a breach of Section 7 of the Bribery Act.

• In December 2015, the first criminal prosecution (albeit uncontested) by the SFO for a breach of Section 7 of the Bribery Act.

• The largest fine that has been imposed by the Financial Conduct Authority (“FCA”), and its predecessor the Financial Services Authority (“FSA”), for financial crime failings.

Jonathan Middup Partner, UK Head of Anti-Bribery and Corruption

1Section 7 of the Bribery Act 2010 introduced a corporate offence of failure to prevent bribery by an associated person of the organisation.

UK Bribery Digest Special Edition 32 UK Bribery Digest Special Edition

Interview with the Serious Organised Crime Division and Civil Recovery Unit in Scotland

.Q How would you characterise your response to self-reported cases and the organisations that bring them to you?

.A We assess each case on its merits but in overall terms we would like to be seen as treating organisations fairly. We have an open mind as to whether a business wishing to make a self-report is either a victim or a perpetrator, or simply one in difficulty, and our approach appears to have public support.

.Q We note that not all of the cases brought to date under the Scottish self-reporting initiative have concerned wrongdoing only in Scotland. How might a business located or headquartered outside Scotland be brought under your jurisdiction?

.A The general principle is that a case will be considered where the majority of the criminality occurred. So a business based elsewhere in the UK can find itself under our jurisdiction, for example, if it is dealing corruptly with a Scottish counterparty or for whatever reason paying its bribes in Scotland. There are guidelines we share with the SFO, the basic purpose of which is to prevent any exploitation of differences in approach.

.Q What is the legal basis of the settlements?

.A It is Section 5 of the Proceeds of Crime Act. We have regard to the Bribery Act; that Act of course only specifies criminal offences, but it provides the structure for examining the bribery activity.

.Q What are the similarities with the regime elsewhere in the UK as regards self-reporting?

.A Under both regimes, the hoped-for outcome for an organisation bringing a self-report is to prevent a criminal prosecution. Organisations are encouraged to self-report both under the Scottish regime and by the SFO elsewhere in the UK. Under both regimes it is those organisations that fully commit to the openness and cooperation on which self-reporting relies that will benefit. Self-reporting in Scotland does not guarantee a civil outcome and, as we know from the Prosecutor’s guidance, a self-report to the SFO in England, Wales and Northern Ireland will not guarantee a DPA — it is at the discretion of the SFO to offer a DPA. We should add that none of the Scottish cases that have been self-reported to us to date have resulted in a criminal prosecution against the business. This has been a result of the particular circumstances of each case, which have meant that it has been possible and appropriate to achieve resolution via civil settlement. It is important that any business self-reporting has had legal advice before reporting.

.Q What are the key differences to the regime elsewhere in the UK as regards self-reporting?

.A It should be obvious, but it is worth explaining to avoid any doubt, that there is no DPA regime in Scotland. As the name DPA indicates, the solution it offers is a deferral of the criminal prosecution which is subject to the conditions being met over the specified term of the DPA. The civil settlement in Scotland is the end of the matter, provided the terms of the settlement agreement are complied with. Self-reports in Scotland are concluded before any public announcement is made about the case, whereas the approval of a DPA is heard in front of a judge in open court. However, in practice the outcome of the process may well be similar.

.Q What is the risk of not self-reporting corruption?

.A If a business sat on an issue and did not report it to us and left it for us to discover through some other means, then the benefits of the self-reporting initiative will not be available to that business. So that case is more likely to proceed down the criminal prosecution route. Unlike the SFO, we do not have an in-house intelligence function here in Scotland but we do gather intelligence from a variety of sources such as HMRC, Police Scotland and various EU bodies. We also have an informal agreement with the SFO and have the ability to share information with them, so we are not wholly dependent on self-reporting to learn about possible corruption offences.

We were delighted that in December 2015 Jonathan Middup (EY’s UK Head of Anti-Bribery and Corruption) and the team had the opportunity to interview Linda Hamilton (Head of the Civil Recovery Unit (“CRU”)) and Ernie Shippin (Former Deputy Head of the Serious Organised Crime Division (“SOCD”)).

Since the UK Bribery Act became effective in July 2011, businesses have been able to self-report bribery offences to the Scottish authorities and have their cases considered for conclusion through civil settlement2. As specialist units of the Crown Office and Procurator Fiscal Service (“COPFS”), both the SOCD and the CRU work closely together in assessing a self-report: the SOCD performs the first review of the case to determine if it is suitable for criminal proceedings and, if not, a civil case would be initiated. Criminal proceedings are dealt with by the SOCD and civil proceedings by the CRU.

2Under the Guidance on the approach of the Crown Office and Procurator Fiscal Service to reporting by businesses of bribery offences.

“ If a business sat on an issue and did not report it to us and left it for us to discover through some other means, then the benefits of the self-reporting initiative will not be available to that business.”

4 UK Bribery Digest Special Edition UK Bribery Digest Special Edition 5

.Q Self-reporting aside, what, if any, is the key consideration when deciding whether a corruption matter goes down the criminal or civil route?

.A Crown Counsel has to approve any proposed settlement based on a consideration of the public interest, which is measured against a published list of criteria. The one that stands out is whether or not the senior management of the business was involved in the bribery and whether or not that same senior management is still in position. It is hard to imagine that Crown Counsel would approve a civil settlement for a corruption matter where the same senior management team that was actively involved in the corruption is still in position in the business. If it is the same senior management team still in position, but it was not actively involved in the corruption, then that is more difficult and it would depend on the specific facts of the case.

.Q What about the use of privilege in corruption investigations?

.A The guiding principle is an open approach; surface the facts of the case, look at the mitigation and remediation, and, if a civil resolution is appropriate, reach a fair settlement. In light of this, we are looking for a minimal reliance on privilege by self-reporting organisations. We understand that there may be privileged communications, but we expect a fairly restricted concept of privilege. The quid pro quo is speedy resolution with no criminal prosecution.

.Q The Bribery Act refers to the ‘adequate procedures’ defence and the self-reporting guidance for Scotland states that regard is given to the business’s anti-corruption systems. What factors do you take into consideration when assessing anti-corruption procedures?

.A We certainly look at what procedures were in place at the time of the wrongdoing and what has been done to improve them since. Crucially, can the organisation put forward strong evidence to prove it has fully investigated what happened and taken meaningful, pro-active steps to prevent a ecurrence and to address bribery and corruption risk? The culture of the business is also important — again at the time of the offence and how it may have improved since. We also consider whether the individuals involved are still employed by the business and, if so, what has been done to re-educate or re-position them.

.Q What sort of timelines are we looking at for civil settlements?

.A Typically about six months for us to make our enquiries subsequent to the self-report and then no more than six months after that, so overall it would be reasonable to expect resolution within a year of the self-report. Of course, for complex cases it may take longer.

.Q How do you approach the calculation of the recovery amount in a civil resolution?

.A We look at it in the round. In essence it’s about reaching a fair settlement which removes any advantage or profit resulting from bribery, but at the same time allows the business to move on. If the business’s books are looking stronger as a result of bribery then it has an advantage and it is about quantifying that. We are likely to use gross margin as a starting point, however we consider the wider picture and there are a number of complexities in calculating a balance, for example, if the business has obtained a larger market share as a result of the wrongdoing then we would take that into account. This is similar to the concept of disgorgement. As the name of the CRU indicates, we are focused on civil recoveries, enabled by the Proceeds of Crime Act. We do not issue penalty fines. This is different to the DPA regime elsewhere in the UK where a financial penalty equivalent to what would have been incurred upon prosecution can be imposed as a term of the DPA.

.Q Is there a time limit to how far back you will go in considering acts of bribery or determining the recovery amount?

.A We are reluctant to bring in a time limit, but we do understand that going back in time does bring practical evidential difficulties both in terms of access to people who may have moved on from the business or records that may no longer exist.

.Q The guidance states that legal advisors and forensic accountants should be involved. What reliance do you put on the involvement of an organisation’s external advisors?

.A Overall, we consider if the business is being truthful and complete in the reports we receive and if we have cause to believe otherwise then we investigate further. If forensic accountants and external solicitors are involved we will look at the scope of the work, the experience of those carrying it out and the quality of the investigation. In some cases the external work has not met our expectations, but for the most part their involvement is helpful in giving comfort that the full facts are on the table. In practice we always follow up and we can appoint a third party investigator if we are not satisfied with the reports we receive.

.Q How effective have you found the self-reporting regime and what do you predict for its future?

.A The self-reporting regime has been extended several times, which is a validation of its effectiveness, and has been extended until 30 June 2016. Cases we might not otherwise have known about have been brought forward and costly and lengthy prosecutions have been avoided. Those are indicators of success. We will be continuing to work closely with the SFO in developing our approaches to the civil settlement of bribery issues.

Recent Scottish corruption cases (*self-reported)

Entity Date Outcome Bribery Digest case reference

Brand-Rex Limited September 2015 Settlement £212,800 47*

Four individuals June 2015 Imprisonment up to four years and four months

45

International Tubular Services Limited

December 2014 Settlement £172,200 41*

Abbot Group Limited November 2012 Settlement £5.6 million 28*

Weir Group plc December 2010 Settlement £13.9 million

Fine £3 million

11

“ The guiding principle is an open approach; surface the facts of the case, look at the mitigation and remediation, and, if a civil resolution is appropriate, reach a fair settlement.”


3 We report only completed cases in the Bribery Digest, typically signified by sentencing in criminal cases and any appeals in civil cases. We include civil cases involving findings of substantial bribery or corruption and we do not seek to include all civil cases with an element of bribery.

52 — 46io

Case write-ups

Cases in the second half of 2015

3

52Sweett Group plc(December 2015)

Sweett Group plc (“Sweett Group” or “the Group”) is an AIM listed provider of professional services for the construction and management of building and infrastructure projects. In July 2014 the SFO opened an investigation of the Group in relation to its activities in the UAE and elsewhere, leading to it being charged in December 2015 for an offence under Section 7 of the Bribery Act 2010 regarding its conduct in the Middle East. The Group pleaded guilty to an offence later the same month. In February 2016 the Group was sentenced and ordered to pay £2.25 million, broken down as £1.4 million in fine and £851,152 in confiscation. Additionally £95,032 in costs were awarded to the SFO.

The Group was charged that contrary to Section 7(1) of the Bribery Act, between 1 December 2012 and 1 December 2015 it failed to prevent the bribing of Khaled Al Badie by an associated person, Cyril Sweett International Limited, their servants and agents. This bribery was intended to obtain or retain business, and/or an advantage in the conduct of business for the Group, namely securing and retaining a contract with Al Ain Ahlia Insurance Company for project management and cost consulting services in relation to the building of a hotel in Dubai.

The SFO’s investigation was reportedly triggered by allegations in the Wall Street Journal that a former Sweett Group employee had offered design work on a US$100 million (£65 million) hospital construction contract in Morocco to a New York-based architecture firm, if it agreed to pay a bribe to a UAE official of 3.5% of the value of the contract.

Sweett Group’s own investigation is reported to have uncovered two related offences which were reported to the SFO. The Group provided

no detail about the findings of its investigation, saying only that “a summary of facts” had been given to the SFO in April 2015.

It is understood that the SFO is investigating individuals who are no longer at the Group.

We comment as follows:

• The case appears to have a bearing on the interaction of internal investigations and privilege with cooperation as it is defined by the SFO. In a November 2014 Press Release, the Group had announced that the SFO was of the view the Group was not cooperating because it was continuing to carry out its own internal inquiry into the bribery allegations. The Group set out that it “…believes that it is doing all that it reasonably can to cooperate with the SFO investigation while at the same time exercising its fundamental right to legal professional privilege in fulfilling its corporate and regulatory requirements.” We note earlier SFO speeches expressing its concern over the appropriate use of privilege in bribery investigations and its desire to be able to influence an internal investigation, although it did not raise concerns as regards any particular case. Non-cooperation is a factor militating against an organisation being offered a DPA, resulting in a prosecution. Unfortunately, the published case reports do not provide any indications of working guidelines on either the conduct of internal investigations or on the use of privilege.

• The commercial impact of bribery allegations and prosecutions can be substantial, especially for smaller and medium sized businesses that do not have the scale or resources to ride out the consequences. The Group’s share price fell to less than a third of their peak prior to the bribery allegations and it has decided to withdraw from business in the Middle East. While these events may also have been influenced by other factors, the bribery prosecution was possibly a contributing factor.


51Standard Bank plc(November 2015)

The SFO’s first application for a DPA was approved by the Crown Court on 30 November 2015. The counterparty to the DPA, Standard Bank plc4 (“Standard Bank” or “the bank”), was the subject of an indictment alleging failure to prevent bribery contrary to Section 7 of the Bribery Act. This indictment, pursuant to DPA proceedings, was immediately suspended for three years, after which, subject to the bank’s compliance with the terms of the DPA, the SFO will discontinue the proceedings.

As a result of the DPA, Standard Bank was required to pay financial orders of US$25.2 million (a US$16.8 million financial penalty and US$8.4 million disgorgement of profits) and also to pay the Government of Tanzania a further US$7 million in compensation. The bank also agreed to pay the SFO’s reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.

The bank has also agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement the recommendations of the independent reviewer.

The suspended charge relates to a US$6 million payment by a former sister company of Standard Bank, Stanbic Bank Tanzania (“Stanbic”), in March 2013 to a local partner in Tanzania, Enterprise Growth Market Advisors (“EGMA”). The SFO alleged that the payment was intended to induce members of the Government of Tanzania to show favour to Stanbic and Standard Bank’s proposal for a US$600 million private placement to be carried out on behalf of the Government of Tanzania. The placement generated transaction fees of US$8.4 million, shared by Stanbic and Standard Bank.

In 2012, the Government of Tanzania needed to raise public funds in order to support Tanzania’s ongoing “Five Year Development Plan” and to meet key infrastructure requirements within the country. Standard Bank and Stanbic put forward a proposal where they would be mandated to raise those funds for the Government of Tanzania by way of a sovereign note private placement. Negotiations had begun in February 2012 when Standard Bank and Stanbic quoted a combined fee of 1.4% of gross proceeds raised. The matter did not, however, progress until September 2012, when Stanbic increased the proposed fee to be paid by the Government of Tanzania to 2.4%. It transpired that 1% of that fee would be paid to the local partner EGMA. EGMA’s Chairman and one of its three shareholders and directors was at all relevant times Commissioner of the Tanzania Revenue Authority and, as such, a serving member of the Government of Tanzania. EGMA’s Managing Director had been CEO

of the Tanzanian Capital Markets and Securities Authority between 1995 and 2011. The room for conflict and risk was evident but this issue was never addressed by Stanbic, the judge found.

The judge also found that in the period which thereafter elapsed, there was no evidence that EGMA provided any services in relation to this transaction: no paperwork or notes of meetings were found. Further, the proposed involvement of a local partner (along with the increased fee) was only disclosed to Standard Bank sometime after it had been proposed to the Government of Tanzania. The judge concluded that the only inference was that both the Chief Executive Officer of Stanbic and its Head of Corporate and Investment Banking intended the 1% fee promised to EGMA to induce its Chairman, and perhaps other members of the Government of Tanzania, to show favour to Stanbic and Standard Bank’s proposal. After the addition of EGMA to the arrangement, the proposal proceeded quickly and Stanbic and Standard Bank were awarded the mandate in November 2012.

By completion of the financing in March 2013, the amount to be raised stood at US$600 million. In March 2013, EGMA’s 1% fee of US$6 million was paid by Stanbic into an additional collection account opened with Stanbic earlier that month. Within 10 days of Stanbic’s payment, the vast majority had been withdrawn by way of four cash withdrawals of between US$1.17 million and US$1.45 million each. Staff at Stanbic raised their concerns about these withdrawals. These concerns were immediately escalated and referred to Standard Bank Group head office in South Africa, which began an internal investigation. Standard Bank in London was informed and it instructed its legal advisors immediately to report the matter to the authorities. Thus, in April 2013 reports were made to the Serious Organised Crime Agency (“SOCA”) and the SFO. Standard Bank also instructed its external counsel to begin an investigation and to disclose its findings to the SFO. The SFO reviewed the material obtained and conducted its own interviews.

In its Press Release, the SFO emphasised that a DPA is not a private plea “deal” or “bargain” between the prosecutor and the defendant company. Rather, it is a way in which a company accounts for its alleged criminality to a criminal court, and has no effect until a judge confirms in open court that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate.


• As set out in the DPA Code of Practice (“DPA Code”), the decision whether to prosecute or offer a DPA entails a careful and fair consideration of the public interest including, inter alia, the seriousness of the offence in terms of the culpability of the offender and the harm caused. The DPA Code states that a prosecution will usually take place unless there are factors against prosecution which “clearly outweigh” those in favour. The SFO therefore submitted a number of factors to explain why the DPA was in the interests of justice, which the Court considered, including the seriousness of the offence. As explained in the published Judgment, a distinction was drawn between the criminal activities of Stanbic and its two senior officers and the criminality of Standard Bank:

“The criminality which Standard Bank potentially faces is the failure to prevent the intended bribery committed by senior officials of Stanbic (a sister company the management of which is unconnected to the Bank) arising out of the inadequacy of its own compliance procedures and its own failure to recognise the risks inherent in the proposal. The SFO has reached the conclusion that there is insufficient evidence to suggest that any of Standard Bank’s employees committed an offence: whilst a payment of US$6 million was made available to EGMA, the evidence does not demonstrate with the appropriate cogency that anyone within Standard Bank knew that two senior executives of Stanbic intended the payment to constitute a bribe, or so intended it themselves.”

Many commentators would doubtless have preferred a more extensive legal analysis of the applicability and implications of Section 7 of the Bribery Act (the section that concerns the failure of a relevant organisation to prevent bribery by an associated person). The Judgment appears to offer comfort to organisations that fail under Section 7 but have no direct knowledge of the bribery: this is likely to be a common circumstance of a failure under Section 7 where, as in this case (as described below), the organisation has failed to ensure that adequate due diligence is performed by its associated person.

• The Judgment drew attention to a number of compliance failures.

“In the event, Standard Bank engaged as joint lead manager with Stanbic in a transaction with the government of a high risk country in which a third party received US$6 million with the protection of only KYC checks relevant to opening a bank account. The checks in relation to that third party were conducted by Stanbic, a sister company in respect of which Standard Bank had no interest, oversight, control or involvement. It did not undertake enhanced due diligence processes to deal with the presence of any corruption red flags regarding the involvement of a third party in a government transaction, relating to a high risk country. There were also failings in terms in not identifying the presence of politically exposed persons and not addressing the arrival of a third party charging a substantial fee. In essence, an anti-corruption culture was not effectively demonstrated within Standard Bank as regards the transaction at issue.”

The lesson appears clear: an organisation retains responsibility for ensuring that adequate corruption due diligence is performed by it or its associated person.

• The fact that Standard Bank was able to evidence it had made significant enhancements to its compliance policies, procedures and processes since a risk and supervisory review conducted by the FCA in 2011 was in its favour (as explained below). But the bank was apparently unable to avail itself of the defence of having adequate procedures.

• As regards the corrupt payment itself, it followed the classic modus operandi of a payment to a third party for inadequately specified services, without any justification of the business rationale or basis for the fee — in this case the substantial amount of 1% of the US$600 million raised.4Now known as ICBC Standard Bank plc. Standard Bank was not part of ICBC at the time of the

bribery. ICBC had no involvement in the bribery in any way.


• Another factor that was given “considerable weight” in the decision to offer a DPA was the fact that Standard Bank immediately self-reported. The Judgment states that the self-report was within days of the suspicion coming to the bank’s attention and before its own external counsel had begun (let alone completed) its own investigation. It was also recognised that, but for the self-report, the offending may not otherwise have come to the attention of the authorities.

• The timetable overall was quite short compared with most of the other completed cases on which we have reported. The bribe was made in March 2013 and by 18 April 2013 had been identified by the bank and reported to the authorities. The bank’s own investigation ran through to July 2014. It appears that the SFO subsequently conducted its own interviews. The DPA was announced some 16 months later. The Judgment notes that the bank’s own investigation had been sanctioned by the SFO: the indication is therefore that organisations should not be seeking to complete an investigation before self-reporting, but rather involving the SFO earlier so that it has input into the conduct of the investigation (an approach the SFO has publicly requested on several occasions).

• The DPA Code does not specify the appointment of a monitor as one of the normal terms of a DPA; rather, the Code states that the use of monitors should be “approached with care…will depend upon the factual circumstances…and must always be fair, reasonable and proportionate.” The Judgment merely notes that a monitor should be appointed but does not explain the reasoning for the appointment of a monitor as part of this DPA. One inference is that this resulted from the compliance failures described elsewhere in the Judgment (and summarised above) and that the appointment of a monitor will be a term of a DPA where compliance failures are noted — which will invariably be the case. In describing the monitor, the DPA specifically identifies the need to review controls, procedures and policies in respect of intermediaries (such as introducers, consultants and local partners) and anti-corruption training (as regards completion and effectiveness).

“ Suffice to say, this self-reporting and cooperation militates very much in favour of finding that a DPA is likely to be in the interests of justice.”Extract from the Approved Judgment in respect of the Standard Bank DPA

• The total amount to be paid by Standard Bank as a result of the DPA is some US$32.6 million calculated in accordance with the DPA Code and the Definitive Guideline issued by the Sentencing Council in respect of Fraud, Bribery and Money Laundering Offences (which came into force in October 2014) and comprises the following:

• A penalty of US$16.8 million, calculated to be broadly comparable to the fine that a court would have imposed on the bank on conviction for the alleged offence following a guilty plea. This requires assessment of two factors: the culpability of the offender and the harm caused. As regards culpability, the Judgment references the Innospec case (see Case 7 in the Bribery Digest) in which the judge commented that corruption of government officials is among the most serious offences. However, as, among various considerations noted in the Judgment, Section 7 of the Bribery Act does not comprise “a substantive bribery offence” and no one at Standard Bank intended or knew of an intention to bribe, medium culpability was concluded. This highlights a distinction between the active bribery offences and the failure to prevent (Section 7) offence. As to harm, the starting point is measured by the gross profit from the contract corruptly obtained, measured in this instance by the fee shared by Stanbic and Standard Bank of US$8.4 million (1.4% of US$600 million raised). Having considered a number of aggravating and mitigating factors, a multiple of 300% of the value of the transaction was concluded (giving a gross penalty of US$25.2 million). To this is applied a reduction of one third, equivalent to the reduction for a guilty plea, represented by the bank’s self-reporting and cooperation with the SFO (i.e. a reduction of US$8.4 million to US$16.8 million). The US authorities were also consulted as to the level of this penalty, the Judgment points out.

• Disgorgement of the profit from the contract corruptly obtained, measured by the fee shared by Stanbic and Standard Bank of US$8.4 million (1.4% of US$600 million raised).

• Compensation to the victims of the bribery, measured in this instant by the corrupt fee of US$6 million paid to EGMA plus interest thereon of US$1,046,197.

• SFO costs of £330,000.

• The publication of the DPA itself (8 pages), the Court’s Judgment (17 pages) and the Statement of Facts (55 pages) represents fulsome disclosure which contrasts with the limited published information about civil settlements under the old SFO regime.

• This was a globally coordinated investigation and settlement, in which it would appear the SFO took the lead role. The SFO Press Release acknowledges that it had worked with the US Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) throughout the process and the Foreign and Commonwealth Office and the Financial Conduct Authority (“FCA”) had provided assistance. The SEC’s Press Release — on the same day as the SFO’s - describes a “global settlement”

totalling approximately US$36.9 million, of which a penalty of US$4.2 million was agreed between Standard Bank and the SEC in respect of separate related conduct, namely failing to disclose the involvement of EGMA and the payment of US$6 million to it in connection with the debt issued, as a result of which the offering documents and statements to potential investors in the debt offering were materially misleading. (The SEC did not have jurisdiction to bring charges under the FCPA because Standard Bank was not an “issuer” as defined by that Act). The SEC stated that: “This action against Standard demonstrates that when suspicious payments made anywhere in the world result in tainted securities offerings in the United States, the SEC is fully committed to taking action against the responsible parties.”

• The Director of the SFO stated that this DPA “will serve as a template for future agreements.” Whether or not there are a number of subsequent DPAs remains to be seen, however. The Director of the SFO also states that: “The judgment… provides very helpful guidance to those advising corporates.”

50Barclays Bank plc(November 2015)

The Financial Conduct Authority (“FCA”) fined Barclays Bank (“Barclays” or “the bank”) £72,069,400 for failing to minimise the risk that it may be used to facilitate financial crime.5 The failings relate to a £1.88 billion transaction (“the Transaction”) that Barclays arranged and executed in 2011 and 2012 for a number of ultra-high net worth clients. The Transaction involved investments in notes backed by underlying warrants and third party bonds. It was the largest of its kind that Barclays had executed for individuals. The circumstances of the Transaction gave rise to a number of features which, together with the status of the individuals, indicated a higher level of risk.

The clients involved were politically exposed persons (“PEPs”) and should therefore have been subject to enhanced levels of due diligence and monitoring by Barclays, the FCA found. The FCA’s action concerned the bank’s failure to minimise the risk of financial crime generally, however the widely-reported link to bribery and corruption was established through the bank’s definition of a PEP as a person “in relation to whom there is a greater level of risk or exposure to bribery or corruption because, for example, they reside or are located in certain high risk countries, occupy particular senior ranking roles or whose occupation involves an industry that is especially susceptible to bribery or corruption.”

5 Specifically for breaches of Principle 2 of The Principles for Businesses, which are a general statement of the fundamental obligations of firms under the regulatory system and are set out in the FCA’s Handbook. These Principles derive their authority from the FCA’s rule-making powers as set out in the Financial Services and Markets Act 2000 (“the FSMA”) and reflect the Authority’s regulatory objectives. Principle 2 states: “A firm must conduct its business with due skill, care and diligence.”


49Various individuals(October 2015)

Munir Patel, a court clerk, was the first person to be prosecuted under the Bribery Act (see Case 20 in this Bribery Digest). In October 2011, some four months after the Act had come into force, he was found guilty under Section 2 of the Act of receiving bribes in return for not entering traffic summons into the official records, thereby allowing those summoned to avoid prosecution.

In all, 29 people have been tried and 22 convicted as a result of a four year Metropolitan Police investigation into those who aided or paid bribes to Mr Patel. They were sentenced in October 2015. One of Mr Patel’s aides received a sentence of six months for misconduct in a public office. Others who had paid bribes to Mr Patel received sentences of between four and 18 months. The offences preceded the Bribery Act and they were sentenced for perverting the course of justice.

This is crime, as the judge repeated at each sentencing, which “strikes at the very heart of the criminal justice system.”

Mr Patel had allocated the summons in question to an “unscheduled” list, which was supposed to be reviewed periodically but was not. The result was that these summons effectively vanished. It is reported that in Mr Patel’s first year as a court clerk, the number of cases on the unscheduled list rose from 84 to more than 2,000.


• When Mr Patel became the first person to be prosecuted under the Bribery Act, some commentators dismissed the case as unimportant. The extent of the corruption and the number of individuals involved as disclosed in this later prosecution reveals the case as having much wider implications.

• These prosecutions remind us that bribery impacts the UK in a direct way. As a result of suppressing the summons, drivers with a disregard for the rules of the road were able to continue driving.

• The case highlights that corruption can quickly flourish in localised cultures where there is a corrupt individual to encourage it.

• This is an example of non-financial data — in this instance the ever growing and unreviewed “unscheduled” list — that offered the clue that something was amiss.

• The large increase in the number of cases on the unscheduled list may unfortunately suggest that the 29 brought to trial are but a few of the true number of offenders.

48Anthony Bodgin, Kevin Wingrave, Lynda McMayon, Gary Rawlings and Harold McGirl (September 2015)

Mr Bodgin was a senior official in Exeter City Council’s housing department. According to press reports, he admitted accepting cash kickbacks and hospitality to the estimated value of £400,000 in connection with the award of contracts for repair and maintenance work on council housing stock between 2005 and 2010.

Mr Wingrave, a building contractor, was found to have paid £262,746 in kickbacks to Mr Bodgin to secure contracts for himself and associated individuals and companies, the most significant being a payment of £125,000 to secure a £2 million contract for the installation of roof vents. Mr Wingrave’s partner, Ms McMayon was charged for her role in assisting him.

Mr Rawlings was found to have paid a kickback of £33,000 to receive £88,830 for conducting energy surveys which were in fact fictitious. Mr McGirl admitted involvement in respect of a kickback of £5,000 to secure a £81,000 contract.

Mr Bodgin and Mr Wingrave were sentenced to 3.5 years imprisonment for, inter alia, conspiracy to commit misconduct in a public office. The others received suspended jail terms.


• This case is a further instance of bribery in the procurement function (see cases 9, 24 and 45 for other instances of bribery in the public sector and cases 23 and 26 for bribery in private sector procurement) and highlights the risk of so-called passive bribery (i.e. the receipt of bribes) in procurement. Passive bribery is, in our view, an inappropriate term as acceptance of a bribe involves a positive decision in the same way as offering a bribe and is likewise an offence under UK laws.

• Receiving bribes does not trigger the section 7 ‘Failure of commercial organisations to prevent bribery’ offence, and therefore may be viewed as not carrying the same corporate risk. However to treat the risk of giving and receiving bribes differently when constructing anti-bribery and corruption controls is to ignore the potential commercial losses (the bribes can mean higher purchase costs or lower quality goods or services) and the potential associated reputational risks.

The FCA specifically found that Barclays:

• Senior management at the relevant time failed to oversee adequately Barclays’ handling of the financial crime risks associated with the business relationship and that it was unclear which senior managers were in charge of doing so.

• Failed to respond appropriately to a number of features of the business relationship that indicated a higher risk of financial crime.

• Followed a less robust process than it would have done for other business relationships that had a lower risk profile.

• Failed to establish the purpose and nature of the Transaction and did not sufficiently corroborate the clients’ stated source of wealth and source of funds for the Transaction.

• Failed to monitor sufficiently on an ongoing basis the financial crime risks associated with the business relationship.

The fine comprises disgorgement of £52.3 million, which is the amount of revenue that Barclays generated from the Transaction, and a penalty of £19.7 million. This is the largest fine that has been imposed by the FCA and its predecessor the FSA for financial crime failings.


• The FCA made no findings that financial crime was involved in the case or facilitated by Barclays, or that the funds invested as part of the Transaction were derived from financial crime. Nor did it make any finding that the £52.3 million of revenue that Barclays generated from the Transaction was derived from financial crime. The FCA also made no criticisms of the bank’s clients. In view of this, some observers may be surprised at the severity of the FCA’s fine and that the bank was required to disgorge the entirety of its revenue earned on the Transaction — sanctions comparable to a criminal prosecution for corruption, but for purely “compliance failures” in this instance. In contrast, Section 7 of the Bribery Act does not create a compliance offence. In short, FCA regulated entities face a tougher standard than applies in non-regulated sectors.

• The case highlights the critical importance of not ignoring an organisation’s own processes designed to safeguard against the risk of financial crime, including bribery and corruption.

• The case raises the challenging issue of the interplay of client confidentiality with due diligence. While there is nothing inherently wrong with firms maintaining a high level of client confidentiality, the FCA noted, it was the bank’s responsibility to ensure that, by doing so, it was not limiting its ability to follow appropriate procedures for establishing the business relationship.

• The FCA highlights examples where abandoned proposals as part of the transaction should have been seen as red flags of heightened risk, rather than just as issues that had gone away.


47Brand-Rex Limited(September 2015)

Brand-Rex Limited (“Brand-Rex”) is a developer of cabling solutions for network infrastructure and industrial application and employs over 300 staff based mainly in Scotland. In September 2015, the CRU6 agreed a civil settlement in the amount of £212,800 with Brand-Rex, which accepted that it had benefited from unlawful conduct by a third party.

In June 2015, solicitors acting on behalf of Brand-Rex contacted the COPFS7 in Scotland to disclose an instance of failing to prevent bribery by a third party associated with the company.

Between 2008 and 2012 Brand-Rex had operated an incentive scheme known as “Brand Breaks” for UK distributors and installers. In return for meeting or exceeding sales targets, installers and distributors were eligible for varying degrees of rewards, including foreign holidays. The Brand Breaks scheme was not in itself unlawful.

However, an independent installer of Brand-Rex products offered his company’s travel tickets to an employee of one of his customers. This went beyond the intended terms of the scheme, as this customer was an end user of Brand-Rex products, rather than an installer or distributor. The individual who ultimately received the tickets was in a position to influence decisions as to which company they purchased cabling from. Personnel from this company and individuals connected to them used these tickets for foreign holidays in 2012 and 2013.

Brand-Rex became aware of this issue through an internal review and launched an investigation conducted by external solicitors and forensic accountants. As a consequence of the investigation, Brand-Rex made a self-report to the COPFS and accepted that they failed to prevent this when they should have done, accepting responsibility for a contravention of Section 7 of the UK Bribery Act.

Under the self-reporting initiative, the case was deemed suitable for civil recovery settlement, rather than criminal prosecution. The settlement was based on the gross profit of the company related to the misuse of the Brand Breaks scheme.


• This was the first case to cite a breach of Section 7 of the UK Bribery Act.

• The case highlights the need to closely monitor promotional schemes in order to understand how they are being used in practice. This scope of monitoring may be unfamiliar to some businesses as it is outside the traditional scope of financial and reporting controls.

46Guido Bakker and Sijbrandus Scheffer(September 2015)

These two former UN consultants were jailed for receiving bribes to rig a contract worth US$43 million to supply medicines to the Democratic Republic of Congo. Mr Bakker and Mr Scheffer took payments totalling almost US$1 million from a Danish pharmaceutical company called Missionpharma in return for helping it win this lucrative contract.

In 2005, their company, World Response Consulting, was working with the UN Development Programme to help it arrange contracts for the supply of medicines to combat HIV and malaria. They used their inside knowledge to leak crucial details to Missionpharma to “stack the deck” in favour of the company in its UN bid. The pair hid their links to Missionpharma when they promoted the company to the UN. The judge described their conduct as involving “blatant dishonesty.”

The pair’s fee was five percent of the US$43 million contract, with Missionpharma overcharging by almost US$1 million to cover these fees. They used their London based solicitor to set up a firm to receive the corrupt payments, which were disguised through a network of offshore companies, with the ultimate destination of some of these funds being the London property market.

In 2007 the UN launched an investigation into how the contracts were awarded, resulting in their arrests.

Mr Scheffer and Mr Bakker, who are both Dutch nationals, were jailed for 15 months and 12 months respectively. Their solicitor was earlier found guilty of money laundering and given a two-year prison sentence suspended for 12 months.

6 The Civil Recovery Unit (“CRU”) in Scotland was established in 2003 to act on behalf of the Scottish Ministers to recover property and cash which have been acquired through crime. The CRU reports to the Lord Advocate and the Solicitor General. 7 The Crown Office and Procurator Fiscal Service (“COPFS”) is the Scottish criminal prosecution authority.


• While the Democratic Republic of Congo, where the medicines were supplied, is perceived as one of the most corrupt countries in the world according to Transparency International’s 2015 Corruption Perception Index (ranked 147 out of 167 countries), the fulcrum of this corruption involved a company based in the least corrupt country (namely Denmark) and two individuals from “top ten” countries (the UK and the Netherlands), according to the same index. This is a reminder, were it needed, that corruption is not just an issue for the less developed nations.

• The selling of critical information to distort a procurement process is a familiar corruption scheme.

• The use of professional service providers to process the proceeds of corruption is a feature of this case.

• The spoils of corruption may be enjoyed in the “clean” territories of the world, in this case the London property market.

“ In appropriate circumstances such as this, where companies accept that they have failed to prevent bribery and take steps to ensure that it will not occur again, the self-reporting initiative allows for a civil settlement rather than criminal proceedings.”The Head of the Civil Recovery Unit commenting on the Brand-Rex settlement


As we have now reached a landmark of 50 reported cases, we also include for ease of reference our commentary on all of those earlier cases since April 20088.

Cases prior to July 2015

45 — 42io

Case write-ups

The first half of 2015

8 These commentaries are reproduced as they originally appeared in the Digest for the relevant period and have not been updated for any subsequent revisions of, for example, sentences.

Disclaimer: The factual content of this Digest is based on published sources. We provide comment based on our understanding as forensic accountants and compliance advisors of the relevant laws and related guidance. This does not comprise legal analysis or advice.


45Charles Owenson, James Costello, Kevin Balmer and Brendan Cantwell (June 2015)

Messrs. Balmer and Cantwell were directors of a construction company. Messrs. Owenson and Costello were employees of Edinburgh City Council and helped the construction company win contracts for the maintenance of council properties between 2006 and 2010 in return for cash payments and extensive hospitality, including corporate seats at football matches, meals out, bar crawls and visits to lap dancing clubs. The construction company’s invoices to the council were inflated to cover these costs meaning that the council was effectively being charged for the cost of bribing its own officials.

The offences pre-date the Bribery Act and were brought under the Public Bodies Corrupt Practices Act 1889. The council employees received longer jail sentences for abusing a position of public trust and in Mr Owenson’s case because he did not accept that he had done anything wrong. The sentences were:

• Charles Owenson: four years and four months.

• James Costello: three years and nine months.

• Kevin Balmer: two years and ten months (and disqualified from acting as a company director for five years).

• Brendan Cantwell: two years and three months (and disqualified from acting as a company director for five years).

The sentences reiterate that the courts regard bribery as a serious offence: the amounts involved were not in themselves so significant. The directors of the construction company were found to have made cash payments of £28,387 to Mr Owenson and £14,134 to Mr Costello. In addition, the company spent over £30,000 on providing hospitality inducements to the two council employees. The amount by which the construction company’s invoices to the council were falsely inflated to cover the cost of these bribes was £68,910.

Red flags included the facts that Messrs. Owenson and Costello were often seen at the offices of the company and that Mr Costello bragged about the lavish hospitality he was receiving. (It was reported that at one event Mr Costello would place his empty glass on his head to signify that it was time for someone from the company to buy him another drink).


• The case is unusual as the large part of the corrupt transactions were in the form of hospitality. Corporate hospitality is not illegal in itself, but it is a possible channel for corrupt payments. Businesses therefore need to have appropriate compliance processes around it, especially as regards interaction with the public sector and foreign public officials.

• This is one of many cases that highlight the importance of whistle blowers in disclosing corrupt schemes.

44Graham Marchment(May 2015)

Mr Marchment was sentenced to two and a half years imprisonment for conspiracy to corrupt contrary to section 1(1) of the Criminal Law Act 1977. He was a co-conspirator with four others who had been sentenced in January 2012 (see Case 23) for obtaining payments (disguised as commissions) for supplying confidential information to bidders in relation to oil and gas engineering projects in Egypt, Russia and Singapore. They obtained the information in their procurement roles at procurement services companies. The contracts in which Mr Marchment was personally involved were worth about £40 million.

Mr Marchment had not stood trial with his co-conspirators as he was living in the Philippines and he refused to return to the UK, which at the time did not have an extradition treaty with the Philippines. When his passport expired he was unable to renew it because of the outstanding arrest warrant, and he returned to the UK.

43Delroy Facey and Moses Swaibu(April 2015)

This case is a further prosecution arising from the National Crime Agency’s (“NCA”) probe into match fixing of non-league football (see also Case 35). Mr Facey was a former professional player (most notably for West Bromwich Albion) and Mr Swaibu a non-league player.

Key pieces of evidence were found in various social media. In one communication Mr Facey approached a player saying: “You guys can’t win for **** so you may as well make some peas.” The amounts offered for fixing scores were in the in order of £2,000.

Mr Facey was jailed for two and a half years and Mr Swaibu for 16 months.

42 Bank of Beirut, its Compliance Officer and its Internal Auditor(March 2015)

In April and May 2011, the FCA visited Bank of Beirut to assess its anti-corruption and anti-money laundering systems and controls and found deficiencies in customer due diligence and monitoring processes. The FCA found that it did not carry out adequate customer due diligence or enhanced due diligence when establishing relationships with higher risk customers, nor did it conduct the appropriate level of ongoing monitoring on its existing higher risk customers. Specifically, inter alia, it did not investigate allegations of corruption and Safewatch hits (software that screens persons and transactions against watch lists) nor did it establish and verify with adequate evidence the source and wealth of funds of higher risk customers.

The Bank of Beirut was required to address these concerns regarding its systems and controls, but repeatedly provided misleading information to the Regulator indicating that it had completed remedial actions when it had not. For this failure, it was fined £2.1 million (reduced from £3 million for early settlement) and was restricted for a period of 126 days from acquiring new customers in high risk jurisdictions9.

Related to this action, the former Compliance Officer at the Bank of Beirut and the Internal Auditor, were fined £19,600 and £9,900 respectively for failing to deal with the Regulator in an open and cooperative way when responding to queries about the actions taken to mitigate financial crime risk10.


• This enforcement action is a reminder, should it even be needed, that dealings with the Regulator need to be on an honest, complete and straightforward basis and that remediation plans and timetables agreed with the regulator should be complied with.

“We are reliant on compliance officers and internal audit to act as an important line of defence, to support effective regulation at firms and to show backbone even when challenged by their colleagues.”FCA press release on the Bank of Beirut case

• The FCA’s Final Notice makes several references to the inappropriate culture within the Bank of Beirut. The regulator concluded that insufficient consideration was being given to the risk that the firm could be used for financial crime. This is a reminder that “hard controls” are only part of a compliance system and that “soft controls” must also be in place. These soft controls present themselves in the attitudes of senior management and key employees toward risk awareness and risk management, including corruption risk specifically. This enforcement action reiterates the FCA’s clear position that its member firms must have adequate corruption risk management systems in place, as part of broader financial crime risk management systems.

• The fines against the former Compliance Officer and the Internal Auditor result from serious breaches of their responsibilities as Approved Persons. They were responsible for addressing a number of the actions required of the firm. The Compliance Officer handled most of the communication between the firm and the Regulator and he sought to dismiss concerns that the firm was not properly implementing the required changes. The Internal Auditor provided false assurance that the improvements to the firm’s processes had been made. The FCA noted that both of them were influenced by senior management. However, the FCA relied on them to gain comfort that the changes to the firm’s processes had been completed. Given their position as Approved Persons, the FCA concluded they should have resisted their senior management in these circumstances. The FCA stated that “we are reliant on compliance officers and internal audit to act as an important line of defence, to support effective regulation at firms and to show backbone even when challenged by their colleagues.” It serves as reminder that persons in these positions must maintain their independence from management and recognise their duties to the FCA as well as their responsibilities to their employers.

• This is only the second time the FCA has used its suspension or restriction powers to punish a firm for serious misconduct. The FCA stated that this sanction is intended to send a message of deterrence to the rest of the industry, and serve as a reminder that the FCA is able to respond with sanctions that target the business activities of the firm where the misconduct occurred.

• The definition of “high risk jurisdictions” applied by the FCA is countries with a score of 60 or below in Transparency International’s Corruption Perception Index (“the CPI”). This comprises most of the countries in the CPI (138 countries scored 60 or below in the 2014 CPI — including China, India, Italy, Saudi Arabia, South Africa and Spain).

9 The relevant FCA Principle for Businesses is Principle 11: A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice. 10 The relevant FCA Principle is the Statement of Principles for Approved Persons 4: An approved person must deal with the FCA, the PRA and other regulators in an open and cooperative way and must disclose appropriately any information of which the FCA or the PRA would reasonably expect notice.


41 — 37io

Case write-ups

The second half of 2014

41International Tubular Services Limited(December 2014)

International Tubular Services Limited (“ITS”), a Scottish oil and gas services company, admitted that it had benefited from corrupt payments made by a former Kazakhstan-based employee to secure additional contractual work from a customer in Kazakhstan. The bribery and corruption was discovered as part of the due diligence when the company was being acquired. ITS reported their discovery of the corrupt payments to the Crown Office & Procurator Fiscal Service in November 2013 under the self-reporting initiative that has been in place in Scotland since mid-2011.

In return for self-reporting, a full admission (based on a comprehensive internal investigation), putting in place effective systems to prevent bribery recurring, repaying the illegitimate profits and cooperating with any criminal investigation into any individuals who may have committed offences, the Scottish Crown Office & Procurator Fiscal Service and Scotland Civil Recovery Unit will, in appropriate circumstances, consider resolving any corporate liability of the commercial organisation by way of a civil settlement instead of launching a criminal investigation, although this is not guaranteed.

In this case, the Civil Recovery Unit recovered £172,200 under the Proceeds of Crime Act, the amount representing the total profit made under the corrupt contract in Kazakhstan. The funds are passed to the Scottish Consolidated Fund, to be reinvested back into Scottish communities.

The settlement guarantees that there will be no criminal enforcement against ITS in Scotland in respect of the matters reported. In view of any criminal investigation of others that may follow, any further details of the corrupt payments have not been published.

This is the second corporate bribery case resolved in Scotland under the self-reporting initiative. The first corporate settlement was in November 2012 when Abbot Group admitted it had benefitted from corrupt payments and settled for £5.6 million (see case reference 28 in the Bribery Digest).

This case underlines the importance of acquisition due diligence focused on corruption risk, especially of businesses operating in higher risk sectors and territories.

40Smith and Ouzman Limited, Christopher Smith and Nicholas Smith(December 2014)

This case is the SFO’s first conviction, after trial, of a corporate for offences involving bribery of foreign public officials. As the offences pre-date the Bribery Act, (the bribes were paid between November 2006 and December 2010), the prosecution was under the Prevention of Corruption Act 1906.

The company, Smith and Ouzman Limited, is a printing firm based in Eastbourne which specialises in security documents such as ballot papers and certificates. Christopher Smith was the Chairman and Nicholas Smith was the Sales and Marketing Director. The corrupt payments totalled £395,074 and were made to public officials for multiple contracts awarded to the company, primarily in Kenya but also in Mauritania, with total value £2,220,520.

The bribes were paid through a number of mechanisms:

• Primarily as inflated “commissions” to the company’s agents in Kenya and in Mauritania. It was these two agents that mainly had contact with the corrupt government officials (at the Independent Interim Electoral Commission and the Kenyan National Examinations Council in Kenya and the Ministry of the Interior in Mauritania) and distributed the “commissions” to them.

• In some instances by direct bank transfer from the company.

• In some instances by cash payments to the corrupt government officials for “subsistence” during their visits to the company in the UK.

• In respect of the main part of the Mauritania bribes, by direct bank transfer from the company to the accounts of the daughters of one of the corrupt government officials in France described as “educational costs” or similar.

The defendants sought to argue that the commissions were either entirely for the agents or for entirely legitimate purposes. The artificially inflated commissions resulted in additional costs of the products to the buyers of about 25% in respect of the Kenyan contracts and 15% in respect of the Mauritania contracts. The corrupt government officials’ modus operandi was to either justify single sourcing of the contracts on the grounds that there was limited time for open tendering or to adjust the contract price after awarding the contract to allow for the added commissions.

There were two principal sources of evidence of the bribes:

• Pricing summary schedules within the directors’ records which showed two separate commissions, one for the agent and an additional much larger one which the prosecution successfully demonstrated was for bribes. In several instances these showed the breakdown by recipient identified by their initials.


• Emails between Messrs Smith and the agents. Those with the Mauritanian agent appeared to take little effort to conceal their messages and several of them are quite explicit, but those with the Kenyan agent adopted the stratagem of referring to the bribes as “chicken.” This required interpretation of the emails. Examples of possible interpretations are as follows:

• “…we shall all go to my bank and I’II give the chicken to karani” (I will take one of the government officials to my bank to pay over the bribes).

• “…they are desperate for the chicken” (the government officials want to receive the bribes soonest).

• “…the chickens will fly straight away” (the bribes are available immediately).

• “We will keep our chickens for now” (do not make cash payments to any of the government officials on their visit to the UK as some of them are clean).

• “These guys are already on the table waiting to be served” (the government officials await their bribes).

• “…we have sharpened our pencils and the chickens are all dead” (we have re-examined the proposed units prices and they are too low to fund any bribes).

When interviewed, Christopher Smith stated that his father (who presumably was previously involved in the same business in Kenya) used to give out actual chickens. It is to be inferred that the jury did not accept the defendants various explanations of the meaning of “chicken” nor of the purpose of the “commissions.”

Christopher Smith was sentenced to 18 months imprisonment suspended for two years (he is 72 years of age), 250 hours of unpaid work and three months curfew. He was additionally ordered to pay £4,500 in confiscation and costs of £75,000. Nicholas Smith was sentenced to three years imprisonment, and was ordered to pay £18,693 in confiscation and costs of £75,000. Both individuals were disqualified from acting as directors for six years.

The company was ordered to pay a total of £2.2 million as a result of its conviction for making corrupt payments. This includes a fine of £1,316,799, as well as £881,158 to satisfy a confiscation order applied for by the SFO and £25,000 in costs.

“ Your behaviour was cynical, deplorable and deeply antisocial, suggesting moral turpitude.”HHJ Higgins in sentencing the former directors of Smith and Ouzman Limited

We comment on this case as follows:

• The SFO announced this case as its first conviction, after trial, of a corporate for offences involving bribery of foreign public officials. (As the offences pre-date the Bribery Act, the prosecution was under the Prevention of Corruption Act 1906). This might suggest a corporate dimension of greater significance than is merited. On our reading, the prosecution of the company merely reflects the fact that Christopher Smith and his son Nicholas Smith were the key players in what is in essence a family business and therefore the “directing minds” of the business (or “the bosses” as the prosecution succinctly put it). It therefore followed as a matter of course that their successful prosecution also made the company guilty of an offence under the Prevention of Corruption Act 1906.

• This is yet another arrangement that involves agents playing key roles in the bribery schemes.

• This case again demonstrates that email is a key source of evidence.

• The investigation required the cooperation of the authorities in Kenya and Switzerland. The trend has been for increasing international cooperation and this is likely to continue.

39Gary West and Stuart Stone(December 2014)

Gary West, a former Director and Chief Commercial Officer of Sustainable AgroEnergy plc (“SAE”) and Stuart Stone, Director of SJ Stone Ltd, a sales agent of unregulated pension and investment products, were convicted of conspiracy to commit fraud, conspiracy to furnish false information, fraudulent trading and Bribery Act offences. The offences arose from the selling and promotion of SAE investment products based on “green biofuel” Jatropha tree plantations in Cambodia. The investment products were sold to UK investors primarily via self-invested pension plans (“SIPPs”). These investors were deliberately misled into believing that SAE owned land in Cambodia, that the land was planted with Jatropha trees and that there was an insurance policy in place to protect investors if the crops failed.

The judge described the fraud as a “thickening quagmire of dishonesty… there were more than 250 victims of relatively modest means some of whom had lost all of their life savings and their homes.” The judge added that the bribery was an aggravating feature. It is reported that Mr West received bribes for his role in submitting false invoices to Mr Stone which allowed exorbitant commission rates (of as much as 65%) to be charged on investors’ funds. Irregular transactions were disguised using false e-mail addresses, Swiss bank accounts and overseas companies registered in the Seychelles and British Virgin Islands.

Mr West received a sentence of four years for each of the Bribery Act offences (both under Section 2 for the offence of being bribed), to run concurrently with his nine year sentence for the fraud offences. He was also disqualified from being a director for 15 years.

Mr Stone received a sentence of six years for each of the Bribery Act offences (both under Section 1 for the offence of bribing another person), to run concurrently with his six year sentence for the fraud offences. He was also disqualified from being a director for 10 years.

We comment as follows on this case:

Mr West’s and Mr Stone’s convictions are the first to be secured by the SFO under the Bribery Act since the Act came into law in July 2011. They also comprise the first commercial bribery case under the Bribery Act. Commentators have been waiting some time for this event, but it is something of a false dawn. This was substantially a traditional investment fraud case with aspects of bribery within it. The case therefore sheds no light on the aspects of the Bribery Act and its enforcement, including Deferred Prosecution Agreements, on which commentators await clarification. For example:

• No charges were brought against the companies involved and Section 7 of the Bribery Act (the corporate offence of failing to prevent bribery and the related defence of having “adequate procedures”) was not therefore at issue.

• There do not appear to be any extra-territorial jurisdictional issues.

The outcome of this case might suggest that bribery convictions are more likely to be sought under the Bribery Act — as part of broader fraud schemes or separately — compared with the more complex laws that it replaced. At the same time, the fact that Mr West was acquitted of one count of bribing another person, even in the context of a significant fraud, serves as a reminder that the prosecution of bribery offences in more complex scenarios is not straightforward.

“These three individuals preyed on investors, many of whom were duped into investing life savings and pension funds. As a result, many lost life-changing amounts of money.”The Director of the SFO commenting on the Sustainable AgroEnergy plc case

38FHR European Ventures LLP and others v Mankarious and others(July 2014)

This long-running case (legal proceedings commenced in 2009 following an initial complaint in 2005), concerning a secret commission relating to the sale of a hotel, was subject to an appeal judgement in July 2014.

At the centre of the dispute was the sale of a long leasehold interest in the Monte Carlo Grand Hotel in December 2004, purchased by the claimants for €211.5 million. Mr Mankarious operated Cedar Capital Partners (“Cedar”) with the intention of providing consultancy services to the hotel industry. (Cedar was also involved in the sale of the Savoy Hotel in London, the Danieli in Venice, the Intercontinental in Paris and the Hotel de l’Europe in Amsterdam).

Cedar had entered into an exclusive agreement with the vendors of the Monte Carlo Grand Hotel giving Cedar the right to sell the hotel and to receive a fee of €10 million upon the sale. Mr Mankarious, through Cedar, also negotiated the purchase of the hotel as the agent of the claimants. In April 2005, the claimants discovered that Cedar had been paid a fee of €10 million in relation to the sale of the hotel.

The main issue at trial was whether Cedar had made sufficient disclosure of its relationship with the vendor so that it could be said that Cedar had acted with informed consent of the claimants.

One of the principal findings in this case was that while Cedar had made certain disclosures to some of the purchasing parties for which it acted as agent, Cedar failed to get fully informed consent from the parties to receive and retain the €10 million fee from the vendors. Counsel for both the claimants and the defendants had argued that the €10 million fee was not intended to be a corrupt payment or bribe. Mr Mankarious had made limited disclosure of this retainer “but not enough to deprive the fee… of its character as a secret profit”, the trial judge concluded.

The claimants successfully claimed the €10 million of undisclosed commission that had been received by the defendants in breach of their duties as fiduciary agents not to secretly profit from their position or to put themselves in a position where their interest and duty were in conflict. The defendants had unsuccessfully argued that they were entitled to retain the commission as it was known to the claimants.

The appeal concerned the legal point of the nature of the remedy against Cedar — whether it is a personal or proprietary remedy. This in turn concerned the question of whether the secret commission received by an agent is held on trust for the principal or whether the principal merely has a claim for equitable compensation. As the Supreme Court itself noted, this is a “rather technical sounding question, which has produced inconsistent judicial decisions over the past 200 years, as well as a great deal of more recent academic controversy….” As it is not the purpose of this Bribery Digest to offer


legal analysis, this is not further described other than to note that this has significant practical implications for the claimants capacity to follow and trace the amount and would also affect the claimant’s ranking in insolvency proceedings.

37Bruce Hall(July 2014)

Bruce Hall, an Australian national extradited from his home country, was found guilty of conspiracy to corrupt in relation to contracts for the supply of goods and services to a Bahraini smelting company, Aluminium Bahrain B.S.C. (“Alba”). Mr Hall served as CEO of Alba from September 2001 to June 2005. The court heard how Mr Hall received £2.9 million in corrupt payments between 2002 and 2005. The payments were made in exchange for Mr Hall agreeing to and allowing to continue corrupt arrangements dating back to 1998 that Alba’s Chairman (a member of the Bahrain royal family and Minister of Finance at the time) had been involved in before Mr Hall’s appointment as CEO.

The judge commented “In any view, this was an extremely serious use of corruption… You breached the trust that was placed in you as the CEO of Alba… there was a reluctance by you to accept that what was done by you was as corrupt as it so obviously was.”

Mr Hall was sentenced to 16 months in prison for the offences of corruption and conspiracy to corrupt (contrary to Section 1 of the Criminal Law Act 1977 and Section 1 of the Prevention of Corruption Act 1906) and acquiring and transferring criminal property (contrary to Sections 327(1) and 329(1) of the Proceeds of Crime Act 2002). He was also required to pay a confiscation order of £3 million (or face serving an additional term of imprisonment of 10 years) and compensation of £500,000 to Alba.

Commenting on Mr Hall’s actions, the judge noted that he had cooperated with numerous authorities throughout the investigation. If he had not been so cooperative, he could have faced around six years in prison, close to the maximum sentence for conspiracy to corrupt. He was also entitled to a further reduction due to entering a guilty plea.

He also agreed to divest himself of other corrupt payments totalling US$900,000 he received during his time as the CEO of Alba. These payments were not part of the indictment as the SFO did not have the jurisdiction to prosecute and they were recovered by way of civil proceedings under Part 5 of the Proceeds of Crime Act 2002.

“Corruption has been described as an insidious plague that has corrosive effects across communities… In any view, this was an extremely serious use of corruption… You breached the trust that was placed in you as the CEO of Alba… there was a reluctance by you to accept that what was done by you was as corrupt as it obviously was.”Judge Loraine-Smith in sentencing the former director of Alba

36 — 32io

Case write-ups

The first half of 2014


36Former directors of Innospec Limited(June 2014)

June 2014 saw the completion of the conviction of a number of former Innospec Limited Directors. The company itself had been found guilty in March 2010 of conspiracy to corrupt (see Case 7). There followed actions against individual directors which have proceeded as follows11:

• Dennis Kerrison (former CEO) and Miltiades Papachristos (former Regional Sales Director for Asia Pacific) : June 2014

• Paul Jennings (former CEO): June/July 2012

• David Turner (former Sales and Marketing Director): January 2012

These former directors were found guilty of involvement in agreeing corrupt payments to public officials and agents of the Government of Indonesia between 2002 and 2008 as rewards for securing contracts with the government for the supply of TEL, a leaded fuel additive.

Dennis Kerrison was sentenced to four years imprisonment, Paul Jennings to two years imprisonment and Miltiades Papachristos to 18 months imprisonment. David Turner received a 16 months suspended sentence in return for his cooperation with authorities, otherwise the judge stated he would have gone to prison.

This is the first contested case for overseas corruption handled by the SFO.


• These prosecutions are notable for their cross-border cooperation between the law enforcement agencies, involving the SFO, CoLP and Cheshire Constabulary in the UK, the DoJ and SEC in the US, the Corruption Eradication Commission in Indonesia and the Swiss and Singaporean authorities.

• The case provides a clear example of the social impact of corruption. TEL is a dangerous compound, banned in the UK for many years for its environmentally damaging effects (it was linked to severe neurological damage). The bribery scheme of the former Innospec directors prolonged the use of this chemical in Indonesia and ran counter to official government policy to ban it.

• The Innospec Limited investigation by the SFO commenced in 2008 and has therefore taken six years to reach its outcome, while the underlying transactions date back to as early as 2002 — an indication of just how long these cases may occupy the lives of those involved.

35Chann Sankaran, Krishna Ganeshan and Michael Boateng(June 2014)

At a time when, stimulated by the World Cup, rumours of corruption at much higher levels in international soccer were getting plenty of air time, a “lower division” prosecution was completed in the UK.

The judge found that Sankaran and Ganeshan had come to the UK in November 2013 solely to visit clubs to find soccer players they could corrupt and targeted lower division clubs because it was cheaper to bribe players on modest wages. Boateng, the former Bristol Rovers and Whitehawk FC defender, was lured into their scheme by Sankaram’s pretence of being an agent for a Finnish club through a front company Matchworld Sports Limited. The judge warned clubs at all levels need to be vigilant of the risk of match fixing (although no actual match fixing was proven in this case), motivated by manipulating betting.


• This is not the first UK prosecution for match fixing (see Case 21) but it is the first in the sport of soccer.

• As with Case 21, which was in the world of cricket, the prosecution has its origins in a newspaper investigation, with the findings handed over to the NCA. Both the newspaper and the NCA used covert recordings, including those of meetings set up to discuss supposed match fixes as an investigative tool.

11 As we report only on completed cases in the Bribery Digest and as sentencing of all four ex-directors awaited the completion of the contested cases, we are only now reporting on these four prosecutions.

• The severity of the sentences (five years each for Sankaran and Ganeshan) in the light of the modest amounts involved (the NCA undercover agent handed over €60,000 to them and Boateng appears to have received only €450) again underlines the judiciary’s view that bribery is a serious offence. The judge had a view to the importance of soccer and sport in UK national life in assessing the seriousness of the offence.

• The prosecution for conspiracy to corrupt rather than under the Bribery Act presumably reflects the nature of the evidence available to the NCA.

• The NCA has other enquiries in this area in progress and further prosecutions might be expected.

Older readers may perhaps recall a parallel with Peter Swan of Sheffield Wednesday who was banned for life from professional soccer (although the ban was later lifted) and received a four year jail sentence for his involvement in a betting scam, also disclosed by a newspaper investigation. He, together with two other players, bet on Sheffield Wednesday to lose a match against Ipswich Town in 1962. Reflecting on this in 2006, he was of the opinion that Sheffield Wednesday proved quite able to lose the game fair and square, but, if it had been required, he would have given away a penalty or even scored an own goal. It is believed the ban kept him out of the victorious England World Cup team of 1966. He had missed the previous World Cup in Chile because of dysentery. His fortune changed upon his return to professional soccer in 1972 when he scored his first professional goal, for Bury against Torquay United.

34Besso Limited(March 2014)

The FCA fined Besso Limited (“Besso”), a medium-sized general insurance broker, £315,000 (reduced from £450,000 for early settlement) for operating between 2005 and 2011 with “a weak control environment surrounding the sharing of commissions with third parties which gave rise to an unacceptable risk that they could be used for corrupt purposes”.

The case echoes three earlier FCA actions dating back as far as 2009, against JLT Specialty Limited (see case 31), Willis (see case 18) and Aon (see case 4).

The FCA’s list of Besso’s particular failings has many familiar features to it:

• Bribery and corruption policies and procedures that were not adequate in their content or implementation.

• Failure to conduct an adequate risk assessment of third parties before entering into business relationships.

• Not carrying out adequate due diligence on third parties to evaluate the risks involved in doing business with them.

• Failure to establish and record an adequate commercial rationale to support payments to third parties.

• Failure to review relationships with third parties, in sufficient detail and on a regular basis, to confirm that it was still appropriate to continue with the business relationship.

• Not adequately monitoring its staff to ensure that each time it engaged a third party an adequate commercial rationale had been recorded and that sufficient due diligence had been carried out.

• Failure to maintain adequate records of the anti-bribery and corruption measures taken on its third party account files.

• The FCA noted that Besso did not, overall, operate in a sector of the market (wholesale general insurance) or in countries with high corruption risk. Nonetheless, its anti-bribery and corruption systems and controls were inadequate even for that relatively low level of risk.

The FCA also noted that Besso had received in January 2012 the report of a review by solicitors on its anti-bribery and corruption systems and controls. While Besso promptly implemented some of the improvements set out in that report, it is to be inferred that either Besso did not action all of the recommendations in that report or that the report’s recommendations were not sufficiently comprehensive.

We make the following comments:

• This is a further example of the FCA’s pro-active enforcement — the FCA does not seek to prove bribery offences, only that control weaknesses may be conducive to bribery offences. These actions are on the basis of breaches of Principle 3 of the FCA’s Principles for Businesses12.

• The FCA noted that Besso had not responded to “numerous industry wide warnings” about the need for adequate corruption risk management systems.

• Businesses in low risk environments are nonetheless required to have anti-bribery and corruption systems and controls adequate for that relatively lower level of risk.

• The FCA’s purview includes pre-Bribery Act activities. The FCA cited Besso’s insufficient bribery and corruption policies and procedures between January 2005 and October 2009. The Bribery Act came into effect in July 2011. There were anti-corruption laws in place prior to that date, but they were not actively enforced until 2008.

• The FCA expects regulated firms to respond promptly and appropriately to its inspections, “Dear CEO” letters, thematic review findings and to the findings of actions against other member firms.

• As usual in the FCA’s Final Notices, the detailed findings serve as a rich source of guidance for the improvement of anti-bribery and corruption systems and controls.

12 Proof of breach of Principle 3 in the context of bribery risk management does not require the FCA to be able to prove actual corrupt transactions e.g. payment of bribes. There was no evidence that Besso Limited had entered into any illicit payments or inducements; nor was it found that the breaches were intentional or reckless; nor was it found that Besso Limited gained any financial benefit from the breaches or caused any loss.

“Corruption in this company was endemic, institutionalised and ingrained… but despite being a separate legal entity it is not an automated machine; decisions are made by human minds. None of these defendants would consider themselves in the same category as common criminals who commit crimes of dishonesty or violence….. but the real harm lies in the effect on public life, the effect on community and in particular with this corruption, its effect on the environment. If a company registered or based in the UK engages in bribery of foreign officials it tarnishes the reputation of this country in the international arena.”Comments of HHJ Goymer in sentencing the former directors of Innospec Limited


33Constantin Medien AG v Ecclestone and others(February 2014)

This civil case received wide publicity because of those involved. While the Claimant’s claims failed, the judge did find that the transaction that was core to this matter –payments totalling US$44 million by Mr Ecclestone to Mr Gribowsky in 2006 and 2007 — comprised a bribe and part of a corrupt scheme under which Mr Gribowsky was to be rewarded for facilitating the sale of shares owned by Mr Gribowsky’s then employer (“BLB”) in the Formula One group to a buyer acceptable to Mr Ecclestone, as the Claimant alleged. The Claimant had also unsuccessfully alleged that the shares had been sold at an undervalue, thus depriving it of overage payments had the shares been sold for more than a specified sum. In June 2012, Mr Gribowsky had been sentenced by the German criminal court to seven years and nine months imprisonment for the corruption offence.

32Otkritie International Investment Management Ltd and others v Urumov (also known as George Urumov) and others(February 2014)

The Otkritie Group is a Russian business group involved in commercial and investment banking, including brokerage and asset management, with an office and a regulated entity (Otkritie Securities) in London.

The allegations (and counter-allegations) in this civil case were wide-ranging and included, in addition to bribery13, alleged dishonesty, deceit, conspiracy, fraud, misrepresentation, forgery, blackmail, money-laundering, false impersonation, intimidation, entrapment, subterfuge, kidnap and even murder. As the judge noted in his Judgment: “In many senses, this trial has been extraordinary...Anyone sitting in court listening to the evidence and the parties’ respective submissions might have been forgiven for supposing that they were in the Old Bailey rather than in the Commercial Court sitting in the Rolls Building.”

At the heart of the case were two discrete frauds, referred to as the Sign-On Fraud and the Argentinean Warrants Fraud. In brief, the judge found certain of the defendants in principle liable for variously as much as US$23 million in respect of the Sign-On Fraud and US$151 million in respect of the Argentinean Warrants Fraud.

The Sign-On Fraud concerns the circumstances in which Mr Urumov came to be employed by Otkritie Securities. Mr Urumov and four other securities traders from within his team joined Otkritie Securities on payment of a “golden hello” of some US$25 million. The Claimants asserted that this amount was paid in reliance upon various representations by Mr Urumov, significantly that each of those five individuals had a guaranteed income of US$5 million per annum at the employer they were about to leave and the “golden hello” would be shared equally between them. The Claimants asserted that Mr Urumov in fact personally received about US$8 million and that most of the remainder was used by him to pay substantial bribes or kickbacks (some US$12 million in total, paid in part under the guise of a sham consultancy agreement with a Panamanian shell company) to two senior employees of the Otkritie Group for their part in lobbying for his recruitment by Otkritie Securities. Mr Urumov and one of the recipients of the bribes were found liable on the basis of, variously, the tort of bribery and/or dishonest assistance, conspiracy and breach of fiduciary duty.

The Argentinean Warrants Fraud, in which Mr Urumov had a key role, concerns one particular deal whereby Otkritie Securities was deceived into purchasing some 1.65 billion Argentine GDP peso (ARS) denominated warrants for a total of about US$213 million when the warrants were in fact worth only about US$63 million — an overpayment of some US$150 million.


• This case serves as a reminder that substantial bribery may be remediated through the civil courts.

• Bribery may be an integral element of wider fraud schemes.

• Several of the FCA Notices concerning the LIBOR manipulation cases comment on the contributing factor of business culture to the misconduct. The FCA comment, in summary, that a focus purely on financial performance/ bonuses/ incentives and the related reporting is not sufficient and is not conducive to a compliant culture. It is noteworthy that in this case too, the judge refers to submissions that: “Bankers, it should be uncontroversial and to put it mildly, are predominantly motivated by their bonus arrangements.”

13 The Bribery Digest includes civil cases involving findings of substantial bribery; we do not seek to include all civil cases with an element of bribery.

31io

Case write-ups

The second half of 2013


31JLT Specialty Limited(December 2013)

The FCA fined JLT Specialty Limited (“JLTSL”) over £1.8 million for failing to have in place appropriate checks and controls to guard against the risk of bribery or corruption. JLTSL provides insurance broking, risk management and claims consulting services. The control failings were in the area of making payments to overseas third parties, known as overseas introducers, who helped it secure new business. During the period February 2009 to May 2012, JLTSL received almost £20.7 million in gross commission from business provided by overseas introducers, and paid them over £11.7 million in return.

JLTSL was found to have breached Principle 3 of the FCA’s Principles for Businesses. Principle 3 (Management and control) requires that: “A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.” The following specific failings were cited:

• Failure to conduct adequate due diligence before entering into a relationship with the overseas introducers and, in particular, failure to assess whether overseas introducers were connected with clients they introduced and/or public officials. JLTSL’s screening software did not allow this to be done comprehensively

• Failure to adequately assess the potential risk associated with each piece of new insurance business secured through overseas introducers, which meant that JLTSL could not ensure that it took sufficient steps to counter the risk of bribery and corruption prior to making payments to overseas introducers. It was found that inadequate systems around these payments created an unacceptable risk that overseas introducers could use the payments made by JLTSL for corrupt purposes, including paying bribes to people connected with the insured clients and/or public officials

• Failure to adequately implement its own anti-bribery and corruption policies, resulting in JLTSL entering into higher risk relationships without sufficient senior management oversight and approval, and failure to carry out adequate checks that would have enabled it to identify that its policies were not being implemented correctly.

The FCA’s Final Notice highlighted the fact that JLTSL actually had the checks in place to manage risk, but did not use them effectively e.g. by issuing guidance on how anti-bribery policies might be applied in practice.

“[The company] did not take reasonable care to ensure that the anti-bribery and corruption policies that it had put in place operated effectively.”FCA’s Final Notice concerning JLT Speciality Limited (December 2013)

14 The matter was brought under section 206 of the Financial Services and Markets Act 2000, which empowers the FCA to enforce Principle 3 of the FCA’s Principles for Businesses. Proof of a breach of Principle 3, in the context of bribery risk management, does not require the FCA to be able to prove actual corrupt transactions, e.g. payment of bribes. There was no evidence that JLTSL had entered into any illicit payments or inducements; nor was it found that JLTSL’s breaches were intentional or reckless; nor was it found that JLTSL gained any financial benefit from the breaches or caused any loss.

15 In October 2013 the FCA published its thematic review Anti-Money Laundering and Anti-Bribery and Corruption Systems and Controls: Asset Management and Platform Firms.

The FCA’s director of enforcement and financial crime commented that: “Bribery and corruption from overseas payments is an issue we expect all firms to do everything they can to tackle. Firms cannot be complacent about their controls — when we take enforcement action we expect the industry to sit up and take notice.” JLTSL’s penalty was increased because of its failure to respond adequately either to the numerous warnings the FCA had given to the industry generally or to JLTSL specifically.

We observe the following:

• The basis of the FCA’s enforcement regime14 arguably results in FCA regulated businesses being more exposed than other businesses who are subject to only the Bribery Act. The FCA’s approach effectively gives a regulatory dimension to Section 7 of the Bribery Act. In essence, JLTSL was fined for not preventing an “unacceptable risk” of bribery and corruption regarding its transactions through overseas introducers. As the FCA itself acknowledges, this case echoes the actions against Willis (see case 18) and Aon (see case 4) in July 2011 and January 2009 respectively brought by the FCA’s predecessor, the FSA.

• The risk created by agents (especially business introducers) and failures of third party due diligence procedures are by now familiar features of corruption cases

• Newer aspects of the JLTSL case include:

• The expectation of risk assessment down to a product/transaction level

• The emphasis on the active role of senior management in bribery and corruption management

• The need for businesses not just to develop policies, procedures and controls but to assess that these measures are effective, in short that they are properly implemented so as to mitigate corruption risk in the way they are designed to. In this regard there are a number of recurring findings in the Final Notice:

• The failure to provide sufficient guidance to relevant officers and employees to apply in practice the policies, procedures and controls e.g. to identify what constitutes “sufficient concern” arising from a due diligence review such as what comprises a connection between an overseas introducer and a client

• The failure to test implementation effectiveness e.g. that screening software is actually screening the directors and shareholders of corporate overseas introducers

• The failure to comply in full with its own policies, procedures and controls as specified

“These failings are unacceptable given [the company] actually had the checks in place to manage risk, but didn’t use them effectively…”FCA’s Press Release relating to its Final Notice concerning JLT Speciality Limited (December 2013)

• The implications for “principles based” policies. This approach to policies is a preferred alternative to creating a “tick box” approach to compliance. However, the inference from the FCA’s Final Notice is that principles alone do not suffice: there needs to be detailed guidance about what to do in practice. It is essential that practical steps are presented in guidance as not illustrative (and therefore optional) nor as exhaustive

• Reference to JLTSL appointing “an independent skilled person” to approve new business with third parties pending remediation of its own procedures to the FCA’s satisfaction.

It is perhaps unsurprising that several of the conclusions and findings in the FCA’s October 2013 thematic review15 are echoed in the FCA’s Final Notice regarding JLTSL. In particular, we note the emphasis on:

• Proactive risk management as distinct from, as we characterise it, a “tick box” approach to compliance

• The exposure arising from third parties, in particular agents and introducers

• The need to assess the effectiveness of anti-bribery and corruption measures.

“Conducting an accurate risk assessment is fundamental to countering bribery and corruption risk. Without accurately assessing the risk associated with each new piece of… business… [a company]… could not ensure that it took sufficient steps to counter the risk that it might become involved in bribery and corruption as a result of the relationship.”FCA’s Final Notice concerning JLT Speciality Limited (December 2013)

“Bribery and corruption from overseas payments is an issue we expect all firms to do everything they can to tackle. Firms cannot be complacent about their controls — when we take enforcement action we expect the industry to sit up and take notice.”FCA’s Press Release relating to its Final Notice concerning JLT Speciality Limited (December 2013)


30 — 1io

Case write-ups

Cases in prior periods

30Yang Li(April 2013)

April 2013 saw the third prosecution under the UK Bribery Act. As with the two previous Bribery Act cases this is a prosecution of an individual.

Yang Li, a student at the University of Bath, was awarded a 37% mark for his dissertation, just short of the 40% pass mark. He visited two of his tutors. They set out three options: resubmit the dissertation, appeal against the marking or accept it and withdraw from the course. The court heard that Mr Li set out a fourth option: he placed £5,000 in cash on the table and proposed “… you can keep the money if you give me a pass mark….” His tutor declined the offer and asked Mr Li to leave, but as Mr Li picked up his coat and put the money away, a 0.177 air pistol fell from his pocket onto the floor. Mr Li’s defence counsel argued that Mr Li was carrying £5,000 as he had withdrawn it that morning intending to use it at the weekend but instead impulsively offered it as a bribe, and that Mr Li thought it safer to take the air pistol to the meeting rather than leave it in the car — he had planned a shooting session in his garden after the meeting.

Mr Li received a twelve month prison sentence for the bribery offence and six months concurrently for the firearm offence.

The case indicates that simpler bribery scenarios can move through the legal system quite swiftly: the bribing incident was in November 2012 and Mr Li was convicted in April 2013.

This case prompts a number of observations:

• The courts regard bribery as a serious offence, as was made clear by the judge and as reflected in the sentence

• The bribe does not need to be successful to commit an offence — the offer of the bribe is itself an offence and, indeed, the person offered the bribe may file the complaint

• A foreign national committing offences in the UK will of course be liable to prosecution in the UK.

29Mawia Mushtaq(December 2012)

Mawia Mushtaq became the second person to be convicted of an offence under the Bribery Act by attempting to bribe a Licensing Officer to obtain a private taxi licence. Mr Mushtaq is reported to have offered the Licensing Officer bribes of £200 or £300 in exchange for a pass mark on his test, having failed multiple times previously. The Licensing Officer subsequently informed his manager of the attempted bribe, who referred this matter to the police.

There are some lessons for the business community in this prosecution:

• The amount and nature of the payment is similar to what many people would mistakenly explain away as facilitation payments. Rather, by his offer of payment Mr Mushtaq was seeking to get something he was not in fact entitled to, as he had not fulfilled the requirements and it is therefore a bribe, albeit small. To be clear, there is no concept of facilitation payments in the Bribery Act

• The personal exposure to prosecution for these sorts of acts.

28Abbott Group(November 2012)

Abbott Group is a private equity owned Aberdeen based drilling business. It is the first Scottish business to enter into a civil settlement under the self-reporting initiative since it was introduced in Scotland in 2011. Under the Proceeds of Crime legislation, it agreed to pay £5.6 million, representing profits made on a contract between its overseas subsidiary and an overseas oil and gas company. The contract was entered into in 2006 and corrupt payments were made in 2007. Further details of the corrupt payments were withheld in view of any criminal investigation of others that may follow.

The corrupt payments were brought to light in May 2011 following routine enquiries by an overseas tax authority, which resulted in an investigation by UK lawyers and forensic accountants instructed by Abbot. Abbot reported the results of the investigation to the Crown Office and Procurator Fiscal Service (“COPFS”) in July 2012. The investigation is reported to have considered over 100 contracts covering 12 years and one million email communications.

The COPFS listed the following criteria that were considered in the decision to refer this case for an extra-judicial settlement in accordance with the published guidance on self-reporting:

• The nature and seriousness of the offence and the extent of the harm caused

• The extent of the wrongdoing within the business, including whether the conduct was authorised by, or connived in, by senior management, or restricted to a small number of lower-ranking individuals

• Whether it was clear that the business was taking action as soon as the matter came to the attention of senior management (as opposed to taking no action until it became aware that there was a risk that the conduct was going to come to light)

“It is another example of a new owner acquiring a bribery exposure as part of its acquisition.”Abbott Group case


• Whether the business (or the individuals involved in the matter reported) had any previous record for this type of conduct. This would go beyond a previous criminal conviction, and would include any regulatory enforcement action or warning

• Whether the individuals involved in the wrongdoing had left the business and, where decisions were taken at Board level, whether there was a new Board in place, and in both cases the timing and reasons for the departure of these individuals

• Whether the business had honoured its commitment to engage with the Crown meaningfully and in particular to disclose the full extent of the wrongdoing

• Whether the business had in place adequate anti-bribery systems at the time of the criminal conduct and whether it has further addressed this following the conduct

• Whether there were particular considerations which may have weighed against prosecution, such as the consequences of prosecution for the company’s employees and stakeholders.

The COPFS announced that the funds which have been recovered will be remitted to the Scottish Consolidated Fund to further expand the CashBack Programme by funding projects that will contribute towards delivering youth employability, healthy lifestyles and reducing re-offending for the young people of Scotland.


While the COPFS has sought to provide an explanation of its approach to this case, as set out above, these settlements remain open to criticism of a lack of transparency compared with deferred prosecution agreements, which would be made public through the Court process. Concerns have also been raised that the active use of civil settlements in Scotland may be out of step with the harder line being indicated south of the border: however, such concerns may be premature.

The Abbott case is another example of a new owner acquiring a bribery exposure as part of its acquisition: the bribe was paid in 2007, the private equity acquisition of Abbott Group took place in 2008 and the tax audit that led to discovery of the bribe was in 2011.

As noted, Abbot reported the results of the investigation to the COPFS in July 2012; this case was brought to resolution quite swiftly, by November 2012.

27Oxford University Press(July 2012)

In May 2011, following notification by World Bank investigators, Oxford University Press (“OUP”) became aware of the possibility of irregular tendering practices involving its education business in East Africa, conducted through wholly owned subsidiaries within Oxford Publishing Limited (“OPL”), which has its head office in Oxford. OUP acted immediately to investigate the matter, instructing independent lawyers and forensic accountants to undertake a detailed investigation.

As a result of the investigation, in November 2011 OUP voluntarily reported certain concerns in relation to contracts arising from a number of tenders which its Kenyan and Tanzanian subsidiaries had entered into between the years 2007 and 2010. The SFO required OUP to follow a procedure based on the guidance contained within its published protocol document “The Serious Fraud Office’s Approach to Dealing with Overseas Corruption” (which, we note, was subsequently withdrawn).

Because two of the tenders were funded by the World Bank, OUP also voluntarily reported on a potential breach of the World Bank’s Procurement Guidelines to the World Bank.

The findings of OUP’s investigation led the SFO and the World Bank to believe that Kenyan and Tanzanian subsidiaries of OPL had offered and made payments, directly and through agents, intended to induce the recipients to award competitive tenders and/or publishing contracts for schoolbooks to them.

The basis of the Civil Recovery Order for some £1.9 million obtained by the SFO against OPL is explained in the SFO Press Release as follows. As wholly owned subsidiaries, the Kenyan and Tanzanian subsidiaries pay dividends and certain fees to OPL. Accordingly, OPL has and would receive revenue that had been derived from unlawful conduct, namely bribery and/or corruption. Following an accounting examination of the benefit obtained from the affected contracts, the SFO was in a position to determine the appropriate amount to be recovered. The approach to costs was conservative, with the result that the agreed methodology produced a higher figure than would normally be recognised as trading surplus in the accounts. No allowance has been made for the payments which are considered bribes or inducements.

In addition to the Civil Recovery Order, OUP:

• Unilaterally offered a voluntary contribution of £2 million to not-for-profit organizations for teacher training and other educational purposes in sub-Saharan Africa. This was a reflection of the seriousness with which OUP views the course of events that were subject to the investigation and OUP’s wish to acknowledge that the conduct fell short of that expected within its wider organization. The funds would not be used in a way which would provide OUP with a commercial advantage

• Paid US$500,000 to the World Bank

• Introduced enhanced compliance procedures intended to significantly reduce the risk of recurrence of bribery. These procedures will be subject to review by an independent monitor who will report to the Director of the SFO within 12 months, with additional and separate reporting to the World Bank.

In response to previous criticism in relation to the transparency of the processes and proceedings in civil recovery matters concluded by the SFO, in this case the terms of the order (summarised above) and the basis for the proceedings were dealt with in some detail in the SFO’s Press Release.

The following summarizes the (several and diverse) reasons given for pursuing a civil recovery order:

• The test under the Code for Crown Prosecutors in relation to the case meeting the criteria to prosecute could not be met:

• Key material obtained through the investigation was not in an evidentially admissible format for a criminal prosecution

• Witnesses are in overseas jurisdictions and were considered unlikely to assist or cooperate with a criminal investigation in the UK

• Difficulties in relation to obtaining evidence from the jurisdictions involved and potential risks to the personal welfare of affected persons

• The resources needed to facilitate an investigation into this matter would be considerable and a Civil Recovery Order allows a better strategic deployment of resources to other investigations which have a higher probability of leading to a criminal prosecution

• OUP has conducted itself in a manner which fully met the criteria set out in the SFO guidance on self reporting matters of overseas corruption

• No evidence of Board level knowledge or connivance within OUP in relation to the corrupt business practices

• The products supplied were of a good standard and provided at ‘open market’ values — the jurisdictions involved have not been victims as a result of overpaying for the goods or as a result of being supplied with goods which were unsuitable or not required

• The settlement terms ensure all gross profit from any tainted contract will be disgorged

• The subsidiaries will be subject to parallel World Bank procedures which will result in them being debarred from participating in future World Bank funded tenders for a number of years.

We note a number of interesting facts to this case:

• It has a number of echoes of the Macmillan Publishers case and highlights the particular risks in east and southern Africa

• It is yet another case featuring risks created by agents and intermediaries

• The explanation of the reasons given for pursuing a civil recovery order provides useful insights. However, we still await cases that shed light on the interpretation of the Bribery Act. For example, had the bribery in this case occurred after July 2011, we may have been provided with insights into:

• The scope of “Associated persons” under Section 7 as regards the agents, intermediaries and subsidiaries

• The implications of “indirect benefit” as referred to in the Ministry of Justice Guidance.

26Andrew Behagg, David Baxter and John Maylam(June 2012)

This UK-based bribery case involved a major supplier of potatoes to Sainsbury’s. It appears to involve many of the classic features and red flags of bribery schemes.

Andrew Behagg and David Baxter were the Operations Director and Finance Director respectively of the company, which supplied half of Sainsbury’s potatoes in the UK. John Maylam was a buyer for Sainsbury’s.

The scheme appears to have been straightforward: Sainsbury’s were overcharged for potatoes supplied since 2006 with the excess (some £8.7 million) being accumulated into what was called The Fund. John Maylam and his associates received £4.9 million of The Fund and the remainder was retained by the other defendants.

Some of the red flags suggested by the facts in the Press coverage include the following:

• Lavish hospitality and holidays for John Maylam (including a £200,000 bill at Claridge’s Hotel and a £350,000 holiday to the Monaco Grand Prix) paid from The Fund

• Some £1.5 million transferred by John Maylam to Luxembourg

• A “consultancy report” for which he was paid £85,000

• Large and frequent cash payments to him — the scam was uncovered by an employee of the potato supplier who became suspicious of being asked to withdraw £5,000 in bundles of £50 notes.

If there was any lingering doubt that bribery is a risk faced by all sectors, then that doubt is surely dispelled by this case: if the potato business generates a bribery prosecution then any sector must be seen as at risk.

“It is yet another case featuring risks created by agents and intermediaries.”Oxford University Press case


25Bank of Ireland v Jaffery and Gill(May 2012)

This case is a reminder that bribery allegations may be pursued, in certain circumstances, by way of civil disputes between private parties and that English law takes a broad view of what constitutes a bribe for civil claims where the briber is inducing what he knows to be an agent of another party and there is a failure to disclose it to the other party.

This case was brought by the bank against one of its former senior executives (Mr Jaffery) and one of his associates (Mr Gill). Mr Gill was the agent for several of the bank’s customers and the case concerned a series of loans made by the bank to those customers. All of the customers were introduced to the bank by Mr Gill and both defendants admitted that the relevant customers were all ultimately owned by one or other of Mr Gill’s sisters.

The key allegations were that Mr Jaffery acted in breach of his fiduciary duty to the bank by putting himself in a position in which his personal interest conflicted with his duty to the bank and that Mr Gill dishonestly assisted Mr Jaffery’s breach. Of the various bribery allegations made by the bank, the successful claim concerned a promise made by Mr Gill to Mr Jaffery that he would receive a 10% interest in a project for which a customer connected with Mr Gill was seeking funding from the bank. The judge held that the 10% had been promised as a quid pro quo for Mr Jaffery assisting Mr Gill to obtain banking facilities and that after being promised the interest Mr Jaffery had encouraged the bank to loan money to Mr Gill and his family. The encouragement took the form of promoting the loans and giving references to the bank for Mr Gill and his family.

The judge held that Mr Gill had acted dishonestly in procuring Mr Jaffery’s services to assist him in obtaining the loan and that the bank would not have proceeded with the loan had it known that Mr Jaffery had been promised a 10% interest in the project.

24James McGeown, William Marks, John Symington and Carol Kealey(March 2012)

This case involved the familiar bribery model of a supplier making payments to government officials to show favour in the tendering and continuation of contracts, in this instance CCTV provided to the Ministry of Defence in Northern Ireland. It is another example of a domestic bribery prosecution and in this case both the supplier and the government officials were prosecuted. We also note that bribery can become a family matter: Carol Kealey is the sister of William Marks and became involved by agreeing to use her bank accounts to receive the corrupt monies.

23Andrew Ryback, Ronald Saunders, Philip Hammond and Barry Smith(January 2012)

This case highlights a type of corrupt activity that receives less comment but which is potentially of serious consequence: the selling of confidential information.

The confidential information supplied to bidders was held by companies acting as procurement agents for the projects in the oil and gas sector. Certain of the defendants were engaged by these procurement agents and had access to information which they passed on (through the other co-defendants or their front companies) to targeted bidding companies who either made, or agreed to make, corrupt payments for the information, disguised as “consultancy services.”

These were established UK-based procurement companies, dealing with some of the larger projects in the sector. Several of the bidders who agreed to pay for the information were in mature economies, such as Italy, France and Canada.

The SFO reports that the procurement companies helped the investigation enormously and were appalled at the apparent blatant disregard shown by the defendants (several of whom were short-term contract staff) for the confidentiality and integrity of the project environments.

Had the selling of confidential information occurred after 1 July 2011(when the Bribery Act came into force), the procurement and bidding companies are likely to have been exposed to prosecution for the section 7 offence of failing to prevent bribery.

22Mabey Engineering (Holdings) Limited (January 2012)

This represents the final act in the Mabey & Johnson case: the company itself was prosecuted in September 2009 and three directors and officers in February 2011 (see cases 5 and 13 respectively in the Digest). Mabey & Johnson self-reported the irregularities in early 2008 and, therefore, the matter took four years to be fully resolved. The January 2012 case concerned a civil order requiring the shareholder of Mabey & Johnson (Mabey Engineering (Holdings) Limited)to pay £131,201 in recognition of sums received through share dividends derived from contracts won through unlawful conduct.

In the SFO Press Release, Richard Alderman, the Director of the SFO at that time, stated: “First, shareholders who receive the proceeds of crime can expect civil action against them to recover the money… In this particular case, however, the shareholder was totally unaware of any inappropriate behaviour… The second broader point is that shareholders and investors in companies are obliged to satisfy themselves with the business practices of the companies they invest in. This is very important and we cannot emphasise it enough. It is particularly so for institutional investors who have the knowledge and expertise to do it. The SFO intends to use the civil recovery process to pursue investors who have benefitted from illegal activity. Where issues arise, we will be much less sympathetic to institutional investors whose due diligence has clearly been lax in this respect.”

The Proceeds of Crime Act (“POCA”) has featured heavily in earlier cases and offers broad powers to the SFO, especially in dealing with privately held businesses. Proceeding against a publicly owned business and more “passive” investments using this power is likely to be more problematic for the enforcement agency.

The position is rendered yet more complex by the yet-to-be clarified scope of the Bribery Act Section 7 offence (Failure of commercial organisations to prevent bribery by an associated person) — but, of course, this and the earlier cases pre-date the Act. The Guidance (see paragraph 42) states that liability under the Act will not accrue “through simple corporate ownership or investment or through the payment of dividends” and appears to require a more direct and intentional link between the investor and the bribery.

Because a number of both criminal (e.g. Bribery Act) and civil (e.g. POCA) laws impinge on incidents of bribery, there is a need for sound analysis and advice for investors in managing corruption risk. The SFO’s comment, quoted above, highlights that an investor will be in a more defensible position where adequate due diligence has been performed.

21Mazhar Majeed, Salman Butt, Mohammad Asif and Mohammad Amir(November 2011)

These members of the Pakistan cricket team that played England in a test match at Lord’s in August 2010 were found guilty of arranging to bowl three no balls for money with the object of enabling others to cheat at gambling.

While a prosecution in respect of a gambling scam in the world of cricket may not appear to offer lessons for the business world, the Judge’s sentencing remarks suggest at least two parallels. The first is that the courts look to the broader consequences of the corruption in assessing its seriousness: “It is the insidious effect of your actions on professional cricket and the followers of it which make the offences so serious.” The second reminds us that corruption is fundamentally about unfair competition: “What ought to be honest sporting competition may not be such at all” [as a result of the defendants’ action].

It is also worth noting that this case, as with that of Mr Patel (see below), was initiated by a Press sting (in this case The News of the World). Texts and telephone records were an important part of the evidence.

20Munir Yakub Patel(October 2011)

Mr Patel was the first person to be convicted of bribery under the Bribery Act 2010. He worked in Redbridge Magistrates’ Court and he pleaded guilty to having accepted in August 2011 £500 to avoid putting details of a traffic summons on a court database. He was sentenced to three years imprisonment (and six years concurrently for the offence of Misconduct in Public Office).

Mr Patel’s prosecution highlights that the Act has broad application and that the courts regard corruption as a serious offence: the three years imprisonment was for the bribe after 1 July 2011 (£500) only and, according to the sentencing remarks, could have been up to five years had Mr Patel not pleaded guilty.

However, a prosecution of an individual for domestic bribery of a non-commercial nature unfortunately offers little insight into how the courts and enforcement agencies will approach more serious cases involving commercial organisations.

The case is also notable for the involvement of The Sun newspaper in exposing the bribery.


19Macmillan Publishers Limited(July 2011)

This case concerns Macmillan Publishers Limited (“MPL”) activities in the educational publishing sector in East and West Africa during the period 2002 to 2009. The initial enquiry commenced after a report from the World Bank as funder of a contract in South Sudan, in respect of which an agent of MPL had unsuccessfully attempted to pay a sum of money with the view in mind of persuading the award of the tender. MPL self-reported shortly thereafter.

The scope of the enquiry was broadened by the SFO from the initial report and an aggressive approach was taken by the SFO, as indicated by the SFO Press Release:

“The SFO remit was broader in its scope in that it required investigation of all public tender contracts in the three jurisdictions [Rwanda, Uganda and Zambia] over the period 2002-2009 whether funded by the World Bank or otherwise... It was impossible to be sure that the awards of tenders to the Company in the three jurisdictions were not accompanied by a corrupt relationship. Accordingly it was plain that the Company may have received revenue that had been derived from unlawful conduct. Following an accounting examination and taking an aggressive approach to the revenue received in order to capture all potential unlawful conduct the SFO was in a position to determine the appropriate amount to be recovered. The value of the Order made by the High Court is £11,263,852.28.”

There are aspects of this case which have wider implications:

• Agents remain a significant source of potential exposure

• The World Bank and similar funders have zero tolerance of corruption in respect of contracts they fund or part-fund: MPL was debarred from World Bank funded tender business for a minimum of three years. This debarment had been reduced from six years subject to completion of a compliance programme and continued cooperation with the World Bank Integrity Vice President. MPL decided — apparently in connection with this debarment — to withdraw from all public tenders in East and West Africa regardless of the source of funding

• In citing that it was impossible to be sure that tenders were not accompanied by a corrupt relationship the SFO has set a high standard for the evidence it expects to be available and the conclusions it will draw if this evidence is lacking.

18Willis Limited(July 2011)

This case concerns Willis Limited (“Wills”) making payments totalling £27 million between 2005 and 2009 to overseas third parties who assisted in winning and retaining business, particularly in high risk jurisdictions.

Willis had a fine of £6.895 million imposed on it by the FSA, reduced by 30% from £9.85 million in recognition of a Stage 1 FSA executive settlement procedure.

It is clear that for regulated businesses the onus is on the business to be able to demonstrate its anti-corruption procedures and controls actually work and the business will not be given the benefit of the doubt in this regard, as underlined by the following quote from the FSA’s press release:

“Willis failed to take the appropriate steps to ensure that payments it was making to overseas third parties were not being used for corrupt purposes... it is vital for firms not only to put in place appropriate anti-bribery and corruption systems and controls, but also to ensure that those systems and controls are adequately implemented and monitored... These failings created an unacceptable risk that payments made by Willis to overseas third parties could be used for corrupt purposes, including paying bribes.”

The Willis case is also a useful reminder that businesses regulated by the FSA have a higher standard to meet and are arguably more exposed to fines for “adequate procedures” type actions, to use Bribery Act terminology. This is because the Bribery Act Section 7 offence of failing to prevent bribery is triggered only where there could have been a prosecution for a bribing offence (although not an actual prosecution). The FSA does not need to meet this requirement and can take action where it finds only inadequate procedures, in isolation as it were16.

Willis’ particular failures as regards its procedures and controls are listed by the FSA as relating to the following areas:

• Recording adequate business rationale to support payments to third parties

• Due diligence over third parties

• Regular review of third party relationships for risk and ongoing business need

• Ensuring policies were in fact implemented

• Sufficiency of information to senior management about performance of relevant policies and mitigation of the risks.

“Willis Limited failed to take the appropriate steps to ensure that payments... were not being used for corrupt purposes.”FSA press release

16 The Willis matter was brought under section 206 of the Financial Services and Markets Act 2000 in respect of a breach of Principle 3 of the FSA’s Principles for Businesses and Rule SYSC 3.2.6 R of the FSA’s Senior Management Arrangements, Systems and Controls Handbook.

While the Willis matters pre-date the Bribery Act coming into force, these failures described by the FSA are an example of what might be cited in future Bribery Act Section 7 offences of “failing to prevent bribery” by associated persons of a relevant commercial organisation.

A number of other aspects of this case are noteworthy:

• £27 million in commissions to overseas third parties was paid by Willis in the relevant period. “The FSA did not seek to determine... whether any of this business was corrupt.” $227,000 of suspicious payments gave rise to the filing of Suspicious Activity Reports (“SARs”)

• While Willis was making efforts to improve its corruption risk management as regards payments to third parties, the inference is that the FSA did not consider that Willis had done enough with sufficient urgency in view of its “Dear CEO” letter on the matter in November 2007. The message is that the response to these sorts of letters from regulators needs to be prompt, comprehensive and address the substantive risks

• Willis introduced improved policies and guidance in August 2008 and reviewed how they were operating later the same year. This review led to revised guidance being issued in May 2009 and ultimately Willis being held accountable for a failure to ensure its policies were adequately implemented between August 2008 and May 2009

• The detailed factual findings described in the Final Notice provide valuable insights into the FSA’s expectations of how relevant controls and procedures and compliance roles should work in order to be considered effective.

The Willis case has a number of similarities to the earlier Aon Limited matter, settled in January 2009.

17DePuy International Limited(April 2011)

The unlawful conduct consisted of payments made by DePuy International Limited (“DePuy”) to intermediaries for the purpose of making corrupt payments to Greek medical professionals working in the Greek public health system. Payments to the intermediaries amounted to twenty percent of the price at which the product was ultimately sold. These payments covered the commission for the intermediary and were available to be used to pay inducements or rewards for the use of products sold by DePuy. “Cash incentives” and “Professional Education” were used as euphemisms for corrupt payments. According to the SFO, the corporate benefit sought by DePuy, as a result of the payments to intermediaries, was retention and enhancement of market position.

This case is perhaps most noteworthy as regards the legal basis of the case in the context of simultaneous enforcement in the US. In its Press Release the SFO expresses the view that those who commit

serious fraud and/or corruption offences must not be viewed or treated in any different way to other criminals; serious criminality should be made patent for all to see. It goes on to state that on the facts of this case, criminal sanction of the Greek conduct had been achieved by the conclusion of a Deferred Prosecution Agreement with DePuy‘s parent company (Johnson & Johnson) and the Department of Justice (“DoJ”). The Director of the SFO concluded that a prosecution was therefore prevented in the UK by the principles of double jeopardy, preventing a defendant from being prosecuted twice for the same offence in different jurisdictions. The DoJ Deferred Prosecution Agreement has the legal character of a formally concluded prosecution and punishes the same conduct in Greece that had formed the basis of the SFO investigation. Consequently, the SFO pursued a Civil Recovery Order under the Proceeds of Crime Act 2002.

As to the amount of the Civil Recovery Order, the SFO recognised that it would not be appropriate or possible to apply for recovery of the full amount of the unlawfully obtained property (£14.8 million of contract profits) as the Securities and Exchange Commission (“SEC”) was to impose a penalty and civil sanction and the Greek authorities had restrained assets. The SFO applied for £4.829 million (the derivation of this figure is not apparent to us). The SFO “has considered the matter from a global perspective”.

A number of other aspects of this case are noteworthy:

• It is an example of cooperation between international enforcement agencies: the matter had been referred to the SFO by the DoJ (as the bribes had been paid by a UK entity) after extensive investigation by the DoJ and SEC

• This was an acquired corruption problem: Johnson & Johnson had acquired DePuy Incorporated (of which DePuy International Ltd was a subsidiary) in 1998

• In April 2010, Robert Dougall, former Director of Marketing at DePuy, pleaded guilty to violating Section 1 of the Prevention of Corruption Act 1906 in respect of these same facts and transactions. He was described by the SFO as the first “cooperating defendant.” He was sentenced to a twelve month prison term. This was subsequently suspended for two years on appeal.

16Mark Jessop(April 2011)

The case is notable in that it is a criminal prosecution of an individual with comparatively small amounts involved, resulting in a custodial sentence.

The backdrop to this case is the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence from HM Treasury.


Suppliers so approved were paid from the UN escrow account upon presentation of contract and consignment documents to show that the goods had reached Iraq, been inspected by UN appointed agents, and cleared into the country by the authorities there.

In August 2000, the Iraqi government imposed a policy that contract prices be uplifted to allow for a 10% kickback to the regime. Suppliers who accepted this condition were required to submit pro-forma invoices that did not reveal the uplift, or described it as “after sales service fees.” Contracts were duly awarded, consignments shipped and documents presented by the supplier to be paid out of the escrow account. The supplier was required to pay the kickback into accounts held by the Iraqi government before the goods were shipped to Iraq. Mark Jessop accepted contracts on this basis admitting that nearly €104,649 was illegally transferred to benefit the Iraqi regime with a further amount of €235,237 outstanding but unpaid due to military intervention in March 2003.

In January 2001 Jessop contacted the Foreign & Commonwealth Office for advice on the recently introduced Iraqi government demand that contracts be uplifted to include 10% “after sales service fees”, which he explained was code for payments to the Iraqi regime. He was advised that he should not proceed with contracts that would put him in breach of UN sanctions. Despite this, later that month Jessop applied for a licence to supply goods to Iraq in a contract that was inflated to pay the kickback.

The 10% contract value payments and in-country cash payments were made without approval from HM Treasury, and therefore in breach of UN sanctions that prohibited payments to Iraq or persons in Iraq without (in the UK) a Treasury licence.

15Aftab Noor Al-Hassan and Riad El-Taher(February 2011)

These two related cases are of particular importance because they concern prosecutions of individuals resulting in imprisonment (suspended for two years for Al-Hassan).

These two cases also involve the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence from HM Treasury. Al-Hassan and El-Taher made payments to secure oil contracts without approval from HM Treasury, and therefore were in breach of the Iraq (United Nations Sanctions Order 2000) that prohibited payments to Iraq or persons in Iraq without (in the UK) a Treasury licence.

14 MW Kellogg Limited(February 2011)

Perhaps the most significant aspect of this case is that the SFO recognised that MW Kellogg Limited (“MWKL”) took no part in the criminal activity which generated the funds the SFO recovered (some £7,028,077). The funds due to MWKL were share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by MWKL’s parent company and others. MWKL was found to have been used by the parent company and was not a willing participant in the corruption.

The corruptly obtained contracts had been awarded to a company partly owned by MWKL on behalf of its US parent company. The US parent company was one of four corporate entities which formed a joint venture to bid for contracts on a liquefied natural gas Bonny Island Project in Nigeria. The joint venture created three special purpose vehicles to bid for, and subsequently run, the contracts. Three of the four contracts won by the joint venture were obtained through promises to pay or payments of bribes. The parent company had acknowledged that it owned the special purpose vehicle created for the Nigerian project through MWKL in order to distance itself from the corruption and avoid the consequences of the FCPA.

A number of other aspects of this case appear noteworthy to us:

• The case was pursued in cooperation with the US Department of Justice

• The matter had been self reported to the SFO in October 2009 and concluded in February 2011. The origins of the investigation trace back to French prosecutors extending an existing investigation regarding a separate matter in June 2003. This indicates how long these sorts of issues may take to resolve

• This had been a wide-ranging prosecution in the US involving a number of corporates and individuals, including UK nationals. In March 2011, Jeffrey Tesler, the UK solicitor who served as a consultant to the joint venture, pleaded guilty to conspiracy and FCPA violations, having failed in his fight against extradition from the UK.

“[The parent company] has acknowledged… that it owned the special purposes vehicle… in order to distance itself from the corruption...”SFO press release

13Richard Forsyth, David Mabey and Richard Gledhill (ex-Mabey & Johnson)(February 2011)

This case was the follow-on case against the directors who had been involved in the Mabey & Johnson matter (the company had been prosecuted in September 2009 — see Case 5 below). Richard Forsyth and David Mabey, directors, were found guilty of making illegal payments to Iraq in breach of UN sanctions. Forsyth (former Managing Director) received 21 months imprisonment and was disqualified as a company director for five years, Mabey (former Sales Director) received eight months imprisonment and was disqualified as a company director for two years. Richard Gledhill (former Sales Manager) pleaded guilty at an early stage and cooperated with prosecutors. He received an eight months prison sentence suspended for two years.

12BAE Systems plc(December 2010)

In the build up to the Bribery Act 2010, BAE Systems plc (“BAE”) was undoubtedly the most high profile corruption matter in the UK. This high profile case arose from matters which ultimately were not pursued by the UK enforcement agencies. BAE had been subject to an SFO investigation which had begun in July 2004 relating to BAE’s activities in connection with a project known as Al Yamamah, a government-to-government agreement in the 1980s and 1990s reputedly worth over £40 billion under which the UK government arranged large arms sales to Saudi Arabia (primarily Tornado aircraft) for which payments were linked to the supply of oil. Press reports contained numerous allegations of corrupt conduct on the part of BAE, including frequent and lavish entertainment, and alleged payments to the Saudi Ambassador in the US.

The SFO investigation relating to Saudi Arabia was discontinued in December 2006 in the interest of national security. Legal challenges in respect of this were completed in July 2008, when the House of Lords (at that time the final Court of Appeal) held that the Director of the SFO had not acted unlawfully in discontinuing the Al Yamamah investigation. The SFO’s investigations of BAE’s activities in Tanzania, South Africa, Czech Republic and Romania, prompted by the Al Yamamah investigation, continued. Press reports in early 2009 stated that the SFO was seeking penalties in the hundreds of millions of pounds to show it too could obtain penalties of a scale similar to those that the SEC imposed (albeit to conclude an unrelated matter against Siemens). Ultimately, only the Tanzania matter was pursued against BAE in the UK.

A contract for the supply of a radar defence system for Dar-es-Salaam International Airport had been agreed in 1999 with the government of Tanzania and BAE’s subsidiary British Aerospace Defence Systems Limited (“BAEDS”). BAE’s practice was to engage advisers to help with its marketing. These advisers were either classified by BAE as “overt” (i.e. that is they operated openly as BAE’s in-country representatives), or “covert.” The latter operated in circumstances where there was a need for confidentiality. In order to maximise confidentiality with regard to its use of covert advisers and the making of payments to them, BAE set up Red Diamond Trading Company, incorporated in the British Virgin Islands.

In Tanzania a local businessman, Shailesh Vithlani, was recruited at an early stage to advise BAE on its negotiations with the government on the radar contract. Shortly before the contract was signed two new adviser arrangements with Vithlani were concluded. One was made between Red Diamond and a Vithlani-controlled Panama-incorporated company, Envers Trading Corporation. This was a “covert” arrangement where the fee for Vithlani’s services was to be not more than 30.025% of the radar contract price. The other arrangement was “overt” and was for services direct to BAE by a Vithlani-controlled business, Merlin International, registered in the B.V.I. It did not involve Red Diamond and the fee was 1% of the radar contract value.

Between January 2000 and December 2005 around $12.4 million was paid to Vithlani’s two companies. These payments were recorded in the accounting records of BAEDS as payments for the provision of technical services. In the prosecution’s opening for a charge brought under S221 of the Companies Act 1985 it was stated “... BAE has accepted that there was a high probability that the payments to Vithlani were intended to compensate him for work done in seeking to persuade relevant persons to favour BEADS in respect of the radar project. It is not now possible to establish precisely what Vithlani did with the money that was paid to him... it is no part of the Crown’s case that any part of those payments were in fact improperly used... nor is it any part of the Crown’s case that BAE was party to any agreement to corrupt. To lobby is one thing, to corrupt another.”

In response to the prosecution’s opening statement, the Judge said “I accept... it is not now possible to establish precisely what Mr Vithlani did with the money that was paid to him. But on the basis of the documents shown to me it seems naive in the extreme to think that Mr Vithlani was simply a well paid lobbyist.” However, the Judge went on to say “I also accept that there is no evidence that BAE was party to an agreement to corrupt. They did not wish to be and did not need to be. The fact that the money had been paid through the two offshore companies placed BAE at two or three removes from any shady activity by Mr Vithlani.”

BAEDS pleaded “the financial position... was not stated with reasonable accuracy, since it was not possible for any person considering the accounts to investigate and determine whether payments were properly accounted for and were lawful. The failure to

“The prosecutor does not have to prove the existence of bribery or corruption but rather the inadequacy of accounting controls and procedures.”


record the services accurately was the result of a deliberate decision by one or more officers of [BAEDS].” BAE plc added “It is not known who... was responsible for creating the relevant inaccurate accounting records or for the commission of the offence. However, it was known... that such inaccurate accounting records were in existence and BAE plc failed to scrutinise them adequately... and permitted them to remain uncorrected.”

The most striking comment in the Judge’s sentencing remarks is perhaps the following “I also cannot sentence for an offence which the prosecution has chosen not to charge.” He further stated “I could not, without hearing evidence, accept any interpretation of the basis of plea which suggested that what BAE were concealing by the S221 offence was merely a series of payments to an expensive lobbyist... Neither side sought to call evidence, although I indicated that I was prepared to grant an adjournment for them to do so.

In passing sentence, the Judge referred to the lack of evidence as to what Vithlani did with the money paid to him. “I therefore... sentence on the basis that by describing the payments in their accounting records as being for the provision of ‘technical services’ the Defendants were concealing from the auditors and ultimately the public the fact they were making payments to Mr Vithlani... with the intention he should have free rein to make such payments to such people as he thought fit in order to secure the Radar Contract...”

As to the fine, the Judge added that there was “moral pressure” on the Court to keep the fine low, as BAE had agreed in the plea bargain to pay £29.5 million in corporate reparations to the people of Tanzania and fines of £500,000. BAE also paid SFO costs of £225,000.

This judgement followed a settlement by BAE in what the SFO described as a “ground breaking global agreement” reached earlier in the year with the SFO and the DoJ concerning contracts in a number of countries.

The DoJ parallel investigations, including the Saudi contracts, had continued. In February 2010 BAE reached a settlement with the DoJ under which BAE pleaded guilty to a charge of making false statements to the US Government in connection with certain regulatory filings and undertakings (regarding FCPA compliance programmes and arms sales licencing), agreeing to pay a fine of US$400 million covering misconduct in the Czech Republic, Hungary and Saudi Arabia (including Al Yamamah), which compares with an estimated profit from the underlying transactions of US$200 million. According to information disclosed during criminal proceedings in the USA, since 2000 BAE had made payments of £135 million and US$14 million to its marketing intermediaries through an offshore entity in the British Virgin Islands and a further £19 million of undisclosed commissions in respect of Eastern Europe. BAE also subsequently agreed a civil settlement with the DoJ of US$79 million in respect of the arms export licencing violations, together with three non-US BAE affiliates being barred from receiving export licences.

The Judge took into account in sentencing BAE that the group had committed itself to a process of change following the landmark Report of Lord Woolf. This report had been commissioned by BAE and was made public in May 2008.

A large part of it is written from a broader perspective than that of BAE, or even the defence industry, alone: it is one of the earliest examples of guidance specific to corruption risk management and in particular intermediaries. Twenty three recommendations are set out in the report. One of its observations was the desirability of the Government quickly bringing forward the proposed changes of the Law Commission to anti-bribery law in the UK.

The BAE Tanzania matter reflects in a UK case a common feature of many bribery and corruption investigations: the prosecutor does not have to prove the existence of bribery or corruption but rather the inadequacy of accounting controls and procedures.

By way of illustration of the potential scope of a settlement agreement, the BAE Settlement Agreement included, inter alia, the following terms:

• “The SFO shall not prosecute any person in relation to conduct other than conduct connected with the Czech Republic or Hungary [which, in the event, did not happen]

• The SFO shall forthwith terminate all its investigations into the BAE Systems Group

• There shall be no further investigation or prosecutions of any member of the BAE Systems Group for any conduct preceding 5 February 2010

• There shall be no civil proceedings against any member of the BAE Systems Group in relation to any matters investigated by the SFO

• No member of the BAE Systems Group shall be named as, or alleged to be, an unindicted co-conspirator or in any other capacity in any prosecution the SFO may bring against any other party.”

Campaign Against the Arms Trade had sought, but failed, to challenge the BAE Settlement Agreement by way of judicial review, arguing that the SFO should have brought corruption charges: it was held that it was not arguable that the decision to limit the charge to one under Section 221 of the Companies Act 1985 was unlawful.

The case also highlights how companies may face enforcement actions in multiple jurisdictions (in this case the US, the UK, Austria and South Africa) and on legal bases other than anti-corruption laws. “One challenge of regulatory investigations is that they put a lot of things on ice... you don’t want long, lingering investigations” BAE’s general counsel stated in a subsequent interview by way of explanation of BAE’s desire for a settlement.

11Weir Group plc(December 2010)

This case was pursued by the Crown Office and Procurator Fiscal Service of Scotland (the SFO does not have jurisdiction in Scotland). The backdrop to the case is the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence. Weir paid £3 million in kickbacks to the regime of Saddam Hussein in order to secure fifteen contracts (returning profits of some £13.9 million) and £1.4 million to an agent, an Iraqi national, to a Swiss bank account to facilitate payment of the kickbacks to the Iraqi government.

This case represented the first use of the Proceeds of Crime Act 2002 (“POCA”) in Scotland and the largest corruption related confiscation order to date in the UK: a reminder that the profits on corruptly obtained contracts may be recoverable in full by the enforcement agencies.

10Julian Messent (PWS International Limited)(October 2010)

Julian Messent was a director and head of the Property (Americas) Division at PWS International Limited (“PWS”). In this role he was responsible for securing and maintaining contracts for reinsurance in the Central and South America regions. Between 1999 and 2002, PWS acted as broker on behalf of the Instituto Nacional de Seguros (“INS”), which in turn was the insurer for Instituto Costarricense de Electricidad (“ICE”). Both INS and ICE were state institutions of the Republic of Costa Rica. During this period, Messent authorised 41 corrupt payments totalling some $1.9 million to be paid to Costa Rican officials, their wives and associated companies, as inducements or rewards for assisting in the appointment or retention of PWS International Ltd as broker of the lucrative reinsurance policy for INS. Following elections in Costa Rica in 2002, officials in INS and ICE were replaced. Enquiries were made into the contract with PWS and questions were raised about payments made under it. Julian Messent admitted two counts making or authorizing corrupt payments to officials in INS and ICE and asked for 39 similar offences to be taken into consideration.

Other pertinent aspects of this case include the following:

• Julian Messent’s prosecution involved plea negotiations under the Attorney-General’s Guidelines with the SFO. He admitted offences put to him in accordance with an early plea agreement

• Parallel proceedings in the Republic of Costa Rica against those alleged to have taken bribes were supported by the SFO

• Several of the inducements and rewards had been paid indirectly to the Costa Rican officials, for example through wives and related companies

• The matter had been notified to the SFO by the Foreign and Commonwealth Office, whose embassies and consulates become aware of domestic bribery scandals.

9Paul Kent, Silinder Singh Sidhu, John Stuart Ford, Rebecca Hoyle and Sarah Kent (nee Emberton) (Learning Skills Council)(June 2010)

This case is notable for being a prosecution of domestic bribery. These five persons had been running a contract rigging ring involving training and skills education operated through the Learning Skills Council (“LSC”). Three of them worked for the Shropshire office of the LSC, which awarded contracts to local training providers. The other two, Ford and Hoyle, were suppliers of training services and were complicit in the corrupt arrangements.

Kent’s role involved the soliciting and evaluation of tenders from the private sector. Within a few months of starting work Kent encouraged a former school friend of his, Rebecca Hoyle, to apply through her business, for contracts with LSC. Later, Kent expanded his corrupt practices to include Silinder Singh Sidhu, a work colleague. In 2005 the scale of the corruption increased significantly when Stuart Ford, a local businessman who had hitherto been unsuccessful in securing LSC contracts, was approached by Kent to apply for LSC contracts. Once LSC contracts had been corruptly secured and monies paid on them, Hoyle, Sidhu and Ford paid Kent significant backhanders. Kent received corrupt payments of just over £300,000 on contracts valued at over £1.3 million.

In order to obtain his post with the LSC , Paul Kent submitted a CV containing false details of his previous employment, for which he separately pleaded guilty17.

17Paul Kent pleaded guilty to obtaining a pecuniary advantage by deception contrary to Section 16 (1) of the Theft Act 1968.


8Robert John Dougall (DePuy International Limited)(April 2010)

Robert Dougall, former Director of Marketing at DePuy, pleaded guilty to violating Section 1 of the Prevention of Corruption Act 1906 in respect of the same facts and transactions which subsequently resulted in his employers Civil Recovery Order in April 2011 under the Proceeds of Crime Act 2002. Dougall was described by the SFO as the first “cooperating defendant in a major SFO corruption investigation.” He was sentenced to a 12 month prison term. This was subsequently suspended for two years on appeal.

7Innospec Limited(March 2010)

The Innospec Limited (“Innospec”) matter is significant on the global as well as the UK anti-corruption scene as a rare example of a corporate corruption prosecution actually getting to be considered in Court — or at least certain aspects of the prosecution. Indeed, it is the Judge’s comments that articulated many of the issues that have caused debate.

By way of background, the Innospec case involved the NASDAQ listed Innospec Inc’s UK subsidiary Innospec Limited using agents based in Indonesia to engage in what was later described by the Judge as “systematic and large scale corruption.” The SFO investigation originated as a spin-off from the UN Independent Inquiry Committee in respect of the Iraq Oil-for-Food scheme. In order to conduct its business in Indonesia, Innospec Limited appointed agents to act on its behalf in seeking to win or continue contracts for its TEL product (a lead based anti-knock fuel additive which was being phased out due to environmental concerns). Between February 2002 and December 2006, Innospec paid US$ 11.7 million to its agents. From these commissions, bribes (estimated as up to US$8 million in total) were paid by the agents to staff at the state-owned petroleum refinery, Pertamina, and other public officials who were in a position to favour the company by purchasing orders of TEL. Payments were made in an attempt to ensure that Pertamina favoured TEL over unleaded alternatives.

The SFO further reported the agents acted under the instruction of Innospec Limited and the commission fees paid were authorised by the UK subsidiary. Innospec Limited accepts that it knew a proportion of the commission funds would be used to bribe both Pertamina officials and other public officials at higher regulatory or ministerial levels, with influence over the purchase of TEL.

In addition to commissions, the company also created “ad hoc” funds. These funds assisted specific or “one-off” arrangements with particularly influential individuals within Pertamina or at a political level. One particular fund was structured to protect the interests of the lead based additives industry, whereas in reality, it was a slush fund to corrupt senior officials in various ministries with the intention of blocking legislative moves to ban or enforce the ban on TEL on environmental grounds and/or seeking a higher level buy-in to continued yearly supplies of TEL to Pertamina.

The SFO accepted that Innospec Limited had been cooperative throughout the investigation and pleaded guilty at the first opportunity.

The SFO refers to Innospec as a ground-breaking case involving a global settlement: the SFO states it had worked with the DoJ, the SEC and the Office of Foreign Assets Control (“OFAC”), inter alia in coming to a fair and true assessment of Innospec’s means to pay a penalty in the UK of US$12.7 million.

The Judge’s sentencing remarks contain a number of important conclusions about the approach to sentencing by a UK prosecutor and Court where there have been joint investigations with overseas prosecutors, concurrent prosecutions and a “global settlement” reached with the offender as to the penalties. These conclusions have significant implications for the approach of the SFO going forward, especially as regards its dealings with corporates under investigation and, therefore, significant implications for the corporates too.

The Judge’s remarks on the level of criminality in the offence of corruption of a foreign government provide a backdrop to his remarks on sentencing. In summary, the Judge made it clear that the UK Courts regard corruption as a serious offence that should be severely punished, and stated that:

• “There can be no doubt that corruption... is at the top end of serious corporate offending both in terms of culpability and harm... it is no mitigation to say others do it or it is a way of doing business... those who commit such serious crimes as corruption must not be... treated in any different way to other criminals”

• In the absence of the particular circumstances of the case (which imposed an effective limit to any fine of US$12.7 million), “the fine would have been measured in the tens of millions... a fine of $12.7 million would have been wholly inadequate as a fine to reflect the criminality displayed...”

• “... unless I had been satisfied that the new management of the company would not engage in similar [corrupt] conduct in the future, I would not have assented to a fine or other penalty that would have enabled the continuing survival of this company”

“Corruption… is at the top end of serious corporate offending both in terms of culpability and harm… those who commit such serious crimes as corruption must not be… treated in any different way to other criminals.”Lord Justice Thomas

As regards “global settlements” the Judge concluded that:

• The SFO “cannot enter into an agreement under the laws of England and Wales with an offender as to the penalty in respect of the offences charged”

• It will “rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order; the criminal Courts can take account of cooperation and the provision of evidence against others by reducing the fine otherwise payable. It is of the greatest public interest that the serious criminality of any, including companies, who engage in the corruption of foreign governments, is made patent for all to see by the imposition of criminal and not civil sanctions. There may, of course, be a place for a civil order, for example, as means of compensation in addition to a fine”

• “It is... plainly desirable the Lord Chief Justice should consider directions that ensure civil penalties are heard in conjunction with criminal proceedings.”

The Innospec case and sentencing remarks have given rise to a number of other noteworthy debating points:

• In commentary after the judgment, the SFO raised the issue of how to ensure that countries that have suffered from corruption actually benefit from any money recovered from the guilty parties

• The broader environmental angle in this case was highlighted by the Judge: the Indonesian Government’s intention to go lead-free, initially conceived in 1999, was not realised until 2006

• It is yet another case involving agents in the bribing schemes. From the facts summarised in the SFO press releases, it would appear that Innospec itself had a clear understanding of what the agents were doing on its behalf

• Innospec gave rise to the first instance of a jointly agreed monitor, acceptable to both the SFO and DoJ, being appointed, to monitor the US and UK companies’ implementation of policies and procedures to reduce its exposure to corruption risk

• The fines imposed on Innospec were quantified so as not to force the company into liquidation. As we understand it, nominal confiscation orders can be awarded enabling revisits as and when convicted companies and individuals have funds available in the future.

6Amec plc(October 2009)

On 26 October 2009 the SFO obtained a Civil Recovery Order (“CRO”) against Amec plc (“Amec”) for £4.95 million following an internal investigation and the subsequent self-reporting in respect of the receipt of irregular payments by an associated company. The SFO

have not reported further details of the case, however, it has been widely reported in the media and by the company itself that the associated company in which Amec was a shareholder was undertaking a US$1 billion bridge building project (the 12.3km Incheon Bridge) linking Yeongjong Island to mainland South Korea.

The director of the SFO determined the underlying unlawful conduct to which the CRO relates was a breach of S221 Companies Act 1985 (failure to keep proper books and records). However, it is significant that the £4.95 million CRO was imposed without recourse to criminal charges being brought against Amec.

A statement released by Amec explains “No improper overall commercial advantage accrued to Amec in connection with the receipts and no adjustment is required to any Amec financial statements.”

The Amec plc case has a number of similarities with the Balfour Beatty plc case in October 2008 (see Case 3 below):

• Both businesses are in the same sector

• Both had followed a transparent approach in self reporting the issue and had cooperated throughout the investigation

• Both had already taken comprehensive steps to review and improve their control processes and had committed to continue to review and improve their compliance function and to engage in an agreed external monitoring programme

• Both accepted unlawful conduct, in the form of inaccurate accounting records arising from certain payment irregularities.

5Mabey & Johnson Limited(September 2009)

In its Press Announcement, the SFO described the sentencing of Mabey & Johnson as a “landmark outcome” for being... “The first conviction in [the UK] of a company for overseas corruption and for breaking the UN Iraq sanctions and, satisfyingly, achieved quickly. The offences are serious ones but the company has played its part positively by recognising the unacceptability of those past business practices and by coming forward to report them and engage constructively with the SFO.”

The company had indicated in July 2009 that it would plead guilty to the offences and agreed that it would be subject to financial penalties to be assessed by the Court. The company will “pay reparations and will submit its internal compliance programme to an SFO approved independent monitor.”

Part of the company’s cooperation with the SFO involved it waiving privilege over certain materials from its own internal investigation.

The prosecution for corruption arose from the company’s voluntary disclosure to the SFO of evidence to indicate that the company had sought to influence decision-makers in public contracts in Jamaica


and Ghana between 1994 and 2001. Further, between May 2001 and November 2002 Mabey & Johnson had made funds available to the government of Iraq or a person resident in Iraq in breach of UN sanctions pursuant to the Oil for Food Programme.

The case has its origins in the January 2007 civil proceedings brought by Mabey & Johnson against certain former employees and its agent in Jamaica. A Defence and Counterclaim filed in those proceedings alleged that it was common practice for the company to make payments to government officials in order to secure contracts. The company investigated these allegations and the results of that investigation were provided to the SFO. Mabey & Johnson was fined £3.5 million and was subject to a confiscation order of £1.1 million. Total reparations of £1.41 million were awarded to Ghana, Iraq and Jamaica and the company incurred Courts costs and related ongoing compliance costs in excess of £0.6 million.

The case also resulted in the first prison sentences for bribery in breach of UN sanctions by any enforcement authority: three former directors were sentenced in February 2011 for between eight months (suspended for two years) and 21 months (as referred to in Case 13 above). The Judge commented: “When a director of a major company plays even a small part, he can expect to receive a custodial sentence.”

4Aon Limited(January 2009)

In this case the FSA made clear to the UK financial services industry that it is unacceptable for businesses to conduct business overseas without having in place appropriate anti-bribery and corruption systems and controls.

The matter was brought under section 206 of the Financial Services and Markets Act 2000 which empowers the FSA to enforce Principle 3 of the FSA’s Principles for Businesses and Rule SYSC 3.2.6 R of the FSA’s Senior Management Arrangements, Systems and Controls Handbook, Aon Limited (“Aon”) was found to have failed to take reasonable care “to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to non FSA authorised overseas third parties.”

Between January 2005 and September 2007, Aon “failed to properly assess the risks involved in its dealings with overseas firms and individuals” who helped it win business and failed to implement effective controls to mitigate those risks. An FSA press release stated that as “a result of Aon’s weak control environment, the firm made various suspicious payments, amounting to approximately US$7 million, to a number of overseas firms and individuals.”

The particular failings described in the FSA’s Final Notice may be summarised as follows:

• Payment procedures did not require adequate levels of due diligence to be carried out either before relationships with overseas third parties were entered into or before payments were made. Its authorisation process did not take into account the higher levels of risk that certain parts of its business were exposed to in the countries in which they operated

• Failure to monitor its relationships with overseas third parties in respect of specific bribery risks. After a relationship had been approved and set-up for payment, neither the relationship nor the payments were routinely reviewed or monitored. Any failure in the acceptance process was therefore allowed to continue without further checking

• Failure to provide its staff in business divisions which dealt with overseas third parties with sufficient guidance or training on the bribery and corruption risks involved in such dealings

• Failure to ensure that the committees it appointed to oversee these risks received relevant management information and/or otherwise routinely assessed whether bribery and corruption risks were being managed effectively.

The conclusion set out in the Final Notice is that there was “an unacceptable risk that Aon Ltd could become involved in potentially corrupt payments to win or retain business... that Aon Ltd failed adequately to question the nature and purpose of these suspicious payments in circumstances where it ought to have been reasonably obvious... that there was a significant risk that the Overseas Third Party might bribe the insured, the insurer or a public official and/or that there was no genuine commercial purpose to making the payment...”

In its Press Release, the FSA emphasised that this was at that time the largest financial crime related fine imposed by the FSA. The FSA considered the pro-active determination of Aon’s senior management to identify past issues and improve the firm’s systems and controls in this area as a model of best practice that other firms may wish to adopt. The programme Aon put in place included a general prohibition on the use of intermediaries whose only service was to obtain and retain business through client introductions, unless the country corruption risk assessment is low.

Aon cooperated fully with the FSA and had agreed to settle at an early stage of the FSA’s investigation. Aon’s response upon finding suspicious transactions helped its position vis a vis the FSA. This response included:

• Promptly reporting the matter to the Serious Organised Crime Agency (SOCA) and the FSA

• Establishing a dedicated steering committee reporting directly to its Board to oversee the review of suspicious payments and related controls and procedures

• Engaging external professional support to conduct a review of all payments to overseas third parties for a five year period from January 2002.

On the other hand, the FSA took into account, inter alia, in concluding the failings to be serious that Aon has a leading competitive position in the sector in the UK and therefore its practices set an example.

The Aon case was echoed in the similar case against Willis Limited settled in July 2011.

3 Balfour Beatty plc (October 2008)

This case is an example of resolving a corruption issue via civil remedy, a resolution which has been followed in the subsequent cases of Amec plc and Weir Group plc. The Balfour Beatty case is most notable for being the first deployment of a Civil Recovery Order under the Proceeds of Crime Act (“POCA”). Part 5 of POCA enables law enforcement agencies to recover property obtained by unlawful conduct in a civil action via the High Court. The provisions do not require a specific offence to be established against any particular company or individual, but merely that the property sought under the order is the proceeds of unlawful conduct. The powers were made available to the SFO from April 2008.

A Balfour Beatty subsidiary was party to a joint venture project to build the Bibliotheca Alexandria in Egypt. The project completed in 2001. Sometime after the completion of the project, Balfour Beatty conducted an internal investigation. An SFO press release stated “Balfour Beatty plc accepted that unlawful conduct, in the form of inaccurate accounting records arising from certain payment irregularities occurred within a subsidiary entity during the construction of The Bibliotheca Project in Alexandrina, Egypt, completed over seven years ago.”

Balfour Beatty agreed to a settlement payment of £2.25million together with a contribution towards the cost of the Civil Recovery Order proceedings. The company also agreed to continue to review and improve its compliance function and to engage in an agreed external monitoring programme.

Some of the reported factors that appear to have resulted in this outcome include the following:

• Balfour Beatty plc adopted a “transparent and responsible approach” in self reporting the issue and had cooperated throughout the investigation

• The SFO investigation concluded that there was no financial benefit to any individual employee and most of the relevant individuals have long since left the company. The SFO had concluded in the circumstances of this case that the prosecution of any individual or corporate entity was not merited

• The company had already taken comprehensive steps to review and improve its control processes and had committed to continue to review and improve its compliance function and to engage in an agreed external monitoring programme.

By proceeding in this way the SFO stated it had been able to signal its “continuing determination to deal with unlawful conduct wherever it occurs” and “impose a significant sanction on a major UK company whilst avoiding the extensive cost to the public purse of lengthy court proceedings”.

2Niels Tobiasen (CBRN Team Ltd) and Ananias Tumukunbe(September 2008)

This case is seen as a legal landmark as it was the first successful prosecution by the City of London Police (“CoLP”) Overseas Anti-Corruption Unit (“OACU”). Anti-corruption campaigners pointed out that the two convicts were, at that time, the only people to be convicted in the UK of an overseas corruption offence since the signing of the OECD anti-corruption treaty 11 years previously. By comparison, Transparency International pointed out that during the same period, the US had secured 105 foreign bribery prosecutions.

Tobiasen, a Danish national, was the MD of CBRN Team Ltd, a consultancy advising on the threat of chemical and nuclear attacks. CBRN won contracts to supply training and equipment to guard the commonwealth meeting in Kampala that was attended by world leaders. Ananias Tumukunbe, a science and technology advisor to the Ugandan President, had approached CBRN and demanded payments for “local taxes.” Tobiasen made five payments, which went to Tumukunbe and a Ugandan military officer.

Niels Tobiasen pleaded guilty and was given a jail sentence of five months, suspended for a year. Ananias Tukukunbe pleaded guilty and was jailed for a year. He has since been deported to Uganda. The Ugandan military officer, Rusoke Tagawire, is still wanted by the CoLP.


AbbreviationsCoLP City of London Police

COPFS Crown Office & Procurator Fiscal Service

CJA Criminal Justice Act 1967

CLA Criminal Law Act 1977

CPS Crown Prosecution Service

CRO Civil Recovery Order

CRU Civil Recovery Unit

DoJ US Department of Justice

DPA Deferred Prosecution Agreement

DPP Director of Public Prosecutions

ECU Economic Crime Unit

FCA Financial Conduct Authority

FSA Financial Services Authority

FSMA Financial Services and Markets Act 2000

MPS Metropolitan Police Service

NCA National Crime Agency

OECD Organisation for Economic Co-operation and Development

PCA Prevention of Corruption Act 1906

POCA Proceeds of Crime Act 2002

SAR Suspicious Activity Report

SEC Securities and Exchange Commission

SFO Serious Fraud Office

SOCA Serious Organised Crime Agency

SOCD Serious Organised Crime Division

To subscribe to receive future editions of the Bribery Digest email [email protected]

Fraud Investigation & Dispute Services

John Smart +44 (0) 20 7951 3401

[email protected]

Jonathan Middup +44 (0) 121 535 2104

[email protected]

David Lister +44 (0) 131 777 2308

[email protected]

Steve Caine +44 (0) 20 7951 4433

[email protected]

Contacts

The case is noteworthy in a number of other respects:

• It is a reminder that local practices, or assertions about them, are rarely a reliable defence — Tumukunbe had apparently convinced Tobiasen that these “local taxes” were routine in Uganda

• The Foreign Public Official Tumukunbe was prosecuted by UK Courts relating to an offence committed abroad

• It is not just large global businesses who are subject to such criminal proceedings. Small businesses may also be prosecuted for bribery and corruption offences.

1Dobb White & Co(April 2008)

The bribery element of this case is a separate off-shoot investigation led by the SFO and Leicester Police Economic Crime Unit, connected to the investigation of a Ponzi fraud scheme by the US SEC. When the SEC sought a freezing order over bank accounts related to the Ponzi scheme, the fraudsters conspired to bribe the US Attorney General or other US law enforcement officers to lift a freezing order obtained over bank accounts holding the investor deposits obtained through the Ponzi fraud.

Dobb White & Co was an accountancy practice in the Midlands in which Shinder Singh Gangar and Alan White were partners. In addition to providing accountancy services, they ran a transatlantic high-yield investment pyramid scheme known as Vavasseur programmes which was operated by Terry Dowdell, an American citizen. A fourth person, Nigel Heath, was a solicitor who acted as a middleman introducing clients to Gangar and White. It is estimated that the total value of the fraud exceeded US$200 million.

When enforcement action in respect of the fraud led to US bank accounts being frozen, Heath, Gangar and White thereupon conspired to pay a bribe of some US$500,000 to an unnamed US official to lift the freezing order over the bank accounts.

Gangar and White were found to be guilty of conspiracy to corrupt for which they each received a prison sentence of 18 months to be served consecutively to six year sentences for conspiracy to defraud. Heath pleaded guilty to an offence of conspiracy to commit corruption and received a six month sentence.

In addition to the actions taken by the SFO and Leicester Police, the FSA also took action against Dobb White & Co ten years prior to Gangar, White and Heath’s convictions for corruption. The FSA placed the accountancy firm into liquidation and the individuals into bankruptcy using its insolvency powers under the Financial Services and Markets Act (“FSMA”). This was the first occasion the FSA had used its insolvency powers.

The FSA decision to use its powers follows a conviction against Gangar for two offences of failing, without reasonable excuse, to produce documents and information required by the FSA for the purpose of investigating suspected illegal deposit taking in contravention of Section 3 or 35 the Banking Act 1987.

This is pertinent as it was the FSA who referred the more recent case to the SFO and indicates that Dobb, White & Co and/or Gangar, White and Heath were under the radar of enforcement agencies for at least ten years.

Some noteworthy aspects of this case include the following:

• It is a reminder that corruption may be ancillary to other commercial activities

• It is an example of how one investigation can lead to off-shoot investigations by a different authority and jurisdiction

• Terry Dowdell was made available in person during his US prison sentence to give evidence for the prosecution in the UK, together with the FBI, SEC and Federal Reserve Bank

• Heath’s sentence was substantially lower than that of Gangar and White which we assume reflects his guilty plea

• The FSA also undertook its own enforcement action

• Regulators commenced investigations into Dobb White & Co in 1998. Whilst not all of the investigations were related, this case shows that enforcement against Gangar, White and Heath took place over a ten year period reflecting the scale and complexity of some corruption and fraud investigations.


Case reference Date Name Sector

Enforcement agency notified

Enforcement agency Source of enquiry

Self-reported? Date of transactions

Value of business advantage gained Value of bribe

Location of transactions Legal basis of action Financial penalty Basis of financial penalty Other penalties Other financial effects

52 December 2015 Sweett Group plc Construction July 2014 SFO Press allegations No 2012 to 2015 US$100m (value of contract) US$3.5m Middle East Criminal: S.7 Bribery Act £1.4m£851,152

Fine Confiscation

£95,032 SFO costs

51 November 2015 Standard Bank plc Banking April 2013 SFO Internal investigation Yes March 2013 US$8.4m (profit on contract) US$6m Tanzania Criminal: S.7 Bribery Act US$8.4mUS$16.8mUS$7m

Disgorgement of profitFineCompensation to Government of Tanzania

Compliance with terms of the DPA, including independent review of its existing anti-bribery and corruption controls

£330,000 SFO costs

50 November 2015 Barclays Bank plc Banking November 2014 FCA FCA No 2011 to 2012 £52,300,000 (revenue from transaction) Not known Civil: S.206 FSMA £52.3m£19,769,400

Disgorgement of revenueFine

49 October 2015 22 individuals (re case 20) Public Service August 2011 MPS Press investigation No 2010 to 2011 Not known UK Imprisonment (sentences of between 4 and 18 months)

48 September 2015 Anthony Bodgin Kevin WingraveGary RawlingsHarold McGirlLynda McMayon

Public sector 2011 CPS Police investigation No 2005 to 2011 £2.3m (value of contracts)£88,830 (value of contract)£81,000 (value of contract)

£400,000 (Bodgin) £262,746 (Wingrave)£33,000 (Rawlings)£5,000 (McGirl)

UK Criminal: S.1 CLACriminal: S.4 Fraud ActCriminal: S.327 POCA

3 years and 6 months imprisonment 3 years and 6 months imprisonmentSuspended sentenceSuspended sentenceSuspended sentence

47 September 2015 Brand-Rex Limited Manufacturing June 2015 CoPFS Internal investigation Yes 2008 to 2012 £212,800 Not stated UK Civil: POCA (Part 5) £212,800 Gross profit obtained

46 September 2015 Guido BakkerSijbrandus Scheffer

Pharmaceutical / International development

2007 CoLP UN investigation No 2004 to 2007 $43m (value of contract) $1m Denmark and UK 12 months imprisonment15 months imprisonment

45 June 2015 Charles OwensonJames CostelloKevin Balmer

Brendan Cantwell

Construction/ Public sector

2010 COPFS Whistleblower No 2006 to 2010 Not known £42,521 in cash (£28,387 paid to Owenson and £14,134 paid to Costello) £30,249 in hospitality

UK Criminal: Public Bodies Corrupt Practices Act 1889Criminal: POCA

4 years and 4 months imprisonment 3 years and 9 months imprisonment2 years and 10 months imprisonment and disqualified from acting as a director for 5 years 2 years and 3 months imprisonment and disqualified from acting as a director for 5 years

Proceedings against all four individuals with a view to recovery of stolen funds

44 May 2015 Graham Marchment (re case 23)

Oil and Gas April 2008 SFOCoLP

Whistleblower No 2004 to 2008 Approx £40m (value of contracts) US$250,000 (for QASR Gas Gathering Project, Egypt)£357,000 and US$229,000 (for Sakhalin Island Project, Russia)

Egypt, Russia and Singapore

Criminal: S.1 CLA 30 months imprisonment

43 April 2015 Delroy FaceyMoses Swaibu

Football/gambling November 2013 NCA Press investigation No November 2013 £2,000 UK Criminal: S.1 CLA 30 months imprisonment 16 months imprisonment

42 March 2015 Bank of Beirut Anthony Wills (compliance officer)Michael Allin (internal auditor)

Banking March 2013 FCA No 2011 to 2013 Civil: S.206 FSMA £2.1m £19,600 £9,900

Fine (bank) Fine (compliance officer) Fine (internal auditor)

Stopped from acquiring new customers from high risk jurisdictions for 126 days

41 December 2014 International Tubular Services Limited

Oil and gas services November 2013 COPFS Acquisition due diligence Yes £172,200 (profit on contract) Kazakhstan Civil: POCA (Part 5) £172,200 Profit on the contract corruptly obtained

40 December 2014 Christopher Smith

Nicholas Smith Smith and Ouzman Limited

Security printing October 2010 SFO No November 2006 to December 2010

£2,220,520 £395,074 Kenya and Mauritania Criminal: S.1 PCA £4,500£75,000

£18,693 £75,000£1,316,799£881,158£25,000

Confiscation orderCosts

Confiscation orderCostsFineConfiscation orderCosts

18 months imprisonment suspended for 2 years, 250 hours unpaid work, 3 month curfew and disqualified from acting as a director for 6 years3 years imprisonment and disqualified from acting as a director for 6 years

39 December 2014 Gary West (Director of Sustainable AgroEnergy plc)Stuart Stone

Investment fund SFO No April 2011 to February 2012

£23m of investment funds US$2.2m UK Criminal: S.2(1) and (2) Bribery Act

Criminal: S.1(1) and (2) Bribery Act

4 years imprisonment (concurrent with fraud offences)and disqualified from acting as a director for 15 years6 years imprisonment (concurrent with fraud offences) and disqualified as a director for 10 years

SFO to pursue compensation and confiscation orders against both individuals

38 July 2014 FHR European Ventures LLP v Mankarious and others

Hotels December 2004 €10m Monaco Civil: breach of fiduciary duty Order to deliver up €10m

37 July 2014 Bruce Hall Metals June 2009 SFO COLP

No 1998 to 2006 £2.9m US$0.9m

Bahrain Criminal: S.1 PCA Criminal: S.1 CLACriminal: S.329 and S.327 POCACivil: POCA (Part 5)

16 months imprisonment (reduced from 6 years for cooperation and guilty plea)

£3,070,106 confiscation order£500,010 compensation£100,000 towards prosecution costsUS$900,000 disposal by consent

36 June 2014 Dennis Kerrison

Miltiades Papachristos Paul Jennings David Turner

(Former directors of Innospec Limited)

Chemicals October 2007 SFO UN Independent Inquiry Committee

No 14 February 2002 to 31 December 2006 (indictment period)

US$160m (value of contracts) US$2.9m in kickbacks Indonesia Criminal: S.1 CLA 3 years imprisonment (reduced from 4 years on appeal)18 months imprisonment2 years imprisonment16 months imprisonment suspended with 300 hours unpaid work

Pending confiscation proceedings

Pending confiscation proceedings £5,000 towards prosecution costs£10,000 towards prosecution costs

35 June 2014 Chann Sankaran Krishna Ganeshan Michael Boateng

Football/gambling November 2013 NCA Press investigation No November 2013 €450/€60,000 fund UK Criminal: S.1 CLA 5 years imprisonment5 years imprisonment16 months imprisonment

34 March 2014 Besso Limited General insurance broking

FCA No January 2005 to October 2009

Various Civil: S.206 FSMA £315,000 £450,000 under the Old Penalty Regime less 30% discount for early settlement

Besso was required to requisition a S.166 Skilled Person report

33 February 2014 Constantin Medien AG v Ecclestone and others

Sport May 2005 US$44m Factual finding of bribery within a wider civil claim

32 February 2014 Otkritie International Investment Management and others v Urumov

Securities trading November and December 2010

Approximately US$12m in total London and Moscow Civil: Deceipt, tort of bribery and/or dishonest assistance; conspiracy and breach of fiduciary duty

Damages of US$23m and concurrent delivery of US$12,044,114

31 December 2013 JLT Specialty Limited Insurance broking FCA FCA review No February 2009 to May 2012

£20.7m (gross commissions from business from overseas introducers) £11.7m (commissions paid to overseas introducers)

Global: various countries are cited — Argentina, Bahamas, Cameroon, China, Ecuador, Egypt, Gabon, Nigeria, Sudan

Civil: S.206 FSMA £1,876,000 £1m under the Old Penalty Regime less 30% early settlement discount. Under New Penalty Regime: Relevant revenues £14,000,115 x 10% plus 20% for aggravating factors less 30% early settlement discount

30 April 2013 Yang Li Education Avon and Somerset Constabulary

Individual who was offered bribe

No November 2012 £5,000 UK Criminal: S.1 Bribery Act Prosecution costs 12 month bribery charge, 6 months firearms charge

£4,880 towards prosecution costs

29 December 2012 Mawia Mushtaq Public service October 2011 Greater Manchester Police CPS

Individual who was offered bribe

No October 2011 £200 or £300 UK Criminal: S.1 Bribery Act 2 months imprisonment suspended for 12 months and a 2 month curfew from 6pm to 6am

28 November 2012 Abbot Group Limited Oil and gas July 2012 COPFS Tax audit Yes 2007 Contracts with profit totaling US$8.9m (£5.6m)

Contracts with profit of US$8.9m (£5.6m)

Not known Civil: POCA (Part 5) £5.6m Profit on contract corruptly obtained

27 July 2012 Oxford Publishing Limited (part of Oxford University Press)

Publishing November 2011 SFO World Bank investigation Yes 2007 to 2010 Contracts with profit totaling US$2.9m (£1.9m)

East Africa Civil: POCA (Part 5) £1,895,435 Revenue generated from unlawful conduct World Bank debarment for 3 yearsIndependent monitor for 12 months

£12,500 of costs to the SFOUS$500,000 paid to World BankVoluntary contribution of £2m to not-for-profit organisation

26 June 2012 Andrew Behagg David Baxter John Maylam

Food retailing 2008 CoLP Audit No January 2006 to January 2008

Total of £8.7m overcharge of contracts totaling £40m

£4.9m UK Criminal: S.1 PCACriminal: S.329 POCA

3 years and 6 months imprisonment2 years and 6 months imprisonment4 years imprisonment

25 May 2012 Syed Jaffery Pritpal Gill

Banking No May 2007 to May 2010

Approx £16m (value of loans) UK Civil: Breach of fiduciary duty and bribery Not reported Not reported

24 March 2012 James McGeown

William Marks John Symington Carol Kealey

Government procurement (CCTV contracts)

2002 Ministry of Defence Police (MDP)SFO

Whistleblower No January 1998 to February 2004

£16.2m (value of contracts) £84.5m UK Criminal: S.1 PCACriminal: article 47 (2) Proceeds of Crime (Northern Ireland) Order 1996

3 years imprisonment suspended for 2 years and 7 years disqualification as a director2 years imprisonment suspended for 2 years9 months imprisonment suspended for 2 yearsConditional discharge

Confiscation orders of £1m

Confiscation order of £24,600

23 January 2012 Andrew Rybak

Ronald Saunders Philip Hammond

Barry Smith

Oil and gas April 2008 SFO CoLP

Whistleblower No 2001 to 2009 Approx £70m (value of contracts) US$100,000 (10% of Styrene Monomer Project, Iran)US$250,000 (for info re QASR Gas gathering Project, Egypt)£357,000 and US$229,000 (for info re Sakhalin Island Project)

Iran, Egypt, Russia, Singapore and Abu Dhabi

Criminal: S.1 PCA 5 years imprisonment and 10 years disqualification as a director3 years and 6 months imprisonment3 years imprisonment and 10 years disqualification as a director12 months imprisonment suspended for 18 months

22 January 2012 Mabey Engineering (Holdings) Limited (parent company of Mabey & Johnson Limited)

Engineering(temporary bridges)

January 2007 SFO No 2001 and 2002 Contracts totaling £8m+ (in Jamaica), £26m (in Ghana), €4.2m (in Iraq)

£131,000 (value of dividends) Iraq Civil: POCA (Part 5) £131,000 Dividends received by parent company derived from contracts won by subsidiary through unlawful conduct

£2k in costs

21 November 2011 Mazhar Majeed Salman Butt Mohammad Asif Mohammad Amir

Cricket/gambling Press investigation No August 2010 £150,000 UK Criminal: S.1 CLA 32 months imprisonment30 months imprisonment12 months imprisonment6 months imprisonment

£105k between them in prosecution costs

20 October 2011 Munir Yakub Patel Public service Not known CPS Press investigation No August 2011 £500 UK Criminal: S.2 Bribery Act 3 years imprisonment

19 July 2011 Macmillan Publishers Limited (MPL)

Educational materials

December 2009 SFOCoLP

World Bank report Yes 2002 to 2009 £11.26m (value of contracts) Rwanda, Uganda and Zambia

Civil: POCA (Part 5) £11.26m Revenue received from potentially unlawful conduct MPL debarred from World Bank contracts for minimum 3 years SFO approved monitor put in place

MPL pay all investigation costs. MPL pay £27,000 SFO costs. MPL withdrew from all public tenders in education business in East and West Africa. Loss of bid securities

18 July 2011 Willis Limited Wholesale insurance and reinsurance broking

Not known FSA FSA and SARs filed with SOCA

No 2005 to 2009 £32.7m (net insurance commissions earned)£27m (insurance commissions paid)

£140,600 “High risk jurisdictions” Egypt, Russia and Argentina cited

Civil: S.206 FSMA £6.895m FSA fine considering “all relevant circumstances”High standards of regulatory conduct

Willis to carry out a review of past payments to overseas third parties “Significant” financial and management time costs per the FSA

17 April 2011 DePuy International Limited Medical goods October 2007 SFO Internal whistleblowerReferred to SFO by DoJ

No 1998 to 2006 £14.8m (profit on contracts)£4.5m (payments to Greek officials)

US$7.37m (£4.5m) Greece Civil: POCA (Part 5) £4.829m Had regard to penalties, settlements and seizures in US and Greece

DePuy pays prosecution costs

16 April 2011 Mark Jessop Medical goods December 2005 SFO UN Independent Inquiry Committee

No 2000 to 2003 US$12.3m (value of contracts) €339,900 Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000

£150,000 Fine — payable to the Development Fund for Iraq 24 weeks custodial sentence Jessop pays prosecution costs of £25,000

15 February 2011 Aftab Noor al-Hassan

Riad El-Taher

Oil and gas October 2005 SFO UN Independent Inquiry Committee

No 2001 to 2002 US$220m oil value (with profits of US$4.4m)US$50m oil value (with profits of US$600k)

US$1.6m

US$0.5m

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000

16 months imprisonment suspended for 2 years

10 months imprisonment

14 February 2011 MW Kellogg Limited (MWKL) Oil and gas October 2009 SFO French prosecutors Yes 1995 to 2004 US$6bn (total value of contracts) US$182m (paid to government officials) Nigeria Civil: POCA (Part 5) £7.028m Amount of share dividends payable from profits of parent company derived from contracts obtained by bribery and corruption

MWKL to overhaul its internal audit and control measures

MWKL pay costs of investigation

13 February 2011 Richard Forsyth

David Mabey

Richard Gledhill (Mabey & Johnson Limited)

Engineering (temporary bridges)

January 2007 SFO No 2001 and 2002 €4.2m (contract revenues) £420,000 payments to Iraq government

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000

21 months imprisonment and 5 years disqualification as a director8 months imprisonment and 2 years disqualification as a director8 months imprisonment suspended for 2 years

£75,000 of prosecution costs

£125,000 of prosecution costs

12 December 2010 BAE Systems plc Defence 2004 SFO Investigative journalism No 1999 to 2005 US$39.97m (contract value) US$12.4m (payments to intermediaries) Tanzania Criminal: S.221 Companies Act 1985 £500,000£29.5m

FineEx-gratia payment for the benefit of the people of Tanzania

Remediation as set out in the Report of Lord Woolf£225,000 in SFO costs

11 December 2010 Weir Group plc Oil and gas services 2004 COPFS UN Independent Inquiry Committee

No 2000 to 2002 £13.9m (profit on contracts) £3m kickbacks Iraq Civil: POCA (Part 5) (referencing S.221 Companies Act 1985)Criminal: The Iraq (United Nations Sanctions) Order 2000

£13,945,962£3m

Profit on contractsFine

10 October 2010 Julian Messent (PWS International Limited)

Insurance broking October 2005 SFOCoLP

Foreign and Commonwealth Office

No February 1999 to June 2002

US$1,982,230 as inducements or rewards Costa Rica Criminal: S.1 PCA £100,000 Compensation to the Republic of Costa Rica 21 months imprisonment and 5 years disqualification as a director

9 June 2010 Paul Kent Silinder Singh Sidhu Stuart Ford Rebecca HoyleSarah Kent

(Learning Skills Council (LSC))

Government funded training programmes

July 2006 SFO West Mercia Police

LSC Whistleblower No June 2003 to August 2005

£1.3m (contract value) £270,000 kickbacks UK Criminal: S.1 PCACriminal: S.329(1)(b) POCA (money laundering)Criminal: S.328(1) POCA (acquisition, retention, use or control of criminal property)Criminal: S.16 Theft Act 1968 (pecuniary advantage by deception)

4.5 years imprisonment3 years imprisonment2 years imprisonment1 year imprisonment suspended for 2 years12 months imprisonment suspended for 2 years and 200 hours unpaid work and 12 month supervision order

8 April 2010 Robert Dougall (DePuy International Limited)

Medical goods Not known SFOWest Yorkshire Police

Internal whistleblowerReferred to SFO by DoJ

1998 to 2006 £14.8m (profit on contracts) £4.5m (payments to Greek officials) Greece Criminal: S.1 PCA 12 months prison term suspended for 2 years on appeal

7 March 2010 Innospec Limited Chemicals October 2007 SFO UN Independent Inquiry Committee

No 14 February 2002 to 31 December 2006 (indictment period)

US$160m (value of contracts) US$2.9m in kickbacks Indonesia Criminal: S.1 Criminal Law Act 1977 (conspiracy to corrupt)Criminal: S.1 PCA

US$6.7m

US$6m

Confiscation penalty in respect of Indonesian corruption Civil recovery of which US$5m to UN Development Fund for Iraq (penalties taking into account the ability to pay)

SFO appointed monitor No further funds available to fund confiscation or compensation Innospec to pay costs of a monitor for up to three years

6 October 2009 AMEC plc Engineering and project management

March 2008 SFO Yes 2005 to 2007 US$9m South Korea Civil: POCA (Part 5) (referencing S.221 Companies Act 1985)

£4.95m Contribution to costs of the Civil Recovery Order External consultant appointed

5 September 2009 Mabey & Johnson Limited Engineering (temporary bridges)

January 2007 SFO Yes 1993 to 2002 Iraq: €4.2m (contract revenues)Jamaica: £8m+ (contract revenues)Ghana: £26m (contract revenues)

Iraq: £420,000 payments to governmentJamaica: £200,000 payments to officialsGhana: £470,000 payments to officials

Iraq, Jamaica and Ghana Criminal: S.1 CLA Iraq £2mJamaica £750,000Ghana £750,000

FineFineFine

Iraq reparations £618,000Jamaica reparations £139,000Ghana reparations £658,000Confiscation order £1.1m

First year monitoring costs up to £250,000 SFO costs £350,000

4 January 2009 Aon Limited Insurance broking April 2007 FSA SAR filed with SOCA and FSA

No January 2005 to September 2007

US$7.1m and €1m (revenues arising) US$2.5m and €3.4m to intermediaries Bahrain,Bulgaria, Myanmar, Bangladesh, Indonesia, Vietnam

Civil: S.206 FSMA £5.25m

3 October 2008 Balfour Beatty plc Engineering and construction services

April 2005 SFO Yes 1998 to 2001 Not known Egypt Civil: POCA (Part 5) (referencing S.221 Companies Act 1985)

£2.25m Not known Contribution to costs of the Civil Recovery Order External monitor appointed

2 September 2008 Niels Tobiasen (CBRN)Ananias Tumukumbe

Security consulting services

Not known CoLPCPS

SAR No May 2007 £500,000+ (value of contracts) £83,000 payments to officials Uganda Criminal: S.1 PCA 5 months jail sentence suspended for a year1 year jail sentence; subsequently deported

1 April 2008 Shinder Singh Gangar

Alan White

Nigel Heath (Dobb White & Co)

High yield investments

September 2002 SFOLeicestershire Police ECU

A separate SFO investigation No Not known US$500,000 bribe United States Criminal: S.1 CLA 18 months jail sentence for corruption and 6 years for fraud18 months jail sentence for corruption and 6 years for fraud6 months jail sentence

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

About EY’s Fraud Investigation & Dispute Services Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to succeed. Better management of fraud risk and compliance exposure is a critical business priority — no matter the industry sector. With over 4,400 fraud investigation and dispute professionals around the world, we can assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. We work to give you the benefit of our broad sector experience, our deep subject-matter knowledge and the latest insights from our work worldwide.

Ernst & Young LLPThe UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited.

Ernst & Young LLP, 1 More London Place, London, SE1 2AF.

© 2016 Ernst & Young LLP. Published in the UK. All Rights Reserved.

ED None

In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

ey.com/uk/FIDS

uk bribery digest specialedition - ernst & · pdf fileuk bribery digest special edition uk...

Documents