CORPORATE CRIME BRIEFING

Bribery Act 2010: still a sleeping giant

Having just celebrated its third birthday, the Bribery Act 2010 (2010 Act) is still a Enforcement before the Bribery Act 2010 sleeping giant. In 2010 and 2011, there One rationale for the Bribery Act 2010 (2010 Act) was to replace the notoriously was an alarmist atmosphere concerning its diffi cult Victorian legislation and make it easier for the Serious Fraud Offi ce (SFO) to perceived broad jurisdictional scope and the bring enforcement proceedings. However, despite the challenges of the pre-2010 Act requirement to create and maintain adequate legislation, the SFO has a respectable track record of bringing successful enforcement procedures to prevent bribery (see feature proceedings. For example: article “Bribery Act 2010: what does it mean for your company?”, www.practicallaw.com/8- • In 2009, Mabey & Johnson Ltd was convicted of overseas bribery (see News brief 505-9543). Companies also feared draconian “Serious Fraud Offi ce: targeting dividends”, www.practicallaw.com/3-517-3268). enforcement, particularly for those used to • In 2010, Innospec Ltd pleaded guilty to a charge of conspiracy to corrupt ([2010] US enforcement of the US Foreign Corrupt EW Misc 7 (EWCC); see News brief “Self-reporting corporate corruption: where are we Practices Act of 1977 (FCPA). after Innospec?”, www.practicallaw.com/2-502-1218).

These fears have not yet been realised. • In 2011, BAE Systems plc pleaded guilty to accounting irregularities following its Headlines suggesting that the 2010 Act was investigation by the SFO for bribery allegations (www.practicallaw.com/2-504-8661). the “FCPA on steroids” in hindsight appear • In 2011, the SFO obtained a civil recovery order against Macmillan Publishers Limited wide of the mark and the required adequate after it self-reported attempts by its agent to bribe World Bank employees to win procedures have turned out to be prevailing book sales in southern Sudan. good international compliance practice. To date, the Serious Fraud Offi ce (SFO) has not • In 2012, the SFO obtained a civil recovery order against Oxford Publishing Ltd after brought any corporate prosecutions under it self-reported bribery in its East African operations. the new failure to prevent bribery offence and • In 2014, the Innospec investigation ended with the company’s two former CEOs, there has yet to be a signifi cant UK corporate its business director and sales director being convicted of, and receiving signifi cant prosecution for bribery of overseas public prison sentences for, conspiracy to corrupt under the pre-2010 Act legislation (R offi cials. v Turner, Kerrison, Papachristos and Jennings, unreported Southwark Crown Court, 4 August 2014). Despite what may be viewed as a slow start, we do not believe that the SFO has • In 2014, Bruce Hall, the former CEO of Bahraini company, Aluminium Bahrain BSC, failed to enforce the 2010 Act rigorously or was sentenced to 16 months in prison for corruption under the pre-2010 Act legislation that UK companies can relax about active (R v Hall, unreported Southwark Crown Court, 22 July 2014). anti-corruption enforcement. Indeed, SFO (See also feature article “Foreign bribery and corruption: sentencing trends”, www. pronouncements and its current casework practicallaw.com/9-525-7910). suggest otherwise, and international historical practice indicates that it takes time to mobilise resources to bring cases under a article “Deferred prosecution agreements: sentencing range for corporate corruption and newly enhanced anti-corruption law. In the moving into the unknown”, www.practicallaw. how UK sentences would be benchmarked US, for example, although the FCPA was com/6-525-6101). Under a DPA, a company against other legal systems. The Crown Court enacted in 1977, vigorous enforcement of it that admits certain economic and fi nancial in Innospec said that states should adopt a did not begin until the early 2000s. offences will be able to avoid prosecution uniform approach to fi nancial penalties for if it complies with set conditions, including the corruption of foreign government offi cials Post-2010 Act reforms the payment of fi nancial penalties. DPAs are so that companies in different states are not Since the 2010 Act came into force on 1 July intended to act as an incentive for companies subject to widely varying penalties. 2011, the UK has made signifi cant changes to to co-operate with the SFO and achieve a the criminal justice system to accommodate more proportionate sentencing outcome. In an effort to provide additional uniformity the anticipated upswing of serious corporate and predictability in relation to corporate economic crime cases, such as introducing Until R v Innospec Limited, sentencing fi nes, new guidelines were published on 31 deferred prosecution agreements (DPAs) and principles for corporate corruption were January 2014 for companies convicted of new sentencing guidelines. unclear ([2010] EW Misc 7 (EWCC); see fraud, bribery or money laundering (see News News brief “Self-reporting corporate brief “Sentencing guidelines for corporates: DPAs, which have been available since 24 corruption: where are we after Innospec?”, giving teeth to the DPA?”, www.practicallaw. February 2014, provide a new means of www.practicallaw.com/2-502-1218). It was com/4-558-0365). The guidelines are resolving corporate investigations (see feature almost impossible to predict and advise on a intended to level the playing fi eld between US

© 2014 Thomson Reuters (Professional) UK Limited. This article fi rst appeared in the November 2014 issue of PLC Magazine, published by Practical Law, part of Thomson Reuters (Professional) UK Limited, and is reproduced by agreement with the publishers. 1

and UK sentences and provide a framework Future enforcement strategy Principled decisions. The 9 October against which DPAs can be negotiated and It has not always been easy to perceive a announcement reaffirmed principled benchmarked. consistent enforcement strategy in the prosecutorial decision making. When evolution of the SFO’s corporate enforcement considering an enforcement action, SFO The government has also recently announced actions. Several previous corporate corruption prosecutors will be guided by pre-existing that it is considering proposals to create a investigations have been resolved using non- and well-established law and protocol in its new corporate offence of failing to prevent corruption charges, limitations on conduct decision-making process and the exercise of economic crime, which would mirror and included in admissions or public resolutions, prosecutorial discretion. The SFO’s decision expand the corporate offence of failing to and civil forfeiture. In addition, there has been to prosecute a company is governed by prevent bribery that was introduced in the no clear policy on the standard by which the Full Code Test in the Code for Crown 2010 Act (see News brief “Failure to prevent follow-on proceedings against individuals Prosecutors (www.cps.gov.uk/publications/ economic crime: a new corporate offence”, would be brought. docs/code_2013_accessible_english.pdf), the www.practicallaw.com/7-581-8568). Joint Prosecution Guidance on Corporate On 9 October 2012, the SFO announced Prosecutions (www.sfo.gov.uk/media/65217/ Pipeline delay revised policies regarding corporate self- joint_guidance_on_corporate_prosecutions. The 2010 Act does not apply to conduct reporting, hospitality and facilitation pdf) and, where relevant, the Bribery Act carried out before it came into force (see payments (the 9 October announcement) 2010: Joint Prosecution Guidance of the box “Enforcement before the Bribery Act (see News brief “Self-reporting fi nancial crime: Director of the SFO and the Director of 2010”). Given the normal timeline of moving the goal posts”, www.practicallaw. Public Prosecutions (www.sfo.gov.uk/ enforcement cases, this means that there com/1-522-6197). The revised policies media/167348/bribery_act_2010_joint_ has not necessarily been a delay by the SFO followed a review that was instigated by Mr prosecution_guidance_of_the_director_of_ in bringing 2010 Act cases; rather, it means Green and, somewhat pointedly, superseded the_serious_fraud_offi ce_and_the_director_ that investigation of post-2010 Act conduct the SFO’s previous statements and practices of_public_prosecutions.pdf). is underway. (see box “Procedural guidance”). The revised policies and later press statements also shed Bold decisions. Mr Green signaled a more Complex, multi-jurisdictional matters always some light on the future strategy of the SFO. aggressive approach to previous decisions by have a reasonably predictable time lag reopening the Weavering Capital case in 2012. between detection, investigation and the SFO as prosecutor. In the 9 October The SFO’s 2009 investigation into Weavering start of enforcement proceedings. In the announcement and in subsequent speeches, related to interest rate swaps that infl ated 1990s and 2000s, it was common for the Mr Green has emphasised that the SFO is the apparent net asset value of a managed SFO to have so-called “blockbuster” cases a specialist investigator and prosecutor of fund. The previous director of the SFO had on its roster, with typically no more than the highest level of serious and complex shelved the two and a half-year investigation, one or two cases under investigation at any fraud, bribery and corruption (www.sfo.gov. but subsequent civil proceedings found that given time. Investigations of Guinness plc, uk/about-us/our-views/director’s-speeches/ the interest rate swaps were a sham. the Maxwell brothers, Bank of Credit and speeches-2013/cambridge-symposium-2013. Commerce International (BCCI), price-fi xing aspx). The SFO also took bold decisions in the by generic drug manufacturers and BAE high-profi le bribery trial in December 2013 of Systems plc were all notable of their time; Whereas the number of corruption businessman Victor Dahdaleh. Although the indeed, several of these investigations took investigations that were resolved by civil trial ended in defeat for the SFO, in various several years and spanned the tenure of recovery had previously increased, the SFO pre-trial applications it argued and won many more than one director of the SFO. said in the 9 October announcement that, as a of the contentious legal arguments that were matter of policy, there will be no presumption believed to be an impediment to a successful The current director, David Green QC, has of civil settlements in any circumstances. but diffi cult prosecution. stated that the SFO currently has 68 cases Mr Green appears to have put this policy in the pipeline, including eight projects into practice; the only corruption-related civil Real co-operation. In a recent speech, concerning the 2010 Act. Currently, there recovery under his tenure, against Oxford Ben Morgan, joint head of bribery and are publicly reported bribery and fraud University Press in relation to contracts for corruption at the SFO, reiterated that the investigations involving numerous UK and the sale of educational books to African SFO expects real and honest co-operation global companies and there are undeclared governments, was agreed under the previous from companies and not just the impression investigations into other well-known UK director (www.sfo.gov.uk/press-room/ of co-operation (www.sfo.gov.uk/about-us/ companies. It is likely that this crop of cases latest-press-releases/press-releases-2012/ our-views/other-speeches/speeches-2014/ involves conduct both before and after the oxford-publishing-ltd-to-pay-almost-19- ben-morgan-speech-to-uk-aerospace-and- 2010 Act came into force, and suggests that million-as-settlement-after-admitting- defence-industry-seminar-.aspx). Similarly, Mr a signifi cant number of enforcement actions unlawful-conduct-in-its-east-african- Green advised that maximum co-operation can be expected. operations.aspx). on the part of a company and its lawyers is

© 2014 Thomson Reuters (Professional) UK Limited. This article fi rst appeared in the November 2014 issue of PLC Magazine, 2 published by Practical Law, part of Thomson Reuters (Professional) UK Limited, and is reproduced by agreement with the publishers.

Sectoral sweeps. In a shift away from a Procedural guidance reactive approach, the SFO has indicated that One common complaint about the Serious Fraud Offi ce’s (SFO) announcement of it intends to conduct industry-wide probes and revised policies on 9 October 2012 has been the withdrawal of procedural guidance proactive sectoral sweeps. Mr Green has said for companies that wish to self-report corruption to the SFO. While the SFO could do that he would use intelligence-led policing more to regularise self-reporting and set out some baseline positions, the deferred powers to target the sectors that are most prosecution agreements (DPA) code of practice, published in February 2014, provides vulnerable to economic crime, such as public some useful guidance on prosecutorial and judicial expectations (www.sfo.gov.uk/ contracts and construction, and oil and gas. media/264623/deferred%20prosecution%20agreements%20cop.pdf). It highlights that Mr Green has also indicated that the SFO has the SFO expects a timely self-report, will consider the quality of self-reporting and later enhanced its intelligence capability to enable co-operation, and will want to know about any corporate and individual remediation sectoral analysis, in addition to establishing carried out before the reporting. Companies that can demonstrate having taken these links with UK intelligence agencies and steps will be at an advantage when seeking a DPA. the National Crime Agency to investigate crime as it is happening (www.sfo.gov.uk/ In addition, even though it was conducted under pre-Bribery Act 2010 (2010 Act) legislation, about-us/our-views/director%27s-speeches/ the Innospec Ltd investigation may shed some light on the SFO’s future approach to speeches-2014/cambridge-symposium-2014. corporate corruption enforcement proceedings under the 2010 Act. In particular, the case aspx). included a company-led investigation tested by the investigating regulators, employee remediation, the imposition of a monitor to evaluate future compliance and the company’s Global approach co-operation with the subsequent investigation of executives. As well as improving its enforcement framework, over the past decade the SFO has been developing into a global regulator that an intrinsic part of the DPA process (www.sfo. that would otherwise be subject to legal collaborates with counterparts worldwide gov.uk/about-us/our-views/other-speeches/ professional privilege. Notably, this is a road in its investigations. The SFO was originally speeches-2013.aspx). that has been traveled by US regulators, and created in the 1980s to handle cases too big has resulted in internal US agency guidance for individual UK police forces, but quickly In March 2014, Alun Milford, the SFO’s stating that waiver of legal privilege is not started working with other regulators on general counsel, outlined the SFO’s required to receive full credit for co-operation global enforcement actions. In the mid- expectations of a company’s co-operation in an agency investigation. 2000s, it started forming close relationships when seeking a DPA (www.sfo.gov.uk/about- with DoJ counterparts during corruption us/our-views/other-speeches/speeches-2014/ UK jurisdiction. The SFO has always investigations such as BAE Systems plc, corporate-criminal-liability-and-deferred- prosecuted individuals regardless of their Innospec Ltd and Johnson & Johnson/DePuy. prosecution-agreements--.aspx). In addition nationality for crime that was carried out to noting that companies would be wise to from the UK. However, in the past, the SFO Fraud cases involving alleged manipulation self-report to the SFO and to co-operate has declined to prosecute foreign and UK of LIBOR and the foreign exchange (Forex) with any SFO investigation, he stated that nationals where another regulator expressed market have also demonstrated that multi- the SFO expects: an interest in the matter. For example, in jurisdictional and multi-regulator cases 2006, the “NatWest Three”, UK nationals are likely to be a mainstay of enforcement • Early self-reporting and for companies who were alleged to have participated in proceedings in years to come. The LIBOR to negotiate with the SFO the terms of a fraudulent scheme with Enron, were investigations alone have included cross- a company or lawyer-led investigation. extradited to face trial in the US and, in 2011, border co-operation between authorities in UK national Jeffrey Tesler, who was accused the UK, US, Switzerland, Australia, Singapore, • Prompt, covert data collection with a of being an intermediary to make bribery Canada, Hong Kong, Korea and Japan. Most disclosed and evidenced methodology payments, was also extradited to the US recently, investigations in the pharmaceutical agreed with the SFO. (www.practicallaw.com/9-202-0412). sector have also seen the SFO working with the Chinese authorities, the fi rst notable instance • Waiver of privileged memoranda of In contrast, the prosecution in 2012 of Paul of Anglo-Chinese co-operation (www.reuters. witness interviews and other documents. Jennings of Innospec Ltd (a US/UK national) com/article/2014/07/23/us-britain-fraud-sfo- and the assertion of jurisdiction in 2013 gsk-idUSKBN0FS1U320140723). The current emphasis on co-operation, which over UK banker Tom Haynes in the London may in part stem from a frustration with Interbank Offered Rate (LIBOR) cases, who Gary DiBianco is a partner, Matthew Cowie historic UK defence tactics, risks being taken was the target of the parallel US Department is counsel, and Caroline Wojtylak is an to the extreme. In particular, the scope of co- of Justice (DoJ) LIBOR investigations, associate, at Skadden, Arps, Slate, Meagher operation is not clearly defi ned, and currently illustrate that the SFO is taking a more & Flom (UK) LLP. appears to include providing information assertive role where UK jurisdiction is evident.

© 2014 Thomson Reuters (Professional) UK Limited. This article fi rst appeared in the November 2014 issue of PLC Magazine, 3 published by Practical Law, part of Thomson Reuters (Professional) UK Limited, and is reproduced by agreement with the publishers.