In December last year, Sweett Group plc became the first company to plead guilty to the offence under section 7 of the Bribery Act 2010 of failing to prevent “associated persons” from committing bribery. “Associated persons” means anybody doing business on behalf of the company, such as consultants, agents, contractors, suppliers and employees.
The “associated person” in this case was Sweett’s wholly-owned UAE subsidiary. Alongside a contract to provide project management and other services for a hotel project in Abu Dhabi, the subsidiary also entered into a sham contract for hospitality services with an intermediary which had the effect of paying forward 40% of the main contract price to the intermediary, which provided no services in return. The sentencing judge, Judge Beddoe, described this arrangement as “so obviously a bribe”.
We then had to wait until February this year for the sentencing hearing, which gave more insight into the events leading to the conviction and how those events would influence sentencing.
Sweett’s guilty plea was announced very shortly after the Serious Fraud Office (“SFO”) announced its first deferred prosecution agreement (“DPA”). DPAs were introduced two years ago and the idea is that a company charged with a criminal offence can have its prosecution suspended for a defined period (thereby avoiding collateral damage from a full-blown prosecution) if it meets certain conditions like implementing robust compliance processes.
A prosecutor only invites a company to enter into a DPA if it is in the public interest to do so and key factors considered include how early the company self-reports as well as the level of cooperation with the prosecutor. Here, it appears that Sweett did not help itself. It self-reported late, and only when it had learned of an impending press report about the bribe; this attracted specific criticism from Judge Beddoe, as did a concerted attempt to conceal the bribe, and a general lack of cooperation for long periods of the investigation.
At one stage, relations became so bad that the SFO had insisted on Sweett withdrawing a stock market announcement that it was cooperating with the SFO’s probe. Interestingly though, it was revealed at the sentencing hearing that even after this incident, once Sweett changed its approach to cooperation, discussions had taken place about a DPA. Sweett’s earlier lack of cooperation had not completely scotched the possibility of a DPA, though the company was ultimately not offered one.
So, Sweett was prosecuted. It conceded that the section 7(2) defence of having adequate procedures in place to prevent bribery was not available, and Judge Beddoe had to apply the Sentencing Guidelines to a section 7 offence for the first time.
Judge Beddoe ordered the confiscation of around £850,000, which represented the expected gross profit of the main contract, and imposed a fine of £1.4 million. He calculated the fine by applying a 250% multiple to the value of the bribe, which was £680,000.
Although Judge Beddoe explained that in his view the lower end of the range in the Sentencing Guidelines was appropriate because Sweett had no previous convictions, there are a number of reasons to question whether that was the correct approach. First, the starting point in the Sentencing Guidelines is a multiple of 300%. The judge did not explain why he dropped below this. In addition, there were a number of aggravating factors involved. The judge noted that Sweett had made no real effort following introduction of the Bribery Act to put in place systems to avoid what had happened. Worse still, it had wilfully ignored serious concerns expressed by KPMG in a review of controls conducted in relation to the subsidiary’s business. The subsidiary had not even closed down the arrangement once the investigation started, and it transpired that Sweett had asked the intermediary to provide a fraudulent letter representing that he was a legitimate sub-contractor – something the judge considered a deliberate attempt to mislead the SFO.
Nor was there any discussion at sentencing of whether Sweett should be debarred from entering into public contracts, an available but discretionary sanction for companies convicted of bribery. Was it that Judge Beddoe took the view that the fine was an adequate deterrent against future nefarious activity or was it an acknowledgement that debarment would overly penalise a company which relied heavily on public contracts and had (finally) shown a willingness to mend its ways? For businesses which derive significant revenue from public contracts, the possibility of being debarred is likely to be an important issue when considering whether to self-report and co-operate or to plead guilty. It would have been useful to have some guidance from this case about the circumstances in which this sanction may be imposed.
The take-home message for corporates is simple: the Sweett case shows that the SFO is serious about prosecuting under the Bribery Act, including for activity abroad carried out by subsidiaries. The message to take away from the sentence, however, is much less clear. Despite no real controls to prevent bribery, wilful disregard of concerns raised in a third party review of controls, an obvious bribe, a sustained practice which was not brought to a close even once the SFO’s investigation had started, a deliberate attempt to mislead the SFO in relation to the practice and an initial lack of cooperation with the SFO’s investigation, the sentence was at the lower end of guidelines. It is tempting to wonder what a corporate would need to do to attract a more serious penalty.