Action taken by the Director of the Serious Fraud Office (SFO) in the High Court against Oxford Publishing Limited (OPL), a division of Oxford University Press (OUP), has resulted in an order that OPL pay £1,895,435 as a result of sums it received which were generated through unlawful conduct related to subsidiaries incorporated in Tanzania and Kenya.
Oxford University Press Tanzania (OUPT) and Oxford University Press East Africa (OUPEA) are wholly owned subsidiaries of OPL and part of the International Division of OUP.
The international divisions, among other things, focus on the school text book market. This involves participating in public tenders for contracts to supply governments with text books and other educational materials. These tenders may lead to contracts which are supported or funded by the World Bank Group.
Action taken by OUP
In 2011, the World Bank alerted OUP to the possibility of irregular payments to government officials for contracts to supply school textbooks during tenders involving OUPT and OUPEA.
OUP conducted an internal investigation, instructing independent lawyers and forensic accountants to undertake a detailed investigation. As a result of that investigation, OUP voluntarily reported certain concerns in relation to contracts arising from a number of tenders entered into between 2007 and 2010 by OUPT and OUPEA.
Civil Recovery Order
OUPEA and OUPT (as wholly owned subsidiaries) pay dividends and certain fees to OPL. As a result, OPL had and would receive revenue that had been derived from unlawful conduct (bribery and/or corruption). Following an examination of the benefit obtained from the affected contracts, the SFO determined an appropriate amount to be recovered. The value of the Order made by the High Court was £1,895,435 with OPL also paying the SFO costs of pursuing the order, amounting to £12,500.
Features that may avoid a criminal prosecution
The SFO highlighted the following relevant features which led to the decision to pursue a civil recovery order instead of a criminal prosecution:
- The test under the Code for Crown Prosecutors (namely whether there is enough evidence to charge and whether it is in the public interest to bring the case to court) was not met and there was no likelihood that such a standard would be met in the future. This was due to a number of factors including, among other things, the admissibility of key material obtained through the investigation in a criminal prosecution as well as witnesses being located in overseas jurisdictions who were unlikely to co-operate with a criminal investigation in the UK.
- Difficulties in obtaining evidence from the jurisdwillictions involved and potential risks to the personal welfare of affected persons.
- The conduct of OUP fully meeting the criteria set out in the SFO guidance on self reporting matters of overseas corruption.
- No evidence of board level (or equivalent) knowledge or connivance within OUP in relation to the business practices which led to the case being referred to the SFO.
- The products supplied were of a good standard and provided at 'open market' values. The jurisdictions involved were therefore not victims as a result of overpaying for the goods or as a result being supplied goods which were unsuitable or not required.
- The extensive resources needed to advance an investigation which could be better deployed on other investigations with a more realistic chance of a successful criminal prosecution.
- The settlement terms ensure all gross profit from any tainted contract will effectively be repaid.
- OUPEA and OUPT being subject to corresponding World Bank procedures.
OUP also offered to contribute £2,000,000 to not-for-profit organisations for teacher training and other educational purposes in sub-Saharan Africa.
As 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.
As a result, OUPEA and OUPT will be debarred for three years and OUP will receive a conditional non-debarment. In addition, in order to remedy part of the harm done by the misconduct, OUP has agreed to make a payment of US$500,000 to the World Bank as part of the negotiated resolution.
OUP's acknowledgment of its conduct and the thoroughness of its investigation (which was immediate and detailed, with the assistance of independent lawyers and forensic accountants) provides a good example of how an organisation can address the issues of fraud and corruption and improve its practices.
The action taken by OUP also highlights the advantages of self reporting. This is one of the factors that the SFO may take into account when coming to a decision whether to initiate a criminal investigation which is likely to have very serious consequences for an organisation in terms of adverse publicity, costs and the possibility for a more severe punishment. Avoiding a criminal prosecution is something that an organisation will need to consider very seriously. Indeed, the SFO Director David Green CB QC has said: "This settlement demonstrates that there are, in appropriate cases, clear and sensible solutions available to those who self report issues of this kind to the authorities".
Organisations should also be aware that the process does not necessarily end with the conclusion of the investigation, an order of the court, or any compliance procedures that have been introduced. The process may need to be ongoing and require some form of independent monitoring to be maintained going forward. In this case, the enhanced procedures introduced by OUP will be subject to review by a monitor who will report to the Director of the SFO within twelve months, with additional and separate reporting to the World Bank. The monitor will need to meet strict criteria including clear independence from OUP.
In today's global environment issues of bribery and overseas corruption are likely to be at the top of many organisations' lists, particularly after the introduction of the Bribery Act. Organisations will need to have in place compliance procedures which adequately address issues, such as facilitation payments, overseas entities, corporate entertainment as well as third party relationships.
Each organisation will have specific risks and no one-size will fit all. Different procedures will be appropriate depending on the size of the company, the sectors and jurisdictions in which it does business, as well as the nature of its business partners and transactions. Procedures will need to be proportionate to the risks faced by the organisation.