As previously reported in our January 2016 edition, on 18 December 2015, Sweett Group PLC (“Sweett”) pleaded guilty to failing to prevent an associated person bribing another in order to obtain or retain a business advantage for Sweett contrary to section 7(1)(b) of the Bribery Act 2010. Sweett was sentenced on 19 February 2016. This represents the first successful prosecution and conviction by the Serious Fraud Office (“SFO”) of a corporate for that offence.
The Sweett offence relates to payments totalling about £680,000 between January 2013 and July 2014 made by Cyril Sweett International Limited (“CSI”), a Cypriot incorporated company and a wholly owned subsidiary of Sweett which was responsible for Sweett’s Middle East operations, under a sub-contract, to a company owned by the Vice Chairman of the Board, and Chairman of the Real Estate and Investment Committee, of Al Ain Ahlia Insurance Company (“AAAI”). The payments were made to secure the award of a £1.6 million contract by AAAI to CSI for the building of a luxury hotel in the UAE. The payments represented about 1.08% of the overall value of the project (£63 million). There was no suggestion that Sweett’s senior management were aware that the sub-contract was a sham until it began its own internal investigations into CSI’s practices in 2013.
Sweett was ordered to pay £2.35 million, comprising a fine of £1.4 million, £851,152 in confiscation and the SFO’s prosecution costs of around £95,000. The SFO did not seek, and the English Court did not order, Sweett to pay compensation. The Court ordered Sweett to pay the confiscation monies by 19 May 2016. Half the fine is due by 19 February 2017, with the balance payable by 19 February 2018. The penalty represents almost 18% of Sweett’s market capitalisation as on the date of sentencing (around £13 million).
Despite being a separate legal entity, distinct from Sweett, the Court considered that CSI was not independent of Sweett and that Sweett treated and ran CSI as an internal department. It is a useful example of the circumstances in which a foreign-registered subsidiary may be considered an “associated person” of its UK parent company for the purposes of the Bribery Act.
It is notable that the SFO refused to enter into a Deferred Prosecution Agreement (“DPA”) with Sweett, despite having entered into one in November 2015 with Standard Bank (“SB”). It appears that the differences between Sweett’s and SB’s conduct before and during the SFO’s investigations were a key factor in determining the different outcomes to each prosecution.
For example, whilst SB reported itself to the SFO promptly once it became aware of the circumstances surrounding its sister company’s illegal payments to a local partner in Tanzania, Sweett only self-reported in December 2014 (the SFO began its investigation into CSI’s Middle East practices in July 2014) after it was notified that the Wall Street Journal was going to publish allegations linking it and CSI to bribery offences rather than of its own volition. The Court criticised Sweett’s failure to cooperate fully and openly with the SFO, for deliberately attempting to mislead the SFO as to the illegal nature of the payments, and for attempting to ‘spin’ the findings of its own internal investigation when it presented them to the SFO. The Court was also critical of Sweett’s inadequate internal procedures, finding that Sweett had made “no real effort” to put in place adequate anti-corruption and bribery safeguards and procedures, having been aware since at least 2011 that its and CSI’s systems were unfit for purpose and “willfully” choosing to ignore these failings.
Sweett’s conviction is particularly significant because it sets down the SFO’s clear serious intention to pursue any corporation with connections to the UK for bribery offences, regardless of where the offence(s) took place. Internal antibribery and corruption procedures should be monitored (and, where appropriate, updated) periodically with regular mandatory training provided to all staff, agents and contractors, not just senior management, executives and officers.
The importance of early and voluntary self-reporting to, and together with full cooperation with, the SFO cannot be overstated: the SFO was deeply critical of Sweett’s decision both to continue its internal investigation after the SFO had begun its investigation and to withhold disclosure of certain documentation covered by Legal Professional Privilege. Companies should be aware that the SFO may consider them to be uncooperative—or at least not sufficiently cooperative—and so refuse to offer a DPA if they do not waive legal privilege over all documentation pertaining to the investigation and continue with their internal investigation after the SFO begins its own investigation.