On Friday, 25 September 2009, UK bridge-building company Mabey & Johnson Ltd. received a £6.6 million fine in the United Kingdom’s first successful prosecution of a company for foreign bribery offences. The fine includes £4.6 million in criminal penalties and an additional £2 million in reparations and costs. As discussed in our 15 July advisory, Mabey & Johnson pled guilty earlier this summer to two counts of conspiracy to corrupt relating to the payment of bribes, through local agents, to public officials in Jamaica and Ghana. Mabey & Johnson also pled guilty to one count of “making funds available” in connection with illegal kickbacks to the Saddam Hussein regime in Iraq through contracts awarded under the U.N. Oil-for-Food Program.
The Mabey & Johnson prosecution represents a significant milestone for the UK Serious Fraud Office (“SFO”), which is tasked with enforcing the anti-corruption laws of England and Wales and Northern Ireland. The SFO has devoted significant resources over the last year to enhancing its enforcement capabilities and outreach efforts to industry, which had been less vigorous in earlier periods. The Mabey & Johnson prosecution represents the third SFO enforcement action involving foreign bribery offences in the last year. It follows the SFO’s first successful prosecution, in October 2008, of an individual for foreign bribery offences, and a £2.25 million civil recovery, also in October 2008, against Balfour Beatty of unlawful proceeds arising from inaccurate accounting practices in a project in Egypt. Public reports indicate that other significant SFO enforcement actions are expected to follow in the coming months.
The Mabey & Johnson sentencing has a number of notable characteristics:
- Guilty plea: The company pleaded guilty following plea discussions with the SFO. The case thus represents an early application of the Attorney General’s March 2009 “Guidelines on Plea Discussions in Cases of Serious or Complex Fraud”, which defines – for the first time – procedures for prosecutors in negotiating plea arrangements with defendants in fraud cases. In this case, the Crown Court appears to have endorsed all of the key elements of the plea settlement agreed upon by the SFO and Mabey & Johnson. Whether that will continue to be the case, or if judges will play a guiding role in defining the terms of settlements, remains to be seen.
- Corporate Reforms: The underlying violations involved former senior managers of Mabey & Johnson, which at the time had implemented only limited corporate controls to prevent bribery. In documents filed with Southwark Crown Court and in public comments following the sentencing, SFO Director Richard Alderman observed that the company’s remedial measures included replacement of five of eight members of its board of directors and the implementation of a comprehensive anti-corruption compliance program, and that the company therefore was “to a notable extent, no longer the company that committed these crimes.”
- Voluntary Self-Disclosure: Mabey & Johnson had disclosed the Jamaica and Ghana violations voluntarily to the SFO. As reported in our 30 July alert, the SFO recently issued detailed guidance (in a paper titled the “Approach of the Serious Fraud Office to Dealing with Overseas Corruption”) in which it has encouraged companies to self-disclose violations of the foreign bribery laws, and outlined the SFO’s terms of reference for dealing with parties who submit voluntary disclosures. Commenting on the Mabey & Johnson sentence, Mr. Alderman upheld the case as offering a practical insight into the SFO’s voluntary disclosure approach:
“The offences are serious ones but [Mabey & Johnson] 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. I urge other companies who might seek some parallels for them, to come and talk to us and have the matter dealt with quickly and fairly.”
Documents filed with Southwark Crown Court indicate that Mabey & Johnson also voluntarily disclosed evidence of further potential overseas corruption offences in Mozambique, Angola, Bangladesh and Madagascar, which the SFO specifically declined to formally prosecute as a result of the company’s voluntary cooperation.
- Compliance Monitor: As in the case of the Balfour Beatty settlement, the court’s sentence in the Mabey & Johnson case included the requirement that Mabey & Johnson submit its compliance program to the review of an independent monitor, who must be approved by the SFO.
- Reparations: The sentence also included the payment of £1.4 million in reparations to be paid to the Governments of Iraq, Ghana, and Jamaica.
- Focus On Individual Prosecutions: The settlement was reached notwithstanding the fact that investigations – and possible prosecutions - of the individual former company directors involved in the misconduct remain pending. While the SFO evidently saw little benefit in continuing to investigate and prosecute the company for corrupt activities in Angola, Bangladesh, Mozambique, Madagascar and potentially other countries that Mabey & Johnson admitted to, it signalled its ongoing focus on those individuals for their involvement in corrupt conduct.
The sentence also exhibits many features that have become common in U.S. prosecutions and settlements under the U.S. Foreign Corrupt Practices Act (“FCPA”): an investigation conducted by independent outside counsel, voluntary disclosure, individual prosecutions, a seven-figure penalty, and the requirement of a corporate compliance program and independent monitoring. Indeed, the documents filed with Southwark Crown Court signal the SFO’s explicit adoption, “where appropriate”, of the U.S. Department of Justice’s (“DOJ”) practices in imposing corporate compliance monitors as a condition of settlement in FCPA prosecutions. Notably, however, the SFO appears to have adopted, in some respects, a more aggressive position than the DOJ with respect to what it considers full cooperation in an overseas corruption investigation. It has suggested, for instance, that it will not consider a company to have cooperated to the best of its ability – and therefore be eligible for full “cooperation credit” in mitigating potential penalties – unless it shares attorney-client privileged interview memoranda and other privileged investigation materials. This practice proved controversial in the United States (to the extent that DOJ eventually abandoned it), and may prove similarly so as the SFO brings further prosecutions for voluntarily-disclosed conduct in the United Kingdom. It also may serve as a significant deterrent to companies weighing whether or not to self-disclose.
At the same time, English criminal law may be shifting in a direction that would remove certain impediments to prosecuting corporations (currently one of the most significant distinctions between the tools available to the SFO as compared to its American counterparts), which may encourage voluntary disclosures moving forward. As previously reported, the anti-bribery law reform bill pending in Parliament includes a provision that would create a corporate offence for companies whose personnel or agents commit bribery in connection with company business, and where the company had failed to implement adequate compliance controls. The bill has passed through pre-legislative scrutiny in Parliament, and the Government’s Draft Legislative Programme (published on 29 June 2009) indicated its intention to introduce a Bribery Bill to reform the law of bribery in the next Parliamentary session. Accordingly, it is possible that new legislation could be enacted in early 2010. If implemented, the bill could represent a fundamental shift in the legal risk assessment for UK-based companies doing business overseas.