There are government cutbacks as a result of the global economic crisis. Naturally, the authorities are looking to ensure that the most effective and efficient use is made of the limited resources that are available. Even before the economic downturn, concern had been expressed as to the effectiveness of the current application of resources in the UK's criminal justice system. There are concerns that too much money is being dedicated to expensive and time consuming tasks which provide little benefit, such as the review of documents which fall into the category of "unused material". The enforcement of the law relating to corruption overseas is by no means exempt from the inefficiencies that exist throughout the criminal justice system. Those involved in its enforcement have indicated their intention to adopt a new and more pragmatic approach to the enforcement of criminal justice. An example of this more flexible approach was seen in 2008 when the Serious Fraud Office (SFO) reached an agreement with Balfour Beatty in relation to alleged overseas corruption when the company paid £2.5 million in respect of a Civil Recovery Order and there were no corporate or individual prosecutions. More recently, the SFO's pragmatic approach has been seen in the resolution of the case of Mabey & Johnson, discussed below. This is the first time a company, as opposed to natural persons, has been prosecuted for corruption overseas.
The SFO has issued guidance as to the approach it will take towards those who choose to self-report overseas corruption. Further details of the content of the guidance are set out below but one important point contained within the guidance is the indication that the SFO will work with those who self-report in order to assist and be involved in reaching settlement with other authorities that could take jurisdiction over the corporate's wrongdoing. International organisations such as the Organisation for Economic Co-Operation and Development encourage national authorities who can take jurisdiction over incidents of corruption to do so, however the situation where more than one country takes jurisdiction gives rise to a risk of "double" or "multiple" jeopardy. The most desirable outcome, for those seeking resolution of an incident where two or more national authorities could take jurisdiction, is therefore surely a global settlement. The outcome of the Marine Hoses case, discussed below, is an example in which such a settlement was achieved.
SFO's Guide To Self Reporting Of Overseas Corruption By Corporates
On 21 July 2009 the SFO published its guide entitled "Approach of the Serious Fraud Office to dealing with Overseas Corruption" ("Guide"). In the Guide, the SFO sets out the procedure that it will follow where a corporate self-reports incidents of corruption overseas. The Guide builds on the guidance provided in two earlier guides which were provided by the Attorney-General, namely "Guidelines on Plea Discussions in cases of Serious or Complex Fraud" (in which fraud is defined to include corruption) published in March 2009 and the earlier "Guidelines on the Acceptance of Pleas and the Prosecutor's Role in the Sentencing Exercise" published in October 2005.
The Guide states that provided certain criteria are met, in particular that board members are not involved in corrupt activity, the SFO will seek to settle cases using civil powers rather than criminal sanctions. On a practical note, given the outcome of Mabey & Johnson (discussed below) it is possible that the SFO may take a pragmatic approach even where senior executives/board members are involved, limiting any prosecutions to the body corporate as opposed to natural persons (although the Guide does not provide any guarantee that as a result of self-reporting of overseas corruption natural persons will not be investigated).
There are potentially many advantages to a defendant in bringing a case to an end by way of settlement; most notably perhaps the opportunity to manage adverse publicity. Further, the mandatory sanction of debarment from public and utilities contracts under Article 45 of the EU Public Sector Procurement Directive will not apply if a case is concluded by a civil settlement.
In order to qualify for 'favourable' treatment, the SFO requires that the matter is reported in a timely manner. If the incident also falls under the jurisdiction of the US Department of Justice (DoJ) then a report to the SFO should be made at the same time as a report is made to the US DoJ. Any delay in reporting the incident could be regarded by the SFO as a negative deciding factor. The SFO also requires that the company demonstrates a general commitment to resolving any issues associated with the corrupt act. It is important that the company deals with the SFO in a transparent and open way cooperating in any further investigation and taking appropriate action to improve its corporate ethics including, if necessary, appointing a compliance monitor.
The SFO also records within the Guide that it is prepared to provide an opinion service similar to that operated by the US DoJ. This service would, for instance, allow those who have concerns over the behaviour of a business or the subject of a proposed merger or acquisition, to get advice from the SFO on matters which give rise to concerns.
The Marine Hoses Case
Is an example of where the defendants achieved a "global settlement" in a situation where the authorities, in more than one jurisdiction, were involved in taking enforcement action as a result of criminal conduct. The authorities involved were the UK Office of Fair Trading (OFT) and the US DoJ. The wrongdoing in this case was associated with the creation and management of a cartel. Three of the individuals (UK citizens) who were involved with the management of the cartel were arrested in Houston, Texas in May 2007. They were subsequently charged in December 2007 by the DoJ with one felony charge of participating in a conspiracy, the primary purpose of which was to suppress and eliminate competition by rigging bids, fixing prices and allocating market share for sales of marine hoses in the US. Marine hoses are the hoses used, for example, to unload oil from oil tankers.
In 2007 the UK OFT also launched a criminal investigation into suspected cartel conduct in relation to the UK's market for marine hoses.
The UK nationals managed to achieve a plea of bargain whereby whatever sentences were handed down by the US courts would be deferred to enable them to return to the UK and plead guilty to cartel conduct that occurred in the UK market. This arrangement minimised any risk of double jeopardy, removed legal difficulties over extradition and also prevented any legal delay which can often impede a foreign national sentenced to imprisonment in the US being transferred to serve out the sentence in the UK. A further aspect of the agreement was that each day of the UK sentence of imprisonment served would be offset against the sentence set out in the US plea agreement. Whilst serving time in a UK prison, the individuals were also entitled to benefit from the more generous UK parole provisions.
At first instance the three individuals were handed prison sentences in the UK which were longer than those imposed in the US, with two individuals being sentenced to three years imprisonment and the third to thirty months. The plea agreement made in the US provided for sentences of two years imprisonment for two of the individuals and twenty months for the third. In November 2008, the UK Court of Appeal substituted prison terms that matched those agreed between the Defendants and US DoJ. The only criticism that the Court of Appeal had of the US plea agreement was that it was a term of the agreement reached with the DoJ that the legal counsel acting for the three individuals in the UK agreed not to seek sentences which were lower than those imposed in the USA. The Court of Appeal stated that this restriction was unnecessary and counter productive as, if the sentence in the UK was less than the US sentence, the balance of the sentence would be served in a US prison and would not attract the more generous UK parole provisions.
It is also worthy of mention that the companies involved in the cartel have also been fined €131m by the European Commission.
Mabey & Johnson
Richard Alderman, director of the SFO, has been recorded as saying that he regards this as a landmark case. Mabey & Johnson ("the Company") made a voluntary disclosure to the SFO as a result of allegations having been made in civil litigation between the Company and a former manager. The Company alleged that the former manager had received 'kick backs' whilst the former manager alleged that the Company made improper commission payments in Jamaica, the Dominican Republic and Panama.
The settlement, that appears to have been struck between the SFO and the Company, is that the Company will plead guilty to a series of specified charges in exchange for the SFO agreeing not to pursue criminal charges against the individuals involved. The criminal law in England and Wales is such that it is usually impossible to secure a conviction of a company managed by a board of directors without a single individual being identified both as being the "controlling mind" of the company and having the necessary mens rea (mental element of the crime). It is not possible to identify a single individual as being the "controlling mind" where the ultimate management of the company is a board of directors because management of the company is the responsibility of the collective board rather than any one individual.
The charges to which the Company has agreed to plead guilty relate to bribes that were paid in Jamaica and Ghana and the breach of UN sanctions that applied to the Iraq "Oil for Food" scheme. It is to be expected that the Company will have to (or possibly already have) reached agreement with the Governments of Jamaica and Ghana in relation to these issues and the Company will also have to pay compensation to the UN for breach of sanctions. The Company will be sentenced in the UK courts later this year.
The Company's management team has been replaced. The new management will have to work with an SFO approved compliance monitor. The cost of the monitor will, of course, be paid for by the Company.
It will be interesting to see what actions are taken by authorities in Jamaica and Ghana against those who are said to have received bribes. It will also be interesting, in the light of the agreements that have been reached between the Company and the SFO, to see what action (if any) the authorities in those countries take against the Company and the individuals within the Company, who organised the payment of the bribes. The most desirable result for the Company (and those associated with the Company) would surely have been to put in place a co-ordinated "global" settlement similar to that achieved by those involved in the Marine Hoses case (see above).
It is recorded in the Guide that in appropriate cases the SFO will seek a civil settlement rather than pursuing criminal sanctions. As the Company has been charged, one must assume that this is not a case that meets the SFO criteria which would allow the SFO to go down the civil settlement route. However, the actual outcome of this case, especially for the individuals who organised the payment of the bribes paid by the Company, is probably the "next best thing" as only the Company is facing prosecution. It is difficult to imagine, given the nature of the offences to which the Company has agreed to plead guilty (namely conspiracy and corruption contrary to s1 of the Prevention of Corruption Act 1906), that the SFO does not have substantial evidence as to the wrongdoing of specific individuals who worked for the Company. It is possible that the SFO may have concluded that, in this case, the "public interest" in bringing wrongdoers to justice has been satisfied by obtaining conviction of the Company as opposed to securing convictions against the individuals who worked for the Company.