In November 2013 the Serious Fraud Office (SFO) announced that it has opened a criminal investigation into the conduct of two global security companies, G4S and Serco, following claims that both overcharged the Ministry of Justice for electronic tagging services for released offenders. It is alleged that both companies charged for offenders that were in fact found to be either overseas, back in prison or deceased. An audit conducted by PricewaterhouseCoopers alleged that the overcharging dated back as far as the commencement of the contracts in 2005. Capita has since taken over the contracts.
In September 2013 the SFO charged Gyrus Group Limited and its Japanese parent company, Olympus Corporation, with offences under Section 501 of the Companies Act 2006 for having made a statement to an auditor that was misleading, false or deceptive. Gyrus Group faces four charges and Olympus Corporation faces one charge, spanning a period from April 2010 to March 2011. This case follows the successful conviction of Olympus in Japan, in which it was fined Y700 million (£4.5 million), and the conviction of three former directors. The case relates to the hiding of substantial losses during the course of its acquisition of Gyrus Group Limited (in the region of £1.7 billion), which were uncovered by former Olympus Chief Executive Officer Michael Wood.
This is not the first time that the SFO has prosecuted a corporate body for offences under the Companies Act. As recently as December 2010, BAE Systems pleaded guilty to the offence of failing to keep accurate accounting records under the Companies Act 1985. However, this is the first time that the SFO has prosecuted an overseas parent company for such offences.
The SFO has charged UK printing company Smith & Ouzman Limited, two of its directors, an employee and an agent with offences of corruptly agreeing to make payments totalling nearly £500,000, contrary to Section 1 of the Prevention of Corruption Act 1906. This is a pre-Bribery Act case and the trial is expected to take place in November 2014.
While prosecutions under the Bribery Act may seem slow to take off, it must be borne in mind that the act is not retrospective and the US Foreign Corrupt Practices Act has had many more years on the statute books. There may also be two further factors – the 'investigative pipeline', in which it will take time for cases to come to court, and a policy of choosing cases carefully to 'road test' the new legislation.
Despite the intention of SFO Director David Green QC to improve the performance of the SFO and see more corporate prosecutions, the SFO has just seen one of its highest-profile bribery prosecutions collapse. The trial of Victor Dahdaleh collapsed in December 2013 following the SFO's decision not to offer evidence after one witness changed his evidence and two further witnesses, lawyers at US firm Akin Gump, declined to testify. The SFO alleged that Dahdaleh had paid bribes in Bahrain totalling £38 million to win contracts between Alba (Aluminium Bahrain) and western businesses. It emerged during the course of the trial at Southwark Crown Court that the SFO had effectively delegated its investigation in Bahrain to Akin Gump. This firm was also acting in a US civil case against Dahdaleh, in what would appear to be a conflict of interest. The collapse of this case will no doubt increase the spotlight on the SFO and its ability to prosecute large, complex cases involving multiple jurisdictions, and the pressure will be mounting to achieve a successful prosecution in the London Interbank Offered Rate matter.
For further information on this topic please contact Kathleen Harris at Arnold & Porter LLP by telephone (+44 20 7786 6100), fax (+44 20 7786 6299) or email (firstname.lastname@example.org). The Arnold & Porter website can be accessed at www.arnoldporter.com.