In two recent FCPA enforcement cases prosecuted by the SFO, the British courts in question perceived the SFO’s sentencing recommendations as too lenient and even question the SFO’s authority to enter settlements.
On March 26, 2010, Lord Justice Thomas of Southwark Crown Court approved the SFO’s settlement agreement with Innospec Ltd. but not without criticism of the SFO’s low settlement amount and a pronouncement that the SFO lacked the authority to make such deals.2 Innospec Ltd. had pleaded guilty to charges of conspiracy for systematic bribing of Indonesian officials to secure contracts for the supply of a fuel additive Traethyl Lead (TEL). The bribes totaled about $8 million and the crime was enhanced by Innospec Ltd.’s attempt to block legislative action to ban TEL, due to environmental and public-health concerns.
Although maximum fines for Innospec could have been much higher, the DOJ and the SFO agreed to a global settlement that resulted in the payment of about $40 million, of which Innospec Ltd. agreed to pay $12.7 million to UK authorities. A higher settlement would have rendered Innospec insolvent. A U.S. court easily approved the deal, but Lord Justice Thomas stated the settlement should have been in the tens of millions, and “concluded that the Director of the SFO had no power to enter into the arrangements made” and further indicated that “no such arrangements should be made again.”3 The UK court held that sentencing is a matter for the judiciary – to maintain open and transparent justice.
Ultimately, Lord Justice Thomas approved the $12.7 million fine against Innospec Ltd, but the UK Innospec judgment appears to cast a shadow on the SFO’s ability to participate in global settlements between prosecuting authorities and offenders. Lord Justice Thomas expressly indicated that his decision to uphold the SFO’s settlement with Innospec Ltd. was not precedential.4
The SFO also was criticized by Justice Bean of the Southwark Crown Court for recommending a suspended sentence for an individual who pleaded guilty to participating in a bribery scheme.5 John Dougall, a former marketing executive of Johnson & Johnson’s UK subsidiary, DePuy International, engaged in a scheme in which £4.5 million was paid to Greek doctors to obtain sales contracts. Dougall admitted his wrongdoing and cooperated with the SFO by turning over documents and agreeing to testify against other wrongdoers. The SFO has touted Dougall as the first “co-operating defendant” in a major SFO corruption investigation. For this cooperation, the SFO agreed to recommend a suspended sentence. That recommendation was ignored by Justice Bean, who sentenced Dougall to one year in prison – the first jail sentence for bribery in the UK. Justice Bean felt the suspended sentence was not justified in a case “where corruption was systemic and long-term and involved several million pounds in corrupt payments.”6 On April 29, 2010, Dougall appealed the Crown Court’s decision to the Criminal Court of Appeal, which reversed the lower court, concluding that the argument to suspend the sentence in this case was “powerful” because of its particular facts, including an original sentence of only twelve months.7
Richard Alderman, the SFO’s Director, is expected to discuss with the UK courts a structure for future settlements, but until some agreement between the SFO and the British courts is reached, companies will need to be wary when approaching and dealing with the SFO. Unlike the U.S., where the DOJ’s sentencing recommendations are largely upheld by the courts, there may be significant uncertainty in this regard when negotiating with the SFO.