A small refurbishment company was convicted of failing to prevent bribery in the first contested case of its kind since the UK Bribery Act 2010 came into force in July 2011 (UKBA). The case highlights how important it is for organisations to have adequate procedures in place to prevent bribery in order to defend against such an allegation. The UK government has published guidance on what constitutes adequate procedures, and the result in this case suggests that companies which have not reviewed and updated their compliance programmes in light of this guidance could be found guilty of the failure to prevent offence if bribery does occur.
The defendant company in this case was prosecuted despite having self-reported the conduct; however the particular circumstances of the company meant that it was unable to achieve a deferred prosecution agreement (DPA), and one should be wary of taking any point of principle from this outcome.
In 2013, the then managing director of Skansen International Limited (Skansen) paid bribes as part of a tendering process for two office refurbishment contracts in which Skansen was successful. Shortly after winning the contracts, Skansen’s then managing director paid £10,000 to a company owned by a project manager at the contracting company and made plans to pay a further £29,000 upon completion of the contracts. No services were provided in exchange for the payments.
In January 2014, Skansen appointed a new CEO who initiated Skansen’s first anti-bribery and corruption (ABC) policy and ordered an internal investigation into the payments. During this time, the managing director attempted to make the £29,000 payment, which was stopped before it was paid. The managing director and the head of commercial were dismissed at the conclusion of the internal investigation, the results of which Skansen reported to the National Crime Agency and the City of London Police. Skansen assisted the police in their investigation, including providing privileged reports and advice. Twenty months later, Skansen was interviewed under caution and charged under Section 7(1) of the UKBA for failure to prevent bribery. The former managing director and the recipient of the bribes subsequently pleaded guilty to paying and requesting bribes under Sections 1 and 2 of the UKBA.
Section 7(2) of the UKBA provides that it is a defence to a charge of failure to prevent bribery for an organisation to show that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct.
As required by Section 9 of the UKBA, the Ministry of Justice has published guidance about procedures that relevant commercial organisations can put in place to prevent persons associated with them from bribing. The guidance is based on six guiding principles which highlight that organisations should adopt a risk-based approach to managing bribery risk which is specific and proportionate to the risks faced by the individual organisation. The guidance acknowledges that “[t]he objective of the [UKBA] is not to bring the full force of the criminal law to bear upon well run commercial organisations that experience an isolated incident of bribery on their behalf” while underscoring that the Section 7(2) defence is intended to “encourage commercial organisations to put procedures in place to prevent bribery by persons associated with them.”
At trial, Skansen argued that it had had adequate procedures, relying on the fact that it was a small business, operating locally and out of a single, open-plan office, so as not to require a sophisticated ABC policy. Skansen maintained that its long-standing policies which encouraged staff to conduct dealings with third parties ethically, openly and honestly were sufficient, so as to negate the need for a separate ABC policy. Skansen also argued that its multi-level system of approvals for invoices constituted an adequate procedure for the prevention of bribery by those associated with the organisation.
By contrast, the prosecution highlighted that there was little evidence of an effort by Skansen to create a compliance culture within the organisation and that it had not revised its policies and procedures to reflect the new offences created by the UKBA. In addition, while Skansen had general policies available to staff, the company did not actively communicate the policies to staff, nor did it have a system in place to ensure staff had read, revisited, or been trained on their content periodically. No one at Skansen had overall responsibility for ABC compliance, nor was there a way for staff to communicate concerns regarding unethical conduct other than going directly to senior management who, in this case, were involved in the wrongdoing.
Following a contested trial, the jury returned a guilty verdict having determined that Skansen’s procedures failed to meet the standard required for the Section 7 defence.
Despite the fact that Skansen self-reported its employee’s conduct to the authorities and cooperated with their investigation, the company could not resolve this matter via a DPA. By the time of the trial, Skansen was a dormant company with no assets; its inability to pay a reasonable fine in lieu of prosecution meant that no public interest could be served by such an arrangement.
Given the unusual circumstances of this case, some have questioned the Crown Prosecution Service’s (CPS) decision to prosecute Skansen at all. Without assets to pay a fine, the only available sentencing option upon conviction was for the trial judge to record an absolute discharge which became immediately spent under English law. This means that the judge imposed no penalty on the company, which was legally considered to have been rehabilitated following the conviction. In response to judicial questioning, the CPS justified the prosecution on the grounds that a successful prosecution would send a message to the business community about the importance of having adequate procedures in place to prevent bribery.
The main lesson to be drawn from this conviction is that adequate procedures must be specific and tailored to the risks an individual organisation faces and must be revised and revisited to suit movements in the ABC landscape. Although we cannot know the precise reasoning behind the jury’s decision, it is clear that praying in aid the small size of an organisation as justification for not having an up-to-date compliance programme does not seem to be effective in preventing a conviction. Ensuring the adequacy of anti-bribery procedures should be an ongoing process in all well-run organisations.