There is a significant failing in Australia’s laws in relation to foreign bribery – there are no comparable books and records and internal controls offences in Australia as there is under the US FCPA, as enforced with great success by the US SEC.
The FCPA requires issuers (those listed entities or other entities trading in US-listed shares subjected to the FCPA) to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the entity’s assets. In addition, issuers must devise and maintain a system of internal accounting controls that assures that transactions are executed and assets are accessed only in accordance with management’s authorisation; are periodically reconciled and recorded so that the entity’s financial statements conform to nominated standards. Critically, issuers are strictly liable for the failure of any of their owned or controlled foreign affiliates to meet the books and records and internal control standards.
Under the Corporations Act, a corporation is already required to keep written financial records that correctly record and explain its transactions, financial position and performance and which would enable true and fair financial statements to be prepared and must not falsify records or provide false information. Conduct in contravention of these provisions are offences of strict liability with penalties ranging from fines of up to 200 penalty units (or approximately $34,000 and/or 5 years imprisonment per offence). A director is liable to a civil penalty if he or she fails to take all reasonable steps to comply or to secure compliance with the record-keeping provisions.
This brings us to BHP Billiton’s hospitality program for the Beijing Olympics in 2000, having been named as a principal sponsor and having secured a contract to mint the medals for those Olympics. BHP Billiton is a dual listed Australian and UK entity and one of the largest mining corporations in the world.
On 20 May 2015, the US SEC announced that BHP Billiton would be fined an amount of US$25 million for contraventions of the books and records and internal control provisions of the FCPA. According to the press release issued by the SEC:
An SEC investigation found that BHP Billiton failed to devise and maintain sufficient internal controls over its global hospitality program connected to the company’s sponsorship of the 2008 Summer Olympic Games in Beijing. BHP Billiton invited 176 government officials and employees of state-owned enterprises to attend the Games at the company’s expense, and ultimately paid for 60 such guests as well as some spouses and others who attended along with them. Sponsored guests were primarily from countries in Africa and Asia, and they enjoyed three- and four-day hospitality packages that included event tickets, luxury hotel accommodations, and sightseeing excursions valued at $12,000 to $16,000 per package.
“BHP Billiton footed the bill for foreign government officials to attend the Olympics while they were in a position to help the company with its business or regulatory endeavours,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “BHP Billiton recognized that inviting government officials to the Olympics created a heightened risk of violating anti-corruption laws, yet the company failed to implement sufficient internal controls to address that heightened risk.
What is the response from Australia – little to non-existent save for suggestion in the media (The Sydney Morning Herald 9 August 2015) that the AFP was still investigating BHP Billiton in relation to the Beijing Olympics activities. Certainly there is no suggestion in the media or from ASIC that ASIC is investigating BHP Billiton for any allegedly false or misleading books and records offences arising out of the Beijing Olympics case. In all probability, the US and Australian authorities accepted that if BHP Billiton was to be punished, the US authorities would do it as the laws in Australia were in all likelihood seen as inadequate.
It is important that a substantial books and records and internal controls offence for foreign bribery must be created and the penalties must be as severe as the underlying primary foreign bribery offence (in section 70.2 of the Criminal Code). Careful consideration should be given to whether these offences are included in the Corporations Act (to be enforced by ASIC) or in the Criminal Code (to be prosecuted by the CDPP) and wherever they exist, they are properly and robustly enforced.