Friday saw two sentencing firsts when a fine of £1.3 million was made against the printer Smith and Ouzman Ltd in respect of a conviction under the Prevention of Bribery Act 1906. This was the first time a corporate had been convicted in relation to international corruption investigated by the SFO. It was also the first time the sentence of such a case was considered under the Sentencing Guidelines for Fraud, Bribery and Money Laundering (the Guidelines), even though they did not technically apply. The case provides a valuable insight for practitioners in respect of a Court’s approach to sentencing a corporate offender regarding bribery and corruption.
Smith and Ouzman is a leading international security printing company, established in Eastbourne in 1939. In December 2014, the company was convicted of an offence under the statutory bribery regime which preceded the Bribery Act 2010. The offence was bribery via an agent of government officials in relation to the printing of election and examination papers in Kenya and Mauritania. The total bribes paid amounted to £395,074.
The above Guidelines must be followed by sentencing courts in respect of offences under the Bribery Act 2010. The sentencing recorder, Andrew Mitchell QC, held that even though this conviction was not under this Act, he should nevertheless apply the principles and process set out in the Guidelines. Sentencing Guidelines have retrospective effect and therefore must be followed where they are relevant, even when the offending took place before they were published. They may, however, be disregarded when it is in the interest of justice to do so, for example if the guidelines represent a significant departure from the principles as understood at the time of offending. In a similar vein, in the case of Smith and Ouzman, applying the principles developed for the Guidelines in relation to behaviour which would fall under section 1 of the new Bribery Act, if it happened now, was appropriate.
The Guidelines require that the quantum of the fine is calculated after consideration of compensation and confiscation. This is done via the following steps:
- Identification of the ‘harm figure’. In cases of bribery this is either the gross profit from the contract obtained or sought. For offences under section 7 of the Bribery Act 2010 (concerned with failure to prevent bribery), the ‘harm figure’ may be the likely cost avoided by failing to put in place adequate procedures to prevent bribery. Smith and Ouzmans’ ‘harm figure’ was its gross profit from the offending, which was calculated as £438,933.
- Culpability of the offender. This is determined by identifying whether any of the non-exhaustive list of features set out in the Guidelines applies in order to determine where the offender should be placed in a ranking of A–C, with A being the most culpable and C being the least. In this case the parties agreed that the company was in category A in light of the role of the company, the payments made to government officials, the period of offending, and its position in the market.
- Determination of starting point and category range to identify the multiplier. The factor by which the ‘harm figure’ is multiplied is established by considering aggravating and mitigating features. A further non-exhaustive list of features is provided, which sets out which factors increase seriousness and which reflect mitigation. In this case the Recorder took into consideration several features which are not reflected in the guidelines, notably:
- Significant remedial action;
- The contribution the company has made to, and the high regard it was held in, its local community, Eastbourne;
- Smith and Ouzman’s record of being a ‘good employer’: by way of illustration, 13 of its 83 employees have been with the company for over 25 years.
The Recorder relied on these factors to reduce the multiplier from the 350% that he had initially believed appropriate to 300%.
The total fine of £1.3 million was ordered to be paid in equal instalments over a period of 5 years to assist the company in continuing as a going concern.
While this is the first time that the Sentencing Guidelines have been applied in respect of international bribery following a trial, it is the second time that they have been used to calculate a fine in relation to this type of offending. In the recent DPA agreed between the SFO, Standard Bank plc and the Court, the guidelines were also followed. In this case the Court and the parties disagreed about whether the offending, which involved a single incident of bribing a public official, was category A or B. This disagreement eventually became academic because the Court put the offending towards the lower end of Category A and the parties put the offending at the higher end of category B and so there was agreement about the level of multiplier; 300%.
In neither Smith and Ouzman nor Standard Bank were there any adjustments to the fine following a further step, described as ‘the stepping back process’, in the Guidelines after the initial stages 1 – 3. Steps 1 – 3 set out a process leading to a calculation, and the ‘stepping back’ allows any appropriate adjustments to be made. In this aspect of sentencing, the Court is invited to consider the overall effect of compensation, confiscation and fine, and consider whether it achieves:
- The removal of all gain;
- Appropriate additional punishment, and
This stage of the sentencing process reintroduces discretion and enables the Court to adjust the fine to ensure “that it is substantial enough to have economic impact which will bring home to management and shareholders the need to operate within the law. Whether the fine will have the effect of putting the offender out of business will be relevant; in some bad cases this may be an acceptable consequence.” This is the aspect of the guidelines which makes predicting sentence most challenging for practitioners, as there is no guidance setting out the extent to which fines might be scaled up or down. The steps leading to determination of a multiplier are flexible, as was demonstrated by the Recorder looking beyond the list of features in the Smith and Ouzman case, but their effect is predictable. In contrast, there is no indication in the final ‘stepping back’ as to what quantum an increase or decrease should take. Cases that follow may offer guidance on this aspect of the Guidelines but until they do, anticipating how the ‘stepping back’ might alter a fine will remain a challenge.
In R v Smith & Ouzman & Others – Corker Binning represented an individual who was tried and acquitted of the indictment.