Serious Fraud Office (SFO)

In late February 2018, a two-day jury trial in London’s Southwark Crown Court resulted in the first successful contested prosecution of a corporation for failure to prevent bribery. This offence is contained in Section 7 of the Bribery Act 2010 (the Act).

The particulars of the case may lead one to question the extent to which a prosecution was, in fact, justified, and whether the ramifications are likely to be universally positive.

The Facts

The Defendant was a London-based interior design company, Skansen Interior Limited (SIL). In January 2014, a new CEO of SIL, Ian Pigden-Bennett, was appointed. Upon his arrival, Mr Pigden-Bennett was informed of two payments totaling £10,000 made to a Manchester-based property company. Mr Pigden-Bennett discussed these payments with SIL’s managing director, Stephen Banks, who was seemingly unable to justify them to Mr Pigden-Bennett’s satisfaction. After their discussion, Mr Pigden-Bennett commenced an internal investigation, and put in place an anti-bribery and corruption policy.

Despite this increased scrutiny, Mr Banks attempted to make a third payment of some £29,000 to the same company, which, in the event, was discovered and prevented. It emerged Mr Banks had authorized these payments as bribes to a project manager at the company in order to secure contracts worth £6 million for refurbishing offices in London.

Once this came to light, Mr Pigden-Bennett fired Mr Banks, along with SIL’s commercial director (who, unlike Mr Banks, was not subsequently charged by the police). He also informed the relevant authorities; in this case by contacting the City of London Police and by filing a suspicious activity report with the National Crime Agency. Thereafter, it is understood SIL assisted with the ensuing investigation.

The Offence

SIL was found guilty of breaching Section 7 of the Bribery Act 2010, which provides that:

  1. “A relevant commercial organisation (C) is guilty of an offence under this section if a person (A) associated with C bribes another person intending—
    1. To obtain or retain business for C.
    2. To obtain or retain an advantage in the conduct of business for C.
  2. But it is a defence for C to prove that C had in place adequate procedures designed to prevent persons associated with C from undertaking such conduct.”

And so a commercial organization is strictly liable where an individual associated with that organization has paid a bribe. If the entity in question can demonstrate that, on the balance of probabilities, it had put “adequate procedures” in place to prevent that kind of behavior, it can avoid liability.

The Act gives no consideration to what “adequate procedures” may be. To address this, shortly before the Act came into force in March 2011, the Ministry of Justice published guidance to assist companies. However, given the wide application of the Act, there can be no one-size-fits-all approach and so a degree of uncertainty remained about the practical application of Section 7.

The Prosecution

SIL was able to point to swift action once the offence was discovered: a new anti-bribery and corruption policy, the firing of the relevant individuals, and, perhaps most significantly, the immediate self-reporting and subsequent cooperation with the authorities.

However, this was insufficient for the Crown Prosecution Service (CPS). It has been reported that, at trial, the judge queried why the CPS was pursuing a case against a company which had been dormant for several years. The CPS is understood to have responded that there was a public interest in signaling the seriousness of the requirements of the Act, and the rigorous enforcement regime.

Here, the CPS made a vice of SIL’s virtue: arguing that SIL’s implementation of a new policy, and the fact that the final attempted payment was stopped, revealed the previous procedures were inadequate. It further justified the prosecution on the basis that SIL had seemingly failed to train its staff, and there was no evidence employees had been informed of any existing anti-bribery policies. It was unconvinced by SIL’s protestations that, as the employees were aware bribery was a crime, there was no need for a detailed company policy.

Ultimately, the CPS prevailed, and the jury found SIL failed to enact specific procedures to ensure compliance with the Bribery Act. The judge gave an absolute discharge, meaning, pursuant to the Rehabilitation of Offenders Act 1974, no finding of guilt was registered on the company’s record and there was no financial penalty.

Commentary

In this instance, the CPS appears to have pursued prosecution with a particular zeal.

It has been reported that the CPS considered offering SIL a deferred prosecution agreement. DPAs are a form of settlement agreement which can be offered by the UK Serious Fraud Office (SFO) or the Office of Financial Sanctions Implementation to companies which self-report wrong-doing. The terms are reached between the parties under the supervision of a judge, and permit a company to make reparations for illicit behavior, while avoiding a criminal conviction. It seems, ultimately, SIL was not offered a DPA, ostensibly on the ground that, having been dormant since 2014, and having no assets, it would have been unable to satisfy the financial component of any DPA. One might wonder whether that logic would also hold for the election to prosecute the company.

There is of course some danger that in circumstances where a company does uncover bribery, the temptation would now exist to avoid self-reporting, or worse, take no action at all to avoid arousing suspicion from the authorities. This is perhaps particularly so where such bribery would be unlikely to come to light absent any intervention from the company.

It goes without saying that this temptation should be avoided. Self-reporting remains the best method of securing leniency, however, as the SFO’s own guidance states, this is no guarantee that a prosecution will not follow. The real takeaway is not that reporting crime never pays. Rather, when considering their prevention strategies, companies should be guided by SIL’s failings by, for example, ensuring an appropriate anti-bribery and compliance policy is in place, monitored, and updated as necessary. Internal audit procedures to ensure that accounts payable/receivable are legitimate and supporting a real business purpose also go hand-in-glove with an anti-bribery policy. Nonetheless, a policy is unlikely per se to be sufficient; staff should be made aware of it and trained as necessary. There should also be a designated compliance officer available for staff to report concerns. What constitutes adequate procedures will vary between companies, but these appear to be minima of wide application.