The SFO’s first successful  prosecution of a corporate entity for bribery of foreign public officials and its first successful prosecution of individuals under the UK’s Bribery Act 2010 (the “Bribery Act”), as well as the publication of a broadly favourable report, are three recent markers of what appears to be a gradually improving state of affairs at the country’s lead anti-corruption agency. The question is whether, as argued by the Director of the SFO, David Green, in October last year, “the oil tanker has completed its turn, and is now on the right course and making headway.”

SFO’s first conviction of a corporate entity for bribery of foreign public officials

Smith & Ouzman Ltd,  a printing firm based in Eastbourne, was convicted alongside two of its former employees at Southwark Crown Court on 22 December, following a three year investigation by the SFO. The company was found guilty of corruptly agreeing to make payments to public officials for business contracts in Kenya and Mauritiana, contrary to section 1(1) of the Prevention of Corruption Act 1906. The charges were brought under the Prevention of Corruption Act 1906, not the Bribery Act, as the offences took place before the Bribery Act came into force. Given that section 7 of the Bribery Act was intended to facilitate easier prosecution of corporates by introducing an offence of ‘failure of commercial organisations to prevent bribery’, it is notable that the SFO nonetheless felt able and has indeed been successful in undertaking pre-Bribery Act enforcement action in this case. As noted by David Green: “This is the SFO’s first conviction of a corporate for offences involving bribery of foreign public officials.” Green also commented: “Such criminality, whether involving companies large or small severely damages the UK’s commercial reputation and feeds corrupt governance in the developing world. We are very grateful to the Kenyan authorities for their assistance in this case.” Sentencing will take place in February 2015.

SFO’s first individual convictions under the UK Bribery Act

On 5 December, the SFO successfully prosecuted three men for their roles in a fraud valued at approximately £23 million. This followed an investigation by the SFO which centred on the selling and promotion of biofuel to UK investors between April 2011 and February 2012. The men were sentenced on 8 December, receiving 13, 9 and 6 year terms of imprisonment respectively, as well as being disqualified from acting as directors.[1] The men were convicted of conspiracy to commit fraud, conspiracy to furnish false information, fraudulent trading and offences under the Bribery Act. The convictions under the Bribery Act are the first to be secured by the SFO since the Bribery Act came into force in July 2011, and the corresponding sentences the first to be decided under the new sentencing guidelines for bribery offences under the Bribery Act. Commenting on the verdict, David Green said: “[t]his successful conclusion of the SFO’s investigation clearly demonstrates the harm that this type of investment fraud has on victims and the SFO’s ability and determination to bring criminals to justice.”

The inspector’s report

A report published by HM Crown Prosecution Service Inspectorate (“HMCPSI”) on 28 November is a “follow-up” to the inspector’s damning 2012 report, which concluded that the quality of casework handling at the SFO was “significantly undermined by weakness in systems and processes”. This year’s report describes a mixed picture at the SFO as of the end of 2013. On the one hand, the SFO had made “significant efforts to deal with the deep-rooted issues identified in the last report”: there had been no attempt to “‘plaster over the cracks”, and the SFO was taking “the proper approach of laying sound foundations to ensure success in future years”. It was therefore generally moving in a “positive ‘direction of travel’”. On the other hand, it was considered too soon at the end of 2013 to expect the agency to have delivered the full business impact sought. Nonetheless, the inspectors found that the SFO had made “substantial progress” on three of eight recommendations issued in the 2012 report, and ‘limited progress’ on four.[2] The eighth recommendation (that the SFO should implement intensive staff training programmes) was “no longer applicable” as the assessment framework related to outdated plans, so progress on that issue will be measured in the next inspection. Regarding the other recommendations, the SFO had made “substantial progress” in:

  • its acceptance processes when selecting cases;
  • its casework management processes, including record keeping and quality assurance; and
  • improving the process for deciding to pursue civil recovery and negotiating consent orders.

It had made only “limited progress” in:

  • reviewing and updating its intelligence function;
  • ensuring case investigation and prosecution teams are properly resourced;
  • training staff in investigation techniques and equipping investigations adequately early on; and
  • updating and training staff on disclosure guidance.

Much therefore still needed to be done. The report suggests various areas for further action, including:

  • embedding the National Intelligence Model principles across the office;
  • rolling out a central compliance testing programme to drive improvement in quality assurance;
  • improving clarity around the pathway for cases potentially suitable for civil recovery orders; and
  • continuing to improve staff resourcing to ensure balance between case teams.

Anti-Corruption Plan

Meanwhile, the UK Government’s Anti-Corruption Plan was released on 18 December. This brings together, for the first time, all of the UK’s activity against corruption in one place. The 66-point cross-government Plan follows a six-month review of the various bodies responsible for investigating and prosecuting bribery in the UK and is intended to bring more coherence to the efforts of these bodies to “stamp out bribery and corruption” and raise global standards. Within the UK, the Government’s “immediate priorities” include to “strengthen our law enforcement response so that we can pursue, more effectively, those who engage in corruption or launder their corrupt funds in the UK.”  Of note in this respect, the Plan states that a new central bribery and corruption unit will be created within the National Crime Agency (“NCA”), “to boost capacity to investigate cases of international corruption and act as a centre of excellence”. While recognising that the SFO devotes considerable resource and operational capability to tackling bribery and corruption, and acknowledging a number of the agency’s collaborative initiatives,[3] the Plan does not include a wider review of the SFO’s role.

Conclusions

The SFO’s first conviction of a company for bribery of foreign public officials, its first prosecutions under the Bribery Act and the relatively favourable report from HMCPSI are clearly a step in the right direction for the SFO. However there remains much to do before it can be said that the “tanker has completed its turn”. For example, we await the first corporate prosecution under section 7 of the Bribery Act, and the first Deferred Prosecution Agreement. We also await the conclusion of the high profile investigations into overseas bribery involving several high profile PLCs. If such investigations result in the prosecution of individuals or corporate entities the SFO’s reputation will be perceived as more of a threat in the eyes of the global corporate community. If not, the recent successes risk being viewed as an exception rather than as an indication that the office is making genuine headway. By Henry Garfield and Amy Smith (Baker & McKenzie London)



[1] Two of the three men have been disqualified from acting as directors for 15 years and the third has been disqualified for 10 years.
[2] The report states that “limited progress” is gained by effective review and subsequent action; “substantial progress” involves demonstrable positive business impact.
[3] For example, the SFO and CPS have produced a statement of policy on their joint approach to prosecutions under the Bribery Act and have published jointly agreed guidelines on their approach to prosecuting corporate entities, and the Director of the SFO and the Director of Public Prosecutions have published a joint code of practice for Prosecutors on the use of Deferred Prosecution Agreements.

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