25 September 2009
Mabey & Johnson Ltd, a British company which manufactures bridge equipment, pleaded guilty at Southwark Crown Court to a series of corruption offences committed overseas and is to pay a total of £6.55m in connection with these offences. On Friday 25 September 2009 the company was ordered by the court to pay £4.6m in fines and disgorgement of profits. In addition, the company has undertaken to pay reparations to the affected countries. It will also pay legal costs and the costs of an independent compliance monitor to ensure it has appropriate systems and controls in place going forward.
The company admitted that between 1994 and 2001 it bribed public officials over a bridge and road project in Ghana and another building contract in Jamaica. The company also admitted a separate charge of making €422,000 of illicit payments to Saddam Hussein's Iraqi regime between 2001 and 2002.
The court stressed that the fact that the company had self-reported the problem to the SFO and then cooperated fully in the investigation was the biggest mitigating factor in assessing the level of fine to be imposed.
It is not yet known whether the SFO will bring criminal charges against individual former directors of the company, but today's court ruling does not preclude them from doing so.
This is the first prosecution by the SFO of a British company for overseas corruption. It should be seen in the context of the current drive by enforcement agencies, including the SFO, the City of London Police Overseas Anti-Corruption Unit and the Financial Services Authority, to be seen to be taking action against those who engage in bribery as a method of winning foreign contracts.
The SFO wants companies to self-report
The decision voluntarily to disclose the corruption offences to the SFO was taken by the management of Mabey & Johnson's holding company in February 2008 whereupon an investigation was opened.
SFO Director Richard Alderman said, "These are serious offences and it is significant that Mabey & Johnson has cooperated with us to get to this landmark point. This has enabled this case to be dealt with in just over a year and is a model for other companies who want to self report corruption and have it dealt with quickly and fairly by the SFO."
The SFO is looking to encourage corporates to self-report and has indicated that it will consider using only civil penalties, rather than bringing a criminal prosecution, where companies cooperate with its investigations, except where a company's senior management (such as members of the main Board of Directors) have been complicit in the corrupt activities. This is very much in line with the approach taken by enforcement agencies in the US in relation to breaches of the Foreign Corrupt Practices Act ("FCPA").
There is, however, no guarantee that a company which self-reports will avoid criminal charges being brought. Mr Alderman told the Cambridge International Symposium on Economic Crime at the end of August this year that "Early reporting should never be regarded by a corporate as a means of avoiding prosecution – we ourselves do not treat it as such. Early reporting allows us to consider at a preliminary stage the most appropriate course of action."
Mr Alderman also told the symposium that there are more civil recovery of property orders to come, following the Balfour Beatty case last year. Balfour Beatty self-reported to the SFO that it had inaccurate accounting records relating to irregular payments made by a subsidiary involved in a construction project in Egypt. The company agreed to a settlement payment of £2.25 million and external monitoring of its compliance systems for an agreed period.
Will proposed new legislation lead to more prosecutions of British companies?
The current outdated law on bribery in this country has made it difficult for successful prosecutions to be brought for corruption offences, particularly against corporate wrongdoers. There has been increasing pressure, particularly from the Organisation for Economic Co-operation and Development ("OECD"), for the introduction of modern foreign bribery legislation in line with the OECD Anti-Bribery Convention which the UK ratified 10 years ago.
Following a report by the Law Commission published in November 2008, the Government published its draft Bribery Bill on 25 March 2009. It is expected that the Bill will be enacted next year.
The draft legislation contains a specific offence of bribing a foreign public official in order to obtain business contracts, and a new bribery offence, applicable to companies and limited liability partnerships registered in England and Wales, of negligently failing to prevent bribery by an employee or agent. Thus the Bill, if enacted in its current form, should make it significantly easier for enforcement agencies to bring prosecutions against UK corporate entities in respect of corruption offences committed abroad.
Further, under the proposed legislation it would be possible to hold directors and senior managers individually liable if they consent to or connive at the commission of bribery offences by their organisations.
In addition, other powers which can be used to tackle corporate corruption have been introduced in recent years, including the power to make Serious Crime Prevention Orders plus the imposition of an authorised third party to monitor a company's compliance with good business and ethical standards (as used in the Mabey & Johnson case), as well as powers under the Proceeds of Crime Act 2002 to recover property obtained by unlawful conduct even where there has been no conviction for a specific criminal offence.
Mayer Brown has extensive experience in handling internal corporate investigations, including ones regarding possible violations of the anti-bribery provisions of the FCPA, and we are alert to issues of legal professional privilege, document retention, and electronic disclosure, all of which may be crucial in the event of any enforcement proceedings. We are familiar with the complexities of multinational investigations and have considerable experience in coordinating the work of foreign counsel in such investigations.
We also provide multi-jurisdictional anti-corruption compliance advice for our clients, including the development of training programmes and written compliance procedures for employees. Please contact us for further information on the services we provide in this area.
For further information on financial crime, anti-corruption legislation, and investigations please contact:
Partner, Litigation and Dispute Resolution
Tel: +44 (0)20 7782 8386
Partner, Litigation and Dispute Resolution
Tel: +44 (0)20 7782 8311
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Tel: +44 (0)20 3130 3358
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