Monthly Archive for October, 2008

OECD’s Working Group on Bribery criticises the UK

Published on 19/10/2008. 0 Comments Tags: , , .

The OECD’s Working Group on Bribery has sharply criticised the United Kingdom’s failure to bring its anti-bribery laws into line with its international obligations under the OECD Anti-Bribery Convention.  It urged the rapid introduction of new legislation.

The OECD reports that current UK legislation makes it very difficult for prosecutors to bring an effective case against a company for alleged bribery offenses. Although the UK ratified the OECD Anti-Bribery Convention 10 years ago, it has so far failed to successfully prosecute any bribery case against a company.

Among its main recommendations are that the UK should:

  • Enact modern foreign bribery legislation and establish effective corporate liability for bribery as a matter of high priority
  • Take all necessary measures to ensure that Article 5 of the Convention, which notably prohibits consideration of the national economic interest when prosecuting foreign bribery, applies effectively to all investigative and prosecutorial decisions at all stages of a foreign bribery case
  • Ensure that the Attorney General cannot give instructions to the Director of the Serious Fraud Office about individual foreign bribery cases, and eliminate the need for Attorney General consent to prosecutions of such cases
  • Ensure that the SFO attributes a high priority to foreign bribery cases and has sufficient resources to address such cases effectively.

A Law Commission working group report on suggested changes in the law is expected soon, and provided that this is in line with previous drafts, and importantly, actually results in new laws, then many of the accusations will have been adequately dealt with.  The BAE debacle however seems to indicate that there is still a real effort needed from the top to demonstrate the UK’s commitment to rooting out and prosecuting bribery.   

The report can be found here.

Balfour Beatty settles with the SFO (updated)

Published on 07/10/2008. Closed Tags: , , .

A first for the SFO, which has imposed its first Civil Recovery Order on UK-based engineering giant, Balfour Beatty plc. 

The matter relates to irregular payments made in connection with the huge Egyptian engineering project, the Bibliotheca Alexandrina.   The project finished in 2001, and it is not known the extent of the payments in question, or the benefit obtained. 

Balfour Beatty were not charged with a criminal offence, but instead this seems to have been an appropriate matter to dispose of using the SFO’s new Civil Recovery Order powers.  Although CROs were introduced by the Proceeds of Crime act 2002, they have only been available to the SFO since April 2008.

The civil recovery provisions at Part 5 of the Proceeds of Crime Act permit the SFO to recover, in civil proceedings, property which is, or represents, property obtained through “unlawful conduct” (which must be criminal).  The test though is on the civil ‘balance of probabilities’.  Further, there is no requirement that the defendant be convicted of, or charged with, the offence representing the unlawful conduct – the Civil Recovery Order is a free-standing statutory civil claim.  

The Civil Recovery Order itself is confidential, however it appears that the company pleaded guilty to what is, in effect, the ‘books and records’ provision of  s221 Companies Act 1985 (as amended).  The Companies Act  provides that:

221 Duty to keep accounting records

(1) Every company shall keep accounting records which are sufficient to show and explain the company’s transactions and are such as to—

(a) disclose with reasonable accuracy, at any time, the financial position of the company at that time, and

(b) enable the directors to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(2) The accounting records shall in particular contain—

(a) entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place, and

(b) a record of the assets and liabilities of the company.

(3) If the company’s business involves dealing in goods, the accounting records shall contain—

(a) statements of stock held by the company at the end of each financial year of the company,

(b) all statements of stocktakings from which any such statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and

(c) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.

(4) A parent company which has a subsidiary undertaking in relation to which the above requirements do not apply shall take reasonable steps to secure that the undertaking keeps such accounting records as to enable the directors of the parent company to ensure that any balance sheet and profit and loss account prepared under this Part complies with the requirements of this Act.

(5) If a company fails to comply with any provision of this section, every officer of the company who is in default is guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the company’s business was carried on the default was excusable.

(6) A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

The company agreed to pay £2.25m plus a contribution to its legal costs and agreed to continue to take steps to review and improve its control and compliance processes and engage in an external monitoring programme in the future.

Richard Alderman,  director of the SFO, seems to be pleased….

“This is a highly significant development in our efforts to reform British corporate behaviour. We now have a range of enforcement tools at our disposal, and a major factor in determining which of those tools is deployed will be the responsibility demonstrated by the company concerned”

We suspect that this represents a good result for Balfour Beatty, and in time, such settlements – very modest in comparison with those we are seeing under the FCPA  – will look generous.   

The SFO’s press release can be found here.

CBRN Team: new City of London Police unit get their first conviction (updated)

Published on 05/10/2008. Closed Tags: , .

The managing director of UK-based security firm, CBRN Team has been found guilty of bribing a Ugandan public official.   

The newly formed Overseas Anti-Corruption Unit (OACU), a branch of the City of London police (website here), has secured itself a quick result with this case, prosecuting both the briber, and the foreign official who received the bribes. 

Ananias Tumukunde, was a Science and Technology advisor to President Museveni of Uganda. He was based in Uganda.   In May 2007, he signed a contract worth £210,000 with British company The CBRN Team Ltd, for CBRN to supply training and equipment to the Ugandan army for a forthcoming Commonwealth Heads of Government meeting to be held in Uganda.  CBRN specialise in training and detection to counteract chemical, biological, radioactive and nuclear threats.

Following the agreement, Tumukunde approached CBRN Managing Director, Niels Tobiasen, claiming that he would need to make additional payments to meet a “local tax” of 10%.  Tobiasen agreed and a total of five ‘local tax’ payments worth over £83,000 were made to both Tumukunde and a Ugandan army officer, Rusoke Tagaswire between 1 June 2007 and 11 February 2008. 

The OACU received information that Tumukunde would travel to the UK around March/April 2008 and, on 3 April 2008, he was arrested by Scotland Yard at Heathrow Airport.   He served 6 months on remand, before pleading guilty, and was sentenced to 12 months imprisonment , with a recommendation from His Honour Judge Wadsworth that he be deported at the end of his jail term. He also signed a disclaimer releasing the £52,800 from his bank account, into the custody of the City of London police for restitution.

Tobiasen, pleaded guilty to one count of making corrupt payments and was given a five month jail sentence. It was suspended however for a year after the judge heard how Tobiasen had given a “full and frank” confession soon after his arrest and had co-operated with the prosecution.

The City of London Police press release is here.

First Post

Published on 04/10/2008. Closed Tags: , , , .

This is the opening post to the blog – welcome, and please be gentle on us! 

The World Bank has estimated that approximately $1trillion (£680billion) is paid annually in bribes.  The FCPA is now well established in the US and  throughout the world as the first response against this enormous volume of corruption.  After 10 years or so as an all but forgotten piece of well-meaning legislation, has become one of the most significant and costly, aspects of US law.  

The UK and Europe however is languishing behind, and in many respects we are, and are seen as the ‘sick men’ of the  developed world when it comes to prosecuting bribery.   The circumstances surrounding the SFO’s dropping of the BAE Systems plc bribery investigation are well known – see The Guardian’s pages here. 

Despite this, because of its extra-territorial reach, the FCPA has already caught many European multinationals, including Siemens, which the DOJ now has firmly in its sights.    Many of these are in the oil and gas, infrastructure or healthcase sectors.  

These prosecutions though have been by the DOJ and SEC. We think there will be an increasing number of prosecutions in the UK and Europe by local authorities.    Let’s see if this happens:  if it does, this blog is here to document it……