In written parliamentary questions on 10 February 2009, the Solicitor General was asked (see here) when the SFO would be commencing Civil Recovery Actions under part 5 of the Proceeds of Crime Act 2002. The response was that it is expected that the SFO will have a dedicated proceeds of crime team which will be fully operational by April 2009.
Embarrassingly, no-one at the SFO is yet qualified to undertake a civil recovery investigations. To do so, staff are required to obtain accreditation for Part 5 powers under POCA from the National Policing Improvements Agency. Apparently, and reassuringly for us taxpayers, “The SFO is assisting in the development of the training that leads to accreditation in order to accelerate this process.” The Home office circular here states that:
Suitably accredited AFIs currently have access to the powers to apply for investigation orders and warrants under Part 8 of POCA and to apply for restraint orders in confiscation proceedings. The 2007 Act extends the available powers to:
- seizing property which is subject to a restraint order to prevent its removal from the country
- searching, seizing, detaining and seeking forfeiture of cash in summary proceedings
- executing a search and seizure warrant
Access to these powers is not automatic. All AFIs need to be separately trained and accredited by NPIA to allow them access to the new powers and the Home Office needs to make a statutory instrument (Order) to list them as having access to the new powers.
By way of background, the engine for civil recovery in the UK has historically been the Asset Recovery Agency (all references in POCA are to ARA). The ARA has now merged with the Serious Organised Crime Agency (SOCA), and the Government has extended the power to launch civil recovery proceedings to the three main prosecutors in England and Wales; the Crown Prosecution Service, the Revenue and Customs Prosecutions Office and the Serious Fraud Office , and has also given them powers of civil recovery over & above those in POCA through the Serious Organised Crime and Police Act 2005.
It will remembered – somewhat confusingly – that last October the SFO did successfully obtain its first civil recovery settlement for £2.5 million with Balfour Beatty plc.
The full Part 5 of the POCA can be found here.
The Halliburton/Kellogg Brown & Root fine
Before costs and knock-on effects, the long awaited Halliburton/KBR total penalty was $579million, the second largest in FCPA history, behind Siemens. It is in line with what commentators and the company was expecting. It is clear though that large fines are now the norm, and they’re getting larger.
The KBR settlement story is better told in the FCPA Blog post here.
DOJ
The plea agreement with the DOJ fined KBR $402m. The plea agreement can be found here.
The fine is based on the US Federal Sentencing Guidelines for Corporations, which are a bit of a mystery to us over on this side of the pond. To arrive at the eventual fine requires first an estimate of a ‘base fine’ which is modified based on a multiplier dependant on what is called a ‘culpability score’. And from there, there is considrable negotiating.
Here, the ‘base fine’ was $235.5m being the “value of the benefit received in return for the lawful payments”. The ‘Culpability Score’ was 8, which was a base Culpability Score of 5, to which was added further 5 because the organisation had more than 5,000 employees and high ranking personnel within the organisation participated in, condoned, or were wilfully ignorant of the offence. 2 points were deducted from the score by virtue of the fact that KBR fully co-operated in the investigation and took responsibility for its previous conduct. Applying the guidelines, the culpability score of 8 gives a ‘multiplier’ of between 1.6 and 3.2 which is applied to the base fine, giving the fine a possible range between $376.8m and $753.6m.
The actual fine agreed was $402m, which is approximately $25m (6.7%) higher than the minimum amount. This “reflects the egregiousness and long duration of the criminal conduct, KBR’s leadership in that conduct, and the fact that KBR’s use of international sales agents does not appear to have been limited to a single project.”
By contrast, the Siemens fine was way below the minimum, reflecting apparently the extraordinary remediation efforts.
The KBR fine was payable in instalments: $50million within 5 days, then $50million per quarter until October 2010. The fine is not tax deductible. KBR also has now to appoint a corporate monitor for 3 years.
SEC
The SEC order was for disgorgement of ill-gotten profits amounting to $177million. The SEC complaint is here, and the litigation release is here.
As a deterrent effect, the DOJ is routinely seeking jail time for the key executives. Here, Albert “Jack” Stanley, pleaded guilty in September 2008 to conspiring to violate the FCPA. His sentencing is scheduled for May 2009, and he faces seven years in prison and a restitution payment of $10.8 million.
Further information on Stanley can be found here. His plea agreement is here.