Julian Messent, the former CEO of reinsurance broker PWS Holdings, has been jailed for 21 months, after a plea agreement with the SFO was approved on 26 October at Southwark Crown Court in London. He pleaded guilty to committing bribery in Costa Rica – admitting making or authorising corrupt payments of almost $2million between February 1999 and June 2002 to Costa Rican officials in the state insurance company, and the national electricity and telecommunications provider.
Further, in an interesting reparation move, he was ordered to pay £100,000 compensation within 28 days to the Republic of Costa Rica or serve an additional 12 months imprisonment if he failed to do so.
Messent was at the time the head of the Property (Americas) Division at PWS, where he was responsible for securing and maintaining contracts for reinsurance in the Central and South America regions. Between 1999 and 2002, PWS acted as broker on behalf of several state institutions in Costa Rica. During this period, he authorised 41 corrupt payments totalling just short of $2m to be paid to Costa Rican officials, their wives and associated companies, as inducements or rewards for assisting in the appointment or retention of as broker. Messent was appointed the firm’s chief executive in 2003 and resigned three years later after investigations into the payments began. PWS went into administration in 2008.
The case was brought by the Serious Fraud Office (SFO) and City of London Police after the Foreign and Commonwealth Office was tipped off by the Costa Rican authorities. Charges were brought under s1 (1) of the Prevention of Corruption Act 1906. Messent was charged in April 2010, and had entered into a plea agreement with the SFO.
At the hearing, Messent’s barrister said he had not acted alone – he had not concealed the illicit payments from other PWS staff; the details were known to the heads of the finance department and the compliance unit; and that arrangements for the corrupt payments had been “inherited” by Messent when he became head of the firm’s Latin America department in 1996.
The SFO however believed that Messent was the “directing” mind behind the corruption, and the Court – under Judge Geoffrey Rivlin QC – agreed with them. It emerged during the trial that PWS had created a slush fund in which “ceding” and “third-party” commissions were received from the state and these funds were used to bribe government officials.
The Judge stated that Messent had faced a custodial sentence of between four or five years, but was given a reduced term because of the trial’s length and his previous good character and record.
It is no mitigation to say others do it [pay bribes] or that it is the way of doing business…anyone minded to do it should be deterred from doing so.
The Messent case appears to indicate that the SFO have learned from their experience on Dougall (here). The judge in Messent seems to have felt that the sentence mooted with the defendant was proportionate and reasonable, and both the SFO and City of London Police were complemented by the court on their handing of the case. We haven’t seen the agreement, but from the defendant’s side it appears that the plea agreement and co-operation with the SFO did work to lower the sentence in this case. Nevertheless, despite Messent’s co-operation, a lengthy custodial sentence was still imposed, and this is likely to be a signal to those self-reporting that a slap on the wrists is unlikely to be sufficient if bribery can be easily proved to have taken place.
The SFO’s press release can be found here.
Bribery Act 2010 – ‘Adequate Procedures’. The consultation process begins
The new UK Bribery Act 2010 introduces a strict liability corporate offence of failing to prevent bribery committed by employees, agents, or any other ‘associated person’ of the company. Under Section 7, a relevant commercial organisation commits an offence if a person associated with it engages in bribery, unless it can show that it had in place “adequate procedures” designed to prevent the offence. This element of the Act is due to come into force in April 2011.
In response to much business disquiet about what all this means in practice, the Secretary of State was required to publish guidance about procedures that commercial organisations can put in place to prevent persons associated with them from bribing people. Although much of this is already fairly well established by compliance professionals in this space, we have waited with baited breath to see if this guidance actually contained tangible, concrete procedures which will be useful to business, or just more dishy-washy statements about the importance of tone at the top.
A consultation document has just been published to start the process. This consultation begins on 14 September 2010 and ends on 8 November 2010. The consultation period will last 8 weeks, and is shorter than the standard 12 week period in order to allow enough time for views to be considered and for guidance to be published early in the New Year in advance of the Act coming into force in April.
The Government proposes guidance formulated around six general principles, designed to be of general applicability. The guidance states that it is not intended to be prescriptive or standard setting, or impose any direct obligation on business, however the flip side to this is that the guidance is vague and overly-generic, leaving the reader in many instances feeling: ‘This is all very good – but what should we actually DO?’.
The principles are as follows:
Principle 1 – Risk Assessment
The commercial organisation regularly and comprehensively assesses the nature and extent of the risks relating to bribery to which it is exposed.
Principle 2 – Top-Level Commitment
The top-level management of a commercial organisation is committed to preventing bribery. It establishes a culture within the organisation in which bribery is never acceptable. It takes steps to ensure that the organisation’s policy to operate without bribery is clearly communicated to all levels of management, the workforce, and any relevant external actors.
Principle 3 – Due Diligence
The commercial organisation has due diligence policies and procedures, which cover all parties to a business relationship, including the organisation’s supply chain, agents, and intermediaries, all forms of joint venture and similar relationships, and all markets in which the commercial organisation does business.
Principle 4 – Clear, Practical, Accessible, and Enforceable Policies and Procedures
The commercial organisation’s policies and procedures to prevent bribery being committed on its behalf are clear, practical, accessible, and enforceable. Policies and procedures take account of the roles of the whole work force, from the owners or board of directors to all employees, and all people and entities over which the commercial organisation has control.
Principle 5 – Effective Implementation
The commercial organisation effectively implements its anti-bribery policies and procedures and ensures that they are embedded throughout the organisation. This process ensures that the development of policies and procedures reflects the practical business issues that an organisation’s management and workforce face when seeking to conduct business without bribery.
Principle 6 – Monitoring and Review
The commercial organisation institutes monitoring and review mechanisms to ensure compliance with relevant policies and procedures and identifies any issues as they arise. The organisation implements improvements where appropriate.
Some of the guidance is as expected, not really very guiding, such as the several statements of the obvious ….
The case studies at the end are well worth a read though. They deal with:
I’ll take the liberty of quoting the one that deals with facilitation payments in its entirety.
Principle 1 – Risk Assessment
Principle 2 – Top level commitment
Principle 3 – Due diligence
Principle 4 – Clear Practical and Accessible Policies and Procedures
Principle 5 – Effective implementation
Principle 6 – Monitoring and reviewing bribery-free business policies
The consultation document (in pdf format) can be found here.