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UK-Based Company and Seven Individuals Charged in the UK With Bribery Surrounding Angola Operations
On July 13, the UK Serious Fraud Office (SFO) charged a UK-based logistics and freight operations company, along with seven current and former executives, with making corrupt payments in violation of Section 1 of the Prevention of Corruption Act 1906. The company is a subsidiary of a privately-owned company headquartered in Hamburg, Germany. The conduct at issue is alleged to have occurred between January 2005 and December 2006, and involves an alleged conspiracy to bribe an agent of an Angolan state oil company to bolster the subsidiary company’s business in the Republic of Angola.
Among other things, Section 1 of the Prevention of Corruption Act 1906 criminalizes the act of offering any gift or consideration to induce an agent to take action in relation to the agent’s principal. Notably, the Prevention of Corruption Act 1906, and, collectively, the Prevention of Corruption Acts 1889-1916, were repealed and replaced by the Bribery Act 2010, which took effect on July 1, 2011. The conduct at issue, however, occurred prior to the enactment of the Bribery Act and, although the Prevention of Corruption Acts were repealed, the government can still use them to prosecute offenses committed before the repeal.
The SFO accepted the case for investigation in September 2014. The subsidiary company and the charged individuals are now scheduled to appear before the Westminster Magistrate’s Court on August 4, 2016.
UK Serious Fraud Office Enters Into Second DPA with Undisclosed Company
On July 11, the United Kingdom’s Serious Fraud Office (SFO) entered into its second-ever deferred prosecution agreement (DPA), under section 1 of the Criminal Law Act 1977 (conspiracy to corrupt and conspiracy to bribe) and section 7 of the Bribery Act 2010 (failure of a commercial organization to prevent bribery). The counterparty to the DPA is an unnamed UK small to medium sized entity (SME), a wholly-owned subsidiary of a U.S. corporation, which generates the majority of its revenues from exports to Asian markets. The DPA did not name the entities due to ongoing related legal proceedings.
The allegations implicate conduct spanning from June 2004 through June 2012 (straddling the effective date of the Bribery Act), involving offers and payments of bribes to secure contracts in foreign jurisdictions. As part of the DPA, the SME agreed to pay a penalty of £352,000 and to disgorge £6,201,085 in gross profits, £1,953,085 of which will be contributed by the U.S. parent company as repayment of a portion of the dividends it received from the SME. The DPA also requires the SME’s continued cooperation and reporting of ongoing compliance efforts.
In its judgment accepting the DPA, the Crown Court addressed the issue of whether to allow the SME – a wholly-owned subsidiary of modest resources – to become insolvent or, in the alternative, to mitigate the financial penalties knowing that the SME could only survive a substantial payment with the support of its parent company. Significantly, the Crown Court sought to avoid encouraging a parent company to establish a subsidiary “as a vehicle through which corrupt payment may be made,” and then summarily dumping the subsidiary when facing criminal repercussions, emphasizing that such a scenario would likely result in the parent company facing prosecution under section 7 of the Bribery Act.
The judgment states that while the SME’s compliance programs were wholly inadequate during the relevant period, the U.S. parent company implemented its global compliance program in the SME in late 2011, through which, in mid-2012, concerns came to light regarding the manner in which a number of contracts were obtained. In mitigating the financial penalties to allow the SME to continue its operations, the Crown Court made clear that there was no allegation that the U.S. parent company knowingly profited from the criminal activities of the SME, nor that it should have known of such activities. The judgment states that the U.S. parent company acted promptly and appropriately when such matters came to light, underscoring the value of self-reporting and cooperation.
London-Based Global Building and Infrastructure Company Ordered to Pay £2.25 Million in First UK Section 7 Conviction
Following its December guilty plea in the UK, a London-based global building and infrastructure company on Friday was ordered by a UK court to pay £2.25 million (including a fine of £1.4 million) for violating Section 7 of the UK Bribery Act of 2010. This was the first-ever conviction and sentence for a company under Section 7, which in essence penalizes companies for failing to prevent bribes made on their behalf. The conduct at issue related to a three-year arrangement in the UAE to secure contracts related to large building contracts.
London-based Engineering and Construction Firm Admits to Middle East Bribery
On December 2, a London-based engineering and construction firm admitted to violating Section 7 of the U.K.’s Bribery Act of 2010 – failure to prevent bribery – regarding its conduct in the Middle East. According to the firm, the underlying conduct was related to alleged bribery from 2009 to 2011 involving a former employee located in Dubai.
While the SFO has not yet announced specifics associated with the conduct or any penalties that may be imposed, it previously announced the opening of its investigation into the firm’s activities in the United Arab Emirates and elsewhere. This investigation appeared to have been triggered by a 2013 Wall Street Journal article that reported allegations of bribery involving the construction of a hospital in Morocco. According to the WSJ, a bribe was offered to a United Arab Emirates official’s personal foundation in order to secure the design work contract for the $100 million project.
UK Serious Fraud Office Issues First Deferred Prosecution Agreement with Johannesburg-based Financial Group
On November 30, the United Kingdom’s Serious Fraud Office (SFO), working with the DOJ and SEC, entered into a deferred prosecution agreement (DPA) with a Johannesburg-based financial group under the U.K.’s Bribery Act of 2010 regarding payments by two former employees that were allegedly made to bribe members of the Tanzanian government. The DPA represents the SFO’s first-ever DPA and the first use of Section 7 of the Bribery Act, failure of commercial organizations to prevent bribery, by any U.K. prosecutor. As part of this DPA, the financial group agreed to pay a combined $32.2 million in sanctions to the U.K. and Tanzania, and to cover the SFO’s litigation and investigation costs. The DPA also requires the financial group’s continued cooperation with authorities and the implementation of certain recommendations from its independent compliance consultants.
In addition to the DPA, the financial group agreed to pay $4.2 million to the SEC to settle charges related to the failure to disclose the underlying bribe payments in the bank’s offering documents and statements to potential investors. In light of the financial group’s cooperation with the SFO and the DPA, the DOJ reportedly closed its own investigation without bringing independent charges.
Notably, in one of the first examples of the SEC implementing its plan to make more defendants admit to the allegations against them as part of resolutions, the financial group agreed to the facts underlying the SEC charges.
Three Acquitted In UK Trial For Alleged Nigerian Corruption
On May 27, a London jury found three employees of Swift Technical Solutions Ltd (Swift) not guilty of corruption charges in connection with alleged corrupt payments to tax officials in Nigeria. The SFO announced the verdict on June 2. As to one defendant, the jury was unable to reach a verdict on one count and was discharged; the SFO informed the Southwark Crown Court that it would not seek to retry that defendant on that count and the court entered a verdict of not guilty.
The SFO brought the corruption charges in late 2012 after a two-year investigation related to the tax affairs of a Swift Nigerian subsidiary. The SFO alleged that the Swift employees paid bribes totaling approximately £180,000 in 2008 and 2009 to Nigerian tax officials to avoid, reduce, or delay paying tax on behalf of workers placed by Swift. The alleged bribes occurred before the enactment of the U.K. Bribery Act and allegedly went to agents of two Nigerian Boards of Internal Revenue – the Rivers State Board of Internal Revenue and the Lagos State Board of Internal Revenue. The SFO did not charge Swift with any criminal offense, citing its cooperation with the agency.
UK SFO Revises Guidance on Self-Reporting
On October 9, the United Kingdom Serious Fraud Office (SFO) issued policy statements and frequently-asked-questions (FAQs) with regard to: (1) facilitation payments, (2) hospitality and gifts, and (3) self-reporting. While the bulk of the guidance reasserts existing policies, the SFO did revise its guidance on self-reporting. The new guidance makes clear SFO’s position that self-reporting will not always shield a company from prosecution. The fact that a corporate body has reported itself will be a relevant consideration if it forms part of a "genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice.” A decision by the SFO to prosecute will be based on the Full Code Test in the Code for Crown Prosecutors, the joint prosecution Guidance on Corporate Prosecutions and, where relevant, the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. As explained in the FAQs, the revised statement of policy is not limited to allegations involving overseas bribery and corruption, and if the requirements of the Full Code Test are not established, the SFO may consider civil recovery as an alternative to a prosecution.