Twitter Logo Youtube Circle Icon LinkedIn Icon

FAILING TO PREVENT BRIBERY

April 2018 - Crime. Legal Developments by Rahman Ravelli Solicitors.

More articles by this firm.

Following the first conviction of a company for failure toprevent bribery, Aziz Rahman considers the implications of the case for thosein business.

A modestly-sized company has become the first to be convicted in the UK for failure to prevent bribery. But the case itself raises more questions than it answers – and provides plenty of cause for concern for those who want to tackle bribery in their business

Skansen was an office refurbishment company, employing about 30 people, which won two contracts in 2013 worth a total of £6 million. The court heard that Skansen won the contracts after its managing director paid two bribes, totalling £10,000, to the project manager at the company that was inviting tenders for the work. These bribes were disguised as legitimate payments, with invoices for the bribes being sent to Skansen in the name of a separate company.

A further bribe, of £29,000, was requested but Skansen’s new chief executive officer, who was appointed in January 2014, started an internal investigation and introduced an anti-bribery policy. The £29,000 payment was stopped before it could be made, Skansen dismissed its managing director and its commercial director, filed a Suspicious Activity Report (SAR) to the National Crime Agency and reported the matter to the City of London Police.

Defence

During the police investigation, Skansen cooperated fully. Yet the company was charged with failure to prevent bribery, under Section 7 of the Bribery Act 2010. Under Section 7, a company has a defence if it can show that it had adequate procedures in place to prevent bribery.

In its defence, Skansen emphasised that it:

* Was a small company that did not require a sophisticated anti-bribery procedure but had an ethos of acting with honesty.

* Already had in place policies that told staff to deal with third parties in an open and honest manner – so a separate bribery policy was not necessary.

* Worked in a limited local area, with no need for sophisticated controls on staff.

* Had in place a system of financial controls and clauses in contracts preventing bribery.

It also argued that the managing director knew that bribery was not condoned and that its controls had stopped the largest of the bribes being paid.

Adequate Procedures

The jury, however, was not convinced that Skansen’s controls were robust enough to be considered adequate procedures. Skansen was found guilty of the Section 7 offence. But as, by the time of its conviction in February, Skansen was a dormant company that had no assets, it was given an absolute discharge.

The case raises a number of questions regarding what companies have to do to be able to prove they had adequate procedures in place to prevent bribery. Skansen did have controls in place and its staff were made aware that bribery was not to be tolerated – and yet this was not enough to beconsidered adequate procedures; even for a small company working in a limited geographical area.

This could be considered harsh. But what is perhaps more surprising (and slightly disappointing) is that Skansen was a dormant company that had no assets and yet it was still prosecuted. Was this really a constructive use of taxpayer-funded resources? The prosecution argued that this course of action sent a message to other companies about the need to have adequate procedures in place. But what sort of a message does it send if a small company that had tried to prevent illegal activity is prosecuted and then given an absolute discharge?

Does the case make us any the wiser about what actually constitutes adequate procedures? It seems unlikely.

Self-reporting

What is also concerning about this case is that Skansen investigated the problem, was open and transparent in reporting it to the authorities and cooperated fully with investigators – only to then be charged and convicted. If this is what happens when a relatively small company self-reports, it is hardly likely to encourage others to come forward if and when they discover bribery is being committed in their name.

In an era when the Serious Fraud Office, in particular, has encouraged companies to self-report bribery and has deferred prosecution agreements (DPA’s) available as an alternative to prosecution, is it likely that having a small refurbishment company dragged through the courts – and then given an absolute discharge – will persuade other corporates to disclose their wrongdoing?

And bearing in mind that Rolls-Royce secured a DPA after years of systemic bribery around the world, is this one rule for the little guy and a more lenient approach to the bigger corporates? There may be the argument that a DPA was not available because Skansen was dormant and had no assets. But does that really justify the prosecution of what, to all intents and purposes, is a non-existent company?

Targets

One reading of the way this case has been handled is to see it as proof that prosecutors are aiming for the “low-hanging fruit’’: the easier targets. If that is the case, it means that many companies will need to tread very carefully if they suspect wrongdoing in their workplace.

Another reading of it is that prosecutors may believe it is too difficult to secure the conviction of a company for the Section 1 Bribery Act offence of giving bribes, as it is too onerous to prove that the directing mind and will of the company was involved in the offence. They may, therefore,look to Section 7 to secure convictions, as many companies – according to the message sent out by the Skansen case – will not be able to rely on the defence of having adequate procedures in place. They will, therefore, be easy prey for prosecutors.

If either of these readings is correct, it means that a large number of companies need to examine their anti-bribery procedures very closely to see if they can be considered adequate. The irony is that the Bribery Act does not go into any detail about what would constitute adequate procedures – and yet it expects companies to have them. Guidance from the Ministry of Justice refers to the need for procedures to be proportionate to the risk, have commitment from the top levels of a company and involve risk assessment, due diligence, training and monitoring. But the same guidance then adds that the adequacy of procedures will actually depend on the facts in each case.

Ideally, the Skansen case would not be considered a legal precedent. It is arguably a misjudged use of public funds and a pointless prosecution. But it cannot be ignored. Skansen outlined to the court its procedures for preventing bribery among its staff and explained its system of checks and controls. It also self-reported bribery and cooperated fully with the authorities. Yet it was still prosecuted.

If this prosecution has set the tone for the authorities’approach to Section 7 failure to prevent bribery cases, then many companies need to take advice on how to make sure their procedures would be considereda dequate in the eyes of the law.