Archive for the ‘Mabey Johnson’ Category

Maybe Mabey & Johnson Is Not That Big Of A Deal

Tuesday, January 24th, 2012

It seems that everything that happens in the bribery / corruption space these days is touted as establishing a new trend with wide implications.

Recently the U.K. Serious Fraud Office (“SFO”) announced here that Mabey Engineering (Holdings) Ltd., the parent company of Mabey & Johnson Ltd., forked over approximately £130,000 via a civil order based on the improper conduct of Mabey & Johnson Ltd.  See here for the prior post summarizing the Mabey & Johnson Ltd. enforcement action.  In the release, SFO Director Richard Alderman said that there are “two key” messages.  “First, shareholders who receive the proceeds of crime can expect civil action against them to recover the money.”  Second, “shareholders and investors in companies are obliged to satisfy themselves with the business practices of the companies they invest in.  [...] The SFO intends to use the civil recovery process to pursue investors who have benefited from illegal activity.”

One source said that the Mabey & Johnson development “could have far-reaching implications.”  Another called it a “landmark development” and a “further pressure point for companies to put in place preventative measures or else they and their shareholders face the consequences.”  Another called it a “concerning development.”  Another stated that the SFO is now recovering “tainted dividends from innocent investors.”  Another stated that the SFO is beginning “to claw back dividends paid by companies that are convicted on criminal charges.

Time out!

All that occurred with the recent development is that Mabey Engineering (Holdings) Ltd., the parent company of Mabey & Johnson Ltd., paid money in a civil action based on the improper conduct of Mabey & Johnson Ltd.

This is hardly revolutionary.  Nearly every FCPA enforcement action involves (query whether it should) the parent company being held accountable often in the context of a DOJ non-prosecution or deferred prosecution agreement or an SEC civil action for the alleged improper conduct of its (sometimes very  distant) subsidiary companies.

Much was written about Alderman’s statement that Mabey Engineering (Holdings) Ltd. “was totally unaware of any inappropriate behavior.”  However, the same is true in the majority of FCPA enforcement actions in the U.S., there is no allegation, suggestion, or implication that the parent company knew of or authorized the improper conduct at issue.  The standard that the U.S. enforcement agencies advance is essentially strict liability.

In this alert, Covington & Burling LLP attorneys Robert Amaee, John Rupp, and Alexandra Melia  rightly tempered the brewing storm by laying out reasons why the Mabey & Johnson development “does not set a wide ranging precedent.”  The Bribery Act “guys’ (here) nicely set forth the issues as well.

Indeed, in an e-mail statement, Richard Alderman told me as follows.

“The focus of this going forward will be on investors who have the ability to influence management.  This will normally be the institutions (or major family shareholders) rather than small retail investors.   We are looking to the major shareholders to help ensure that the companies in which they invest have an appropriate anti-corruption culture.   In the regular discussions they have with management for example we would expect them to ask if the company is satisfied that it has adequate procedures under the Bribery Act.  After all, this sort of dialogue is needed in view of the damage to the share price that can happen if there is a corruption investigation.  We are looking to the future with this and are not looking to go back over cases that have been finished.”

*****

In another U.K. development, the SFO recently announced here that former Innospec executive David Turner pleaded guilty to three counts of consppiracy to corrupt.

SFO Flexing It Muscle Even Without the Bribery Act

Thursday, February 17th, 2011

In previous statements (see here for instance) U.K. officials have said that it would be wrong to assume that the U.K. was ignoring bribery issues prior to passage of the Bribery Act.

Case(s) in point – the recent enforcement actions announced by the Serious Fraud Office against MK Kellogg Ltd. and Mabey & Johnson directors.

MK Kellogg Ltd.

Yesterday, the SFO announced (here) that M.W. Kellogg Limited (“MKWL”) has been ordered to pay “just over £7 million [approximately $11.2 million] in recognition of sums it is due to receive which were generated through the criminal activity of third parties.”

This SFO enforcement action has been expected for some time, as noted in this previous post from October 2009.

MKWL was the entity that originally formed the TSKJ consortium the focus of the Bonny Island bribery scandal. See this post for current enforcement statistics as to KBR/Halliburton, Technip, and Snamprogetti / ENI.

MKWL is currently a wholly-owned subsidiary of KBR and as noted in this previous post as well as KBR’s release (here) Halliburton has indemnification obligations to KBR in connection with the SFO enforcement action of “55% of such penalties, which is KBR’s beneficial ownership interest in MWKL.”

According to the SFO release, “the SFO recognized that MKWL took no part in the criminal activity that generated the funds” but that the “funds due to MKWL are share dividends payable from profits and revenues generated by contracts obtained through bribery and corruption undertaken by MWKL’s parent company and others.” The SFO release notes that “MWKL was used by the parent company and was not a willing participant in the corruption.”

As noted in the SFO release, the court order against MKWL was pursuant to the Proceeds of Crime Act 2002. What is the Proceeds of Crime Act? See this piece from John Rupp (Covington & Burling).

Richard Alderman, the Director of the SFO, stated in the release: “our goal is to prevent bribery and corruption or remove any of the benefits generated by such activities – this case demonstrates the range of tools we are prepared to use.”

Mabey & Johnson Directors

In July 2009, the SFO brought an enforcement action against Mabey & Johnson Ltd. (a U.K. company that designs and manufacturers steel bridges). The conduct at issue involved allegations (that the company voluntarily disclosed) that it sought to influence decision-makers in public contracts in Jamaica and Ghana between 1993 and 2001. The prosecution also involved breaches of United Nations sanctions in connection with the Iraq Oil for Food program.

It was the first ever prosecution against a U.K. company for overseas corruption. See here and here for the prior post.

On February 10th, the SFO announced (here) that “two former directors … of Mabey & Johnson Ltd. [Charles Forsyth and David Mabey] have been found guilty of inflating the contract price for the supply of steel bridges in order to provide kickbacks to the Iraqi government of Saddam Hussein.”

According to the release, at the time of the offense, Forsyth was the Managing Director of Mabey & Johnson and Mabey was the Sales Director. The release notes that Richard Gledhill, a Sales Manager for contracts in Iraq, previously pleaded guilty. According to the release, all individuals are to be sentenced on February 23rd.

The U.S. has prosecuted numerous companies in connection with Iraqi Oil-For-Food fraud. See here for such allegations in the ABB matter, here for such allegations in the Innospec matter, here for such allegations in the General Electric matter.

However, these prosecutions have generally been corporate only prosecutions with few related enforcement actions against individuals.

In just its single Mabey & Johnson prosecution, the SFO would appear to have prosecuted more individuals than the U.S. has in its approximately 15 Iraqi Oil for Food corporate enforcement actions combined.

An Update From Across the Pond

Tuesday, September 29th, 2009

The U.S. is not the only country with an “FCPA-like” domestic statute. The United Kingdom has a similar law (actually a mix of several different statutes on the books for nearly one-hundred years – however, in March 2009, a new bill – the “Bribery Bill” was introduced in Parliament and is currently being debated).

As discussed in a July post (see here), the U.K.’s Serious Fraud Office (“SFO”) (an enforcement agency similar to the U.S. DOJ) announced “the first prosecution brought in the U.K. against a company for overseas corruption.”

The company – Mabey & Johnson Ltd. (“M&J”) – a U.K. company that designs and manufacturers steel bridges used in more than 115 countries worldwide.

Last week, the SFO issued a press release announcing the details of M&J’s £6.6 million sentence (see here).

The SFO also released two “prosecution opening statements” relating to (a) the company’s conduct in Jamaica and Ghana; and (b) the company’s breach of United Nations Oil for Food Regulations (see here and here).

To state the obvious, one enforcement action does not constitute a practice.

Subject to that qualification, I offer some comments about the SFO’s released documents compared to what the DOJ and SEC typically release in an FCPA enforcement action (where indeed a common practice has developed).

Naming Names

Unlike a typical DOJ deferred prosecution, non-prosecution agreement or plea or SEC complaint, the SFO documents name names. Specifically identified in the documents are numerous “public officials” in Jamaica, Ghana, Angola, Madagascar, Mozambique, and Bangladesh (see pages 11, 25, 28, 32, 33, 35, and 38) alleged to have received improper payments from M&J (or its agents) to help secure company business.

The SFO documents also specifically identify the agents and their companies which were used by M&J to make certain of the improper payments (see pages 12, 22, 28, 32, 35, 37).

Is there value to “naming names,” does it “punish” the foreign or public official recipient of the improper payment (given that the FCPA only punishes the bribe payor not the bribe recipient)? Does naming the agent effectively blacklist the individual/company and thus serve a useful public function for other companies doing business in that particular market?

All interesting questions to ponder. There is also an interesting historical FCPA angle as well. Many, including the Ford administration, were opposed to the FCPA as it now exists, opting instead for a disclosure approach on the theory, to use the famous Justice Brandeis quote that “sunshine is the best disinfectant.”

Back to the SFO documents.

As referenced above, the applicable term used in the SFO documents is “public official” not “foreign official” as used in the FCPA. Do these terms means the same thing? All of the “public officials” identified in the SFO documents are government Ministers or Ambassadors (what I’ll call core government officials).

There is no exception though, an exception relevant to the current debate over the FCPA’s “foreign official” term and whether it should include employees of state-owned or state-controlled companies.

The Angolan “public officials” appear to be Directors of Empresa Nacional des Pontes, an “Angolan State owned entity.”

Joint Venture Partners

Under the FCPA, conventional wisdom seems to hold that joint venture partners will be liable for improper payments made by other joint venture partners, particularly when the joint venture partners share revenues and profits of contracts secured through improper payments and particularly when the joint venture’s board includes individuals from both companies. (see here for a discussion of this issue in connection with the recent Halliburton/KBR enforcement action).

Not so in the M&J matter.

The SFO documents reference a joint venture relationship between M&J and Kier International Ltd. (“Kier”) in order to facilitate both the construction and engineering aspects of “Jamaica 1″ (the contract allegedly secured through the bribe payments).

According to the SFO documents, M&J and Kier agreed that “overall revenue and profits from the JV with respect of Jamaica I would be divided 57% and 43% respectively.” The documents further state that under the terms of the JV “a sponsor would have primary responsibility for representing the JV” and that “Kier was nominated to act as the sponsor.” Further the documents indicate that “the supervisory board” of the JV comprised both M&J and Kier executives.

However, the documents evidence that the “SFO has investigated the relationship between Kier and M&J in respect of this contract” and “all the evidence currently available to the SFO” indicates that “there is no evidence that Kier [was] privy to these corrupt practices.”

Will JV partners in the cross-hairs of a future FCPA enforcement action be citing to the SFO’s decision as to Kier in the M&J enforcement action to argue that there is no basis for FCPA liability (whether anti-bribery or books and records of internal controls)? Perhaps so.

Cooperation

Despite these apparent differences between the M&J enforcement action and a “typical” FCPA enforcement action, there are some similarities and it is clear that the SFO is following DOJ’s lead when it comes to “rewarding” voluntary disclosure (see pages 40-41 “the SFO have sought where appropriate to have regard to the model for corporate regulation adopted by the Department of Justice in the United States of America under the Foreign Corrupt Practices Act 1977.”).

The SFO’s stance in the M&J matter, in which it noted that M&J’s internal investigation and subsequent voluntary disclosure were “meriting specific commendation” (see pg. 7) is consistent with the approach the SFO set forth in July when it released a memo titled “Approach of the Serious Fraud Office to Dealing with Overseas Corruption” (see here).

Individuals

Finally, much like the DOJ, the SFO appears interested in charging individuals (not just corporations) for participating in improper payments. The SFO specifically noted that “a number of individuals are the subjects of investigation with regard to the corrupt business practices of M&J” (see pg. 5) and it explained that it did not “name certain directors, executives and employees of M&J at this stage because they may face trial in English Courts.”

Again, to restate the obvious, one enforcement action does not constitute a practice. Yet when doing a comparative analysis of the FCPA with other FCPA-like statutes one has got to start “somewhere” and that “somewhere” now exists with release of the specific facts of the U.K.’s first prosecution against a company for overseas corruption.”

Across the Pond

Thursday, July 23rd, 2009

Some noteworthy anti-corruption developments to report from the United Kingdom.

Landmark Mabey & Johnson Ltd. Prosecution

Like the U.S., the U.K. has domestic anti-corruption statutes (actually a mix of several different statutes on the books for nearly one-hundred years – in March 2009, a new bill – the “Bribery Bill” was presented to the U.K. Parliament – an issue I will be following).

However, unlike the U.S., the U.K. has never brought a corporate prosecution under the statutes. For this, U.K. government has been criticized. If you want to fill your afternoon with reading just “google” BAE, Saudi Arabia, and corruption. If you prefer listening over reading, you may want to check out portions of Frontline’s “Black Money” (See here).

Against this backdrop, it is noteworthy that in July 2009, the U.K.’s Serious Fraud Office (“SFO”) (an enforcement agency similar to the U.S. DOJ) announced “the first prosecution brought in the U.K. against a company for overseas corruption.” (See here for the SFO Press Release).

According to the SFO press release, the prosecution arises from Mabey & Johnson Ltd.’s (a U.K. company that designs and manufacturers steel bridges used in more than 115 countries worldwide) voluntary disclosure to the SFO “of evidence to indicate that the company had sought to influence decision-makers in public contracts in Jamaica and Ghana between 1993 and 2001.” According to the release, the prosecution also involves breach of United Nations sanctions as applied to contracts in connection with the Iraq Oil for Food program.

My efforts to locate the actual Mabey & Johnson charging documents (statement of facts, etc.) have thus far proven fruitless. To the extent such documents are publicly available and you have a copy, please do share them with me.

SFO Memo on Corruption Enforcement and the Benefits of Self-Reporting

Also in July 2009, the SFO released a memo titled “Approach of the Serious Fraud Office to Dealing with Overseas Corruption.” The memo notes that the SFO is significantly expanding its anti-corruption resources and staff and that the office will be using “all of the tools at our disposal in identifying and prosecution cases of corruption” as the office “conduct[s] more criminal investigations and prosecutions in the future (particularly if the Bribery Bill becomes law).”

The memo notes that there has been much interest among business and professional advisers for a system of self-reporting cases of overseas corruption to the SFO and the purpose of the memo is thus to set forth SFO policies on self-reporting and the SFO’s position on the benefits which can be obtained from self-reporting.

The memo specifically notes that the benefit to a corporation of self-reporting will be “the prospect (in appropriate cases) of a civil rather than a criminal outcome,” and that a “negotiated settlement rather than a criminal prosecution means that the mandatory debarment provisions under [the relevant EU Directive] will not apply.”

The remainder of the memo touches on general topics familiar to FCPA practitioners currently found in Title 9, Chapter 9-28.000 of the U.S. Attorney’s Manual (Principles of Federal Prosecution of Business Organizations) (the so-called Filip Memo – see here). It is encouraging to see that the SFO, unlike the DOJ/SEC thus far, is willing to articulate, in a specific memo, its views and enforcement policies on corruption issues.

The benefits of self-reporting and voluntarily disclosing conduct which does, or could, violate the FCPA is indeed a “hot topic.” DOJ/SEC enforcement officials routinely say that the benefits of self-reporting are real, whereas FCPA practitioners and the clients they represent aren’t so sure. It now looks like this topic will be debated on both sides of the Atlantic and it will indeed be an interesting issue to monitor.

Of particular interest to FCPA practitioners, the SFO memo notes as follows: “We would also take the view that the timing of an approach to the U.S. Department of Justice is also relevant. If the case is also within our jurisdiction we would expect to be notified at the same time as the DOJ.” Of further interest to FCPA practitioners, the memo announces an initial opinion procedure along the lines currently offered by the U.S. DOJ. The memo notes, “[t]he circumstances in which this procedure will be appropriate will need to be discussed, but we are ready to offer assistance in one type of case” and that type of case is where an acquiring company, during due diligence of a target, discovers corruption issues.