Archive for the ‘United Kingdom’ Category

Developments From Across The Pond

Tuesday, October 13th, 2015

Across the PondA few developments from the United Kingdom worth highlighting.

SFO Speech

In this recent speech, David Green (Director of the SFO) stated:

Deferred Prosecution Agreements (DPAs)

I anticipate that at least 2 DPAs will be completed this calendar year.

Concern has been expressed by some in the NGOs and the media that DPAs will be merely a mechanism whereby companies can buy themselves out of trouble, and that prosecutors will be brow-beaten by lawyered-up corporates. These concerns are misplaced and premature.

DPA’s are intended as a mechanism whereby the collateral damage to innocent parties occasioned by the prosecution of a company can be avoided in an appropriate case. On the English and Welsh model, the prosecutor must identify the full extent of the offending. Judicial approval is required at a preliminary hearing which will take place in private and at the final application for approval which will always be in public. Crucially, the judge must be satisfied that the DPA is in the interests of justice, and is fair, reasonable and proportionate. Rubber stamps have no part in the process.

The bar is a high one. This does not mean that corporates lose their right to contest a genuine question of law or that they have to waive privilege. But cooperation is vital, and for this simple reason: how can the prosecutor convince the judge that a DPA rather than a prosecution is in the interests of justice?

I anticipate that once the offer, the bar and the process are demonstrated and understood in action, we will see many more DPA’s.

Corporate criminal liability

There is, I suggest, one more step necessary to make DPAs mainstream. That involves moving away from the identification principle of corporate criminal liability in English law and embracing something closer to vicarious liability, as in the USA.

Until that is done, a corporate might conclude that if the prosecution of a company is so difficult under our law, why should they agree to a DPA?

On a broader front, if the public interest, in terms of public confidence, demands more prosecutions of corporates, then such change is surely necessary.

Despite the advent of DPAs, prosecution is and remains the default preferred option.”

Bribery Act First reports:

“Drum roll.  We now have the first corporate disposal for a violation of the new offence of failure to prevent bribery.

…in Scotland.

Last Friday the Scottish authorities announced a civil settlement with Brand-Rex Limited. The settlement is of note for two reasons.

Firstly, it is the first concluded settlement for a contravention of the Bribery Act 2010, s.7 – corporate failure to prevent bribery by a third party.

It is a classic case on the thorny question of corporate hospitality and that hospitality being misused.

Secondly, it is the third concluded corporate self-report and civil settlement in Scotland. The Scottish system is akin to that operated by the SFO before deferred prosecutions agreement were introduced. It is clear that Scottish system is encouraging self-reports and that the settlements are being progressed in a reasonable timescale.”

Reform Ditched

Speaking of the above mentioned Section 7 of the Bribery Act, for some time there has been a debate in the U.K. whether to widen such an offense to include economic crimes other than bribery.

Bloomberg reports:

“The U.K. abandoned a much campaigned-for change to legislation that would have made it easier to prosecute corrupt companies in the latest nod to a new era of deregulation for business under the re-elected Conservatives.

In a written answer to a lawmaker’s question posted Monday, junior Justice Minister Andrew Selous said the “ministers have decided not to carry out further work” on an expansion of corporate criminal liability laws as there is “little evidence of corporate economic wrongdoing going unpunished.”

Prosecutors, academics and lawyers have petitioned the government for years to widen the Bribery Act, a 2011 law that allowed companies to be prosecuted for failing to prevent economic crimes such as fraud and money laundering as well as bribery. The decision marks a u-turn by the government, which said in 2012 that the options for dealing with corporate offending were “limited” and the number of convictions each year was “too low” as public displeasure about the Libor and other banking scandals grew.”

The Success Of “Soft Enforcement” In The U.K.

Tuesday, August 18th, 2015

Success3As distinguished from “hard” enforcement of a law by enforcement agencies, “soft” enforcement generally refers to a law’s ability to facilitate self-policing and compliance to a greater degree than can be accomplished through “hard” enforcement alone.

Those subject to the law, whether a traffic law or otherwise, comply with the law’s prohibitions because they “could” be found to be in violation of the law, even though the prospect of “hard” detection and enforcement of the violation is low.

Indeed, one of the most notable statements from the FCPA’s legislative history was made by the Chairman of Lockheed who stated:

“So it is true that we knew about the practice of payments on some occasions to foreign officials. But so did everyone else who was at all knowledgeable about foreign sales. There were no U.S. rules or laws which banned the practice or made it illegal.  […] If Congress passes laws dealing with commissions and direct or indirect payments to foreign officials in other countries, Lockheed, of course, will fully comply with them.” (See Lockheed Bribery: Hearings Before the S. Comm on Banking, Hous., and Urban Affairs, 94th Cong. (1975).

In passing the FCPA, Congress anticipated that the “criminalization of foreign corporate bribery will to a significant extent act as a self-enforcing preventative mechanism.” (See S. Rep. No. 93-114, at 10 (1977). Likewise since the FCPA’s earliest days, the DOJ has recognized that the “most efficient means of implementing the FCPA is voluntary compliance by the American business community.” (See “Justice Outlines Priorities in Prosecuting Violations of For. Corrupt Practices Act,” The American Banker (Nov. 21, 1979).

In this regard, a former DOJ prosecutor responsible for investigating and prosecuting FCPA cases rightly observed that “this new era of more aggressive [FCPA] prosecution has, in turn, encouraged corporations to pay even greater attention to their internal compliance programs, matching the ‘hard’ enforcement with ‘soft’ enforcement.” (See Philip Urofsky, et al, “How Should We Measure the Effectiveness of the Foreign Corrupt Practices Act? Don’t Break What Isn’t Broken—The Fallacies of Reform,” 73 The Ohio Law Journal 1145 (2012).

Against this backdrop, the U.K. government recently released this ”Impact of the Bribery Act 2010 on SMEs” (as in small and medium size enterprises). In examining the findings of the report, it is important to be mindful that the report categorizes medium sized enterprises as having between 50 to 250 employees; small enterprises as having between 10 to 49 employees; and micro enterprises as having less than 10 employees.
According to the report:

Two-thirds (66%) of the SMEs surveyed had either heard of the Bribery Act 2010 or were aware of its corporate liability for failure to prevent bribery. Awareness was greater among SMEs exporting to regions that are less developed, including the Middle East, Asia, Africa and South and Central America (68%) compared to those companies only exporting to developed regions including Europe, North America and Australia (56%).

The proportion of SMEs that had heard of the Act by name increased with business size. Only 42% of micro sized companies had heard of the Act compared to 54% of small companies and 78% of medium sized companies. Furthermore, those exporting to higher risk regions, as defined by the Corruption Perception Index (including the Middle East, Asia, Africa and South and Central America), were more likely to have heard of the Bribery Act (58%) compared to those companies only exporting to regions at less risk including Europe, North America and Australia (41%)

In addition to whether SMEs had heard of the Bribery Act by name, SMEs were asked whether they were aware of the corporate failure to prevent bribery offence at section 7 of the Act (as described in the introduction). Just over half of all SMEs (53%) were aware of it. Awareness was linked with company size with only 39% of micro companies being aware, compared to 53% of small companies and 73% of medium sized companies.

SMEs were also asked if they had sought any professional advice about the Bribery Act or about bribery prevention. Around a quarter (24%) of SMEs who were aware of the Bribery Act or its corporate failure to prevent provisions had sought such advice, which was most commonly offered by legal professionals (54% of those seeking professional advice).

Around four in ten SMEs (42%) said that they had put bribery prevention procedures in place; defined as anything that they thought helped prevent bribery. Among SMEs that did have procedures in place, these procedures were most typically financial and commercial controls such as bookkeeping, auditing and approval of expenditure (94%) or a top level commitment that the company does not win business through bribery (88%). Just under half of those with procedures in place had written staff policy documents about bribery prevention which are signed by staff (48%) or raised awareness and provided training about the threats posed by bribery in the sector or areas in which the organisation operates (44%). Again, SMEs exporting to the less developed export regions (45%) and especially China (59%) were more likely to have bribery prevention procedures in place.

Those more likely to have bribery prevention procedures in place included: Medium sized companies (60%), compared to small companies (43%) and micro companies (29%).

To some, the above numbers represent a failure of the U.K. Bribery Act (such opinions have mostly been from Bribery Act Inc. participants who have used the report to market their compliance services).

However, the above number represent the success of “soft enforcement” of the Bribery Act in the U.K.

Consider these facts: the U.K. Bribery Act only went live in July 2011 and there has not yet been any enforcement of the FCPA-like provisions in the U.K. Bribery Act.

The relevant analogy would be how many U.S. small to medium size enterprises during the first five years of the FCPA’s existence had heard of the FCPA and developed and put in place preventative procedures?

Fast forward today and query, if one would survey SME managers, nearly 40 years after the FCPA was enacted against the backdrop of the current enforcement climate what the numbers would look like?

Would nearly 70% of U.S. SME managers be aware of the FCPA? Would nearly 40% of managers of micro companies (those with less than 10 employees) be aware of the FCPA? Would 60% of medium size companies, approximately 45% of small companies, and nearly 30% of micro companies have pro-active preventative procedures in place?

I highly doubt it.

Thus, what the recent U.K. report demonstrates is that even in the absence of any “hard” enforcement of the FCPA-like provisions of the U.K. Bribery Act, the U.K. Bribery Act – no doubt because of its adequate procedures defense – is having, even at this early stage, a positive impact of “soft enforcement.”

And kudos to the U.K. government for recognizing this.  The report rightly notes that the purpose of the adequate procedures defense is “to influence behaviour and encourage bribery prevention as part of corporate good governance.”

There are several commentators who are opposed to an FCPA compliance defense.  However, noticeably absent for the critiques is any discussion of how a compliance defense can have a positive impact on “soft enforcement” of the FCPA.

As highlighted in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” and numerous posts thereafter (hereherehere and here), a compliance defense might very well lead to a minor reduction in “hard enforcement” of the FCPA,” but the expected increase in “soft enforcement” of the FCPA makes a compliance defense sound public policy.

Time Out On Slamming The Brits

Wednesday, August 12th, 2015

BritishAs highlighted in this recent report:

“The [U.K.] Government is reviewing the Bribery Act after business leaders claimed it was making it difficult for British firms to export goods. The Business Secretary, Sajid Javid, is inviting companies to comment on whether the tough anti-corruption measures are “a problem”. [...] Letters sent by the Department for Business, Innovation and Skills (BIS) invite industry leaders to comment on whether the Act has had an impact on their attempts to export. They also ask if guidance issued to help business people avoid problems under the Act is useful and for suggestions to clarify the information. BIS officials said the guidance that accompanies the Act, rather than the law itself, was the main focus.”

As noted in the report:

“Critics fear it is a way of weakening the law at a time when the Government should be clamping down on existing loopholes, and supporters of the Act say they are surprised by the move. They warn that any attempt to water down the Act will seriously damage the UK’s credibility on corruption.”

Time out for a relevant history lesson.

When the FCPA was still in diapers – as the U.K. Bribery Act currently is – the U.S. government did exactly the same thing!

Almost as soon as the FCPA was passed in 1977 concerns were raised across a wide spectrum that the law was vague and ambiguous, and because of that, harmful to U.S. businesses seeking to compete in the global marketplace.

The early 1980’s saw much FCPA reform activity.  In 1980, the Carter administration (recall that President Carter signed the FCPA into law in 1977) sent a report to Congress prepared by the Secretary of Commerce and the U.S. Trade Representative titled “Report of the President on Export Promotion Functions and Potential Export Disincentives.” (See  Report of the President on Export Promotion Functions and Potential Export Disincentives : Together with the Review of Executive Branch Export Promotion Functions and Potential Export Disincentives,” Transmitted to the Congress (Sept. 1980).

In pertinent part, the report stated:

“The [FCPA] is identified by businessmen and attorneys as one of the most significant export disincentives.  […]  The Act inhibits exporting because of uncertainty within the business community about the meaning and application of some of its key provisions.

“Uncertainty about the meaning of key provisions of the FCPA and how it will be applied is having a negative effect on U.S. exports.  Many of the businessmen and attorneys consulted expressed the view that this uncertainty has a far greater impact than the actual prohibition against bribery.  The problem described, in essence, is that what conduct is prohibited and what conduct is not prohibited under the Act is often unclear.  In order to avoid possible violations of the Act, attorneys often give such cautious guidance that their clients simply forego any transactions where the FCPA could possibly become an issue.”

“The effects of these uncertainties reportedly manifest themselves in various ways.  Consultations with the private sector revealed instances in which U.S. companies: withdrew from joint ventures for fear they later could be held responsible for the acts of their foreign partners; incurred substantial legal and investigative costs to check the backgrounds of their sales agents abroad; were unable to obtain the services of effective sales agents; lost contracts simply because of the time needed to investigate sales agents abroad and institute safeguards; withdrew from existing markets; and declined to enter new markets.”

“Finally, companies point out that the extent to which companies have been successfully prosecuted under the FCPA does not define the extent of the disincentive.  Uncertainty can be a disincentive without any prosecutions and, moreover, exports are inhibited merely by the possibility of public charges and the adverse publicity surrounding them.  Even where a company is totally convinced that a court would find that it had not violated the FCPA, it nonetheless may forego the export opportunity for fear that an enforcement agency could publicly charge it with a violation of the Act.”

In 1981, the Government Accounting Office (“GAO”), the investigative arm of Congress, released a report titled “Impact of Foreign Corrupt Practices Act on U.S. Business.” (See By the Comptroller General, Report to the Congress of the United States, “Impact of the Foreign Corrupt Practices Act on U.S. Business,” (Mar. 1981).

The report was based in part on a GAO questionnaire survey of 250 companies randomly selected from the Fortune 1000 list of the largest industrial firms in the U.S. and the questionnaire addressed the FCPA’s relationship to the following four areas: (1) corporate policies and/or codes of conduct; (2) corporate systems of accountability; (3) cost burdens, if any, incurred by management to comply with the FCPA; and (4) corporate opinions regarding the: (i) FCPA’s effect on U.S. corporate foreign sales; (ii) the clarity of the FCPA’s provisions; (iii) the potential effectiveness of an international anti-bribery agreement; and (iv) perceived effectiveness of the FCPA in reducing questionable payments.

The GAO found that while the FCPA “has brought about efforts to strengthen corporate codes of conduct and systems of internal accounting control,” corporations reported that “their efforts to comply with the [the FCPA] have resulted in costs that were greater than the benefits received” and that a substantial number of businesses “reported that they had lost oversees business as a result” of the FCPA.  The GAO report noted concerns that the FCPA’s anti-bribery provisions were “vague and ambiguous” and stated that while “unambiguous requirements may be impractical and could provide a roadmap for corporate bribery” companies operating in the global marketplace “should be subject to clear and consistent demands by the Government agencies for enforcing the act.”

Despite its widely-perceived deficiencies, reforming a law called the “Foreign Corrupt Practices Act” was a political hot potato simply because of the name of the law. Indeed reform proposals included changing the name of the law so that a substantive, issue-based discussion could take place free from pro-bribery vs. anti-bribery rhetoric. For instance, among the first FCPA reform bills introduced in 1980 was the “Business Accounting and Foreign Trade Simplification Act” which sought to change the name of the FCPA as well as other substantive changes.

However, the mere discussion of FCPA reform was opposed by some who seemed to advance the simplistic – either you are against bribery or for bribery – position.  Despite this political atmosphere, certain Congressional leaders demonstrated courage to reform the FCPA into a better, more useable statute for business and the enforcement agencies alike.

Indicative of the political challenges of reforming a law called the Foreign Corrupt Practices Act, FCPA reform took eight years and it is noteworthy how it occurred.  In 1988 the FCPA was amended, not through a stand-alone bill, but through Title V, Subtitle A, Part I of the Omnibus Trade and Competiveness Act of 1988 signed into law by President Ronald Reagan.

In short, time out on slamming the Brits and their new Bribery Act.

What is currently occurring in the U.K. (no meaningful enforcement and good faith discussions about the impact of the new law) is precisely what happened in the U.S. in the early years of the FCPA.

Developments From Across The Pond

Monday, June 8th, 2015

Across the PondA few developments from the United Kingdom worth highlighting.

The SFO Loses Another Bribery Trial

It is one thing for a law enforcement agency to allege a crime.

It is quite another for a law enforcement agency to prove a crime to someone other than itself.

In legal systems based on the rule of law, the later matters more than the former; however it seems that more attention is paid to the former rather than the later.

In December 2013, the U.K. Serious Fraud Office’s (SFO) case against Victor Dahdaleh on bribery and corruption charges collapsed after the SFO concluded there was no “longer a realistic prospect of conviction.”

Recently the SFO lost another bribery trial when put to its burden of proof.

As stated in this SFO release:

“Three employees of Swift Technical Solutions Ltd were found not guilty at Southwark Crown Court of corruption offences in relation to the tax affairs of a Nigerian subsidiary.  The jury was unable to reach a verdict on one count against the third defendant and was discharged.  The SFO today indicated in court that it did not intend to seek a retrial on that count and a verdict of not guilty was entered.

The defendants were:

Bharat Sodha (age 51) of Middlesex, the former International Tax Manager

Nidhi Vyas (age 49) of Middlesex, the former Financial Controller

Trevor Bruce (age 46) of Northern Ireland, the former Area Director for Nigeria

Bharat Sodha was acquitted of two counts of conspiracy to make corrupt payments. Nidhi Vyas was acquitted of one count of conspiracy to make corrupt payments on the direction of the judge at the close of the prosecution case and was acquitted by the jury of another similar count. Trevor Bruce was acquitted of one count of conspiracy to make corrupt payments and the jury was unable to reach a verdict on the other.

The prosecution case was that these defendants conspired to make corrupt payments to officials of two Nigerian Boards of Internal Revenue, one in Rivers State and the other in Lagos State.  Swift co-operated with the SFO, providing documents and making staff available for interview.  It was not charged with any offence.”

Despite the loss, the SFO deserves credit for issuing the above release.

By comparison, when the DOJ loses an FCPA trial, it’s as if it never happened because the normally robust DOJ press office suddenly develops a case of writer’s cramp (see here for the prior post).


SFO Official Gives U.S. Style Speech

Ben Morgan (Joint Head of Bribery and Corruption at the SFO) recently delivered this speech.  It was very much a U.S. style speech that encouraged corporates to engage early with the SFO and cooperate.  In the speech, Morgan also championed U.K. style DPAs.

Prior to excerpting the speech, a brief comment.

Regarding Morgan’s comment that corporates should “live your corporate values” by submitting to the SFO’s every wishes, corporate leaders on both sides of the Atlantic should reject such self-serving enforcement agency rhetoric that somehow it is immoral or unethical to do the following when faced with an internal potential bribery or corruption issue: thoroughly investigate the issue, promptly implement remedial measures, and effectively revise and enhance compliance policies and procedures – all internally and without disclosing to the enforcement agencies.

Such as response is a perfectly acceptable, legitimate, and legal response to potential bribery and corruption issues in but all the rarest of circumstances.

In pertinent part, Morgan stated as follows.

“Although I am billed in a section entitled “regulator update”, actually the SFO is not a regulator, and I’m not going to tell you how to “remain compliant in an evolving regulatory environment”. The SFO is a prosecutor, and that is not just a semantic distinction, it is a practical one. As our Director has memorably said in the past, “we are not in the business of telling people how not to rob banks”. We are in the business of catching those that do, and holding them to account.

We were created by the Criminal Justice Act 1987 and our statutory remit is to investigate and prosecute the most serious or complex fraud, a concept that includes bribery and corruption. The unusual feature of the SFO is that combination of both investigators and prosecutors under the same roof, something I think is absolutely essential for the work we do. So for any given case we will have a multi-disciplinary team from day one – investigators, accountants, digital forensic experts, lawyers, and other specialists, looking into the case, gathering evidence to understand whether any criminal offences have taken place.

So that is the world we are in – one in which the SFO is investigating precisely what has happened in order to pursue the most appropriate criminal justice outcome if the evidence of an offence is there. It is important to emphasise that if you do find yourself in our world there are a range of possible outcomes and that is why I’d like to explain to you what the SFO is doing at the moment; so that you have a chance, if you want to, to positively influence what happens if something does go wrong.

If there is one message to take away from what I say today it’s this – if you find out about a problem I think it is overwhelmingly in your best interests to engage with us early and to do so fully, honestly and with integrity. Just as you urge those in your business not to treat the compliance process as a passive, box-ticking exercise but rather something that needs substance more than just form, so too engaging with us at the back-end of that process needs substance. If it is worth doing at all, it is worth doing properly.

There are three reasons why I say that I think engaging with us properly is in your interests, and I’ll expand on those in the time I have left. The first is that we will be unimpressed if we find out about a problem from someone other than you, and there is a good chance we will. The second is that when we do find out about it, if the evidence is there we will prosecute those who didn’t tell us about their own wrong-doing, or who did so in an artificial, less-than-frank way. And thirdly – a more positive note- for those who do engage with us properly, there is an opportunity to deal with a problem in something other than a traditionally adversarial way. And while we don’t start from this point, it seems to me this option has the potential to be, by some distance, the most effective commercial outcome for a responsible company wanting to resume honest business quickly.

Taking these three things in turn then – what if the SFO finds out about a problem from someone else? Well, it is more likely than ever that we will so if anyone is thinking that just sitting on something is a sensible strategy they need to reflect on that. In complex business like yours there are just too many people in the know, too many channels through which the truth might surface.


[W]e know the problem is there and we are working with whistle-blowers, disgruntled competitors, domestic partner agencies and international colleagues who share our interest to find out what’s happening. I think the very existence of a conference like this, on this scale, and this well attended, shows we are on the same page in terms of appreciating the inherent risk in the mining sector. There are obviously problems, so I would urge you to come and talk to us about yours before someone else does. It is easy for you to do, but it is just as easy for someone else to do, so be careful assuming you have a head start on us.

My second point is that if you don’t tell us, or you do and don’t engage with us properly, prosecution is a likely outcome. As I said earlier, the SFO is a prosecutor first and foremost and our Director has made it very clear that that is our function. We are not in the business of cosy deals, short-cuts or easy targets. We have the stamina and resources to take on the most demanding cases …


Not only do we have that case load though, but in terms of trial outcomes relating to corruption we have built a good trajectory over the last year – we’ve had our first contested conviction of individuals for overseas corruption (senior managers of Innospec who got custodial sentences), our first contested conviction of a corporate for overseas corruption (Smith & Ouzman, paying bribes into Africa, in relation to election ballot papers, of all things), and our first convictions of individuals under the Bribery Act – and in total the SFO convicted 18 defendants (corporates and individuals) in the last calendar year. If that trajectory continues through our current case load, then common sense tells you that we will soon have convictions of major organisations under the Bribery Act – the kind of work the SFO exists to do, and the public expect us to deliver. So if you try to hide a problem, or engage with us in anything less than a full and frank way, if the evidence is there you can expect to be prosecuted.

So what about that more positive note I mentioned earlier? Well, there is an alternative. If you have a problem somewhere in your network and you are prepared to engage with us honestly then we can have a different relationship. The Deferred Prosecution Agreement regime provides a structure for those wanting to resolve their criminal liability to do so quickly and with a degree of control and certainty largely absent from traditional prosecution. A DPA responds to criminal liability – as I said, no cosy deals – so don’t be under any illusion. In a process scrutinised by a Crown Court judge, criminal proceedings will be commenced against the organisation but immediately suspended pending compliance with the terms of the agreement. Those terms can pack a hefty punch too – a fine, compensation, remedial measures, in some cases a monitor and other possible terms. But it has a lot going for it too – speed and certainty, as I have said; a level of compatibility that enables us to get a bit closer to that hallowed ground of a global resolution for conduct that crosses borders, as I suspect much of the activity in your sector inevitably would; and also the chance to really live your corporate values – integrity around facing up to what’s gone wrong and putting it right rather than being on the back foot, having to be defensive. That’s a much better message for your stakeholders is it not? – employees, customers, shareholders, potential investors, the media, regulators even. You could show that it isn’t just rhetoric: that the ‘tone from the top’ means something in real life in your business, not just on paper. And while it’s not my area of expertise, from attending conferences like this one I always get the impression that the way you talk about compliance and ethics now isn’t about moral high ground, nor about threat even, but actually about adding commercial value. Well if that’s right, I put it to you that genuine engagement with us is the consistent extension of that message; the appropriate and commercial way to fix problems that your well-considered compliance procedures identify.

So those are my three reasons for cooperating with us – if you don’t, we stand a good chance of finding out anyway; anything other than proper cooperation risks prosecution; yet proper cooperation offers the chance to resolve risk sensibly.

The final thing I want to say is a word on proper cooperation. I’ve mentioned a few times how important it is to do things properly if you do choose to engage with us, if you set off down that fork in the road as opposed to electing to be a traditional adversary. And it is really important – it’s what I want you to take away from this. We are no longer, at the SFO, in the world of having to talk up DPAs like some sort of salesmen; corporates want them and some will get them. We have issued our first invitation letters giving corporates the opportunity to enter into DPA negotiations. Where we are now is working with corporates on how best to go through that process – not “why DPA”, but “how DPA”. And when it comes to “how”, the DPA Code is clear; we and the court need you to cooperate fully with our investigation. I and others at the SFO have spoken in some detail about what that looks like so I’m not going to go over that ground extensively again, I will just say this. We have made clear what we expect. It’s all there in the DPA Code. Crucially, where suspicions of corrupt activity arise, we do not require you to carry out internal investigations; investigation is our job. And while we do understand that up to a point you will need to do some work to look into allegations of bribery, we find internal investigations that ‘trample over the crime scene’ to be unhelpful. Our stance is to ask for genuine cooperation with our investigation, not duplication of it. We don’t expect you to keep us in the dark while you carry out extensive private investigations and some months or even years later present us with a package of your findings. If there is suspected criminal conduct, that is our job and there are some important issues around access to, and integrity of, evidence (especially regarding witness accounts) and we expect those to be respected in the same way they would be in any other criminal investigation. We expect you to engage with us early, and to work with us as we investigate, not to rush ahead and, whether intentionally or not, complicate the work we need to do. This is, we appreciate, to some extent a departure from the way things used to be and the way certain practices have built up in other jurisdictions, but we make no apology for that. Our job is to investigate possible criminal offences and we take a very dim view of anything anyone does that makes that job more difficult than it needs to be.

You should know that from where I sit, there appear to be emerging two schools of practice among those advising companies like yours. There are those who seem to view our requests for cooperation as some sort of game, to be instinctively resisted but, I’m sure they would think, cleverly managed nevertheless. They roll out the same stale tactics we have come to know well. And then there are those who seem to actually listen to what we are saying, and take the more innovative approach of genuinely trying to respond to it. It is very clear to me which of those approaches is in the respective companies’ best interests, but until the examples of those who have co-operated filter out across the market I suppose there will continue to be people who want to do things the old way. That’s fine, but you can expect no credit for doing your minimum legal duty. You don’t have to cooperate with us, it is your choice. If you do want to then you have to move beyond that, really make the effort to make our job of investigating a possible crime easier. That is what it takes – not the “impression of cooperation”, saying one thing while really working a more guarded agenda (we know all about that) but actually helping us, being fully frank and honest with us, as little by little, some companies now are.

Remember also that engaging with us doesn’t necessarily mean a criminal sanction at all. We are not looking for scalps. If the evidence is not there then we must conclude that it is not a matter that should be prosecuted. That is an entirely valid and appropriate outcome, and one we are perfectly content to reach. We must be – and will be – fair, and make decisions based on evidence and the public interest alone. So there is that safety-valve built into any engagement you have with us. You can come to us early, before you have gone to the four corners of the earth to form a final view of what has happened, and we can work together to understand what has happened. It could well be the case that having done so, no further action on our part is appropriate – you are not committing yourselves to an inevitable sanction, but you are giving yourselves the best shot at a controlled outcome if it turns out there is criminal conduct that needs to be resolved.”

U.K. Serious Fraud Office Announces Corruption Charges Against Individual Well-Known In The Compliance Community

Wednesday, May 13th, 2015

SurpriseTalk about a head-scratching moment.

If you are even an occasional attendee or participant of anti-bribery and corruption conferences you likely know or recognize Jean-Daniel Lainé who, prior to his retirement in April 2013, was Senior Vice President Ethics & Compliance, and a director of Alstom International Limited.  Laine currently runs jdl.ethiconsult.

As highlighted in this 2010 article, “since 2006, Laine has overseen the rapid development of Alstom’s compliance and ethics programmes, as the threat of corruption investigations has risen up the agenda for companies around the world.”

The article quotes him as follows. ”I know a lot of my peers in the compliance community. I participate in a lot of conferences on the anti-corruption subject. I have the opportunity to review all these topics and issues, and I consider that we are among the best in class.”

Among other things, Laine co-authored the Risk Assessment Chapter of the International Chamber of Commerce’s Ethics and Compliance Training Handbook (see here for a video interview) and Laine was a frequent writer on compliance topics, see here for instance “How Do You Manage Third Party Relationship Risks?”

Against this backdrop, it comes as a shocker to say the least that yesterday the U.K. Serious Fraud Office announced:

“Mr Lainé, 68, … a French national … attended court to answer two charges of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977. The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.”

As noted in the SFO release, also charged was Michael John Anderson and named as a co-conspirator with Mr Anderson and Mr Lainé is Altan Cledwyn-Davies, director and company secretary of Alstom International Ltd. Mr Cledwyn-Davies died in 2010 before charges were brought.

As further noted in the SFO release:

“In July 2014 the SFO charged Alstom Network UK Ltd, and British nationals Graham Hill and Robert Hallett with corruption in India, Poland and Tunisia. That matter awaits trial in May 2016. In addition, the SFO charged Alstom Power Ltd, Nicholas Reynolds and Johanes Venskus with corruption in Lithuania. That matter awaits trial in January 2017.”

See prior posts here and here for recent Alstom-related enforcement actions in the U.S.