Today’s post highlights various developments across the pond in the United Kingdom.
Last week, Sweett Group (a U.K.-based provider of professional services for the construction and management of building and infrastructure projects) provided this update regarding its previously disclosed scrutiny:
“Sweett Group, notified the Serious Fraud Office (SFO) last year about an allegation of impropriety concerning the conduct of a former employee in 2010, which was reported in the Wall Street Journal in 2013. That former employee operated from an office in Dubai under contract with Cyril Sweett International Limited (CSI). CSI is a company registered in Cyprus and is a wholly owned subsidiary of Sweett Group plc. Sweett Group initiated independent investigations of the allegation and has been keeping the SFO regularly informed as to the progress of those investigations. As was reported on 2 April 2014, evidence came to light that suggests that material instances of deception may have been perpetrated by a former employee or employees during the period 2009 – 2011. One of the former employees refused to answer questions asked of him by the independent investigators. The SFO has now decided to exercise its statutory powers under the Criminal Justice Act to investigate this matter. Sweett Group continues to cooperate fully with the SFO on this matter.”
The U.K. SFO issued this release stating:
“The SFO confirmed today that the Director has opened an investigation into Sweett Group in relation to its activities in the United Arab Emirates and elsewhere.”
This recent front-page Wall Street Journal article added Tradition Financial Services of Switzerland to the growing list of financial services firms under scrutiny for prior relationships with senior Libyan officials under Moammar Gadhafi. According to the article, “City of London police pursuing a criminal probe have interviewed former employees of Tradition and are nearing a decision on whether to bring charges.” The article also suggests that the SEC and DOJ are also “examining whether the firm or its employees were part of what authorities believe was a broad pattern in which Western companies used improper means to curry favor with officials in the Gadhafi regime.” According to the article, “U.S. investigators have also looked into the Libyan activities of hedge-fund manager Philip Falcone of Harbinger Capital Partners.”
This 2011 guest post predicted scrutiny concerning business practices in Libya after Gadhafi. This previous post asked – in connection with the various Libya probes – whether the U.S. government bears some responsibility.
This Pillsbury client alert asks – in regards to the Bribery Act’s recent three-year anniversary – “The UK Bribery Act, Three Years On: Can We Relax Yet?” The alert begins:
“The Bribery Act 2010 has now been in force for three years. Despite the announcements and commentary that it heralded a new and aggressive face toward corporate corruption, there have as yet been no corporate prosecutions brought under the Act. Was it all sound and fury signifying nothing? Or should all involved remain cautious and focused on compliance?”
In this recent speech, Ben Morgan (Joint Head of Bribery and Corruption at the U.K. Serious Fraud Office) asks “Deferred Prosecution Agreements: What Do We Know So Far?”
The obvious answer is nothing since there has not yet been a UK DPA in the “FCPA-like” context or otherwise. Nevertheless in the speech Morgan did highlight what “you need to do if a DPA is to be a potential resolution to an issue you discover.”
“It is not my job to try to persuade you to seek a DPA – that is a matter entirely for you and it is open to you to ignore that potential disposal of an issue and defend a prosecution instead. We are very comfortable with both scenarios, but the point of today is to concentrate on the DPA fork in the road as opposed to the adversarial prosecution fork in the road, so that’s what I will concentrate on. While my intention today is to encourage co-operation between you and the SFO, do remember that that only applies to those of you who choose the DPA fork in the road. For everyone else, remember we are ultimately a prosecutor and you can expect the bulk of our case load to be prosecuted in the usual way – the Director has made that entirely clear.”
[Comment: years ago the DOJ said the same thing about NPAs and DPAs (i.e. they were to be used sparingly and only in appropriate circumstances) however the passage of time has suggested otherwise].
Back to Morgan’s speech. He stated:
“If I was back in my old job, advising a company that had become aware of a potential criminal incident, I would be asking myself these two questions:
- 1) Will the SFO ever find out? and
- 2) If they do, what would they really do about it anyway?
Those of you who follow what the SFO has to say about DPAs will know that the Director and our General Counsel have spoken about both of these points at length. I do not repeat what they have said today, although I do endorse it. Today I want to make just two new points to amplify that.
As for “will the SFO find out” the point is simply this – our intelligence capability is expanding and as is widely known, we are investing heavily in it. The Director has said that we are seeking to make use of the full range of investigative tools available to us, and I can say from personal experience that that is now moving to a new level in practice. Through our own capabilities, and in conjunction with our law enforcement and intelligence partners, we have access to and are using that full range of tools. That is potentially game changing for us, not only in respect of forensic recovery of things that have happened in the past, but also in respect of evidence of things happening right now – crime in action.
Judging whether we will find out has always been an exercise in balancing risk. My message for you is if you don’t understand what that full range of investigative tools entails, you are not doing a proper balancing exercise – so you need to do some research on that, and have another think about your risk appetite. Refresh your assessment of what we’re able to do and how that might affect you.
As for “the SFO won’t do anything anyway”, I have to acknowledge history – we have very few corporate convictions in our stable. But under the current Director’s leadership I and others are expressly addressing that as a priority. Three points are worth making.
1) It is often said that it is too difficult to prosecute under pre-Bribery Act legislation. I disagree with that strongly – it can be done if the evidence is there. With the convictions recently of two of the controlling minds of Innospec – the former CEO and current Sales Director – we have shown that we have the resilience to find that evidence and make sure a jury has the opportunity to consider it, however long that takes and however robustly defendants try to stop that happening. Had the company not already pleaded, we would have had a conviction of a corporate under the old legislation for the bribery of foreign public officials. It can be done, we are doing it on other cases right now and we have the appetite to take it on on new cases as well if the evidence leads that way. It is not too difficult to prosecute under pre-Bribery Act legislation. It is hard, yes, but that is what the SFO is for, and we will do it.
2) Of course as time moves on, more and more of the conduct we are looking at is starting to straddle or post-date the coming into force of the Bribery Act, so for corruption offences at least, the job of prosecuting a corporate should become easier.
3) Finally on this, you will have heard the Director speak about the need for the logical expansion of the section 7 offence to cover other economic crimes, and my own view is that that logic is irresistible, such that the job of prosecuting corporates for more than just corruption offences should also become easier.”
As to “what we know about DPAs so far,” Morgan stated:
“[W]hen you become aware of potentially criminal conduct, there is a fork in the road – do you keep quiet and brace yourself for a fight if the SFO comes calling; or do you come and talk to us, work with us rather than against us, and try to manage the consequences of that incident responsibly, exhibiting the characteristics of honesty and integrity that I am sure every one of you has a lot to say about in your Code of Ethics and your Corporate Social Responsibility literature. Do you do the right thing morally, regardless of your analysis of the balance of risk?
I speak to defence barristers and solicitors about this a lot, and I am frequently told that the impediment to corporates coming forward is that their advisers cannot say with enough certainty what will happen if they do. That’s nonsense. Ever since DPAs have been on the agenda the consistent message from the SFO has been that a company that comes to tell us about a problem and genuinely co-operates with us in resolving it is unlikely to be prosecuted. While there will still be corporate prosecutions, the Director has said on many occasions that if a company genuinely does that, it will weigh heavily against the public interest parts of the Full Code Test pointing toward a prosecution. So actually, the position is pretty clear.
The question that naturally arises then is what is meant by genuinely co-operating with us? Again, I personally think this is pretty clear too – the DPA code covers it, and we have developed that in several speeches since. It seems to me that the issue amongst defence lawyers on co-operation is less a lack of clarity about what we are asking for, and more the fact that they don’t particularly like what we are asking for. For that reason I am glad to have this opportunity to speak directly to the corporates present here today. I think it’s important people hear from us about what we are asking for. If you want to have a chance of getting a DPA when you discover an issue somewhere in your network, you need to think through some of the following:
1) Tell us something we don’t already know, and do it within a reasonable period of the incident coming to light. I accept that it is hard to strike the balance between knowing enough about what has happened to make it worth speaking to us, and leaving it too long and us finding out anyway. If I was an adviser, I would be trying to approach that judgement by reference to the SFO’s own criteria for taking on a case. The Director has the power under section 1 of the Criminal Justice Act to open a criminal investigation into a suspected offence which appears to him on reasonable grounds to involve serious fraud, bribery or corruption. Practical tip number one is why not approach your analysis using that same test? I can’t guarantee it will get you a DPA, but it is the best help I feel I can offer in terms of when to come and talk to us.
One thing I can say with confidence is that generally speaking, the time to come will be a lot sooner than people have tended to think in the past. We certainly do not need you to have instructed lawyers to do an 18 month internal investigation and produce a weighty report. In the context of DPAs, from the SFO’s perspective those days are over. You need to decide early if you want a DPA to an option, and come and see us promptly if you do. And if that seems worrying, remember this – we have to apply the Full Code Test to any charging decision we make, so if you come and tell us something early you have the security that if having looked at it together, the evidence of a crime is not there, we MUST NOT pursue the case, and I can promise you we won’t. We are far too busy to try to force a square peg into a round hole.
4) There are a series of other important steps a co-operating company needs to take – and these are set out in the Code of Conduct: engaging with us on the scope of an ongoing investigation, points around the capture and sharing of digital material, that sort of thing. The final practical tip I would offer is this. In the case of all co-operative steps, make sure that you really are co-operating; genuinely. I came across the awful phrase recently at an event “the impression of co-operation” and believe me, nothing is more likely to derail the DPA process than a stage-managed attempt to co-operate that, as our investigation progresses, inevitably transpires to have been designed to give no more than the impression of co-operation. It is a matter of substance, sustained over time, not form, and proper co-operation requires genuine effort on the part of a company from the point of coming to speak to us, right through the DPA process, and then on throughout the life of the DPA.
Remember that ultimately it is a matter for a judge whether a DPA is finalised, not the SFO. I can say for my part that I certainly won’t be inviting any corporate into the process who I do not honestly believe is being fully frank with us. Littering correspondence with the word “co-operation” but in fact doing anything but is really not good enough. Co-operation is something we will judge by actions, not words. And while I can’t speak for the judiciary, I would be stunned if anything other than genuine, unreserved co-operation from a corporate would be enough to satisfy a judge that it is in the interests of justice to dispose of criminal conduct through a DPA rather than a prosecution.
For those that choose the DPA fork in the road, my message for you today is a warm one; if we think a DPA is appropriate then we are willing to work with you, collaboratively, to present to the court a DPA that is properly in the interests of justice. To get to that mutual goal, where we are both in court asking the judge for the same thing, you will have to be frank and open with us, and co-operate with us. I’ve explained what that means to us. A DPA won’t be appropriate in every case, and even if you follow everything I’ve said this morning I can’t guarantee you will get a DPA, but if you choose to ignore everything I’ve said, you might quickly find you’ve ruled one out.”