News updates

30 September 2015	Despite repeated calls from the SFO (amongst others) to introduce a strict liability failure to prevent economic crime offence, the Parliamentary-Under-Secretary (Ministry of Justice), Andrew Selous MP, has confirmed that the Ministry of Justice has dropped work on developing the new offence.  In response to a written question submitted by Byron Davies MP, Mr Selous said that: “Ministers have decided not to carry out further work at this stage as there have been no prosecutions under the model Bribery Act offence and there is little evidence of corporate economic crime going unpunished.”  Calls to introduce the offence stem from the view that the current test for corporate liability (the so called “directing mind and will” test or identification principle), is too high a threshold and places too much burden on the prosecution to secure corporate convictions. Following publication of the UK’s Anti-Corruption Plan in December 2014 (which committed the Ministry of Justice to bring forward proposals on the new offence by June 2015), it was hoped thought likely the threshold would be lowered and the approach adopted by the Government in the Bribery Act 2010 would be replicated for other economic crimes such as money laundering and fraud.  However, in light of Mr Selous’ statement, it appears that this has been dismissed.  This could be, in part, due to the SFO’s recent successful corporate prosecution of Smith & Ouzman Ltd, where the company (along with two of its senior officers) was found guilty of pre-Bribery Act bribery offences under the identification principle.  This challenges the assertion that the bar for corporate liability is set too high.  However, it is worth noting that unlike many of the corporates hitting the headlines for allegations of economic crimes, the company in question was a small, regional company and the individuals found guilty were at the most senior level of management, making it more straightforward to meet the test.
25 September 2015	The Scottish Crown Office and Procurator Fiscal Service have announced the first settlement of an offence under section 7 of the Bribery Act 2010, by which a corporate is liable for failing to prevent bribery committed by someone performing services on its behalf.  Brand-Rex Ltd, a Scottish developer and supplier of cabling systems, self-reported bribery committed by one of its independent installers (treated as an associated person for the purpose of section 7) after it found out the installer had offered rewards to an employee of a customer who was in a position to influence decisions as to the purchase of one of Brand-Rex’s cabling solutions.  In this case, Brand-Rex agreed to pay £212,800 by way of a civil recovery order under the Proceeds of Crime Act 2002 (based on the gross profit resulting from the bribe).  This case highlights both the risks posed by agents and other third parties who are involved in winning business for corporates as well as the benefits of cooperating with the authorities when issues arise.  While the case is significant due to its being the first resolution of a case under section 7 of the Act, it provides no precedent authority as to the approach that may be taken in England or Wales in similar circumstances.  The SFO was previously criticised in the English courts for concluding similar civil settlements with corporates and with the introduction of Deferred Prosecution Agreements as an available resolution mechanism for corporates who self-report and cooperate with the authorities in appropriate circumstances, that may be a more likely route to be taken in England.
30 August 2015	Rolls Royce has confirmed it is co-operating with Brazilian authorities in their investigation into Petrobras.  This announcement follows the company being linked to the scandal earlier this year, when a former Petrobras executive alleged that Rolls Royce had bribed politicians and Petrobras staff.  Press reports suggest that the allegations may be linked to a large contract to supply power turbines for Petrobras oil platforms, worth around £100m.  Rolls Royce is separately under investigation by the UK SFO in connection with contracts in Asia.
21 July 2015	Chief Executive and President of Toshiba, Hisao Tanaka, has today confirmed he is to resign after Toshiba announced it has overstated its profits for the past six years.  An independent panel appointed by the company has said that the company’s operating profit has been overstated by approximately 141.8bn yen (£780m).  The irregularities were uncovered when Japanese securities regulators probed the company’s balance sheet earlier this year.  The Vice-Chairman, Norio Sasaki, will also resign.  This is the second high-profile case of accounting irregularities to hit the global press in the last 12 months, after the UK’s Serious Fraud Office launched a criminal investigation into Tesco Plc’s accounting practices in October 2014.  Tesco Plc allegedly overstated its accounts by over £260m.  That investigation is ongoing.   In a recent survey, which questioned 3,800 respondents across 38 countries, EY reported that 37% of respondents agreed that companies in their country often reported their financial performance as being better than it was and over 150 respondents said that mis-stating financial performance could be justified.  Another significant finding was that one in five senior management respondents were aware of early recognition of revenue in their company in the last 12 months.  This finding seems high given the international climate of increased regulatory scrutiny post-LIBOR scandal.  The US Department of Justice and Securities and Exchange Commission have historically taken an aggressive approach to accounting irregularities, given the Foreign Corrupt Practices Act contains specific accounts and records offences.  While other international authorities have generally been slower on the uptake, recent events perhaps demonstrates that they are becoming more active in this area and this is a sign of things to come.   Source: EY: “Fraud and corruption – the easy option for growth?  Europe, Middle East, India and Africa Fraud Survey 2015"
9 July 2015	Money Laundering Case Law Update:  Earlier this year, the Supreme Court gave guidance on the section 328 POCA offence (the ‘arrangement offence’) in the case of R v GH [2015] UKSC 24.  This case concerned two individuals, B and H, and a fraudulent scheme to sell fictional motor insurance policies to customers.  B pleaded guilty to a number of offences arising from establishing four websites and falsely pretending to offer discounted motor insurance through those sites. B recruited associates to open bank accounts to receive the proceeds obtained from customers.  Almost £600,000 was paid into two accounts opened by H.  H was charged under s. 328 POCA for entering into or becoming concerned in an arrangement which he knew or suspected facilitated the retention, use or control of criminal property by B.  Read our full case update here.
29 June 2015	The High Court today ruled that it would not order three corporate investigation companies to disclose the identity of their business intelligence sources, to support US legal proceedings.  The companies had been engaged to provide reports to Rio Tinto PLC regarding the commercial and political climate in Guinea, following loss of its iron ore mining concessions in the country due to suspected impropriety.  You can read more about the case in our Law-Now article here.
27 May 2015	This morning, the Swiss authorities (on behalf of the US Department of Justice) arrested seven senior FIFA officials in Zurich on charges of racketeering, wire fraud, bribery and money laundering conspiracies, in connection with an alleged 24 year scheme to gain through corruption in international football.
11 May 2015	Guilty plea makes it five convictions secured from Operation Navigator    Graham Marchment today pleaded guilty to three counts of conspiracy offences in connection with the award of a series of high-value infrastructure projects in Egypt, Russia and Singapore.  Operation Navigator was a joint investigation between the SFO and City of London Police launched into these (and other) projects in 2008.    In 2012, the SFO secured convictions of four individuals (Andrew Rybak, Ronald Saunders, Philip Hammond and Barry Smith) for conspiracy to corruptly obtain payments in connection with these projects by supplying confidential information to project bidders.  At that time, Mr Marchment was living in the Philippines and could not be extradited to the UK to stand trial.    However, in 2014, his passport expired and he returned to the UK, where he was arrested and charged.  Mr Marchment pleaded guilty and was sentenced to 2.5 years in prison.  In sentencing, HHJ Taylor said: “You [Marchment] with your experience knew that the information you were passing was confidential and would be useful to rival bidders…You were in a position of trust….[yet] were motivated by greed.”
16 April 2015	Corruption-related charges were brought today against Alstom Network UK Ltd (Alstom) and one of its employees (a business development director working in France).  The corruption and conspiracy to corrupt charges relate to the supply of trains to the Budapest Metro.  In July 2014, the SFO charged Alstom and one of its employees in connection with corruption in India, Poland and Tunisia.
13 February 2015	Two former employees of Smith & Ouzman Ltd (“SO”) were sentenced at Southwark Crown Court yesterday for foreign bribery offences. SO is an Eastbourne-based printing company that specialises in security documents, such as ballot papers. A jury found that between 1 November 2006 and 31 December 2010, corrupt payments totalling £395,074 were made to public officials in Kenya and Mauritania in return for contracts.    You can read more about the case in our Law-Now article here.
29 October 2014	The SFO has opened an investigation into accounting practices at Tesco plc.  No further information has been released by the SFO as to the exact issues being investigated or potential criminal offences that may have been committed.  However, last week the supermarket announced that it had overstated its profits by £263m, which were overstated as a result of accounting early for rebates from suppliers.  The Financial Conduct Authority had been investigating this issue but have now reportedly stopped their investigation and handed over their evidence to the SFO.    Please read our latest Law-Now article:  Using disclosed documents in other proceedings:  Tchenguiz appeal dismissed.
19 September 2014	Today a Chinese court has fined GSK China Investment Co Ltd (GSK’s Chinese business) £297 million (3 billion RMB) after it pleaded guilty to bribing doctors and hospitals in China to promote its products.  Former head of GSK’s Chinese operations, Mark Reilly (a UK national), was sentenced to a suspended three-year term in prison.  A number of other senior executives are also due to be sentenced in connection with the same matter.    The fine is strikingly similar in value to the alleged amount of bribes GSK China were reported to have paid.  This represents the end to a long criminal process for GSK in China, but is only a step in the process of rebuilding reputation in the region.    Other international prosecuting authorities (including the SFO) are still investigating these and other issues in other jurisdictions, which may result in further proceedings and penalties and/or prosecutions of individuals in the future.  While the UK authorities generally respect the concept of double-jeopardy where a person has already been prosecuted in another country for the same wrongdoing, much will depend on whether issues that may fall under the jurisdiction of the UK authorities have in fact been dealt with in the Chinese proceedings.   The US authorities are also known to be looking into these matters and they are less generous in their approach to double jeopardy when they consider themselves to have jurisdiction to prosecute, particularly where they do not consider the sanctions or penalties imposed by the foreign courts were adequate to reflect the wrongdoing in question.
4 August 2014	4 former executives of Innospec Limited were today sentenced in Southwark Crown Court on charges of conspiracy of corrupt state officials in Iraq and Indonesia. Dr Miltiades Papachristos (former regional sales director for the Asia Pacific region), Dennis Kerrison (former CEO), Paul Jennings (former CEO) and Dr David Turner (global sales and marketing director) received the following sentences:   Mr Kerrison – 4 years in prison – found guilty of one count of conspiracy to corrupt. Mr Jennings – 2 years in prison – pleaded guilty in January 2012 to two counts of conspiracy to corrupt and a further count in July 2012. Dr Papachristos – 18 months in prison – found guilty of one count of conspiracy to corrupt. Dr Turner – 16 months suspended sentence and 300 hours community service – pleaded guilty in January 2012 to three counts of conspiracy to corrupt.   Upon sentencing the defendants, HHJ Goymer said:   "Corruption in this company was endemic, institutionalised and ingrained… but despite being a separate legal entity it is not an automated machine; decisions are made by human minds. None of these defendants would consider themselves in the same category as common criminals who commit crimes of dishonesty or violence….. but the real harm lies in the effect on public life, the effect on community and in particular with this corruption, its effect on the environment.  If a company registered or based in the UK engages in bribery of foreign officials it tarnishes the reputation of this country in the international arena."
26 July 2014	The International Chamber of Commerce today published its guidelines on gifts and hospitality, which provide guidance for companies on how to establish and maintain a policy relating to gifts and hospitality, based on the most recent international, regional and national rules and guidance, as well as on commercial best practice.    The guidelines are available here.
24 July 2014	The SFO has announced that it has brought charges against Alstom Network UK Ltd (formerly Alstom International Ltd), a UK subsidiary of Alstom for corruption and conspiracy to corrupt under the pre-Bribery Act 2010 regime.   The alleged offences purportedly took place between 1 June 2000 and 30 November 2006 and concern projects in India, Poland and Tunisia.
22 July 2014	Bruce Hall, former CEO of Bahraini company Aluminimum Bahrain B.S.C (Alba), was today sentenced to 16 months in prison for conspiracy to corrupt offences.   Mr Hall pleaded guilty to accepting corrupt payments from a member of the Bahraini royal family in exchange for allowing corrupt arrangements made prior to his time as CEO to continue.   Mr Hall was also ordered to pay a confiscation order of over £3m, compensation to Alba of £500,010 and £100,000 towards prosecution costs.