First Company Convicted Under Section 7 of UK Bribery Act
19 February 2016: Sweett Group PLC (“Sweett Group”) were sentenced and ordered to pay £2.25 million [1] in respect of offences under Section 7 of the UK Bribery Act 2010. This represents the first conviction of a company under the UK Bribery Act nearly 5 years since it came into force and is the second enforcement of a corporate body for bribery offences by the Serious Fraud Office (“SFO”).
The SFO is an independent UK government department responsible for investigating and prosecuting serious and complex fraud, bribery and corruption.
The story behind the corporate conviction is arguably not unusual. Following an SFO investigation (that lasted over a year) the construction and professional services company pled guilty to a charge of failing to prevent bribery in December 2015. The offence related to staff paying bribes to win business in the Middle East namely to secure the award of a contract for the building of a hotel in Abu Dhabi. Corrupt contracts apparently dated from 2013. In sentencing, his Honour Judge Beddoe, described the offence as a system failure patently committed over a period of time.
This conviction follows in the wake of a different form of SFO enforcement when in November 2015 Standard Bank Plc entered into the first Deferred Prosecution Agreement “DPA” with the SFO. DPAs (which have been available in England and Wales for 2 years but are not available in Scotland) are seen as a means for companies to resolve their criminal liability with UK authorities without the repercussions of a criminal conviction: it is in effect an agreement between a prosecutor and an organisation facing prosecution for certain prescribed offences where prosecution is deferred in return for the offending organisation agreeing to take certain steps. In Scotland a voluntary self-reporting scheme exists. Where an offence is reported the prosecuting authorities in Scotland may agree to the offender paying a civil penalty equivalent to the profits derived from the corrupt payment. However unlike England this does not prevent those prosecution authorities from then bringing criminal proceedings.
While recognised as a powerful tool in the SFO’s enforcement toolkit the strict and potentially onerous conditions imposed under DPAs mean that they are unlikely to be used extensively. Their very nature means DPAs are more likely to be sporadic, marking this recent corporate conviction relevant as another enforcement milestone. It serves to emphasise that financial crime remains high on the regulatory agenda. The SFO have been clear that the conviction and punishment of Sweett Group is intended to send a strong message to UK companies who “must take full responsibility for the actions of their employees and in their commercial activities”.
The repercussions for Sweett Group (evidenced by the group’s share price tumbling immediately after their admission of guilt) will persist. It is likely to include difficult commercial decisions. Following the guilty plea the company announced that it would retreat from the Middle East with the chief executive hoping for “closure” on the company’s Middle East legacy. The corporate conviction is just one side of the coin: the SFO’s investigation into individuals within Sweett continues.
UK companies should take note. The SFO intends to make UK companies accountable for corrupt activities. The Crown Office & Procurator Fiscal Service (“COPFS”) prosecute acts of bribery in Scotland and all indicators suggest that COPFS would take a similar approach. This enforcement trend is set to continue highlighting the importance of ensuring the adequacy and effective implementation of anti-corruption measures: these are likely to come under greater scrutiny than ever before. Complacency could prove to be an expensive risk. 19 February 2016: Sweett Group PLC (“Sweett Group”) were sentenced and ordered to pay £2.25 million [1] in respect of offences under Section 7 of the UK Bribery Act 2010. This represents the first conviction of a company under the UK Bribery Act nearly 5 years since it came into force and is the second enforcement of a corporate body for bribery offences by the Serious Fraud Office (“SFO”).
The SFO is an independent UK government department responsible for investigating and prosecuting serious and complex fraud, bribery and corruption.
The story behind the corporate conviction is arguably not unusual. Following an SFO investigation (that lasted over a year) the construction and professional services company pled guilty to a charge of failing to prevent bribery in December 2015. The offence related to staff paying bribes to win business in the Middle East namely to secure the award of a contract for the building of a hotel in Abu Dhabi. Corrupt contracts apparently dated from 2013. In sentencing, his Honour Judge Beddoe, described the offence as a system failure patently committed over a period of time.
This conviction follows in the wake of a different form of SFO enforcement when in November 2015 Standard Bank Plc entered into the first Deferred Prosecution Agreement “DPA” with the SFO. DPAs (which have been available in England and Wales for 2 years but are not available in Scotland) are seen as a means for companies to resolve their criminal liability with UK authorities without the repercussions of a criminal conviction: it is in effect an agreement between a prosecutor and an organisation facing prosecution for certain prescribed offences where prosecution is deferred in return for the offending organisation agreeing to take certain steps. In Scotland a voluntary self-reporting scheme exists. Where an offence is reported the prosecuting authorities in Scotland may agree to the offender paying a civil penalty equivalent to the profits derived from the corrupt payment. However unlike England this does not prevent those prosecution authorities from then bringing criminal proceedings.
While recognised as a powerful tool in the SFO’s enforcement toolkit the strict and potentially onerous conditions imposed under DPAs mean that they are unlikely to be used extensively. Their very nature means DPAs are more likely to be sporadic, marking this recent corporate conviction relevant as another enforcement milestone. It serves to emphasise that financial crime remains high on the regulatory agenda. The SFO have been clear that the conviction and punishment of Sweett Group is intended to send a strong message to UK companies who “must take full responsibility for the actions of their employees and in their commercial activities”.
The repercussions for Sweett Group (evidenced by the group’s share price tumbling immediately after their admission of guilt) will persist. It is likely to include difficult commercial decisions. Following the guilty plea the company announced that it would retreat from the Middle East with the chief executive hoping for “closure” on the company’s Middle East legacy. The corporate conviction is just one side of the coin: the SFO’s investigation into individuals within Sweett continues.
UK companies should take note. The SFO intends to make UK companies accountable for corrupt activities. The Crown Office & Procurator Fiscal Service (“COPFS”) prosecute acts of bribery in Scotland and all indicators suggest that COPFS would take a similar approach. This enforcement trend is set to continue highlighting the importance of ensuring the adequacy and effective implementation of anti-corruption measures: these are likely to come under greater scrutiny than ever before. Complacency could prove to be an expensive risk.
[1] Of the penalty, £1.4 million represents the fine and £85k was confiscation. Costs of £95k were awarded to the SFO.
