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Bribery Act case flags need for active prevention

17 April 2018 by Peter Burrell and Amanda Azarian

Bribery Act case flags need for active prevention - Read more

The outcome of a failure to prevent bribery case shows how seriously prosecutors are taking compliance

Corporations in the UK are facing pressure to not merely abstain from crime, but to actively prevent their staff committing it. Where once companies would not be culpable for the misbehaviour of staff, they are now being asked to have adequate measures in place to stop tax evasion and bribery, or face punishment.

After the Home Office published an anti-corruption strategy in December, some campaigners called for this approach to be applied to other types of economic crime.

Yet it is only now we are seeing what a prosecution under the Bribery Act 2010, which originated the approach under its section 7, looks like when it gets to court.

Sending a message

Ending in February, this first contested section 7 prosecution led to a guilty verdict for Skansen Interiors Limited (SIL), a refurbishment contractor. Many criticised the Crown Prosecution Service’s (CPS’s) decision to prosecute a small, dormant company for failure to prevent bribery.

At the least, the prosecution clearly wanted to send a message. Unfortunately, this may have left more questions than answers, and little guidance on when a company’s procedures will be considered ‘adequate’ to sustain a defence and protect a company from liability.

Even so, companies should take this opportunity to reassess their own compliance programmes in light of the limited insight that can be gained from the prosecution’s submissions in the matter.

Firms should also heed the warning that the CPS gave companies on how seriously they consider Bribery Act compliance when the prosecutor took this matter to trial.

Insufficient controls

The CPS alleged that SIL’s former managing director Stephen Banks bribed the project manager of a real estate company, Graham Deakin, to help secure a tender for office refurbishment contracts worth £6 million.

After winning the tender, Banks circumvented financial controls in place at SIL to effect and conceal two payments to Deakin totalling £10,000.

A third payment of £29,000 was offered but discovered to be part of the bribery scheme by chief executive Ian Pigden-Bennett of SIL’s parent Skansen Group before being paid.

After concluding its internal investigation, the group dismissed Banks and its commercial director, reporting its findings to the National Crime Agency and the City of London Police for further investigation.

“The firm argued that it was common sense to not pay bribes and therefore no specific policy to that effect was required”

SIL provided the CPS with a fairly clear cut example of a company that did not have sufficient controls in place. At the time of the bribery, it did not have a dedicated anti-bribery and corruption policy and attempted to rely on non-specific policies that referenced the need for dealing with third-parties honestly.

The firm argued that it was common sense to not pay bribes and therefore no specific policy to that effect was required. SIL also did not have a compliance officer and could not point to any employee designated to take on the responsibility for anti-bribery compliance.

The firm further could not show that any training had been conducted or that its employees had read the policies or agreed to comply with them.

In fact, SIL had a difficult time providing records showing any anti-bribery and anti-corruption culture at the company, and could not show that any response had been taken after the Bribery Act went into effect in 2010.

Individual and different

Of course, being a trial by jury, it is not clear which of these omissions were felt to make SIL’s compliance programme so inadequate that it could not avail itself of the defence. Some would even argue that a group with only 30 employees did not need a compliance officer.

However, the other failures are fairly clear, even in a small company.

We would expect any company seeking to comply with the Bribery Act to have a basic code of conduct, be able to show training on that, and show that it had responded to the Bribery Act by appointing a member of senior management to be responsible for the company’s initiatives to comply with the act.

On the other hand, having some or all of the anti-bribery controls that SIL lacked and that were flagged by the prosecution does not guarantee a successful ‘adequate procedures’ defence. Each company’s business and risks are different, but the pressure is on to comply.

Peter Burrell is head of litigation, compliance and enforcement, and white collar defence; and Amanda Azarian is an associate, both at Willkie Farr & Gallagher LLP

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