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FCPA Blog Daily News

Entries in Britain (16)

Monday
Jul012013

Will Snowden leaks scuttle joint U.S.-EU anti-bribery enforcement?

Over the weekend, the German weekly Der Spiegel said the NSA bugged European Union offices in Washington, Brussels, and at the U.N. in New York, and infiltrated EU computers to monitor telephone conversations, e-mails, and other documents.

Click to read more ...

Wednesday
Aug292012

SFO May Investigate Barclays' Qatar Payments

The U.K. Serioius Fraud Office might start a criminal investigation into Barclays Plc for alleged payments to Qatar’s sovereign wealth fund, according to a report Wednesday by Lindsay Fortado of Bloomberg's Businessweek.

Click to read more ...

Wednesday
Jun292011

The Coming Chaos In Global Enforcement

Anti-corruption laws are breaking out all over. In a few days, the U.K. Bribery Act will be a reality. Other countries, prodded by the OECD and U.S., are criminalizing overseas public bribery.

Click to read more ...

Tuesday
Feb222011

The Future Of British Enforcement

Richard Alderman, director of the SFO, answered some questions we asked about the SFO, the Bribery Act, and global compliance. Here's the exchange:

Click to read more ...

Thursday
Sep232010

Bribery Act Guidance Released

Tom Fox on guidance under the UK's Bribery Act.

Click to read more ...

Thursday
Jul222010

The British Question

This week's news that the newly elected U.K. government cracked under pressure from the business lobby and delayed implementing the Bribery Act until April 2011 was a setback for lots of reasons.

Opponents claimed they needed more guidance to help them comply with the new scheme. What will happen to the Bribery Act between now and next April is anyone's guess. Many think the government is likely to water down its provisions if not kill the act altogether.

The new law was supposed to clarify a century-old patchwork of statutes and common law and extend compliance obligations in a way similar to the Foreign Corrupt Practices Act.

All new laws raise questions. "Don't spit on the sidewalk" can induce the same sort of panic as the Bribery Act. What's the definition of spit, do both feet need to be on the sidewalk, what about medically induced spitting, how about unconscious drooling? But very quickly judges, defendents, and lawyers figure out what laws mean, as happened with the FCPA and countless other decrees through the ages, and life and business go on.

The U.K. knee buckling means that 33 years after enactment of the FCPA, the U.S. is still nearly alone in the battle against global graft. But for the battle to be won, and for American companies to ever enjoy a level playing field, the U.S. needs allies. The U.K. was about to become the first full-fledged partner.

Meanwhile, the U.K.'s Serious Fraud Office -- the agency responsible for prosecuting major cases of overseas corruption -- is struggling against its own domestic opposition. The SFO's ability to join the U.S. Justice Department in forging global settlements with global defendants in global anti-corruption prosecutions is up in the air.

In March this year, Britain's second-ranking criminal judge said the $12.7 million fine the SFO agreed with a U.K. division of Innospec Inc. went beyond the SFO's authority. Delaware-based Innospec had reached what it believed was a $40 million global settlement with U.S. prosecutors and the SFO. At Innospec's hearing, however, Lord Justice Thomas, the deputy head of criminal justice in the U.K. courts, said: “I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.” 

A few weeks ago, the SFO's director, Richard Alderman, tried to reassure the world that global settlements are still on the table. But he didn't sound too sure himself. He said:

The question here is whether the SFO remains committed to taking part in global resolutions in cases where a corporate is subject to the jurisdiction of the authorities in a number of different countries. The answer to that emphatically is yes. We are very committed to this. Clearly we are feeling our way. Global resolutions in cases of concurrent jurisdiction are new and, until recently, our Judges have not had to consider the issues that arise in these cases. Innospec was our first global resolution and we obtained guidance on some of the issues from the Judge in that case.

As Trace has reported, of 515 outbound, or foreign enforcement actions, more than 75 percent are U.S. matters. The remaining 25 percent are the result of the combined efforts of 21 other nations. The United Kingdom ranks a distant second in the number of outbound bribery cases with 4.3 percent of the total.

Some help is better than none. But without real partners, America's anti-corruption effort won't be effective and over time will look more and more like legal bullying. It's not a one-country fight but a global fight. Whether the U.K. is really part of that fight is now an open question.

Wednesday
Apr142010

Goodbye, Mr. Mendelsohn

As head of the DOJ's Foreign Corrupt Practices Act enforcement unit, Mark Mendelsohn transformed the FCPA from a legal backwater to a headline practice. He's leaving the Justice Department Friday after a dozen years, and leaving behind the most aggressive overseas anti-bribery regime in the world.

In November last year, Mendelsohn's boss, Assistant AG Lanny Breuer, called him an "exceptional public servant and a visionary steward of the FCPA program." In private practice, he's expected to earn between $2.5 and $3 million a year. 

Mendelsohn's view of the FCPA and American anti-corruption policy wasn't complicated. He pushed enforcement against corporations of any size and from any country -- including U.S.-government contractor KBR, German industrial giants Siemens and Daimler AG, British-based BAE Systems, and France's Alcatel-Lucent. Financial penalties ballooned during Mendelsohn's time, topped by Siemens' $800 million payment to the DOJ and SEC in December 2008.

He also led the government's charge against individual FCPA defendants -- among them KBR's Jack Stanley, entrepreneur Frederic Bourke, and the 22 shot-show defendants. 

During his term, no corporations mounted a courtroom defense against FCPA charges; instead all made deals with the DOJ to settle their cases. That gave Mendelsohn extraordinary power -- in the FCPA realm, he and the DOJ became prosecutor, judge, and jury. That's more power than most mortals can handle, but he did just fine. 

Like all top cops, he was criticized from every direction. Some said he was overzealous, that his expansive view of the FCPA went far beyond Congress' original intent. Others complained that corporations enjoyed easy settlements, based not on bribery charges but only related offenses, and never resulting in debarment from U.S. government business. But his fans cheered because nearly all corporate defendants were given second chances.

Above all, Mendelsohn was an honest advocate for compliance, not only at home but abroad. That may be his most important contribution. His steady hand encouraged prosecutors in other countries to fight public sleaze. And his FCPA team partnered with counterparts in England and Germany, Italy and France, Switzerland, Hungary, Costa Rica, Nigeria and elsewhere, forging ties that led to the first real global enforcement actions. Those cases helped change attitudes everywhere.

His boss was right. Mark Mendelsohn was an extraordinary public servant and an FCPA visionary.

Monday
Apr052010

Britain's FCPA Plus

Photo by Steve PunterBy Thomas Fox

The U.K. Bribery Bill, introduced in March 2009, is still on track to pass out of Parliament before the upcoming general election, expected to be in June. The Bribery Bill is a major shift in the U.K.'s overseas anti-corruption regime -- and it goes even further than the FCPA.

Because so many U.S. companies have offices or operations in the U.K., or employ U.K. citizens in their world-wide operations, this legislation exposes them to new risks of prosecution.

Unlike the FCPA, the Bribery Bill has no exception for facilitation payments. It creates strict liability for the failure of a corporate official to prevent bribery, prohibits bribery not just of government officials but also private citizens, and has criminal penalties of up to 10 years prison per offense (not 5 years as under the FCPA).

The Conservative Party tried to introduce amendments that would have allowed facilitation payments "reasonable in amount," "customary in the situation," or the "only reasonable alternative in the situation." Blogger Alan Holroyd reported that Clair Ward, the Parliamentary Under-Secretary of State for Justice, blasted the idea, saying the exceptions (which died in the debate) would have "driven a coach and horses through the policy objectives of the bill."

There's one affirmative defense for "adequate procedures." The defense would allow a corporation to put forward credible evidence that it had adequate procedures (i.e., an effective compliance program) in place to prevent its people from committing bribery offences. The Secretary of State for Justice will be required to publish guidance on "adequate procedures" when the Bill becomes law. And the Government has signaled that it will work with the U.K. business community to develop compliance standards.

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. He can be reached at tfox@tfoxlaw.com

More information about the Bribery Bill can be found here.

Tuesday
Aug042009

Here Comes The SFO, Part Two

The U.K.'s Serious Fraud Office is supposed to prosecute overseas corruption. But its track record has been weak. Last month, however, it announced a break-through enforcement action against Mabey & Johnson (here). We wondered if that case could mark the emergence of an energized Serious Fraud Office. According to the SFO itself, the answer is yes.

The agency issued an "operational note" on July 21 that spells out how companies can benefit from self-reporting overseas corruption and proving they have an effective compliance program. The document amounts to an enforcement blueprint similar to the way the U.S. Justice Department enforces the Foreign Corrupt Practices Act. The SFO said part of its reason for the new approach is eventual adoption of the U.K.'s pending anti-corruption bill that we discussed here.

The SFO hopes to soon have 100 staff working on overseas bribery cases. And it said that after the Mabey & Johnson prosecution, "More will follow. We shall be using all of the tools at our disposal in identifying and prosecuting cases of corruption that we find."

The idea is to reward self-reporting with civil instead of criminal penalties. But if a company hasn't been sincere about compliance -- if it doesn't have what amounts to the U.K.'s version of an effective compliance program -- it might still face criminal penalties. As the SFO explained:

In any discussions about procedures within the corporate [defendant] we shall be looking to find evidence of adequate procedures to assess how successful the corporate has been in mitigating risk. We shall also be looking closely at the culture within the corporate to see how well the processes really reflect what is happening in the corporate. For example, we shall look for the following:

• a clear statement of an anti-corruption culture fully and visibly supported at the highest levels in the corporate.

• a Code of Ethics.

• principles that are applicable regardless of local laws or culture.

• individual accountability.

• a policy on gifts and hospitality and facilitation payments.

• a policy on outside advisers/third parties including vetting and due diligence and appropriate risk assessments.

• a policy concerning political contributions and lobbying activities.

• training to ensure dissemination of the anti-corruption culture to all staff at all levels within the corporate.

• regular checks and auditing in a proportionate manner.

• a helpline within the corporate which enables employees to report concerns.

• a commitment to making it explicit that the anti-bribery code applies to business partners.

• appropriate and consistent disciplinary processes.

• whether there have been previous cases of corruption within the corporate and, if so, the effect of any remedial action.

Finally, the SFO said that no matter how much the company cooperates, individuals -- including directors -- could still face criminal prosecution. It added that it will help self-reporting companies resolve potential liabilities they face in other jurisdictions, presumably including the U.S.

The SFO's July 21, 2009 operational note on self-reporting overseas bribery can be downloaded here.
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Thursday
Jul232009

Here Comes The SFO, Part One

The last time we had a serious discussion about the U.K.'s Serious Fraud Office was to report its thrashing in June 2008 by a former American prosecutor. Jessica de Grazia, who'd been an assistant district attorney in Manhattan for 13 years, was hired by the U.K.'s then-attorney general to find out why the SFO couldn't get it right. As the U.K. Times said, her arrival at the SFO sparked panic.

But times change and even the SFO gets a second chance. Earlier this month it brought what may be the first of several cases against British firms for overseas corruption.

Mabey & Johnson pleaded guilty this month to violating the U.N.'s old Iraq sanctions and to an additional ten charges of overseas graft. The BBC reported that the company, which specializes in making temporary bridges, admitted at the Westminster Magistrates Court that it tried to influence officials in Jamaica and Ghana to award it public contracts. It also admitted paying more than £123,000 to the pre-war Iraqi regime in violation of the U.N. sanctions. The company hasn't been sentenced yet.

Reuters said Mabey & Johnson's admissions let to the resignation of Jamaica's junior minister of transport and works after he was linked to the U.K. company's corrupt business practices.

The emergence of an energized Serious Fraud Office, if that's what we're seeing, could mean the start of a lot more anti-corruption enforcement from London. According to the Telegraph, the SFO has spent £22 million investigating breaches by British firms of the oil-for-food program and more prosecutions could follow.

Former SFO director Robert Wardle left his post in April 2008, two months before de Grazia released her report. The U.K. Times' story about de Grazia was called "She came, she saw, she scythed through the SFO." The paper quoted an ex-staffer at the SFO as saying, “She caused chaos. She called meetings of case controllers and asked them to identify the crap assistant directors. Then she went to the investigators and asked them who was a crap case controller.”

The SFO had often been in hot water because of blown prosecutions. The worst trouble, though, came after its 2006 decision to drop the high-profile investigation of BAE Systems for bribery. It said it had no choice because Saudi Arabia threatened not to buy Typhoon aircraft or continue sharing anti-terrorism intelligence. The High Court in London called the episode an outrage, an abject surrender to threats, and a capitulation. On the government's appeal to the House of Lords, five law lords decided the SFO's action was legal but "extremely distasteful."

In de Grazia's 157-page report, she compared prosecution rates for the Serious Fraud Office with those of her former employer, the New York District Attorney's Office. In 2007, she said, the SFO had about three times more lawyers than the Frauds Bureau at the Manhattan District Attorney's Office. The New York DA's 19 lawyers -- with virtually no outside help -- managed to conclude the prosecution of 124 white collar defendants from 2003 to 2007. During the same period, the SFO's 56 staff lawyers concluded 166 prosecutions, and spent more than £4 million on external counsel. That means the per-lawyer prosecution rate in the New York DA's office was at least double and maybe triple that of the SFO.

Britain's Sunday Times reported that after release of de Grazia's report, dozens of lawyers, accountants and investigators were offered large severance packages to leave the agency.

Download a copy of Jessica de Grazia's June 2008 report here.

Coming up: The SFO meets the DOJ.
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Thursday
May212009

The Quiet Revolution

Here's some news you don't hear every day -- in fact, no one's heard it for the last 367 years: Britain's House of Lords this week suspended two of its members because of corruption. It's the first time a Lord has been barred since 1642.

Lord Taylor of Blackburn, a peer since 1978, and Lord Truscott, who joined the upper house five years ago, agreed to put a loophole in a new tax law in exchange for a promise of cash payments. The bribers, it turned out, were undercover reporters from The Sunday Times. Two others, Lord Moonie and Lord Snape, were also investigated. Both were cleared. But as a result of evidence found during the investigation, they were invited to apologize for "inappropriate attitudes" toward the rules.

The House of Lords Sub-Committee on Interests said Lord Truscott "was advertising his power and willingness to influence parliament in order for substantial financial inducement." He called that verdict "outrageous and slanderous." Lord Taylor said he knew the journalists were running a sting operation and that he made "increasingly extravagant and outlandish claims in an effort to flush out the truth." The ethics committee rejected his defense. Prosecutors said they don't plan to bring criminal charges.

Neither of the Lords actually took any cash. But the internal ethics panel found that they violated their Code of Conduct. It requires members to "always act on their personal honor." The suspensions will last six months -- until the start of Parliament's next session in November; Lords can be permanently removed only by the Queen and she's not expected to take any action.

Over in the House of Commons, meanwhile, the odorous expense-account scandal cost the speaker, Michael Martin, his job, following a no confidence vote. It's also been awhile since the First Commoner of the Land was treated that way -- about 300 years.

The expense account abuses were discovered through the persistence of an American reporter, Heather Brooke. She kept asking for the information under the U.K.'s freedom of information act until she finally received it.

The Daily Telegraph, though, broke the story and has run with it. The staid broadsheet even launched a glitzy website dedicated to the scandal, complete with links for best excuses ("The garden came with the house. It was in a totally derelict state and had not been touched in 30 years...") and the 20 most bizarre claims (ginger crinkle biscuits, 67p; ice cube tray, £1.50).

The Guardian's Alastair Harper said that with scandals now raging in both Houses of Parliament, he and other Britons are having to "ration our disgust" between them. About the Lords' debacle, he said:

For my money, it is Lord Taylor who has become the perfect villain. There he was, trying to look terribly confused over the proceedings, feeling rather persecuted, cocking his head in embarrassed befuddlement like a dim beagle. If you've heard of Junior Soprano you'll know the role – the old mafia don, caught 20 years too late, pretending he was too simple, too frail to have been capable of all these awful things the FBI are accusing him of. At the same time he made the ludicrous argument that he knew exactly what the journalists were up to and was turning the tables on them. In order to, well, make himself look exactly like a corrupt peer. And no one can deny that he played the role to perfection, saying all the things a corrupt peer would do right up until when the story came out. What a masterplan.
And the AP's Gregory Katz said: Few imagined that every lawmaker was scrupulously honest and frugal with the public purse, but the flagrant greed of many has provoked public demands for wholesale change. Some in Parliament are calling it the "Quiet Revolution" - a surge of anger forcing lawmakers to consider relinquishing power they've had for centuries.

We're living in amazing times.
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Sunday
Oct192008

Amid OECD Criticism, A Breakthrough In Britain

The U.K.'s failure to prosecute its multinationals for overseas bribery, while other European countries and the U.S. are stepping up enforcement, threatens the integrity of the international anti-bribery effort. That's what a fed-up OECD Working Group on Bribery says in its just-released report.

The 37-member OECD anti-bribery group launched an investigation into Britain's enforcement practices after the U.K.'s Serious Fraud Office quashed a corruption investigation into BAE Systems in December 2006. The military equipment supplier had been accused of funneling £1 billion in secret payments to the former Saudi ambassador to the United States, Prince Bandar bin-Sultan, in exchange for help selling jet fighters to the Saudi government. Both BAE and the Prince have denied breaking any laws.

The OECD was blunt. It said in its report:

The Working Group is disappointed and seriously concerned with the unsatisfactory implementation of the [OECD Anti-bribery] Convention by the UK. The continued failure of the UK to address deficiencies in its laws on bribery of foreign public officials and on corporate liability for foreign bribery has hindered investigations. . . . The Working Group also strongly regrets the uncertainty about the UK's commitment to establish an effective corporate liability regime in accordance with the Convention, as recommended in 2005, and urges the UK to adopt appropriate legislation as a matter of high priority.
Meanwhile, the U.K. government is celebrating two well-timed maiden anti-corruption victories. The breakthrough prosecutions are reported in a briefing from a Fulbright & Jaworski team led by Washington partner William B. Jacobson. Billy -- who joined Fulbright last month after serving with distinction as the Assistant Chief for FCPA Enforcement at the Justice Department's Fraud Section, Criminal Division -- graciously consented to our liberal use of the material. We're happy about that. For the past few days we haven't had a spare minute due to the ALCS -- i.e., planning to watch the games, watching the games, then talking about what happened in the games.

Here, then, is an abridged version of Fulbright's report:

In the course of just a few weeks, the UK has brought two separate foreign bribery cases to conclusion - the first such cases brought by UK authorities.

First, in late September, the Overseas Anti-Corruption Unit ("OACU") of the City of London Police announced that both an employee of CBRN Team Ltd ("CBRN"), a UK security consulting firm, and an official of Uganda pled guilty to bribery charges stemming from a scheme in which CBRN paid the Ugandan official in order to receive a contract to advise the Ugandan Presidential Guard. While the CBRN employee received a suspended sentence, the Ugandan official was sentenced to twelve months' incarceration.

Second, on October 6, 2008, the UK's Serious Fraud Office ("SFO"), in a case the SFO was investigating for evidence of foreign bribery, announced that it had reached a £2.25m (US$3.9m) settlement with major construction firm Balfour Beatty plc for alleged unlawful accounting in connection with certain 'payment irregularities' which it self-reported. While the SFO acknowledged that there were no grounds for criminal prosecution of either the company or any individual, this marks the first time a company has reached this type of civil settlement as part of a foreign bribery investigation. This is a significant event in the UK's enforcement of anti-corruption laws and comes only 6 months after the SFO was given the powers to make a civil recovery of the proceeds of crime.

The SFO's Powers

The SFO is a UK investigation and enforcement authority established to deal with serious financial crime and has the power to investigate any suspected offence appearing on reasonable grounds to involve serious or complex fraud. In the course of an investigation, the SFO may give notice to the subjects of the investigation, or to anyone else that the SFO thinks may have relevant information, to answer questions or to provide information or specified documentation, and in appropriate circumstances may issue warrants to compel production. The SFO may also commence and conduct criminal proceedings relating to that fraud. The SFO's powers to obtain civil recoveries in relation to the proceeds of crime are relatively new. In April 2008, the Serious Crime Act 2007 transferred the civil recovery powers formerly vested in the Assets Recovery Agency to a number of agencies including the SFO.

The CBRN Team Case

The prosecution of the managing director of CBRN and the Ugandan official who received the bribe is noteworthy in many respects. First and foremost, it represents the first convictions for foreign bribery in UK history. Second, having been investigated by the City of London Police's OACU, it also marks the first successful foreign bribery investigation by that recently-formed unit. Third, the prosecution was handled by the Crown Prosecution Service and not the SFO, which usually investigates foreign bribery with the OACU.

Additionally, the UK's ability to prosecute the foreign official who took the bribe sets the UK's legislation apart from the United States' foreign bribery law, the Foreign Corrupt Practice Act ("FCPA"). Under the FCPA, only the giver of a bribe, and not the foreign official who received the bribe' may be prosecuted. For all the criticism that the UK's foreign bribery legislation has received in recent years, those laws are, in this respect, stronger than the FCPA.

View Fulbright's full briefing on the cases here.

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