Tag: Debevoise & Plimpton

Self-Reporting Corruption in the UK

serious-fraud-office

As part of its renewed efforts to combat overseas corruption, the United Kingdom’s Serious Fraud Office published its new Approach of the Serious Fraud Office to Dealing with Overseas Corruption PDF Document .

Previously, the Serious Fraud Office saw its role as an after-the-event investigator and prosecutor, difficult for a company to engage except in the context of a formal investigation. The new policy statement shows a very different approach in which the Serious Fraud Office is offering to work with a company to avoid criminal prosecution.

What does this mean?

The Serious Fraud Office wants to encourage self-reporting. The benefit is that the Serious Fraud Office will more likely consider a civil, rather than criminal, outcome and the opportunity to manage publicity proactively. A negotiated settlement rather than a criminal prosecution means that the mandatory debarment provisions under Article 45 of the EU Public Sector Procurement Directive in 2004 will not apply.

What about the US Department of Justice?

If the case is within the jurisdiction of the DOJ and the Serious Fraud Office, they expect to be notified at the same time.

What do you need to do to avoid criminal prosecution?

Very soon after they receive the self-report and the acknowledgment of a problem, they want to establish the following:

  • Is the Board of the corporate genuinely committed to resolving the issue and moving to a better corporate culture?
  • Is the corporate prepared to work with the SFO on the scope and handling of any additional investigation the SFO considers to be necessary?
  • At the end of the investigation (and assuming acknowledgment of a problem) will the corporate be prepared to discuss resolution of the issue on the basis, for example, of restitution through civil recovery, a program of training and culture change, appropriate action where necessary against individuals and at least in some cases external monitoring in a proportionate manner?
  • Does the corporate understand that any resolution must satisfy the public interest and must be transparent? This will almost invariably involve a public statement although the terms of this will be discussed and agreed by the corporate and the SFO.
  • Will the corporate want the SFO, where possible, to work with regulators and criminal enforcement authorities, both in the UK and abroad, in order to reach a global settlement?

They are not offering an “unconditional guarantee” that there will not be a prosecution.

What about corporate officers?

There are no guarantees. There are a few questions that will influence their course of action:

  • how involved were the individuals in the corruption (whether actively or through failure of oversight)?
  • what action has the company taken?
  • did the individuals benefit financially and, if so, do they still enjoy the benefit?
  • if they are professionals should the SFO be working with the appropriate Disciplinary Bodies?
  • should the SFO be looking for Directors’ Disqualification Orders?
  • should the SFO think about a Serious Crime Prevention Order?

Conclusion

The Serious Fraud Office is trying to take the same approach that the Department of Justice is taking. Companies should self-investigate, self-report and negotiate to avoid the harshest sanctions.

References:

Ignorance Is No Excuse When It Comes to the FCPA

Paul R. Berger, Bruce E. Yannett, Erin W. Sheehy, and Emily S. Pierce of Debevoise & Plimpton LLP wrote an article: Fair Warning: Ignorance Is No Excuse When it Comes to the FCPA (March 2008).

The article focused on some of the implications of Unites States V. Kay, 513 F.3d 432. [See Kay v. United States and Kay – Certiorari Denied]. The authors point out that one of the defendant defenses was that they did not have fair notice that bribes paid to reduce taxes and levies violated the FCPA.

The article also points out that there have been several prosecutions under the FCPA’s book and records requirement even when bribery could not be proven.

They also highlight the guidance from the DOJ about what are acceptable travel and entertainment expenses. They summarize FCPA Opinion Release 2007-01 and FCPA Opinion Release 2007-02 as providing these factors that made the proposed travel acceptable:

  • the foreign officials making the trip were not selected by the company and had no direct authority over decisions relating to potential contracts or licenses necessary to operate in the foreign country;
  • the expenses would be limited – no international airfare and economy class domestic airfare; no entertainment or leisure (although a “modest four-hour city sightseeing tour” was acceptable); no stipends; reimbursement for incidental expenses up to “a modest daily minimum, upon presentation of a written receipt”; no expenses for spouse, family or guests; and souvenirs limited to company-branded items of nominal value;
  • the company would pay all incurred expenses directly to the service providers (not to the officials) and properly record such payments in its books and records; and
  • the company received a written legal opinion that the trips did not violate the laws of the home country of the foreign official.

The authors point out that the best defense against FCPA is to have a robust compliance program in place that includes written policies, procedures, training and testing through internal audits.