Corporates who discover evidence of serious fraud, bribery or corruption often face a serious dilemma; do they self-report and cooperate with the Serious Fraud Office ("SFO") or do they not? Developments in the law, including the introduction of corporate criminal offences under the Bribery Act 2010 and the Criminal Finances Act 2017, along with introduction of Deferred Prosecution Agreements (DPA's), has made this decision more difficult than ever, with strong arguments both for and against self-reporting.
In August 2019, the SFO published its Corporate Co-operation Guidance (the "Guidance"). The Guidance states that:
"Co-operation by organisations benefits the public and advances the interests of justice by enabling the Serious Fraud Office ("SFO") more quickly and reliably to understand the facts, obtain admissible evidence, and progress an investigation to the stage where the prosecutor can apply the law to the facts".
The SFO hope that corporates will be encouraged to report criminal wrongdoing and co-operate with and they state that co-operation will be a relevant consideration in the SFO's charging decision. Each case will inevitably be assessed on its own merits and will be assessed on the strength of the evidence. However, corporates faced with this challenge will closely scrutinise the SFO's track record before making a decision.
The last few years have brought mixed results for the SFO. Whilst the SFO have entered into five DPA's, they have failed to secure a significant number of high profile convictions (see Fieldfisher's Corporate Crime Enforcement Trends). This includes charges brought against individuals relating to criminal activity accepted by the corporate as part of their DPA.
Freedom of Information Request
As part of research carried out by Kyle Phillips, a Director in the Corporate Crime team at Fieldfisher, made a Freedom of Information request ("FOI") to the SFO. The FOI revealed that since 1 April 2013, the SFO has conducted 43 criminal investigations whereby at least one suspect is a corporate. During this period, the SFO brought 11 prosecutions whereby at least one charge was against a corporate (not including DPAs). However, the SFO only secured seven convictions against five corporates in this time.
Additionally, the FOI established that a significant amount of SFO investigations opened after 1 April 2013 have not yet reached a conclusion, with 32 of the 43 investigations still live.
The Famous Five
As stated above, the SFO managed to secure convictions against five corporates since 1 April 2013, but who are the famous five?
- Smith & Ouzman Ltd – In 2014, the UK printing company was found guilty of making almost £400,000 of corrupt payments to secure contracts in Kenya and Mauritania. They were convicted of three counts of corruptly agreeing to make payments, contrary to section 1(1) of the Prevention of Corruption Act 1906. They were sentenced to pay a fine of £1,316,799, ordered to pay a confiscation order of £881,158 and received a cost order of £25,000.
- Sweet Group Plc - On 19 February 2016, Sweet Group Plc was sentenced after pleading guilty to a charge of failing to prevent bribery, contrary to section 7 of the Bribery Act 2010. The SFO investigation uncovered that its subsidiary had made corrupt payments to the vice chairman of the Board and chairman of the Real Estate and Investment Committee of AAAI to secure the award of a contract for the building of the Rotana Hotel in Abu Dhabi. Sweet Group Plc were sentenced to a fine of £2.25m.
- 3. Alstom Power Ltd – On 10 May 2016 Alstrom Power Limited pleaded guilty to conspiracy to corrupt. The charges related to corruption in two power station contracts in Lithuania, with payments directed through Alstom Prom AG, Switzerland. In 2018 they were sentenced to fine of £6,375,000, ordered to pay compensation to the Lithuanian government of £10,963,000 and ordered to pay costs of £700,000.
- Alstom Network UK Ltd – On 10 April 2018 Alstrom Network UK Ltd were found guilty of one count of conspiracy to corrupt for making corrupt payments to win a tram and infrastructure contract in Tunisia. The company failed in its application for permission to appeal its conviction in July 2019 and they await sentence.
- F.H. Bertling Ltd – On August 2017 FH Bertling Ltd pleaded guilty to charges of conspiracy to make corrupt payments. This related to payments made to an agent to secure contracts in Angola. On 3 June 2019, the company was sentenced to pay a fine of £850,000, although they are now in liquidation.
Securing convictions against only five corporates, from 43 investigations, is alarmingly low. However, the substantial number of investigations that are still live and have been for some time, is also greatly concerning.
The SFO informed Fieldfisher that their cases are inherently complex and usually take much longer than other criminal cases to investigate and, where appropriate, prosecute. Issues with staff turnover and funding have no doubt played their part in the SFO's struggles. But delays to investigations cause stress and anguish for those concerned, and this can have a serious impact on the quality of evidence produced at trial. For example, key witnesses may struggle to recall crucial aspects of their evidence.
In December 2018, Lisa Osofsky, Director of the SFO, informed MPs on the House of Commons Justice Select Committee that she was personally reviewing more than 70 cases to see why it was taking more than five years in some cases to decide whether to charge corporates and individuals.
Unless significant progress is made soon, this backlog of cases will continue to rise risking further delays to SFO investigation process. But until then, the SFO's low conviction rate against corporates, and the time it takes for the SFO to investigate matters, are important factors which corporates will carefully consider when deciding whether or not to self-report and cooperate.