Overseas Corruption – Potential "Leniency" for Companies who self-report

The Serious Fraud Office is to adopt a "leniency" programme to encourage increased self reporting of overseas corruption by companies.

The SFO's Approach to Leniency

There has been considerable uncertainty over the SFO's approach to overseas corruption and the pros and cons of companies self reporting overseas corruption to it. Just last week, bridgework supplier Mabey & Johnson pleaded guilty to ten charges of corruption and sanctions violation, having self reported the making of corrupt payments to the SFO.

The SFO have now published a guide which aims to bring clarity to the approach that the SFO takes to self reporting of overseas corruption by companies and other organisations. Importantly, it states that the SFO wishes to settle self referral cases against companies using a civil process, where possible, and sets out the circumstances in which the SFO may agree to a civil settlement of overseas corruption.

Obtaining a Civil Settlement

A civil settlement is likely to include a payment of a penalty which will represent the amount of the benefit derived from the paying of any bribe, plus interest and the SFO's cost.

The company will also need to be willing to agree a programme of remedial measures with the SFO and independent monitoring of those measures. 

To obtain a civil settlement, companies require to self report the suspected corruption to the SFO directly.  Having self reported, the SFO will expect a company to investigate the suspected corruption fully and may require it to instruct external lawyers to conduct the investigation on the company's behalf.  The company will need to keep the SFO updated as to the investigation's progress and to share the findings of the investigation with the SFO.

Any civil settlement will likely involve a public statement by the SFO, although the SFO will seek to agree the terms of the statement with the company.
 
No Guarantees

Unlike other government agencies, such as the OFT and HM Revenue & Customs, the SFO will not guarantee a company and its employees immunity from prosecution in return for self reporting. In particular, the SFO is unlikely to settle corruption cases on a civil basis which involve Board members who engaged personally in the corrupt activities, especially if they had benefited personally.

The issues for the directors themselves, self-evidently, are even more serious - potentially involving imprisonment.  Although the SFO is keen to reach civil settlements with companies, it also wishes to reserve its right to prosecute individual directors and employees in appropriate cases.

Before self reporting, companies need to be aware that there is a risk that the SFO will use any information provided by a company to launch a criminal investigation, potentially against the company and its directors and employees.

In most cases, companies should not self report until a preliminary investigation has been conducted and the extent of the corruption ascertained.  It will be crucial that such an investigation is covered by legal professional privilege to ensure that confidentiality is maintained.  Accordingly, any company which believes it has a potential issue in this area should take urgent legal advice.

Companies also need to be aware that the SFO may share any information provided to it with other agencies, including overseas authorities such as the Department of Justice in the US. Although, the SFO has indicated that it will assist companies to achieve a "global settlement", the SFO is unlikely to be able to tie the hands of overseas authorities, especially the Department of Justice.

At the end of the day, the SFO is prepared to entertain civil settlements of overseas corruption cases because of the inherent difficulties in investigating and prosecuting such cases. In cases where it is thought that a civil settlement is unlikely to be agreed to, or where there are concerns that the SFO may disclose any information to a more aggressive authority overseas, self reporting may not be advisable. 

Reasons for self reporting

In many cases, however, there will be clear advantages to obtaining a civil settlement of overseas corruption.

Criminal convictions for corruption are extremely damaging to a company's reputation and its ability to win future work, particularly for companies involved in public sector contracts. Under Article 45 of the EU Public Sector Procurement Directive, public bodies are required to exclude candidates with criminal convictions for corruption, fraud or money laundering from public procurement contracts.

Criminal investigations and prosecutions are also extremely disruptive for a business and worrying for those under suspicion or required to give evidence. It usually takes several years for cases to be investigated and prosecuted.

Under the SFO's civil settlement route, the company investigates the corrupt activities itself. It therefore has a degree of control over the investigation and the timeframe for achieving a civil settlement. Importantly, the company would not be excluded from future and potentially lucrative public contracts if a civil settlement was secured.

Conclusion

There is a clear desire on the SFO's behalf to engage with the corporate world and to work with companies to find alternatives to lengthy, expensive and difficult prosecutions.

Whilst this pragmatic approach is to be welcomed, self reporting remains riddled with risk for companies and should only be done after taking legal advice.

For further information please contact:

Tom Stocker
Director
Tel +44 (0)131 777 7362
Email tom.stocker@mcgrigors.com

James Bullock
Partner
Tel +44 (0)207 054 2726
Email james.bullock@mcgrigors.com