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The Anticorruption Blog

New EU directive allows public contract suppliers convicted of corruption to “self-clean” their bad behaviour

Posted in Commercial Bribery, Compliance Program, Czech Republic, France, Germany, UK Bribery Act, United Kingdom

The Public Contacts Directive (2014/24/EC – the “2014 Directive”)[1] sets out the legal framework for public procurement when contracting authorities seek to acquire supplies, services, or works (e.g. civil engineering or building). The intention is that procurement rules become simpler and more flexible. Despite the 2014 Directive not requiring transposition into Member States’[2] law until April 2016, the UK prioritised the implementation through the Public Contracts Regulations 2015, which came into force on 26 February 2015 (with some exceptions).

The 2014 Directive provides that contracting authorities must follow certain procedures when considering suppliers for the award of contracts. Authorities can choose between a number of different types of procedures. The procedures only apply when the contract exceeds prescribed thresholds and will not apply if the contract qualifies for an exemption, such as grounds of national security, ‘in-house awards’ (i.e. contacts with an entity which the contracting authority controls) and ‘inter-authority cooperation’ (i.e. agreements between  two or more contracting authorities who deliver a public service jointly).

Interestingly, the 2014 Directive contains a number of provisions which should help combat bribery and corruption. These include:

  1. A continued requirement that organisations convicted of corruption be subject to mandatory exclusion. Under the 2014 Directive, breaches of the UK Bribery Act 2010 section 1 (active bribery), section 2 (passive bribery) and section 6 (bribery of foreign public official) gives rise to a mandatory exclusion. Breach of section 7 (failure of commercial organisations to prevent bribery) however may give rise to discretionary exclusion but does not require mandatory exclusion.
  2. Despite the continued exclusion requirements, the 2014 Directive provides that suppliers previously excluded from public procurement for bad practice (including but not limited to corruption) will be able to “self-clean” – i.e. their exclusion will be brought to an end, if they can prove they have sufficiently remediated and changed their behaviour to such an extent that they can demonstrate their reliability despite the existence of a relevant ground for exclusion. The contracting authority can then choose whether or not to accept that the organisation has “self-cleaned”. Only Austria, Germany and Italy previously had such provisions.
  3.  Contracting authorities must implement procedures to deal with conflicts of interest. Although the specific procedures required are not defined, requiring employees to declare any interests that they have with potential contracting parties so that any dealings with them can be closely monitored, is likely to be sufficient.
  4.  Suppliers will only be able to be excluded for a certain amount of time, which can be 3 or 5 years depending on the circumstances.

There are however specific requirements that an organisation must have undertaken for the “self-cleaning” provision to apply. An organisation must have:

  1. paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct;
  2.  clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities; and
  3. taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct. These measures will be evaluated depending on the gravity and particular circumstances of the criminal conduct.

Given point C above, organisations that bid for public sector work and that have been convicted of corruption now have an even greater incentive to ensure that they implement remedial measures to ensure that they do not engage in further corrupt activities. Organisations should be mindful of the “adequate procedures” that the UK Bribery Act 2010 and its guidance requires organisations to implement to prevent bribery, as implementing these is likely to be sufficient to be able to mount a successful argument that the organisation has indeed “self-cleaned”.


[1] The 2014 Directive supersedes the Public Contracts Directive 2004/18/EC.

[2] The rules in the 2014 Directive will be applicable to all countries in the EU and the EEA (European Economic Area) but also to all other countries who are signatories to the Government Procurement Agreement (GPA), these being: Armenia; Aruba; Canada; Hong Kong; China; Chinese Taipei; Iceland; Israel; Japan; Republic of Korea; Liechtenstein; Norway; Singapore; Switzerland; and the USA.

Monthly China Anti-Bribery Update Report — August 2015

Posted in Uncategorized

1. New laws or regulations

State level:

(1) On August 29, 2015, the Ninth Amendment to PRC Criminal Law (the “Ninth Amendment”) was officially promulgated by National People’s Congress Standing Committee. The changes will become effective as of November 1, 2015. The Ninth Amendment proposes several updates, revisions, and addition to the current PRC Criminal Law, including to the sanctions concerning bribery and corruption crimes. The following are particularly worthy of note in this regard:

(i) The threshold at which bribes may trigger sanction has been deleted.

Under the current PRC Criminal Law, a person committing the crime of receiving bribery will be punished depending on the amount of bribes s/he has taken, i.e., if below RMB 5,000 (USD 786), s/he may be sentenced to up to 2 years’ imprisonment; if between RMB 5,000 (USD 786) and RMB 50,000 (USD 7,866), s/he may be sentenced to up to 10 years’ imprisonment; if between RMB 50,000 (USD 7,866) and RMB 100,000 (USD 15,732), s/he may be sentenced to life imprisonment; and if over RMB 100,000 (USD 15,732), s/he may receive the death penalty.

According to the Ninth Amendment, the foregoing thresholds have been removed and replaced by more general parameters, i.e., (a) relatively high (s/he may be sentenced to up to 3 years’ imprisonment), (b) very high (s/he may be sentenced to up to 10 years’ imprisonment) or (c) extremely high (s/he may receive the death penalty). This Ninth Amendment, however, does not specify the amount of bribes that will be regarded as “relatively high”, “very high”, or “extremely high”, giving the authorities discretion in making such determinations.

(ii) New provision penalizing those bribing any close relative of a current or retired State Functionary.

The current PRC Criminal Law does not stipulate whether or how a person or entity who offers a bribe to a close relative of a state functionary should be sanctioned. The Ninth Amendment addresses this situation by specifying that a person/entity will be deemed to have committed the crime of offering bribery if s/he/it has bribed any close relative or any other person who has a close relation with a state functionary for the purpose of seeking an improper benefit.

(iii) Fines will be imposed upon the person/entity involved in any bribery or corruption crime.

Under the current PRC Criminal Law, not every kind of bribery or corruption crime will include monetary punishment. The Ninth Amendment corrects this by establishing the fine as a general punishment for any person/entity who commits a bribery or corruption crime.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) It was reported on August 4, 2015 that Shen Peiping (“Shen”), the former Deputy Governor of Yunnan Province, was being prosecuted by No.1 People’s Procuratorate of Beijing Municipality for taking bribes. According to the prosecution, during the period from 2000 to 2012, Shen took advantage of his positions as the Party Secretary of Tengchong County and the mayor of Simao City, Yunnan Province to provide illegal and improper assistance to many entities in connection with the sale of iron ore, the governance of overload transport, the exploration of copper projects, and the settling of mass disturbances in mining areas. In return, Shen is alleged to have received benefits from bribe-givers valued at RMB 16.15 million (USD 2.54 million) in total. The No.1 Intermediate People’s Court of Beijing will issue a verdict in the future.

(2) On August 11, 2015, Wang Zongnan (“Wang”), the former General Manager of Shanghai Friendship Group Co., Ltd. (“Friendship Group”) and former Chairman of Shanghai Lianhua Supermarket Co., Ltd. (“Lianhua Supermarket”), was sentenced to 18 years in prison plus confiscation of personal property totaling RMB 1 million (USD 157,334) by No.2 Intermediate People’s Court of Shanghai for embezzlement and bribery-taking. Wang was also deprived of political rights for 5 years.

The court found that between 2001 and 2006, Wang conspired with his colleagues in Lianhua Supermarket, including the former general manager, director, financial officer, and HR manager of Lianhua Supermarket, to take advantage of their positions to embezzle the public funds of Lianhua Supermarket and its subsidiaries/branches amounting to RMB 195 million (USD 30.68 million) over a total of more than 10 occasions, using such funds to register two companies in Shanghai to engage in businesses of company registration services, capital verification services, and real estate investment. Reportedly, Wang has enjoyed illegal gains exceeding RMB 1.2 million (USD 188,800).

(3) On August 14, 2015, Guan Shouzhong (“Guan”), the former Deputy General Manager of Anhui Electric Power Company was sentenced to 12 years’ imprisonment for taking bribes by the Intermediate People’s Court of Lu’an City, Anhui Province with personal properties worth RMB 400,000 (USD 62,933) confiscated.

It was determined that during his term of office from 2000 to 2013, Guan abused his position by seeking illegal benefits from project bidding and contracts in relation to the power communication backbone network, the renovation of transformer substations, and the buildout of control building for bribe-givers and accepting RMB 4.54 million (USD 714,296), USD 40,000, EUR 10,000 (USD 11,245) and shopping cards valued at RMB 50,000 (USD 7866) in exchange.

(4) It was reported on August 19, 2015 that Liu Ya (“Liu”), the former Deputy Mayor of Bengbu City, Anhui Province had been sentenced by the Intermediate People’s Court of Lu’an City, Anhui Province to 20 years in prison plus confiscation of personal property amounting to RMB 700,000 (USD 110,133) for bribery-taking, mediate bribery, and owning large amounts of unidentified property.

Reportedly, during the period from 1993 to 2013, Liu took advantage of his position to seek illegal benefits for others, and solicited and accepted bribes including RMB 7.33 million (USD 1.15 million), HKD 100,000 (USD 12,903), USD 10,000, EUR 10,000 (USD 11,245) in cash, shopping cards valued at RMB 50,000 (USD 7,866), and 500 grams of gold. Liu also was found to have illegally accepted properties valued at up to RMB 4.5 million (USD 708,003) from bribe-givers who sought improper benefits through the misuse of official positions by state functionaries with whom Liu had close relation. Apart from bribery-taking and mediate bribery, Liu’s household property and expenditure was found to exceed his legal income, and part of his properties valued at more than RMB 3.78 million (USD 594,723) have no legitimate origin.

(5) On August 31, 2015, Chen Mingxian (“Chen”), the former Party Secretary and Deputy Director of the Department of Transportation of Hunan Province was sentenced by the Intermediate People’s Court of Zhuzhou City, Hunan Province to death with a 2-year’s reprieve for accepting bribes and holding large amounts of unidentified property.

Chen was accused of abusing position functions, soliciting and accepting bribes individually and together with his wife and other individuals in amounts up to RMB 49.41 million (USD 7.77 million), USD 10,000, and HKD 40,000 (USD 5,161). In return, Chen was found to have sought illegal benefits in project bidding, the supply of materials, and the insurance business with regard to civil works, greening, power distribution, and the design of highways in Hunan Province. Chen also failed to explain the source of certain large properties that he owned. These were valued at RMB 12.81 million (USD 2.01 million), USD 150,000, HKD 570,000 (USD 73,548), GBP 10,000 (USD 15,308), ERU 10,000 (USD 11,245) and JPY 5,000 (USD 41).

4. Other

No developments.
5. China-related FCPA Action

No developments.

Australian Education Providers Warned of Corruption and Bribery Risks Associated with International Students

Posted in China

A deal to strengthen vocational education and training (VET) ties with China could increase the incidence of corruption and bribery occurring at Australian education institutions, with one commentator warning that education providers must assess and manage the quality assurance risks associated with international student enrolments.

Griffith University Business School senior lecturer and Renmin University visiting research fellow Dr Rakesh Gupta recently told ABC’s Radio National that corruption in the Chinese higher education system is rampant, and normalised to a degree that he “ha[s] not seen anywhere else in the world”.

Dr Gupta expressed concerns about the quality of graduates from the offshore campuses of Australian education and training providers, and the risks posed to the reputation of Australian education facilities. “One institute not performing will mean there’s an effect on the whole education sector from Australia,” Dr Gupta warned.

Exporting Education

Australia’s international student market contributed $17 billion to the economy in 2014 and was the country’s largest export after iron ore, coal and gold.

International students, who often pay more than three times as much as locals for their degrees, generate a quarter of the annual income at some Australian universities. China supplies the greatest proportion of international students enrolled with Australian education providers.

The growth of China’s VET market is also seen to hold promise. In 2013, over 35,000 people enrolled with Australian VET providers in China. More than 30 million students undertake formal VET in China, with the State Council targeting growth of total VET student numbers to 38.3 million by 2020 to develop a skilled workforce.

The Australian Government has set a target to double the number of international students in Australia and double the offshore delivery of education by 2025. Reaching this target will require Australian education providers to enhance their global competitiveness. The Australian international student industry has faced growing competition from universities around the world, even as the global supply of university places continues to outpace the growth in the number of students with academic competency and adequate English-language proficiency.

Strengthening Ties with China

Last month the Australian Skills Quality Authority signed a memorandum of understanding (MOU) with the China Education Association for International Exchange to strengthen collaboration on quality assurance for VET. Assistant Minister for Education and Training Senator Simon Birmingham says that assuring the quality of skills training delivered by Australian providers in China is a key focus for building stronger educational ties in the future.

The MOU follows the ratification of the China-Australia Free Trade Agreement in June. Minister for Trade and Investment Andrew Robb says the agreement will “lock in existing trade and provide the catalyst for future growth across a range of areas including goods, services and investment”.

These agreements may pave the way for Australia to meet its 2025 targets, but it remains incumbent on Australian education and training providers, both current and emergent, to ensure they are well-prepared to engage the international student market.

ICAC Report

In April this year, the NSW Independent Commission Against Corruption (ICAC) released a report identifying several corruption risks created by universities’ international student businesses.

The report suggests that Australian universities were ill-prepared to enter the international student market, resulting in the adoption of detrimental practices, including the aggressive marketing of international students without adequate cost- and risk-assessments, reliance on largely unregulated agents and the establishment of offshore partnerships without necessary due diligence.

Offshore Corruption

Offshore VET collaborations countenance a number of corruption risks. The ICAC reports that universities in NSW have experienced long-running problems with nepotism and corrupt handing of plagiarism at offshore campuses, offshore bribery, and loss of intellectual property to offshore partners. Systemic cheating and widespread fraud in English-language testing are also widely reported, the ICAC notes.

The risks associated with education provision at offshore campuses are just one aspect of the endemic difficulties plaguing the international student business. Corruption has long been a major concern in international student admissions. An investigation by ABC’s Four Corners earlier this year suggests that Australian universities are paying more than an estimated $250 million annually to unregulated agents for the recruitment of international students, despite widespread acknowledgement that a number of these agents are corrupt and deal in fraudulent documents.

Onshore Corruption

The ICAC report demonstrates that corruption is not confined to offshore campuses. With universities increasingly dependent on “on a cohort of students, many of whom are struggling to pass, but who the university cannot afford to fail … [t]he equilibrium between student capability, financial security of the university, course rigour and reputational standing has been disrupted”.

Academic misconduct is not limited to international students, but those with inadequate English proficiency or poor educational preparation are placed in a particularly desperate position. The recent investigation into the online essay ghostwriting service, MyMaster, exposed the widespread use of cheat sites by mainly international students.

Conversely, the ICAC reports, “the financial dependence on international student numbers and student success creates pressures on university staff to accept cheating and plagiarism and to re-mark assessments to pass students who would otherwise fail”. The range of corruption issues which have emerged suggest standards have been compromised. Past inquiries by the Corruption and Crime Commission (CCC) into an English-language testing centre revealed serious misconduct amongst staff members and academics, ranging from the acceptance of financial bribes to sexual favours in exchange for higher marks.

Consequences of Falling Quality Standards

The problems associated with offshore and onshore corruption are not only costly, but publicly embarrassing. Australian education providers must prepare for the anticipated increase in international student numbers, and the corresponding increase in corruption risk, by having robust internal systems in place. We recommend that Australian education providers review their internal policies to ensure they are:

  • managing risk through monitoring of lecturers’ marking and teaching standards
  • initiating best practice due diligence on all agents
  • providing comprehensive training for executive and staff on anti-corruption and bribery laws
  • ensuring offshore partnerships are established with necessary due diligence

Squire Patton Boggs has specific and extensive experience in:

  • advising on domestic and global Anti-Bribery and Corruption legislative frameworks
  • working with Australian universities
  • partnership agreements
  • intellectual property agreements

Is the First UK Deferred Prosecution Agreement (DPA) on the Horizon?

Posted in Commercial Bribery, Compliance Program, Courts, UK Bribery Act, United Kingdom

The UK Serious Fraud Office (SFO) has publically announced that it has sent out the first invitation letters offering DPAs to corporations.

In this blog we discuss:

  • the definition of a DPA;
  • the new attitude in relation to DPAs and movement towards the first DPA; and
  • co-operation with the SFO– dos and don’ts.

Quick Recap: What is a DPA?

The Bribery Act is not the only development in fraud related legislation in the last 5 years; Deferred Prosecution Agreements have also been introduced in the UK following the Crime and Courts Act 2013.

A DPA is essentially a plea bargain that allows for the suspension of a prosecution for a fixed period of time, but only if the organisation agrees to stringent conditions. DPA conditions could include account of profits; payment of a fine; compensation for victims and costs; co-operation in prosecution of individuals; and involvement with a compliance programme. DPAs might be appropriate if public interest is not necessarily well-served by a prosecution.

As far as corporations are concerned, DPAs are strictly for use in relation to economic crime cases, in particular fraud, bribery and money laundering offences. The SFO defined a DPA as: “an agreement reached under judicial supervision between the prosecutor and an organisation.”

The SFO have also produced guidance in the form of the Deferred Prosecution Agreements Code of Practice.

New attitudes and the Start of Negotiations

Ben Morgan, Joint Head of Bribery and Corruption at the SFO, discussed DPAs in May this year in his speech on Compliance and cooperation at the 2015 Mining Conference. He upheld the hard-lined image of the SFO (discussed in our previous blog – The Serious Fraud Office gets serious) and reminded us that:

“We [the SFO] are not in the business of cosy deals, short-cuts or easy targets. We have the stamina and resources to take on the most demanding cases as a snap-shot of our publically known case-load demonstrates”

As the title of his speech would suggest, he also spoke about co-operation and identified DPAs as alternatives to prosecution. Attitudes towards DPAs seem to have changed and according to Morgan, the SFO is no longer: “in the world of having to talk up the DPAs like some sort of salesmen; corporates want them and some will get them.”

Morgan took the opportunity to confirm that:

  1. the SFO has now issued the very first invitation letters, giving corporates the opportunity to enter into DPA negotiations; and
  2. to outline the benefits of the DPA regime for offenders.

At this early stage, the SFO have not given away the identity of the organisations currently involved in negotiations, but spoke more generally about the DPA regime. DPAs provide structure for those wanting to resolve their criminal liability to do so quickly and with a degree of control and certainty largely absent from traditional prosecution. However, a DPA is not a “cosy deal”. Criminal proceedings will be commenced and then suspended provided that the corporation complies with the terms of the agreement. The terms of the agreement will be tough and can include fines, orders to pay compensation and other remedial measures.

“Genuine Co-operation”

The SFO has caveated its request for co-operation by repeatedly stressing that it does not want companies to carry out extensive internal investigations before self-reporting which in effect “trample over the crime scene” and potentially compromise evidence.

The SFO is looking for “genuine cooperation” from corporate bodies. The SFO wants Companies to self-report. DPAs are supposed to encourage self-reporting as the deal offered will usually be preferable to being prosecuted and obtaining a criminal record. Genuine self–reporting is a factor that will be considered by the SFO when making the decision whether to prosecute an offender, but it is only one factor and there is no guarantee that the SFO will offer a DPA following a self –report. Companies need to be aware that by informing the SFO in detail of their wrongdoing and providing evidence, they run the risk of that evidence being used against them in a prosecution if they are not offered a DPA as they had hoped.

Also, even if a DPA is agreed, companies will have to consider the true extent of the benefits; a fine can be imposed as a condition of the DPA and the agreement is a transparent, public document which will inevitably lead to bad publicity which could be very damaging, perhaps as damaging (from a reputational perspective) as a traditional prosecution.

Although it is not yet known who the recipients of the first invitation letters are, the fact that the SFO has now started the ball rolling indicates that that the first DPAs are on the horizon. Violation of Section 7 of Bribery Act, failure to prevent bribery, is thought to be an offence to which DPAs could be well suited, however we won’t really know how the SFO will use DPAs until the first UK agreement is finalised. Following Morgan’s comments, we shouldn’t have long to wait.

Australian Federal Police (AFP) Launch Crackdown on Foreign Bribery by Corporates

Posted in Australia, Commercial Bribery

The AFP’s new Fraud and Anti-Corruption Centre (FAC Centre) says it is ramping up investigations on foreign bribery, sending a clear warning that Australian companies with foreign operations need to get their house in order.

FAC Centre Manager Commander Linda Champion recently told The Australian Financial Review that the AFP “started ramping up [their] efforts towards foreign bribery a couple of years ago and now we are starting to the see the fruit of that… we’ve got some healthy investigations under way to get some real momentum in that area”.

The renewed push is in response to a 2012 report from the Organisation for Economic Cooperation and Development (OECD) which criticised Australia for bringing a single foreign bribery prosecution in 13 years, despite receiving 28 referrals over that time period.

Recent Prosecutions

In her first nine months on the job, Commander Champion commenced Australia’s second foreign bribery prosecution. John Jousif, Mamdouh Elomar and Ibrahim Elomar were charged by the Commonwealth Director of Public Prosecutions with attempting to bribe a public official in order to win construction contracts for Lifese Steel Fabrication or Lifese Pty Ltd in Iraq. The proceedings contributed to the resignation of Lifese Pty Ltd’s Chairman John Dowd, a former NSW Attorney General and Supreme Court Judge.

This prosecution represents a significant shift in the Australian government’s attitude towards foreign bribery, with additional resources allocated to the enforcement of national bribery laws and tightening up of legislation.

Ramping Up Investigations

The FAC Centre is currently investigating mining giant BHP Billiton in relation to allegedly improper payments and gifts given by the company in Cambodia, and its sponsorship of the 2008 Beijing Olympic Games. Construction company CIMIC, formerly known as Leighton Holdings, is being investigated for its role in the alleged payment of millions of dollars in bribes to win a AU$750 million oil pipeline contract in Iraq.

In parallel to these investigations, the Federal Government is undertaking a Senate inquiry which seeks to assess how effectively Australia is fulfilling its obligations under the OECD Anti-Bribery Convention and the United Nations Convention against Corruption.

The inquiry includes an extensive terms of reference, but in general terms is focusing on measures governing the activities of Australian corporations, entities, organisations, individuals, government, and related parties with respect to foreign bribery. Submissions close on 24 August 2015 with a report due on 1 July 2016.

You can find more information on the Committee’s terms of reference and how to make a submission on the Australian Parliament website.

Consequences of the Crackdown

Commander Champion says the FAC Centre will continue to play an active role in enforcing national bribery laws.

Companies with foreign operations, particularly in high risk countries, must prepare for this increased oversight by having robust internal systems in place. We recommend that companies review their internal policies to ensure they are:

  • managing risk through monitoring and recording of any proposed transactions
  • initiating best practice due diligence on all agents, contractors and suppliers
  • providing comprehensive training for executive and staff on anti-bribery laws.

If a company suspects it has breached the rules on foreign bribery, Commander Champion invites them to work with the FAC Centre. Leighton Holdings and the Reserve Bank of Australia were heavily criticised for engaging independent experts to assess potential breaches, rather than reporting matters to the police. Commander Champion asks companies to “err on the side of caution”, and says the FAC Centre will “do the best [it] can to achieve the best outcome for you as a company and your shareholders”.

Squire Patton Boggs has specific and extensive experience in:

  • advising on domestic and global Anti-Bribery and Corruption legislative frameworks
  • conducting and managing forensic investigation into broad scale corporate fraud and corruption

working with global forensic investigators and accounting firms to provide strategic advice to corporate boards on how to forecast, mitigate and manage worst case scenarios.

Monthly China Anti-Bribery Update Report — July 2015

Posted in China, Commercial Bribery

1. New laws or regulations

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) On July 3, 2015, Li Fengchun (“Li”), the former Deputy Inspector of the Standing Committee of Xinyu Municipal People’s Congress and the former Chairman of General Trade Union of Xinyu City, Jiangxi Province was sentenced to 9 years in prison plus confiscation of personal property totaling RMB 150,000 (USD 24,169) by the Intermediate People’s Court of Ji’an City, Jiangxi Province for bribe-taking.

Allegedly, during the period from February 2007 to 2011, Li sought illegal benefits on several occasions from various bribe-givers, taking advantage of his positions as the party secretary and chairman of the general trade union of Xinyu City and the group leader for culture and art center construction projects of Xinyu City and receiving bribes amounting to RMB 2.941 million (USD 473,831). Most of the above bribes were under the control of Li’s mistress surnamed Li and were found to have been used for the purchase of her car and apartment and other daily expenditures.

Li was given a lighter sentence due to his confession to his crime, and his surrender of the bribed moneys and the prompt payment of fines.

(2) It was reported on July 11, 2015 that Fu Jun (“Fu”), the former Director of Education Bureau of Changjiang Li Autonomous County, Hainan Province, was sentenced by the No.2 Intermediate People’s Court of Hainan Province to 13 years in prison for taking bribes and receiving large amounts of unidentified property.

Fu was charged with taking advantage of his position and providing assistance to 7 companies and 20 individuals during his term of office from 2011 to 2014 in business undertakings and the payment of project prices relating to infrastructure construction, the purchase of educational facilities, and customization of school uniforms. Fu, in exchange, illegally accepted RMB 5.05 million (USD 813,486). Fu has voluntarily surrendered RMB 7.21 million (USD 1.16 million), including RMB 2.16 million (USD 347,946) for which Fu was unable to explain the source.

(3) On July 12, 2015, Xi Xiaoming (“Xi”), the Vice President of the Supreme People’s Court was accused of serious violation of laws and party discipline. Xi is currently under investigation by the Commission for Discipline Inspection of the Central Committee of the Communist Party of China.

(4) On July 16, 2015, Liang Ronghao (“Liang”), the former Deputy Director of Maritime Bureau of Qinzhou City, Guangxi Province, was sentenced by the Intermediate People’s Court of Qinzhou City to 11 years in prison plus confiscation of personal property valuing RMB 300,000 (USD 48,325) for taking bribes. All the bribes have been recovered and returned to the state treasury.

During his term of office from 2010 to 2011, Liang was found to have accepted bribes totaling RMB 2 million (USD 322,172) on 6 occasions to assist an investment company incorporated in Guangxi that wished to modify its license for sea area use to a land use certificate through the abuse of his office. Further, Liang was charged with taking advantage of his position during the period from 2011 to 2013 to provided assistance to another Qinzhou-based company that was completing its transfer of land use rights, for which Liang was found to have received more than RMB 2 million (USD 322,172).

(5) On July 24, 2015, Sun Jiaqun (“Sun”), a former Member of the Standing Committee of Pingxiang Municipal Committee of Shanxi Province, was sentenced by the Intermediate People’s Court of Yingtan City, Hunan Province to 15 years in prison for taking bribes, including personal property valued at RMB 1 million (USD 161,079), which was confiscated.

Reportedly, during his term of office from 2003 to 2013, Sun took advantage of his position and sought illegal benefits from bribe-givers in connection with project contracts, the settlement of project payments, project approvals, funding appropriation, job arrangement, etc. In return, Sun allegedly accepted bribes exceeding RMB 2.31 million (USD 372,094) personally, as well as RMB 8.4 million (USD 1.35 million) jointly with his nephew He Tao.
4. Other

No developments.
5. China-related FCPA Action

(1) On July 28, 2015, the Securities and Exchange Commission of the United States (the “SEC”) announced that Mead Johnson Nutrition Company (the “Company”), an infant-formula manufacture based in Illinois, had agreed to pay USD 12.03 million to settle civil charges arising from the improper payments by its Chinese subsidy, Mead Johnson (China) Nutrients Co. Ltd, (the “Guangzhou Company”), to Chinese state-owned hospital professionals for recommending the Company’s infant formula, including USD 3 million of civil penalty, USD 7.77 million of disgorgement and USD 1.26 million of prejudgment interest.

According to SEC, the Guangzhou Company funded the third party distributors who market and distribute the Company’s formulas in China in the name of “distribution allowance”, which is actually the off-the-books discount. Employees of the Guangzhou Company had control over and instructed the use of the funds, including providing cash and other incentives to professionals in state-owned hospitals to recommend the Company’s products to patients and obtain personal information of the patients for marketing purpose. SEC also pointed out that the Company failed to maintain sufficient internal control system to ensure the proper use of the funds.

Five Minutes on… Anti-Bribery and Corruption Laws in Europe

Posted in Commercial Bribery, Compliance Program, Courts, FCPA Jurisdiction, Foreign Corrupt Practices Act, France, Germany, UK Bribery Act, United Kingdom

Anti-bribery and corruption has been a hot topic in the US for almost 40 years. The topic has historically however received much less attention within Europe. That is now changing as Europe is beginning to catch up and many European countries have already implemented anti-bribery laws much stricter than those in the US. Recent events have put the topic back on the agenda and we can expect further debate on the effectiveness and efficacy of enforcement in Europe.

Five Minutes On… is a series designed for companies doing business across borders, providing counsel an overview of a complex topic in a format that allows rapid assimilation. To view a full copy of the article on Anti-Bribery and Corruption Laws in Europe please click here.



Monthly China Anti-Bribery Update Report — June 2015

Posted in Uncategorized

1. New laws or regulations

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming laws or regulations

No developments.

3. Government Action

(1) It was reported on June 5, 2015 that Li Jiezhi (“Li”), the former Deputy General Manager of Anhui Highway Holding Group Co., Ltd. was sentenced to 20 years in prison for accepting bribes and for misappropriation of public funds by the People’s Court of Huaiyuan County, Anhui Province.

Reportedly, Li misappropriated public funds up to RMB 30 million (USD 4.83 million) together with others for his own business operation, and illegally accepted cash, shopping cards, and precious metal valued at RMB 3 million (USD 483,525).

(2) On June 11, 2015, Zhou Yongkang (“Zhou”), a former member of the Political Bureau of the Communist Party of China Central Committee, was sentenced to life in prison by No.1 Intermediate People’s Court of Tianjin for taking bribes, abusing power, and intentional disclosure of state secrets following a first trial. Zhou was also deprived of his political rights for life, and all of his personal properties were confiscated.

According to the court, Zhou was proved to have taken advantage of his position and to have sought illegal benefits for several high level officers, including Jiang Jiemin (“Jiang”), the former Chief of State-owned Assets Supervision and Administration Commission. In return, Zhou, along with his wife and son, accepted cash and properties from bribe-givers in amounts exceeding RMB 129.7 million (USD 20.9 million).

The court further ruled that Zhou abused his office by requiring Jiang and Li Chuncheng, the former Deputy Secretary-General of CPC Sichuan Provincial Committee to provide assistance to certain individuals (including his sons) for their business activities, who accordingly gained illegal benefits up to RMB 2.136 billion (USD 344.2 million), causing large economic losses to the state and to public properties estimated to be more than RMB 1.486 billion (USD 23.93 million).

(3) On June 12, 2015, Li Nianyou (“Li”), the former Deputy Director of Hainan Provincial Department of Ocean and Fisheries, was sentenced to imprisonment for 15 years and wsa deprived of his political rights for 5 years after a first trial by the Intermediate People’s Court of Hainan Province.

Allegedly, during the period from 1995 to 2013, while Li held positions in the Transportation Bureau and Department of Ocean and Fisheries of Hainan Province, he accepted bribes on multiple occasions aggregating RMB 4.53 million (USD 730,128) and took advantage of his positions to seek benefits for 16 individuals in the appropriation of funds for project, job transfers, and administrative approval related matters.

(4) On June 25, 2015, Lin Qiaoyin (“Lin”), the former Party Member and Vice President of Municipal Political Consultative Conference of Ji’an City, Jiangxi Province, was sentenced to 13 years in prison by the Intermediate People’s Court of Yingtan City, Jiangxi Province for taking bribes.

According to the court, from September, 2000 to October, 2010, Lin took advantages of his position as the Party Secretary of Xiajiang County, Jiangxi Province and sought illegal benefits for bribe-givers engaged in land transfer, project contracting and project operations, real estate appraisal, and capital appropriation. In exchange, Lin illegally accepted cash amounting to RMB 7.525 million (USD 1.21 million). Lin was given a lighter sentence due to his confession and his return of illegal gains.

(5) It was reported on June 25, 2015 that the Intermediate People’s Court of Suzhou City, Anhui Province affirmed the life imprisonment sentence of Chen Lianggang (“Chen”), the former Director of Land and Resources Bureau of Anhui Province. In addition, Chen was deprived of his political rights for life, and all of his personal properties and ill-gotten gains were confiscated.

Chen was found guilty of taking advantages of his position to seek illegal benefits for several real estate developers and individuals during his term of office from 2004 to 2013. In exchange, Chen illegally accepted cash totaling RMB 2.96 million (USD 477,088), USD 20,000, shopping cards valued at RMB 75,000 (USD 12,088), shares of an investment company valued at RMB 800,000 (USD 128,942), and dividends from a real estate development company up to RMB 2.96 million (USD 477,088).

4. Other

(1) It was reported on June 29, 2015 that the Reporting Center of the Supreme People’s Procuratorate received on average 15,000 letters per week over the past year. The Reporting Center was established to engage the public to combat corruption and bribery through a reporting system. Reports can be made on a no-name basis, and such “whistleblowers” may be rewarded if the case he/she reports is placed on file for investigation and a valid judgement in the case is eventually made by the court. All personal information of the “whistleblowers” is to be kept confidential.

5. China-related FCPA Action

No developments.

The UK Serious Fraud Office (SFO) gets serious

Posted in Commercial Bribery, Compliance Program, Courts, Foreign Corrupt Practices Act, UK Bribery Act, United Kingdom

Reports suggest that the SFO is currently investigating and prosecuting serious allegations of complex fraud and corruption. The announcement this spring that the SFO had started an investigation into the Bank of England’s actions following the rigging rumours, (as reported by the BBC amongst others) demonstrates its intention to pursue high-profile offenders.

David Green, who was appointed as Director of the SFO in April 2012, promised to prioritise the more difficult cases that may fall outside of the expertise of other bodies. He was reported in Fraud Magazine as saying: “Many had the impression that the SFO had developed a certain nervousness about taking on the very top-level cases for which, in my view, it was designed. I have changed that”

In this blog we:

  • look at the new focus of the SFO to combat high level economic crime amongst top level organisations;
  • provide examples of SFO success stories, giving details of the current conviction statistics; and
  • offer a brief discussion of the impact that the Bribery Act 2010 (“Bribery Act”) has had to date.

“Very top-Level” Investigations

Three years on from the appointment of David Green, the SFO seems to be focusing their attentions on industry giants. The SFO is currently investigating major players including a world renowned luxury car manufacturer, international banks, a household name supermarket, a multinational pharmaceutical company and a leading air travel manufacturer for offences such as overseas corruption, accounting irregularities and fraud. There have been some headline grabbing charges and convictions over the last year including:

  • the prosecution of Ulf Magnus Peterson, the head of the collapsed hedge fund Weavering. Peterson received a 13 year prison sentence after being found guilty of fraud, forgery, false accounting and fraudulent trading earlier this year (Reported by the Daily Mail, Bloomberg and the Financial Times);
  • the JJB prosecution in which the former Chief Executive of JJB was found guilty of fraud, furnishing false information and attempting to pervert the course of justice and sentenced to a 4 year prison sentence. The beneficial owners of a JJB supplier, were also sentenced to 18 months’ imprisonment for perverting the course of justice (reported by the Guardian, the Telegraph and the BBC); and
  • the ongoing Alstom investigation, which saw Mr Lainé (the former Senior Vice President Ethics & Compliance and director of Alstom International Limited) become the sixth person involved to be charged by the SFO (See the SFO press release for more information).

The Statistics

The SFO claims it “has recovered its mojo”, but do the statistics support that? Conviction rates[1] which were as low as 70% for 2012/13, have improved significantly since David Green took charge, reaching 85% in 2013/14.  Exaro, the online investigative paper commented that David Green “spent much of his first year as head of the SFO erasing the legacy of his predecessor, Richard Alderman”. At least a portion of the unsuccessful cases brought in 2012 could therefore represent part of that legacy. The recent return to success may also be thanks to the general move away from offering deals to self-reporting corporate bodies, as the new tougher SFO aims for convictions. The SFO has confirmed that “self-reporting is no guarantee that a prosecution will not follow”.

The SFO has now also “rekindled” its relationship with the US Department of Justice (“DoJ”). Previously, the US counterpart felt that the SFO was “interfering in its cases”. Perhaps the improved conviction figures, coupled with the new hardline public image of the SFO under David Green, have given the DoJ a new found confidence in the UK prosecutor. (See Practical Law article: Bribery and corruption: negotiated settlements in a global enforcement environment for more information).

Bribery Act, Anti-climax?

The recent successes have not however been attributed to the introduction of new offences under the Bribery Act. Since 2011, the extent of the impact of the Bribery Act in the UK has been queried – so much so that Stuart Alford QC, Joint Head of Fraud at the SFO, decided to address the following, all too common, question: ‘why have there been no Bribery Act prosecutions; is this Act really being taken seriously?’

In response, the QC highlighted the following key points:

  • there have been convictions! The first two convictions under the Bribery Act 2010 took place in December 2014 following the SFO investigation into the £23m AgroEnergy biofuel scam;
  • the Bribery Act is not retrospective – therefore, criminal conduct punishable under the Act has to have taken place after 1 July 2011; and finally
  • the Bribery Act represents a very significant change and it will take time for corporate ethics to develop as envisaged in the Act. By way of reference, it is helpful to note that it took many years for prosecutions to come through under the 1977 Foreign Corrupt Practices Act in the USA.

According to Stuart Alford QC: “the record in respect of the Bribery Act is not nearly as troubling as some people make out. This is a piece of legislation which is taken very seriously, and you will start to see an increase in the number of prosecutions: both from the SFO and other agencies.”

The new robust SFO should give us plenty to report on in the coming months and perhaps we will start to see more Bribery Act cases over the course of the year.

[1] Conviction rates as provided in the SFO Annual Reports for 2013 and 2014.


Posted in Uncategorized

Written by Anthony Van der Hauwaert (Partner) and Thibault Viaene (Associate), Squire Patton Boggs, Brussels.

On 20 May 2015, the European Parliament increased the hunt for tax evaders, money launderers and terror financiers by adopting the fourth instalment of the Anti-Money Laundering Directive (“AMLD”). The main novelty of the new directive is the introduction of a central UBO-register, a public register which identifies the ultimate beneficial owners (“UBO’s”) of companies and trusts. The implications for Belgian companies are not to be neglected.

Under the previous version of the AMLD, which was adopted in 2005 and transposed into EU Member States’ legislation in 2007, financial institutions, lawyers, notaries and accountants were already obliged to verify who the ultimate beneficial owners of their customers were, but the new directive clearly goes beyond the one it replaces by obliging EU Member States to obtain and hold information on the UBO’s of both companies and trusts.

Member States now have two years to put in place an adequate, accurate and current UBO-register which identifies the beneficial owners of corporate entities established within their territory. A beneficial owner means any natural person who ultimately owns or controls the corporate entity through direct or indirect ownership or control over 25% of the shares or voting rights.

The UBO-register will be accessible for:

  • competent authorities (such as tax administrations and national banks) and EU Intelligence Units, without any restriction;
  • so-called “obliged entities” (notaries, lawyers, banks, … whilst performing their customer due diligence duties); and
  • the public.

The public (any person or organization) can access the UBO-register if they are able to demonstrate a “legitimate interest”. For example a plaintiff in a legal procedure could be able to access the UBO-register in case it seeks evidence of fraud or corruption.

Since tax evaders, money launderers and terror financiers often hide behind trusts and comparable setups, their UBO’s must also be recorded in a separate “fiscal register”, but only if the trust concerned generates tax consequences. The identity of the settlor, trustee(s), the protector (if relevant), of the beneficiaries or class of beneficiaries, and of any other natural person exercising effective control over the trust must also be included in the register. The register will only be accessible to competent authorities, EU Intelligence Units and obliged entities.

Unlike in many other countries, shareholding in Belgian companies is not public. It is yet to be seen whether the introduction of a central UBO-register will change a great deal in Belgium, since a legitimate interest is required to access the register and Member States are able to deny access to the UBO-register in exceptional circumstances. Details on how the system will be implemented in Belgium are not yet available at this stage. Whether an actual public shareholders’ register will be put in place – as was recently the case in Denmark or The Netherlands − is unclear. It may be that the UBO-register will be linked to the Register of Legal Persons of the Official Belgian State Gazette or the Crossroad Bank for Enterprises and that those who want to access it will have to register online and pay a fee.

In times of international terrorism and widespread tax evasion, the UBO-register could prove to be a powerful tool to combat financial and economic crime. In implementing the system in Belgium, the legislator should however try to minimize the administrative burden and expenses, both for corporations and notaries.

Anthony Van der Hauwaert

Thibault Viaene