Smith and Ouzman Ltd and two of its directors, were convicted by a Jury under the Prevention of Corruption Act 1906 (POCA) in December 2014, although the company was finally sentenced on 8 January 2016. The company was convicted under the previous legislation because the offences pre-dated the Bribery Act 2010.
The small family run printing firm based in Eastbourne, which specialised in security documents such as ballot papers and certificates, was convicted of three counts of corruptly agreeing to make payments, contrary to section 1(1) of POCA.
The company had made corrupt payments of £400,000 to public officials in Kenya and Mauritania in order to secure contracts. They were ordered to pay a fine of £1,316,799, a confiscation order in the amount of £881,158 and costs of £25,000, totaling around £2.2 million. The penalty was intended to mirror the estimated value of the advantage gained by the company through payment of these bribes. Confiscation and costs orders were also imposed on the two directors in February 2015. The SFO have reported the sentences on their website.
The sentencing of the company marks the closure of a four year investigation and a significant milestone for the SFO, as it was the first successful conviction of a company by a jury for bribing foreign officials. The case provides a valuable insight for practitioners in respect of a Court’s approach to sentencing a corporate offender regarding bribery and corruption. However, the SFO’s success in obtaining the conviction and in establishing corporate guilt was considered in part due to the business being a small, family owned business which enabled a “directing mind” of the company much easier to identify.
The two convicted directors of the company were sentenced last February 2015, with the Chairman, Christopher John Smith, sentenced to 18 months’ imprisonment, suspended for two years, and ordered to carry out 250 hours of unpaid work. His son Nicholas, the sales and marketing director, was sentenced to a three year jail sentence. Both were also disqualified from being company directors for six years.
Passing sentence at Southwark Crown Court, Recorder Andrew Mitchell said: “Corruption of foreign officials is damaging to the country in which the corruption occurs, is damaging to the reputation of UK business, and of course in the market in which a business operates. It is anti-competitive.”
Through this case the SFO has sent a clear message that it is willing to prosecute companies under English anti-bribery and corruption law, however its hands may be tied in future matters by the difficulties in securing successful convictions against companies. Owing to the tough laws surrounding corporate criminal guilt and the difficulties in identifying a directing mind within a company, the attribution of criminal liability to a corporate entity may be a hard sell to a jury.
With the SFO securing its first Deferred Prosecution Agreement with ICBC Standard Bank plc late last year (see our previous blog) and the recent admission of guilt to an offence under s.7 of the Bribery Act 2010 by the Sweett Group plc (who will be sentenced in February 2016), it may be that prosecution of corporate entities will be the exception rather than the rule. However, to avoid the risk of a potentially very significant penalty, organisations may wish to review the procedures they have in place to prevent bribery and corruption.
Under the Bribery Act 2010 (which came into force on 1 July 2011), a ‘relevant commercial organisation’ is guilty of an offence if a person, who is associated with it, bribes another person intending to obtain or retain business/an advantage in the conduct of business (for the commercial organisation). However, a defence is available where the organisation can show that it has “adequate procedures” in place to prevent such bribery being committed. Procedures to be introduced or reviewed, depending on the nature of the organisation, could include:
- Board Training;
- Bribery and Corruption Policy/Code of Conduct (and implementation of the Policy/ Code);
- Assessment of the risks to the day-to-day business of bribery and corruption;
- Appointment of Compliance Officer / Manager responsible for compliance;
- Employment procedures, including: vetting of new employees; declarations of interest for new and existing employees; and disciplinary and whistleblowing policies;
- Policy for gifts and hospitality;
- Due Diligence on agents, business partners, parties to whom payments for services are made and possibly also other parties in the supply chain;
- Communication of anti-bribery policies and Codes of Conduct to employees, agents, business partners, and all other parties in the supply chain;
- Financial Controls in relation to accounting procedures and payments to third parties;
- Procurement standards;
- Audits, internal and external, covering projects, payments and systems; and
- Documented records of compliance program, steps taken to comply, training, due diligence, issues and investigations, the conflict register, high risk countries and disciplinary action.
Whilst there may be a relatively small number of prosecutions under the Act, the fine and other costs payable in the Smith and Ouzman case underlines that the risks of non-compliance are significant and the adequacy of procedures to prevent anti-bribery and corruption are important.