David Green QC, the newly-installed director of the Serious Fraud Office (“SFO”), has taken action in the High Court against Oxford Publishing Limited (“OPL”), which ordered it to pay £1,895,435, in relation to the unlawful conduct of OPL’s subsidiaries in Tanzania and Kenya. OPL is owned by Oxford University Press (“OUP”), which is the publishing arm, and a department of, Oxford University.
OUP’s international division includes Kenyan-based Oxford University Press East Africa (“OUPEA”) and Oxford University Press Tanzania (“OUPT”), both of which were wholly owned subsidiaries of OPL. In 2011, OUP became aware that OUPEA and OUPT had used illegal methods to win public tender contracts to sell educational publications between 2007 and 2010. OUP launched an investigation immediately, instructing independent lawyers and forensic accountants to undertake a detailed investigation.
Following the investigation, OUP voluntarily reported concerns to the SFO in November 2011. The SFO then required OUP to follow a procedure based on its published guidance “The Serious Fraud Office’s Approach to Dealing with Overseas Corruption”. This process involved numerous interviews and an extensive review of documentation and electronic data relating to public tender contracts, all of which had to be completed to the satisfaction of the SFO and paid for by OUP. In addition, because two of the tenders over which OUP had concerns were funded by the World Bank, OUP voluntarily reported a potential breach of the World Bank’s Procurement Guidelines, with the World Bank also requiring OUP to carry out an investigation.
When OUP presented the findings of their investigations to the SFO and the World Bank, both the SFO and the World Bank decided that payments had been offered and made by OUPEA and OUPT, directly and through agents, with the intention of inducing recipients to award them competitive tenders and publishing contracts for schoolbooks.
OUPEA and OUPT, as wholly owned subsidiaries, paid dividends and fees to OPL. Consequently, under the UK money laundering regime, OPL had received and would continue to receive, criminal property (arising from the acts of bribery and corruption). Accounting examinations allowed the SFO to determine what benefit OPL had received and the amount that should therefore be recovered. A civil recovery order was made by the High Court for £1,895,435, along with the SFO’s costs of £12,500 for pursuing the order.
The SFO listed a number of reasons why civil recovery, rather than a criminal prosecution, was imposed on OPL. Some of the most notable included:
- Credit was given to the fact that OUP had conducted itself in a manner which adhered to the SFO’s published guidance on self reporting matters of overseas corruption.
- There was no evidence of board level knowledge or connivance within OUP of the corrupt practices.
- The products supplied were of a good standard and provided at “open market” value. This meant that the goods had not been sold at over-inflated prices or were goods which were unsuitable or not required.
- The test under the Code for Crown Prosecutors in relation to the case meeting the criteria to prosecute had not been met, and was unlikely to be met, in the future.
The SFO also bore in mind OUPEA’s and OUPT’s debarment from participating in future World Bank funded tenders for three years, which formed part of a Negotiated Resolution Agreement between OUP and the World Bank. OUP also introduced enhanced compliance procedures, which will be subject to review by a monitor. This independent monitor will report to David Green QC within 12 months, along with a separate report to the World Bank. OUP also made a £2 million contribution to not-for-profit organisations for teacher training and educational purposes in sub-Saharan Africa.
It is worth noting the SFO’s approach to this case. The SFO’s published guidance on self reporting overseas corruption states that the SFO will seek to settle self-referral cases civilly wherever possible, if the organisation in question adopts the appropriate approach to the investigation of the suspected corruption. OUP strictly adhered to this guidance, with the SFO listing this adherence as one of the reasons for pursuing a civil recovery order. In addition, the case shows that the SFO were keenly aware of the resource implications of pursuing the case against OUP further. The SFO highlighted the extensive resources needed to facilitate further investigation into the matter, particularly given the cross-jurisdictional nature of the corrupt practices. The use of civil recovery was seen as a “better strategic deployment of resources to other investigations which have a higher probability of…criminal prosecution”. The details of the Order made by the High Court, along with the claim setting out the basis of proceedings have been made public, following criticism of a lack of transparency when civil recovery has been used previously.
The OUP were not the first publisher to be fined for corrupt practices in the sale of educational materials in South Sudan. In 2011, Macmillan Publishing came to a similar settlement with both the SFO and the World Bank, following a voluntary report to the SFO. The Macmillan case also involved the use of bribes to unlawfully influence the award of tender contracts. Macmillan closely followed the SFO’s published guidance whilst investigating the extent of the corruption and the eventual settlement included the appointment of an independent monitor and debarment from World Bank funded tenders. It is likely that OUP sought to follow the same approach on the discovery of the corrupt practices of its East African subsidiaries. However, Macmillan’s fine of £11.26 million was much larger, despite Macmillan self-reporting the corporate case to the SFO.
The level of fines imposed, the cost of the SFO and World Bank investigations and the continuing costs of the independent monitors, along with the attendant negative publicity, means that OUP and Macmillan paid a heavy price for self-reporting to the SFO. These costs stand at odds with the absence of a legal obligation to self-report. The SFO’s guidance, and continued stance, is to encourage commercial organisations to self-report instances of corruption and bribery. Some of the stated benefits include the ability to control any adverse publicity arising from the corruption and the use of civil rather than criminal proceedings. It is noteworthy that both OUP and Macmillan received credit in the SFO’s press releases for their co-operation. However, the mainstream media still widely reported the corrupt practices of the subsidiaries in both cases. Until the SFO brings a criminal prosecution against a corporate who has failed to self-report, there are no cases to serve as a yardstick against which the benefits of self-reporting can be quantified and judged.