First CPS prosecution for failing to prevent bribery - DAC Beachcroft

First CPS prosecution for failing to prevent bribery's Tags

Tags related to this article

First CPS prosecution for failing to prevent bribery

Published 29 May 2018

The Crown Prosecution Service ("CPS") has brought the first successful prosecution in a contested case for the corporate offence of failing to prevent bribery under the Bribery Act 2010.

Normally, settlement is reached with the company via a Deferred Prosecution Agreement ("DPA"). In this case, the company (Skansen Interiors Ltd, a small refurbishment contractor) was targeted for prosecution despite having self-reported and cooperated with the authorities. Moreover, the company was dormant by the time the prosecution was brought. The CPS seems to have determined that Skansen had no assets it could use to achieve settlement under a DPA, and that prosecution was therefore in the public interest even where no fine would result. It is fair to say that this approach has been controversial.

The bribery uncovered

All parties agreed that bribery had occurred. Indeed, Skansen's former Managing Director has pleaded guilty to paying bribes and has now been sentenced to 12 months in prison and disqualified as a director for six years. The case against Skansen turned on whether the company had done enough to prevent the bribery offence. The prosecution also raises issues around self-reporting and the role of a company's officers and directors.

The bribery only came to light when Skansen's new CEO developed suspicions about an unusual payment. This was to have been an instalment of a bribe paid by Skansen's Managing Director in order to secure a tender. Skansen's CEO immediately halted the payment and promptly took remedial action:

  • The company commenced an internal investigation,
  • Skansen self-reported to the National Crime Agency and to the City of London Police,
  • The company cooperated fully with the authorities in their investigations,
  • The individuals suspected of bribery were dismissed, and
  • A new anti-bribery policy was introduced.

Had it not been for Skansen's self-reporting and cooperation, the bribery might never have come to light.

Skansen's defence

Failing to prevent bribery is a strict liability offence. It does not matter that the bribe was paid by one 'bad apple' in a company that is in all other respects a model of ethical behaviour.

The only defence on which a company can rely is that it had 'adequate procedures' to prevent the bribery taking place. (This is set out at section 7 of the Bribery Act.) The Secretary of State provides guidelines on what constitute 'adequate procedures'.

However, it may not be a surprise that the defence failed. In a speech shortly after the R v Skansen decision, Camilla de Silva (the Serious Fraud Office's Joint Head of Bribery and Corruption) claimed that the SFO had "yet to encounter a corporate with sufficient confidence in its compliance programme to persuade us of its adequacy or run a section 7 defence argument in court."

This is circular reasoning. Corporates with adequate procedures are less susceptible to bribery and corporates where bribery occurs are unlikely to have 'adequate procedures', and hence be saved by the defence. Arguably, this renders the defence out of reach in all but extreme cases. Nevertheless, Ms Silva's comment may accurately reflect the deliberations of many prospective juries.

The jury's deliberations are confidential. We cannot say what the jury did and didn't find to be persuasive arguments in favour of the 'adequate procedures' defence. However, it is significant that Skansen felt the need to implement a new anti-bribery policy. The obvious inference is that Skansen's existing ethical guidance was inadequate, and it was this policy that was in place at the time the bribery occurred.

Directors and Officers

The CPS's decision to prosecute raises concerns for directors and officers who suspect bribery has occurred. Some directors and officers might consider that both they – and their company – might benefit by deliberately not reporting suspected bribery.

As set out below, we take a different view.

  1. Arguably, the CPS's decision to prosecute in this case may discourage self-reporting. However, the Skansen case was exceptional. There seemed to be no prospect of Skansen paying sums under a DPA. Even so, the CPS has been heavily criticised.

  2. Self-reporting and cooperating with enforcement authorities remain a prerequisite of achieving a DPA. Failing to cooperate reduces the prospect of settling from uncertain to nothing.

  3. The professional consequences for a director or officer failing to report their suspicions could be severe, including significant reputational harm. Conversely, Skansen's former CEO has emerged from the prosecution with his reputation enhanced.

  4. It could be seen as unwise to draft a new anti-bribery policy in the wake of uncovering suspicious activity. This could suggest that existing procedures were inadequate. A corporate in this situation should certainly consider carefully whether its existing policies in fact meet the guidance established under the Bribery Act. However, it will always be in a corporate's best interests to prevent future problems.

  5. Skansen emphasises that corporates should be very wary of ever proceeding to a jury trial, even if the settlement terms on offer seem harsh. Juries can be unpredictable, and their deliberations are not published.

  6. Finally, this case emphasises yet again that the best way to deal with a bribery allegation is never to face one in the first place. Having 'adequate procedures' to combat bribery is not just a defence, but a vital tool of risk-management.

Although Skansen concerned bribery, similar principles might apply to corporate liability under the Criminal Finances Act 2017 for failing to prevent the criminal facilitation of tax evasion.

Authors

Julian Bubb Humfryes

Julian Bubb Humfryes

London - Walbrook

+44(0)20 7894 6137