Raymond L. Sweigart ]
Directorship of the UK Serious Fraud Office ("SFO") passed this month to David Green QC. Mr. Green joins the SFO from private practice, where he was a barrister specializing in serious crime. He also previously served as the first director of the UK's Revenue and Customs Prosecutions Office. Mr. Green has taken office promising, in remarks to the Financial Times, to "rebalance the relationship between prosecution and civil settlement" and focus on "strategically significant cases". This would suggest a departure in approach from that of Richard Alderman, Mr. Green’s predecessor.
Mr. Green's statements also follow closely on the heels of publication of an Organisation for Economic Cooperation and Development working group report highly critical of the UK's implementation of the Bribery Convention, and critical as well of Mr. Alderman's enforcement of the Bribery Act. (OECD Working Group; Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the United Kingdom.) Much of the OECD report’s criticism appears validated by Mr. Green’s remarks, in which he concedes that "the perception has emerged over the last few years that perhaps there is more willingness to compromise than to prosecute". It looks as if he is out to change that perception. As Mr. Green puts it: "We are primarily a crime-fighting agency and we've got to remember that". Mr. Green has further indicated that he is looking for "significant strategic" cases which threaten confidence in the City and British business, and that he is eager to bring the first "big" Bribery Act case.
OECD Criticisms of the SFO and the Ministry of Justice
The OECD working group's fundamental position is that the SFO's statutory mandate is and must be to conduct criminal investigations and prosecutions. There appears to be no room, as far as the working group is concerned, for the SFO to advise companies on either specific past transactions or corporate measures to prevent future bribery. The working group report goes so far as to suggest that the SFO has created a potential conflict of interest for itself in acting as both legal advisor and prosecutor. Also subject to criticism is the SFO’s entering into de facto non-prosecution agreements through its advice on company responses to past misconduct. The OECD recommends that the SFO stick to law enforcement and leave any advisory role to other government departments.
The working group also criticises a number of specific cases in which it considers the SFO's approach to have been far too lenient. After noting that all corporate bribery cases reported since Innospec have been settled by civil consent agreements, it criticises as fundamentally "unsound" the SFO's "Approach to Dealing with Overseas Corruption” by settling self-reported bribery cases "civilly wherever possible." It urges that the definition of “self-reporting” be tightened to exclude cases where the approach to the SFO follows rather than precedes referrals from other sources or police raids, and that criminal sanctions, including the prosecution of individuals, should more often be sought when plainly available. It also found troubling cases where the stated factual predicate appeared either implausible or flatly contrary to publicly known or admitted facts. Also coming in for criticism were the confidentiality clauses used in the SFO’s agreements with corporate offenders.
The working group's criticisms did not stop with the SFO. It also found the Guidance to Commercial Organisations, published by the Ministry of Justice, to be overly lenient in its approach. A pointed attack was launched against the GCO’s illustrations of "reasonable and proportionate" hospitality and promotional expenditure. Coming in for particular scorn was the scenario in which a company pays for flights and accommodation to allow foreign public officials to meet UK executives in New York, the package to include fine dining and baseball game tickets for "an official and his or her partner". While the GCO takes the position that this situation is unlikely to constitute bribery, the working group (which added the italics) to the contrary felt this was "unadvisable and high-risk activity under almost all circumstances".
The Report further criticised the failure of the GCO to distinguish in various scenarios between private entities and public officials and the substantially increased risk of corruption in the latter cases. Also criticised was the GCO's reliance on whether an expenditure is "commensurate with the reasonable and proportionate norms for a particular industry", since many industries, according to the working group, suffer a high incidence of corrupt payments and that everyone else is doing it should not be a measure of culpability. The working group also suggested that the government, in fact, has no information available to it or even methodology in place to evaluate industry sector norms.
There is, of course, an additional caution to reliance on the GCO. While the Joint Prosecution Guidance requires prosecutors to take its provisions into account in considering cases against commercial organisations for failure to prevent bribery, the judges interviewed by the working group declared themselves unlikely to give the guidance much regard when interpreting the Act. The judges appear to consider its status similar to that of an academic text, and noted that government statements about legislation are "normally not of great relevance".
The SFO Response
The SFO promptly undertook to review its self-reporting policy in response to the views of the working group as well as similar concerns expressed by the judiciary. Indeed, it may well have been the latter that were more meaningful, since the UK has not always accepted or reacted to OECD working group criticisms. The SFO is considering whether self-reporting should be rewarded with reduced criminal penalties rather than a purely civil sanction. Mr. Green has now confirmed that he, too, "would like to rebalance the relationship between prosecution and civil settlement", although he recognises that "[a] corporation might say: 'if we come and self-report we might get prosecuted.' Well, they might get prosecuted". Mr. Green does say, however, that he is 100% in favour of deferred prosecution arrangements, scheduled for introduction sometime towards the end of this year, but that they will be only one of the SFO’s available options. It remains to be seen whether the judges will approve deferred prosecutions as a form of criminal sanction.
One SFO policy which the working group did approve was the recently announced decision to seek recovery from shareholders of dividends alleged to have been paid out of the proceeds of illegal activities. This policy follows the recovery on consent order of dividends paid to Mabey Engineering (Holdings) Ltd, by its subsidiary Mabey & Johnson, that had been derived from contracts which breached UN sanctions in Iraq. The SFO has stated that it will focus particularly on institutional shareholders who can reasonably be held to exercise greater due diligence over their subsidiaries’ activities.
The Realities
While Mr. Green’s arrival as SFO director certainly appears to usher in a far more aggressive prosecution policy rather than the pragmatic, and some would say lenient, approach of the last four years, his task will not be easy. His SFO will operate under a much reduced budget, down some 26% from the 2008-09 fiscal year to £33.9m and due to fall further by 2014-15 to £30.5m. While there has been some suggestion that the SFO may be able to negotiate to retain the proceeds of its prosecutions, it currently does not receive any portion of any criminal fine imposed and only a small percentage of the proceeds of a confiscation order. Mr. Green has stated that he is "all in favour of prosecuting authorities being funded, to a greater or lesser extent, by money taken from criminals", but that revenue stream is not yet available to the SFO.
Thus, the extent to which Mr. Green can realistically ignore the budgetary necessity to cut deals to avoid costly trials remains to be seen. It is, of course, clear that he can be expected to brandish his “tough guy” image to negotiate from a position of strength. It also seems clear that he is now looking for some big targets to prove his point, with all indications that his approach will be significantly harsher than that of his predecessor both in word and likely in deed as well.
