In last month’s article about the first Deferred Prosecution Agreement secured by the SFO, we referred to another prosecution the outcome of which was awaited. Following the entry of a guilty plea to an offence under s.7(1)(b) of the Bribery Act 2010 in December 2015, the Sweett Group plc was sentenced at Southwark Crown Court on 19 February 2016.
The Sweet Group plc is an AIM-listed surveyor in the UK, with offices located around the world. The SFO commenced an investigation into the Sweett Group plc on 14 July 2014, and determined that a Dubai-based former employee of its subsidiary company, Cyril Sweett International Limited, had made corrupt payments. The payments were made to Khaled Al Badie, the Vice Chairman of the Board and Chairman of the Real Estate and Investment Committee of Al Ain Ahlia Insurance Company (AAAI), to secure a contract with AAAI for the building of the Rotana Hotel in Abu Dhabi.
The Sweet Group plc was ordered to pay a £1.4m fine, a £851,152 confiscation amount and £95,000 in prosecution costs.
This case marks the first successful conviction of a s.7 offence in the UK. Essentially, s.7 is the corporate offence of a failure to prevent bribery in the course of business. The Sweett case highlights the important implications the Bribery Act has for companies that are incorporated in the United Kingdom (or are registered as a partnership in the UK) and carry out, or have subsidiaries that carry out, transactions with entities outside the UK. (The scope of s.7 of the Bribery Act could also extend to a non-UK company carrying out any part of its business in the UK).
A company’s only statutory defence to an alleged violation of s.7 is to prove the company had adequate procedures, systems and controls to prevent bribery. In the case of the Sweett Group plc, Judge Beddoe said that the defendant had willfully ignored two KPMG reports in 2011 and 2014 flagging up weaknesses in the company’s systems and controls.
Judge Beddoe also remarked that the Sweett Group had not always been cooperative with the SFO in the SFO’s investigation, and initially there was no admission by the Sweet Group plc that bribes had been paid or that the company had tried to divert prosecutors’ attention away from certain parts of the company’s business. At one point the Sweett Group had contacted the Abu Dhabi company, seeking a letter clarifying that past payments had been finder’s fees rather than criminal bribes. Judge Beddoe said this was a deliberate attempt to mislead the SFO and perhaps highlights why the SFO was not prepared to offer the Sweet Group a Deferred Prosecution Agreement as was done with Smith and Ouzman Ltd late last year.
The SFO commented that “this conviction and punishment, the SFO’s first under section 7 of the Bribery Act, sends a strong message that UK companies must take full responsibility for the actions of their employees and in their commercial activities act in accordance with the law.”
The Sweett Group’s CEO stated, “Sweett Group’s Middle East legacy issue is closed and this marks an important step in the delivery of the company’s new strategy. Over the last year, the company has been transformed with the appointment of a new leadership team, which has successfully addressed key issues facing the business. We have strengthened our internal systems, controls and risk procedures, and refined our strategy, focusing on profitability and cash flow.”
As the SFO begins to take more aggressive action under the Bribery Act, companies should ensure they have robust anti-bribery procedures in place as previously set out in our previous blog. These procedures must be documented, and companies must implement the relevant training, due diligence, monitoring and disciplinary action.
Judge Beddoe’s comments also bring back into focus the question of whether companies should self-report. Companies should consider the difference in the approach taken by the SFO with regards to Smith and Ouzman (which was offered a Deferred Prosecution Agreement) and the Sweet Group plc, which was prosecuted and successfully convicted. Co-operation with the SFO may benefit a guilty party, not only based upon the outcome of the potential fine (which in the Sweet Group’s case was of a similar amount to that levied against Smith and Ouzman, which was fined £1.3 million), but for the potential negative impact a conviction and sentencing remarks may have on the reputation of the company. Concerns held by shareholders with regards to the ethics, transparency and legality of the work being carried out by a company can only be bad for business.