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Mabey & Johnson Pleads Guilty in the First Successful UK Corporate Prosecution for Overseas Bribery
July 15, 2009On Friday, 10 July 2009, Mabey & Johnson Ltd., a UK-based supplier of modular bridges, pleaded guilty to a charge of conspiracy to corrupt in connection with sales in Ghana and Jamaica from 1993-2001, and to paying kickbacks to Saddam Hussein’s regime in Iraq in connection with the United Nations’ Oil-For-Food Program in violation of UN sanctions in 2001 and 2002. Notably, the company had disclosed the Ghana and Jamaican corruption offences voluntarily to the SFO, in connection with an internal investigation conducted by the company beginning in February 2008.
As the first successful UK criminal prosecution for overseas corruption of a corporation – an individual having already been successfully prosecuted in October 20081 – this settlement represents a significant development in UK anti-corruption enforcement. Whether it marks the beginning of a more general trend in the UK toward corporate voluntary disclosures of overseas bribery and aggressive prosecution of wrongdoers is an open question. It is, however, a clear signal – in conjunction with other recent developments in UK anti-corruption enforcement – that UK-based companies or those with significant UK operations need to evaluate carefully whether their anti-corruption compliance efforts adequately address their UK-focused anti-corruption enforcement risks and to be rigorous in investigating any suspicious activities.
The Classic U.S.-Style Corruption Settlement, Or a “One Off”?
Mabey & Johnson’s guilty plea features a number of characteristics that should be familiar to companies and practitioners experienced with more aggressive overseas corruption enforcement regimes, including in particular the U.S. Department of Justice’s and Securities and Exchange Commission’s approach in enforcement of the U.S. Foreign Corrupt Practices Act (“FCPA”):
- Benefits of Voluntary Disclosure: The SFO has signaled that voluntary disclosure in February 2008 of the conduct in Ghana and Jamaica, and cooperation with the authorities in their investigation, enabled it to resolve the matter “quickly and fairly”.2
- Significant Remedial and Compliance Measures:
- Mabey & Johnson’s parent company has replaced five of eight Mabey & Johnson directors who were in place before the voluntary disclosures were made, including the Managing Director.
- Compliance Monitor: The Company will be subject to a corporate compliance monitor, who will report to the SFO concerning Mabey & Johnson’s ongoing anti-corruption compliance.
- Financial Penalties: The Company will be subject to what may prove to be a significant financial penalty – the matter is scheduled for a preliminary sentencing hearing in Southwark Crown Court on 17 July 2009, and the Court will have significant discretion in imposing a final penalty. Unlike U.S. FCPA settlements, Mabey & Johnson also apparently has agreed to pay “reparations” to the Ghanaian and Jamaican governments as compensation for its conduct.4
On the other hand, it is important not to reach an overarching conclusion based on the Mabey & Johnson settlement that the SFO has adopted an “FCPA-style” enforcement approach. Both the company and the SFO likely had powerful incentives to reach a settlement that may not be present to the same degree in future SFO corruption investigations. For Mabey & Johnson’s part, the Company’s investigation of the Ghana and Jamaican offences arose in the same time frame that, as noted, the Company was being investigated by the SFO concerning its participation in the Iraq “Oil-For-Food” program. Moreover, Mabey & Johnson had been subject to press scrutiny in respect of corruption allegations in a number of countries (which also appear to have surfaced in private litigation by the company against a former sales manager5). Accordingly, the company may have viewed the prospect of entering into a settlement agreement with the SFO – until very recently a rarity in the UK - as an opportunity to put longstanding and persistent public allegations of corruption behind it, in a scenario where the risk of the SFO independently becoming aware of the underlying misconduct may have been significant.
For its part, the SFO has incentives to characterize its first successful prosecution of a corporation for overseas corruption as the product of a “voluntary disclosure”. Highlighting the perceived benefits to the disclosing company may encourage other companies to do so in the future. The SFO’s Director, Richard Alderman, has publicly encouraged companies to come forward voluntarily with evidence of overseas corruption, indicating that the SFO would offer cooperation in resolving such matters on a cooperative basis – though the nature and extent of the advantages that companies may receive by submitting voluntary disclosures remains a matter of debate among practitioners. Notably, one significant aspect of the SFO’s characterization of the settlement of the corruption allegations against Mabey & Johnson as having been “voluntarily” disclosed is that the allegations, at least with respect to payments to sales agents in Jamaica, appear to have been publicly known as early as January 2008,6 a full month before the SFO cites Mabey & Johnson as having voluntarily disclosed the offenses. Such public revelations before a company has reported to the authorities may render the subsequent disclosure not eligible for “voluntary disclosure credit” under other overseas bribery regimes (such as the U.S. Federal Sentencing Guidelines in an equivalent FCPA prosecution).
In short, the Mabey & Johnson settlement likely reflects the SFO’s desire to create an atmosphere in the UK where companies choose to self-report their conduct abroad. Whether this matter represents the first in a string of similar voluntary disclosure prosecutions remains to be seen.
Increasing UK Focus on Overseas Corruption
The Mabey & Johnson settlement is the latest in a series of developments that highlight the UK’s increasing focus on overseas corruption. Companies based in the UK or with significant UK-based operations need to evaluate their anti-corruption compliance programs and carefully investigate any suspicious activities. In the past year:
- The UK Financial Services Authority has fined Aon Ltd. £5.25 million in connection with its failure to maintain adequate internal controls to prevent suspicious payments to third party sales agents abroad.
- The SFO has recovered £2.25 million from Balfour Beatty plc as the proceeds of alleged corrupt dealings in connection with Balfour Beatty’s involvement in the reconstruction of the ancient Library of Alexandria in Egypt.
- The Overseas Anti-Corruption Unit of the City of London Police, in conjunction with the Crown Prosecution Service, has successfully prosecuted a Ugandan official and the former Managing Director of CBRN Team Ltd. in connection with bribes paid by CBRN for a contract to advise the Ugandan Presidential Guard.
- A draft Anti-Bribery law was submitted to Parliament for pre-legislative scrutiny in March, which if enacted would significantly enhance the UK’s ability to prosecute overseas corruption. It is anticipated that the bill may receive its first reading in Parliament in October.
1 The former Managing Director of CBRN Team Ltd, Niels Tobiasen received a five-month suspended sentence in connection with bribes paid by CBRN for a contract to advise the Ugandan Presidential Guard.
2 Press Release, Serious Fraud Office, “Mabey & Johnson Ltd prosecuted by SFO”, (July 10, 2009).
3 Michael Holden, “UK brings first prosecution for corruption abroad”, Reuters UK (10 July 2009).
4 Press Release, Serious Fraud Office, “Mabey & Johnson Ltd prosecuted by SFO”, (10 July 2009).
5 David Leigh and Rob Evans, “SFO studies corruption claims against UK bridge builders”, The Guardian (21 December 2005); David Leigh and Rob Evans, “Court battle over secret export commissions claims”, The Guardian (2 January 2008).
6 Id.
