Ernst&Young UK Bribery Digest Edition 1

UK Bribery DigestFraud Investigation & Dispute Services

Edition 1January 2012

iv UK Bribery Digest — Fraud Investigation & Dispute Services

1UK Bribery Digest — Fraud Investigation & Dispute Services

Contents

2 Introduction

3 Overview of 2011 cases

4 Lessons learned from our recent work with clients in corruption risk management

6 Table of cases

7 Cases in 2011

12 Cases in prior periods

20 UK Bribery Digest cases — Edition 1, January 2012

23 Abbreviations

23 Contacts

UK Bribery Digest — Fraud Investigation & Dispute Services

2 UK Bribery Digest — Fraud Investigation & Dispute Services

Introduction

Welcome to the first edition of our UK Bribery Digest, examining completed UK bribery and corruption cases. As this is the first edition, we are catching up on cases over recent years since 2008, when a sustained level of enforcement commenced, in contrast to the lower levels of enforcement of earlier years1. We will be updating our review every six months, focusing on new cases.

The purpose of this review is to highlight interesting aspects of these cases and the lessons to be learned from them. We believe that this Bribery Digest will be a valuable tool for charting trends in bribery cases and will build to be of considerable benefit to those responsible for managing bribery and corruption risk.

We will also be including in the Bribery Digest useful lessons from our recent anti-bribery and corruption work with clients.

examining completed UK bribery and corruption cases1 The convictions of Stephen Hinchcliffe and John Doherty (United Mizrahi Bank),

Allan Green and David Chambers (Cooperative Wholesale Society) and John

Thoroughgood (Modern Integrated Systems Limited) all date back to 2002

and the underlying actions date back several years.


• Actions against directors — Six directors have received prison sentences of between 6 and 21 months in 2011 prosecutions. Action against directors remains a key element of enforcement.

Looking at the cases in 2011 against the backdrop of UK corruption cases since 2008, when enforcement of UK bribery laws stepped up, we note the following:

• Criminal or civil sanction? — Civil recovery orders (CROs) have been favoured by the SFO in recent cases (which are made under the Proceeds of Crime Act 2002 and enable the SFO to claw back “recoverable property” without a criminal prosecution). The use of CROs in this way appears at odds with the sentencing remarks of Lord Justice Thomas in the Innospec case in March 2010 that corruption is a serious criminal offence that should attract severe criminal penalties, with a civil order as a means of compensation only. The SFO and Solicitor General are examining Deferred Prosecution Agreements which might provideasolutiontothisdifficulty.

• Self-reporting —Thereremainsadifficultquestionforunregulatedbusinessesfindinganapparentactofbriberyor corruption about self-reporting to the SFO. The SFO promotes self-reporting by linking it to potentially avoiding lengthy and costly criminal proceedings but there is no guaranteeorguidanceonwhatbenefittoexpect.Norcanthe SFO plea bargain in the criminal courts — its lack of authority to do this was another aspect of the Innospec sentencing remarks. What is unknown is the number of businesses who choose not to self-report because of a lack of clear advantage to doing so.

• Multiple enforcers — It is tempting to look narrowly when reviewing enforcement of bribery legislation in the UK and concentrate only on the SFO but to do so is to overlook the many other agencies initiating action against UK companies. Recent cases underline this — the World Bank beginning enquiriesinthecaseofMacmillan Publishers, the FSA against Willis, and Ernst & Young’s Anti-Bribery and Corruption team’s own experience of ongoing cases has seen even more diverse bodies taking action.

October2011sawthecompletionofthefirstprosecutionunder the Bribery Act 2010, resulting in a three year custodial sentence being imposed for a guilty plea to one count of receiving a bribe of £500. This prosecution reminds us that the Act has broad application and that the Courts regard corruption as a serious offence. However, the prosecution of an individual for domestic bribery of a non-commercial nature unfortunatelyoffersnoopportunityforjudicialclarificationof the application of the Act or any insights into how the SeriousFraudOffice(whichwasnotinvolved)willapproachprosecutionsundertheAct:weawaitthoseclarifications.

The Bribery Act 2010 has been enforceable since 1 July 2011 and is not retrospective. Prosecutions continue to be successfully brought under the old anti-corruption and related laws, in respect of corrupt activities prior to 1 July.

These cases raise a number of observations:

• Materiality considerations can be a red herring — In particular the case of Macmillan Publishers Limited highlights that organisations need to be aware of corruption risk in all parts of the business, material or not. That this issue was linked to small contracts in a relatively small partofthebusinessdidnotmitigatetheconsequences:repayment of the gain from the unlawful conduct; debarment from World Bank funded projects; costs of ongoing monitoring; investigation costs; and prosecutor’s costs (at least in part).

• Regulated businesses need to meet a higher standard — The Willis Limited case shows that businesses regulated by the Financial Services Authority (FSA) are arguably more exposedtofinesfor“adequateprocedures”typeactions,touseBriberyActterminology.Inessence,Williswasfinedbecause its control weaknesses, in the view of the FSA, gave rise to an unacceptable risk that payments could be used for corrupt purposes (not that they actually were). This was despite a policy review initiated by the FSA in 2008 as the FSAruledthatWillishadfailedtoadequatelyimplement the recommendations of this earlier review.

Overview of 2011 cases



“A comprehensive risk assessment based on the real risks faced in country…is the essential basis for building a corruption risk management programme, but is often carried out poorly.”

Lessons from our recent work with clients in corruption risk management

From our own recent case work in this area the following trends are apparent:

• Other than with multi-nationals and businesses who recognise they have higher bribery risk, our experience is that 1 July 2011 (the date the Act was enforceable) has been the start date for many businesses to address the implications of the Act, rather than a target date for completion.

• A comprehensive risk assessment based on the real risks faced in country (rather than the theoretical risks compiled at Head Office) is the essential basis for building a corruption risk management programme, but is often carried out poorly. A good risk assessment delivers a number of benefits:

• It provides a reasoned basis for focusing resource, specifically addressing the real corruption risks

• If the risk assessment is performed in a participative way (e.g. through workshops involving key officers), it reinforces communications around the need for corruption risk management and accountability for it

• It is a channel for key “tone from the top” messages.

• In the area of due diligence we have seen clients being active, asking us to look for bribery and corruption problems at potential acquisition targets.

5UK Bribery Digest — Fraud Investigation & Dispute Services UK Bribery Digest — Fraud Investigation & Dispute Services


Table of cases

Case name Case reference Date completed Page

Mazhar Majeed, Salman Butt, Mohammed Asif and Mohammed Amir 21 Nov–11 7

Munir Yakub Patel 20 Oct–11 7

Macmillan Publishers Limited 19 Jul–11 7

Willis Limited 18 Jul–11 8

DePuy International Limited 17 Apr–11 9

Mark Jessop 16 Apr–11 10

AftabNoorAl-HassanandRiadEl-Taher 15 Feb–11 10

MW Kellogg Limited 14 Feb–11 11

Richard Forsyth, David Mabey and Richard Gledhill (Mabey & Johnson Limited)

13 Feb–11 11

BAE Systems plc 12 Dec–10 12

Weir Group plc 11 Dec–10 14

Julian Messent (PWS International Limited) 10 Oct–10 14

Paul Kent, Silinder Singh Sidhu, Stuart Ford, Rebecca Hoyle and Sarah Kent (Learning Skills Council)

9 Jun–10 15

Robert Dougall (see DuPuy International Limited) 8 Apr–10 15

Innospec Limited 7 Mar–10 15

Amec plc 6 Oct–09 17

Mabey & Johnson Limited 5 Sep–09 17

Aon Limited 4 Jan–09 17

Balfour Beatty plc 3 Oct–08 18

NielsTobiasenandAnaniasTumukunbe(CBRN) 2 Sep–08 19

Dobb White & Co 1 Apr–08 19


21. Mazhar Majeed, Salman Butt, Mohammed Asif and Mohammad Amir (November 2011)

These members of the Pakistan cricket team that played England in a test match at Lord’s in August 2010 were found guilty of arranging to bowl three no balls for money with the object of enabling others to cheat at gambling.

While a prosecution in respect of a gambling scam in the world of cricket may not appear to offer lessons for the business world, the Judge’s sentencing remarks suggest at least two parallels. The first is that the courts look to the broader consequences of the corruption in assessing its seriousness: “It is the insidious effect of your actions on professional cricket and the followers of it which make the offences so serious”. The second reminds us that corruption is fundamentally about unfair competition:

“What ought to be honest sporting competition may not be such at all” [as a result of the defendants’ action].

It is also worth noting that this case, as with that of Mr Patel (see below), was initiated by a Press sting (in this case The News of the World). Texts and telephone records were an important part of the evidence.

20. Munir Yakub Patel (October 2011)

Mr Patel was the first person to be convicted of bribery under the Bribery Act 2010. He worked in Redbridge Magistrates’ Court and he pleaded guilty to having accepted in August 2011 £500 to avoid putting details of a traffic summons on a court database. He was sentenced to three years imprisonment (and six years concurrently for the offence of Misconduct in Public Office).

Mr Patel’s prosecution highlights that the Act has broad application and that the courts regard corruption as a serious offence: the three years imprisonment was for the bribe after 1 July 2011 (£500) only and, according to the sentencing remarks, could have been up to five years had Mr Patel not pleaded guilty.

However, a prosecution of an individual for domestic bribery of a non-commercial nature unfortunately offers little insight into how the courts and enforcement agencies will approach more serious cases involving commercial organisations.

The case is also notable for the involvement of The Sun newspaper in exposing the bribery.

Cases in 2011

19. Macmillan Publishers Limited (MPL) (July 2011)

This case concerns MPL’s activities in the educational publishing sector in East and West Africa during the period 2002 to 2009. The initial enquiry commenced after a report from the World Bank as funder of a contract in South Sudan, in respect of which an agent of MPL had unsuccessfully attempted to pay a sum of money with the view in mind of persuading the award of the tender. MPL self-reported shortly thereafter.

The scope of the enquiry was broadened by the SFO from the initial report and an aggressive approach was taken by the SFO, as indicated by the SFO Press Release:

“The SFO remit was broader in its scope in that it required investigation of all public tender contracts in the three jurisdictions [Rwanda, Uganda and Zambia] over the period 2002-2009 whether funded by the World Bank or otherwise... It was impossible to be sure that the awards of tenders to the Company in the three jurisdictions were not accompanied by a corrupt relationship. Accordingly it was plain that the Company may have received revenue that had been derived from unlawful conduct. Following an accounting examination and taking an aggressive approach to the revenue received in order to capture all potential unlawful conduct the SFO was in a position to determine the appropriate amount to be recovered. The value of the Order made by the High Court is £11,263,852.28.”

There are aspects of this case which have wider implications:

• Agents remain a significant source of potential exposure

• The World Bank and similar funders have zero tolerance of corruption in respect of contracts they fund or part-fund: MPL was debarred form World Bank funded tender business for a minimum of three years. This debarment had been reduced from six years subject to completion of a compliance programme and continued cooperation with the World Bank Integrity Vice President. MPL decided — apparently in connection with this debarment — to withdraw from all public tenders in East and West Africa regardless of the source of funding

• In citing that it was impossible to be sure that tenders were not accompanied by a corrupt relationship the SFO has set a high standard for the evidence it expects to be available and the conclusions it will draw if this evidence is lacking.


• Ensuring policies were in fact implemented

• Sufficiency of information to senior management about performance of relevant policies and mitigation of the risks.

While the Willis matters pre-date the Bribery Act coming into force, these failures described by the FSA are an example of what might be cited in future Bribery Act Section 7 offences of

“failing to prevent bribery” by associated persons of a relevant commercial organisation.

A number of other aspects of this case are noteworthy:

• £27 million in commissions to overseas third parties was paid by Willis in the relevant period. “The FSA did not seek to determine... whether any of this business was corrupt”. $227,000 of suspicious payments gave rise to the filing of Suspicious Activity Reports (SARs)

• While Willis was making efforts to improve its corruption risk management as regards payments to third parties, the inference is that the FSA did not consider that Willis had done enough with sufficient urgency in view of its “Dear CEO” letter on the matter in November 2007. The message is that the response to these sorts of letters from regulators needs to be prompt, comprehensive and address the substantive risks

• Willis introduced improved policies and guidance in August 2008 and reviewed how they were operating later the same year. This review lead to revised guidance being issued in May 2009 and ultimately Willis being held accountable for a failure to ensure its policies were adequately implemented between August 2008 and May 2009

• The detailed factual findings described in the Final Notice provide valuable insights into the FSA’s expectations of how relevant controls and procedures and compliance roles should work in order to be considered effective.

The Willis case has a number of similarities to the earlier Aon Limited matter, settled in January 2009.

“Willis Limited failed to take the appropriate steps to ensure that payments... were not being used for corrupt purposes.” FSA press release

18. Willis Limited (July 2011)

This case concerns Willis making payments totalling £27 million between 2005 and 2009 to overseas third parties who assisted in winning and retaining business, particularly in high risk jurisdictions.

Willis had a fine of £6.895m imposed on it by the FSA, reduced by 30% from £9.85m in recognition of a Stage 1 FSA executive settlement procedure.

It is clear that for regulated businesses the onus is on the business to be able to demonstrate its anti-corruption procedures and controls actually work and the business will not be given the benefit of the doubt in this regard, as underlined by the following quote from the FSA’s press release:

“Willis failed to take appropriate steps to ensure that payments it was making to overseas third parties were not being used for corrupt purposes... it is vital for firms not only to put in place appropriate anti-bribery and corruption systems and controls, but also to ensure that those systems and controls are adequately implemented and monitored... These failings created an unacceptable risk that payments made by Willis to overseas third parties could be used for corrupt purposes, including paying bribes.”

The Willis case is also a useful reminder that businesses regulated by the FSA have a higher standard to meet and are arguably more exposed to fines for “adequate procedures” type actions, to use Bribery Act terminology. This is because the Bribery Act Section 7 offence of failing to prevent bribery is triggered only where there could have been a prosecution for a bribing offence (although not an actual prosecution). The FSA does not need to meet this requirement and can take action where it finds only inadequate procedures, in isolation as it were2.

Willis’ particular failures as regards its procedures and controls are listed by the FSA as relating to the following areas:

• Recording adequate business rationale to support payments to third parties

• Due diligence over third parties

• Regular review of third party relationships for risk and ongoing business need

Cases in 2011 continued

2 The Willis matter was brought under section 206 of the Financial Services and

Markets Act 2000 in respect of a breach of Principle 3 of the FSA’s Principles for

Businesses and Rule SYSC 3.2.6 R of the FSA’s Senior Management Arrangements,

Systems and Controls Handbook.


17. DePuy International Limited (DePuy) (April 2011)

The unlawful conduct consisted of payments made by DePuy to intermediaries for the purpose of making corrupt payments to Greek medical professionals working in the Greek public health system. Payments to the intermediaries amounted to twenty percent of the price at which the product was ultimately sold. These payments covered the commission for the intermediary and were available to be used to pay inducements or rewards for the use of products sold by DePuy. “Cash incentives” and

“Professional Education” were used as euphemisms for corrupt payments. According to the SFO, the corporate benefit sought by DePuy International Limited, as a result of the payments to intermediaries, was retention and enhancement of market position.

This case is perhaps most noteworthy as regards the legal basis of the case in the context of simultaneous enforcement in the US. In its Press Release the SFO expresses the view that those who commit serious fraud and/or corruption offences must not be viewed or treated in any different way to other criminals; serious criminality should be made patent for all to see. It goes on to state that on the facts of this case, criminal sanction of the Greek conduct had been achieved by the conclusion of a Deferred Prosecution Agreement with DePuy ‘s parent company (Johnson & Johnson) and the Department of Justice (DoJ). The Director of the SFO concluded that a prosecution was therefore prevented in the UK by the principles of double jeopardy, preventing a defendant from being prosecuted twice for the same offence in different jurisdictions. The DoJ Deferred Prosecution Agreement has the legal character of a formally concluded prosecution and punishes the same conduct in Greece that had formed the basis of the SFO investigation. Consequently, the SFO pursued a Civil Recovery Order under the Proceeds of Crime Act 2002.

As to the amount of the Civil Recovery Order, the SFO recognised that it would not be appropriate or possible to apply for recovery of the full amount of the unlawfully obtained property (£14.8m of contract profits) as the SEC was to impose a penalty and civil sanction and the Greek authorities had restrained assets. The SFO applied for £4.829m (the derivation of this figure is not apparent to us). The SFO “has considered the matter from a global perspective”.

A number of other aspects of this case are noteworthy:

• It is an example of co-operation between international enforcement agencies: the matter had been referred to the SFO by the DoJ (as the bribes had been paid by a UK entity) after extensive investigation by the DoJ and SEC

• This was an acquired corruption problem: Johnson & Johnson had acquired DePuy Incorporated (of which DePuy International Ltd was a subsidiary) in 1998

• In April 2010, Robert Dougall, former Director of Marketing at DePuy, pleaded guilty to violating Section 1 of the Prevention of Corruption Act 1906 in respect of these same facts and transactions. He was described by the SFO as the first

“co-operating defendant”. He was sentenced to a twelve month prison term. This was subsequently suspended for two years on appeal.


Cases in 2011 continued

16. Mark Jessop (April 2011)

The case is notable in that it is a criminal prosecution of an individual with comparatively small amounts involved, resulting in a custodial sentence.

The backdrop to this case is the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence from HM Treasury. Suppliers so approved were paid from the UN escrow account upon presentation of contract and consignment documents to show that the goods had reached Iraq, been inspected by UN appointed agents, and cleared into the country by the authorities there.

In August 2000, the Iraqi government imposed a policy that contract prices be uplifted to allow for a 10% kickback to the regime. Suppliers who accepted this condition were required to submit pro-forma invoices that did not reveal the uplift, or described it as “after sales service fees”. Contracts were duly awarded, consignments shipped and documents presented by the supplier to be paid out of the escrow account. The supplier was required to pay the kickback into accounts held by the Iraqi government before the goods were shipped to Iraq. Mark Jessop accepted contracts on this basis admitting that nearly €104,649 was illegally transferred to benefit the Iraqi regime with a further amount of €235,237 outstanding but unpaid due to military intervention in March 2003.

In January 2001 Jessop contacted the Foreign & Commonwealth Office for advice on the recently introduced Iraqi government demand that contracts be uplifted to include 10% “after sales service fees”, which he explained was code for payments to the Iraqi regime. He was advised that he should not proceed with contracts that would put him in breach of UN sanctions. Despite this, later that month Jessop applied for a licence to supply goods to Iraq in a contract that was inflated to pay the kickback.

The 10% contract value payments and in-country cash payments were made without approval from HM Treasury, and therefore in breach of UN sanctions that prohibited payments to Iraq or persons in Iraq without (in the UK) a Treasury licence.

15.AftabNoorAl-HassanandRiadEl-Taher(February 2011)

These two related cases are of particular importance because they concern prosecutions of individuals resulting in imprisonment (suspended for two years for Al-Hassan).

These two cases also involve the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence from HM Treasury. Al-Hassan and El-Taher made payments to secure oil contracts without approval from HM Treasury, and therefore were in breach of the Iraq (United Nations Sanctions Order 2000) that prohibited payments to Iraq or persons in Iraq without (in the UK) a Treasury licence.


14. MW Kellogg Limited (MWKL) (February 2011)

Perhaps the most significant aspect of this case is that the SFO recognised that MWKL took no part in the criminal activity which generated the funds the SFO recovered (some £7,028,077). The funds due to MWKL were share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by MWKL’s parent company and others. MWKL was found to have been used by the parent company and was not a willing participant in the corruption.

The corruptly obtained contracts had been awarded to a company partly owned by MWKL on behalf of its US parent company. The US parent company was one of four corporate entities which formed a joint venture to bid for contracts on a liquified natural gas Bonny Island Project in Nigeria. The joint venture created three special purpose vehicles to bid for, and subsequently run, the contracts. Three of the four contracts won by the joint venture were obtained through promises to pay or payments of bribes. The parent company had acknowledged that it owned the special purpose vehicle created for the Nigerian project through MWKL in order to distance itself from the corruption and avoid the consequences of the FCPA.

A number of other aspects of this case appear noteworthy to us:

• The case was pursued in co-operation with the US Department of Justice

• The matter had been self reported to the SFO in October 2009 and concluded in February 2011. The origins of the investigation trace back to French prosecutors extending an existing investigation regarding a separate matter in June 2003. This indicates how long these sorts of issues may take to resolve

• This had been a wide-ranging prosecution in the US involving a number of corporates and individuals, including UK nationals. In March 2011, Jeffrey Tesler, the UK solicitor who served as a consultant to the joint venture, pleaded guilty to conspiracy and FCPA violations, having failed in his fight against extradition from the UK.

13. Richard Forsyth, David Mabey and Richard Gledhill (ex-Mabey & Johnson) (February 2011)

This case was the follow-on case against the directors who had been involved in the Mabey & Johnson matter (the company had been prosecuted in September 2009 — see Case 5 below). Richard Forsyth and David Mabey, directors, were found guilty of making illegal payments to Iraq in breach of UN sanctions. Forsyth (former Managing Director) received 21 months imprisonment and was disqualified as a company director for 5 years, Mabey (former Sales Director) received 8 months imprisonment and was disqualified as a company director for two years. Richard Gledhill (former Sales Manager) pleaded guilty at an early stage and cooperated with prosecutors. He received an 8 months prison sentence suspended for two years.

“The [parent company] has acknowledged…that it owned the special purposes vehicle… in order to distance itself from the corruption...” SFO press release


Cases in prior periods

12. BAE Systems plc (BAE) (December 2010)

In the build up to the Bribery Act 2010, BAE was undoubtedly the most high profile corruption matter in the UK. This high profile arose from matters which ultimately were not pursued by the UK enforcement agencies. BAE had been subject to an SFO investigation which had begun in July 2004 relating to BAE’s activities in connection with a project known as Al Yamamah, a government-to-government agreement in the 1980s and 1990s reputedly worth over £40 billion under which the UK government arranged large arms sales to Saudi Arabia (primarily Tornado aircraft) for which payments were linked to the supply of oil. Press reports contained numerous allegations of corrupt conduct on the part of BAE, including frequent and lavish entertainment, and alleged payments to the Saudi Ambassador in the US.

The SFO investigation relating to Saudi Arabia was discontinued in December 2006 in the interest of national security. Legal challenges in respect of this were completed in July 2008, when the House of Lords (at that time the final Court of Appeal) held that the Director of the SFO had not acted unlawfully in discontinuing the Al Yamamah investigation. The SFO’s investigations of BAE’s activities in Tanzania, South Africa, Czech Republic and Romania, prompted by the Al Yamamah investigation, continued. Press reports in early 2009 stated that the SFO was seeking penalties in the hundreds of millions of pounds to show it too could obtain penalties of a scale similar to those that the SEC imposed (albeit to conclude an unrelated matter against Siemens). Ultimately, only the Tanzania matter was pursued against BAE in the UK.

A contract for the supply of a radar defence system for Dar-es-Salaam International Airport had been agreed in 1999 with the government of Tanzania and BAE’s subsidiary British Aerospace Defence Systems Limited (BAEDS). BAE’s practice was to engage advisers to help with its marketing. These advisers were either classified by BAE as “overt” (i.e. that is they operated openly as BAE’s in-country representatives), or “covert”. The latter operated in circumstances where there was a need for confidentiality. In order to maximise confidentiality with regard to its use of covert advisers and the making of payments to them, BAE set up Red Diamond Trading Company, incorporated in the British Virgin Islands.

In Tanzania a local businessman, Shailesh Vithlani, was recruited at an early stage to advise BAE on its negotiations with the government on the radar contract. Shortly before the contract was signed two new adviser arrangements with Vithlani were

concluded. One was made between Red Diamond and a Vithlani-controlled Panama-incorporated company, Envers Trading Corporation. This was a “covert” arrangement where the fee for Vithlani’s services was to be not more than 30.025% of the radar contract price. The other arrangement was “overt” and was for services direct to BAE by a Vithlani-controlled business, Merlin International, registered in the B.V.I. It did not involve Red Diamond and the fee was 1% of the radar contract value.

Between January 2000 and December 2005 around $12.4 million was paid to Vithlani’s two companies. These payments were recorded in the accounting records of BAEDS as payments for the provision of technical services. In the prosecution’s opening for a charge brought under S221 of the Companies Act 1985 it was stated “... BAE has accepted that there was a high probability that the payments to Vithlani were intended to compensate him for work done in seeking to persuade relevant persons to favour BEADS in respect of the radar project. It is not now possible to establish precisely what Vithlani did with the money that was paid to him... it is no part of the Crown’s case that any part of those payments were in fact improperly used...nor is it any part of the Crown’s case that BAE was party to any agreement to corrupt. To lobby is one thing, to corrupt another.”

In response to the prosecution’s opening statement, the Judge said “I accept... it is not now possible to establish precisely what Mr Vithlani did with the money that was paid to him. But on the basis of the documents shown to me it seems naive in the extreme to think that Mr Vithlani was simply a well paid lobbyist” However, the Judge went on to say “I also accept that there is no evidence that BAE was party to an agreement to corrupt. They did not wish to be and did not need to be. The fact that the money had been paid through the two offshore companies placed BAE at two or three removes from any shady activity by Mr Vithlani’”.

“The prosecutor does not have to prove the existence of bribery or corruption but rather the inadequacy of accounting controls and procedures.”


BAEDS pleaded “the financial position... was not stated with reasonable accuracy, since it was not possible for any person considering the accounts to investigate and determine whether payments were properly accounted for and were lawful. The failure to record the services accurately was the result of a deliberate decision by one or more officers of [BAEDS]”. BAE plc added

“It is not known who... was responsible for creating the relevant inaccurate accounting records or for the commission of the offence. However, it was known... that such inaccurate accounting records were in existence and BAE plc failed to scrutinise them adequately... and permitted them to remain uncorrected.”

The most striking comment in the Judge’s sentencing remarks is perhaps the following “I also cannot sentence for an offence which the prosecution has chosen not to charge.” He further stated

“I could not, without hearing evidence, accept any interpretation of the basis of plea which suggested that what BAE were concealing by the S221 offence was merely a series of payments to an expensive lobbyist... Neither side sought to call evidence, although I indicated that I was prepared to grant an adjournment for them to do so.

In passing sentence, the Judge referred to the lack of evidence as to what Vithlani did with the money paid to him. “I therefore... sentence on the basis that by describing the payments in their accounting records as being for the provision of ‘technical services’ the Defendants were concealing from the auditors and ultimately the public the fact they were making payments to Mr Vithlani...with the intention he should have free rein to make such payments to such people as he thought fit in order to secure the Radar Contract...”

As to the fine, the Judge added that there was “moral pressure” on the Court to keep the fine low, as BAE had agreed in the plea bargain to pay £29.5m in corporate reparations to the people of Tanzania and fines of £500,000. BAE also paid SFO costs of £225,000.

This judgment followed a settlement by BAE in what the SFO described it as a “ground breaking global agreement” reached earlier in the year with the SFO and the DoJ concerning contracts in a number of countries.

The DoJ parallel investigations, including the Saudi contracts, had continued. In February 2010 BAE reached a settlement with the DoJ under which BAE pleaded guilty to a charge of making false statements to the US Government in connection with certain regulatory filings and undertakings (regarding FCPA compliance programmes and arms sales licencing), agreeing to pay a fine of US$400 million covering misconduct in the Czech

Republic, Hungary and Saudi Arabia (including Al Yamamah), which compares with an estimated profit from the underlying transactions of US$200 million. According to information disclosed during criminal proceedings in the USA, since 2000 BAE had made payments of £135 million and US$14 million to its marketing intermediaries through an offshore entity in the British Virgin Islands and a further £19 million of undisclosed commissions in respect of Eastern Europe. BAE also subsequently agreed a civil settlement with the DoJ of US$79 million in respect of the arms export licencing violations, together with three non-US BAE affiliates being barred from receiving export licences.

The Judge took into account in sentencing BAE that the group had committed itself to a process of change following the landmark Report of Lord Woolf. This report had been commissioned by BAE and was made public in May 2008. A large part of it is written from a broader perspective than that of BAE, or even the defence industry, alone: it is one of the earliest examples of guidance specific to corruption risk management and in particular intermediaries. Twenty three recommendations are set out in the report. One of its observations was the desirability of the Government quickly bringing forward the proposed changes of the Law Commission to anti-bribery law in the UK.

The BAE Tanzania matter reflects in a UK case a common feature of many bribery and corruption investigations: the prosecutor does not have to prove the existence of bribery or corruption but rather the inadequacy of accounting controls and procedures.

By way of illustration of the potential scope of a settlement agreement, the BAE Settlement Agreement included, inter alia, the following terms:

•“The SFO shall not prosecute any person in relation to conduct other than conduct connected with the Czech Republic or Hungary [which, in the event, did not happen]

• The SFO shall forthwith terminate all its investigations into the BAE Systems Group

• There shall be no further investigation or prosecutions of any member of the BAE Systems Group for any conduct preceding 5 February 2010

• There shall be no civil proceedings against any member of the BAE Systems Group in relation to any matters investigated by the SFO

• No member of the BAE Systems Group shall be named as, or alleged to be, an unindicted co-conspirator or in any other capacity in any prosecution the SFO may bring against any other party.”


“It is no mitigation to say others do it [pay bribes] or that it is a way of doing business…anyone minded to do it should be deterred from doing so.” HHJ Rivlin QC quoting Lord Justice Thomas

Campaign Against the Arms Trade had sought, but failed, to challenge the BAE Settlement Agreement by way of judicial review, arguing that the SFO should have brought corruption charges: it was held that it was not arguable that the decision to limit the charge to one under Section 221 of the Companies Act 1985 was unlawful.

The case also highlights how companies may face enforcement actions in multiple jurisdictions (in this case the US, the UK, Austria and South Africa) and on legal bases other than anti-corruption laws. “One challenge of regulatory investigations is that they put a lot of things on ice... you don’t want long, lingering investigations” BAE’s general counsel stated in a subsequent interview by way of explanation of BAE’s desire for a settlement.

11. Weir Group plc (December 2010)

This case was pursued by the Crown Office and Procurator Fiscal Service of Scotland (the SFO does not have jurisdiction in Scotland). The backdrop to these two cases is the Oil-for-Food Programme to allow humanitarian supplies to Iraq during the UN sanctions, subject to an approval process to grant a licence. Weir paid £3 million in kickbacks to the regime of Saddam Hussein in order to secure fifteen contracts (returning profits of some £13.9 million) and £1.4 million to an agent, an Iraqi national, to a Swiss bank account to facilitate payment of the kickbacks to the Iraqi government.

This case represented the first use of the Proceeds of Crime Act 2002 (POCA) in Scotland and the largest corruption related confiscation order to date in the UK: a reminder that the profits on corruptly obtained contracts may be recoverable in full by the enforcement agencies.

10. Julian Messent (PWS International Limited) (PWS) (October 2010)

Julian Messent was a director and head of the Property (Americas) Division at PWS. In this role he was responsible for securing and maintaining contracts for reinsurance in the Central and South America regions. Between 1999 and 2002, PWS acted as broker on behalf of the Instituto Nacional de Seguros (INS), which in turn was the insurer for Instituto Costarricense de Electricidad (ICE). Both INS and ICE were state institutions of the Republic of Costa Rica. During this period, Messent authorised 41 corrupt payments totalling some $1.9 million to be paid to Costa Rican officials, their wives and associated companies, as inducements or rewards for assisting in the appointment or retention of PWS International Ltd as broker of the lucrative reinsurance policy for INS. Following elections in Costa Rica in 2002, officials in INS and ICE were replaced. Enquiries were made into the contract with PWS and questions were raised about payments made under it. Julian Messent admitted two counts making or authorising corrupt payments to officials in INS and ICE and asked for 39 similar offences to be taken into consideration.

Other pertinent aspects of this case include the following:

• Julian Messent’s prosecution involved plea negotiations under the Attorney-General’s Guidelines with the SFO. He admitted offences put to him in accordance with an early plea agreement

Cases in prior periods continued


• Parallel proceedings in the Republic of Costa Rica against those alleged to have taken bribes were supported by the SFO

• Several of the inducements and rewards had been paid indirectly to the Costa Rican officials, for example through wives and related companies

• The matter had been notified to the SFO by the Foreign and Commonwealth Office, whose embassies and consulates become aware of domestic bribery scandals.

9. Paul Kent, Silinder Singh Sidhu, John Stuart Ford, Rebecca Hoyle and Sarah Kent (nee Emberton) (Learning Skills Council) (June 2010)

This case is notable for being a prosecution of domestic bribery. These five persons had been running a contract rigging ring involving training and skills education operated through the Learning Skills Council (“LSC”). Three of them worked for the Shropshire office of the LSC, which awarded contracts to local training providers. The other two, Ford and Hoyle, were suppliers of training services and were complicit in the corrupt arrangements.

Kent’s role involved the soliciting and evaluation of tenders from the private sector. Within a few months of starting work Kent encouraged a former school friend of his, Rebecca Hoyle, to apply through her business, for contracts with LSC. Later, Kent expanded his corrupt practices to include Silinder Singh Sidhu, a work colleague. In 2005 the scale of the corruption increased significantly when Stuart Ford, a local businessman who had hitherto been unsuccessful in securing LSC contracts, was approached by Kent to apply for LSC contracts. Once LSC contracts had been corruptly secured and monies paid on them, Hoyle, Sidhu and Ford paid Kent significant backhanders. Kent received corrupt payments of just over £300,000 on contracts valued at over £1.3M.

In order to obtain his post with the LSC , Paul Kent submitted a CV containing false details of his previous employment, for which he separately pleaded guilty3.

8. Robert John Dougall (DePuy International Limited) (April 2010)

Robert Dougall, former Director of Marketing at DePuy, pleaded guilty to violating Section 1 of the Prevention of Corruption Act 1906 in respect of the same facts and transactions which subsequently resulted in his employers Civil Recovery Order in April 2011 under the Proceeds of Crime Act 2002. Dougall was described by the SFO as the first “co-operating defendant in a major SFO corruption investigation”. He was sentenced to a twelve month prison term. This was subsequently suspended for two years on appeal.

7. Innospec Limited (March 2010)

The Innospec matter is significant on the global as well as the UK anti-corruption scene as a rare example of a corporate corruption prosecution actually getting to be considered in Court — or at least certain aspects of the prosecution. Indeed, it is the Judge’s comments that articulated many of the issues that have caused debate.

By way of background, the Innospec case involved the NASDAQ listed Innospec Inc’s UK subsidiary Innospec Limited using agents based in Indonesia to engage in what was later described by the Judge as “systematic and large scale corruption”. The SFO investigation originated as a spin-off from the UN Independent Inquiry Committee in respect of the Iraq Oil-for-Food scheme. In order to conduct its business in Indonesia, Innospec Limited appointed agents to act on its behalf in seeking to win or continue contracts for its TEL product (a lead based anti-knock fuel additive which was being phased out due environmental concerns). Between February 2002 and December 2006, Innospec paid US$ 11.7 million to its agents. From these commissions, bribes (estimated as up to US$8m in total) were paid by the agents to staff at the state-owned petroleum refinery, Pertamina, and other public officials who were in a position to favour the company by purchasing orders of TEL. Payments were made in an attempt to ensure that Pertamina favoured TEL over unleaded alternatives.

The SFO further reported the agents acted under the instruction of Innospec Limited and the commission fees paid were authorised by the UK subsidiary. Innospec Limited accepts that it knew a proportion of the commission funds would be used to bribe both Pertamina officials and other public officials at higher regulatory or ministerial levels, with influence over the purchase of TEL.

3 Paul Kent pleaded guilty to obtaining a pecuniary advantage by deception contrary

to Section 16 (1) of the Theft Act 1968.


In addition to commissions, the company also created “ad hoc” funds. These funds assisted specific or “one-off” arrangements with particularly influential individuals within Pertamina or at a political level. One particular fund was structured to protect the interests of the lead based additives industry, whereas in reality, it was a slush fund to corrupt senior officials in various ministries with the intention of blocking legislative moves to ban or enforce the ban on TEL on environmental grounds and/or seeking a higher level buy-in to continued yearly supplies of TEL to Pertamina.

The SFO accepted that Innospec Limited had been co-operative throughout the investigation and pleaded guilty at the first opportunity.

The SFO refers to Innospec as a ground-breaking case involving a global settlement: the SFO states it had worked with the DoJ, the Securities and Exchange Commission (SEC) and the Office of Foreign Assets Control (OFAC), inter alia in coming to a fair and true assessment of Innospec’s means to pay a penalty in the UK of US$12.7m.

The Judge’s sentencing remarks contain a number of important conclusions about the approach to sentencing by a UK prosecutor and Court where there have been joint investigations with overseas prosecutors, concurrent prosecutions and a “global settlement” reached with the offender as to the penalties. These conclusions have significant implications for the approach of the SFO going forward, especially as regards its dealings with corporates under investigation and, therefore, significant implications for the corporates too.

The Judge’s remarks on the level of criminality in the offence of corruption of a foreign government provide a backdrop to his remarks on sentencing. In summary, the Judge made it clear that the UK Courts regard corruption as a serious offence that should be severely punished, and stated that:

•“There can be no doubt that corruption... is at the top end of serious corporate offending both in terms of culpability and harm... it is no mitigation to say others do it or it is a way of doing business... those who commit such serious crimes as corruption must not be... treated in any different way to other criminals”

• In the absence of the particular circumstances of the case (which imposed an effective limit to any fine of US$12.7m), “the fine would have been measured in the tens of millions... a fine of $12.7m would have been wholly inadequate as a fine to reflect the criminality displayed...”

•“... unless I had been satisfied that the new management of the company would not engage in similar [corrupt] conduct in the

future, I would not have assented to a fine or other penalty that would have enabled the continuing survival of this company”

As regards “global settlements” the Judge concluded that:

• The SFO “cannot enter into an agreement under the laws of England and Wales with an offender as to the penalty in respect of the offences charged.”

• It will “rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order; the criminal Courts can take account of co-operation and the provision of evidence against others by reducing the fine otherwise payable. It is of the greatest public interest that the serious criminality of any, including companies, who engage in the corruption of foreign governments, is made patent for all to see by the imposition of criminal and not civil sanctions. There may, of course, be a place for a civil order, for example, as means of compensation in addition to a fine”.

•“It is... plainly desirable the Lord Chief Justice should consider directions that ensure civil penalties are heard in conjunction with criminal proceedings.”

The Innospec case and sentencing remarks have given rise to a number of other noteworthy debating points:

• In commentary after the judgment, the SFO raised the issue of how to ensure that countries that have suffered from corruption actually benefit from any money recovered from the guilty parties.

• The broader environmental angle in this case was highlighted by the Judge: the Indonesian Government’s intention to go lead-free, initially conceived in 1999, was not realised until 2006

• It is yet another case involving agents in the bribing schemes. From the facts summarised in the SFO press releases, it would appear that Innospec itself had a clear understanding of what the agents were doing on its behalf

• Innospec gave rise to the first instance of a jointly agreed monitor, acceptable to both the SFO and DoJ, being appointed, to monitor the US and UK companies’ implementation of policies and procedures to reduce its exposure to corruption risk

• The fines imposed on Innospec were quantified so as not to force the company into liquidation. As we understand it, nominal confiscation orders can be awarded enabling revisits as and when convicted companies and individuals have funds available in the future.



6. Amec plc (October 2009)

On 26 October 2009 the SFO obtained a Civil Recovery Order against Amec for £4.95m following an internal investigation and the subsequent self-reporting in respect of the receipt of irregular payments by an associated company. The SFO have not reported further details of the case, however, it has been widely reported in the media and by the company itself that the associated company in which Amec was a shareholder was undertaking a US$1bn bridge building project (the 12.3km Incheon Bridge) linking Yeongjong Island to mainland South Korea.

The director of the SFO determined the underlying unlawful conduct to which the CRO relates was a breach of S221 Companies Act 1985 (failure to keep proper books and records). However, it is significant that the £4.95m CRO was imposed without recourse to criminal charges being brought against Amec.

A statement released by AMEC explains “No improper overall commercial advantage accrued to AMEC in connection with the receipts and no adjustment is required to any AMEC financial statements.”

The Amec plc case has a number of similarities with the Balfour Beatty plc case in October 2008 (see Case 3 below):

• Both businesses are in the same sector

• Both had followed a transparent approach in self reporting the issue and had co-operated throughout the investigation

• Both had already taken comprehensive steps to review and improve their control processes and had committed to continue to review and improve their compliance function and to engage in an agreed external monitoring programme

• Both accepted unlawful conduct, in the form of inaccurate accounting records arising from certain payment irregularities.

5. Mabey & Johnson Limited (September 2009)

In its Press Announcement, the SFO described the sentencing of Mabey & Johnson as “landmark outcome” for being... “The first conviction in [the UK] of a company for overseas corruption and for breaking the UN Iraq sanctions and, satisfyingly, achieved quickly. The offences are serious ones but the company has played its part positively by recognising the unacceptability of those past business practices and by coming forward to report them and engage constructively with the SFO.”

The company had indicated in July 2009 that it would plead guilty to the offences and agreed that it would be subject to financial penalties to be assessed by the Court. The company will “pay reparations and will submit its internal compliance programme to an SFO approved independent monitor.”

Part of the company’s cooperation with the SFO involved it waiving privilege over certain materials from its own internal investigation.

The prosecution for corruption arose from the company’s voluntary disclosure to the SFO of evidence to indicate that the company had sought to influence decision-makers in public contracts in Jamaica and Ghana between 1994 and 2001. Further, between May 2001 and November 2002 Mabey & Johnson had made funds available to the government of Iraq or a person resident in Iraq in breach of UN sanctions pursuant to the Oil for Food Programme.

The case has its origins in the January 2007 civil proceedings brought by Mabey & Johnson against certain former employees and its agent in Jamaica. A Defence and Counterclaim filed in those proceedings alleged that it was common practice for the company to make payments to government officials in order to secure contracts. The company investigated these allegations and the results of that investigation were provided to the SFO. Mabey & Johnson was fined £3.5m and was subject to a confiscation order of £1.1m. Total reparations of £1.41m were awarded to Ghana, Iraq and Jamaica and the company incurred Courts costs and related ongoing compliance costs in excess of £0.6m

The case also resulted in the first prison sentences for bribery in breach of UN sanctions by any enforcement authority: three former directors were sentenced in February 2011 for between 8 months (suspended for two years) and 21 months (as referred to in Case 13 above). The Judge commented: “When a director of a major company plays even a small part, he can expect to receive a custodial sentence.”

4. Aon Limited (Aon) (January 2009)

In this case the FSA made clear to the UK financial services industry that it is unacceptable for businesses to conduct business overseas without having in place appropriate anti-bribery and corruption systems and controls.

The matter was brought under section 206 of the Financial Services and Markets Act 2000 which empowers the FSA to enforce Principle 3 of the FSA’s Principles for Businesses and Rule SYSC 3.2.6 R of the FSA’s Senior Management Arrangements,

“Corruption… is at the top end of serious corporate offending both in terms of culpability and harm… those who commit such serious crimes as corruption must not be… treated in any different way to other criminals.”

Lord Justice Thomas



Systems and Controls Handbook. Aon was found to have failed to take reasonable care “to establish and maintain effective systems and controls for countering the risks of bribery and corruption associated with making payments to non FSA authorised overseas third parties.”

Between January 2005 and September 2007, Aon Ltd “failed to properly assess the risks involved in its dealings with overseas firms and individuals” who helped it win business and failed to implement effective controls to mitigate those risks. An FSA press release stated that as “a result of Aon Ltd’s weak control environment, the firm made various suspicious payments (emphasis added), amounting to approximately US$7 million, to a number of overseas firms and individuals.”

The particular failings described in the FSA’s final Notice may be summarised as follows:

• Payment procedures did not require adequate levels of due diligence to be carried out either before relationships with overseas third parties were entered into or before payments were made. Its authorisation process did not take into account the higher levels of risk that certain parts of its business were exposed to in the countries in which they operated

• Failure to monitor its relationships with overseas third parties in respect of specific bribery risks. After a relationship had been approved and set-up for payment, neither the relationship nor the payments were routinely reviewed or monitored. Any failure in the acceptance process was therefore allowed to continue without further checking

• Failure to provide its staff in business divisions which dealt with overseas third parties with sufficient guidance or training on the bribery and corruption risks involved in such dealings

• Failure to ensure that the committees it appointed to oversee these risks received relevant management information and/or otherwise routinely assessed whether bribery and corruption risks were being managed effectively.

The conclusion set out in the Final Notice is that there was “an unacceptable risk that Aon Ltd could become involved in potentially corrupt payments to win or retain business... that Aon Ltd failed adequately to question the nature and purpose of these suspicious payments in circumstances where it ought to have been reasonably obvious... that there wasasignificantrisk that the Overseas Third Party might bribe the insured, the insurer or the a public official and/or there was no genuine commercial purpose to making the payment...”

In its Press Release, the FSA emphasised that this was at that time the largest financial crime related fine imposed by the FSA. The FSA considered that the pro-active determination of Aon’s senior management to identify past issues and improve the firm’s systems and controls in this area as a model of best practice that other firms may wish to adopt. The programme Aon put in place included a general prohibition on the use of intermediaries whose only service was to obtain and retain business through client introductions, unless the country corruption risk assessment is low.

Aon Ltd cooperated fully with the FSA and had agreed to settle at an early stage of the FSA’s investigation. Aon’s response upon finding suspicious transactions helped its position vis a vis the FSA. This response included:

• Promptly reporting the matter to the Serious Organised Crime Agency SOCA and FSA

• Establishing a dedicated steering committee reporting directly to its Board to oversee the review of suspicious payments and related controls and procedures

• Engaging external professional support to conduct a review of all payments to overseas third parties for a five year period from January 2002.

On the other hand, the FSA took into account, inter alia, in concluding the failings to be serious that Aon has a leading competitive position in the sector in the UK and therefore its practices set an example.

The Aon case was echoed in the similar case against Willis Limited settled in July 2011.

3. Balfour Beatty plc (October 2008)

This case is an example of resolving a corruption issue via civil remedy, a resolution which has been followed in the subsequent cases of (Amec Plc and Weir Group Plc). The Balfour Beatty case is most notable for being the first deployment of a Civil Recovery Order under the Proceeds of Crime Act (POCA). Part 5 of POCA enables law enforcement agencies to recover property obtained by unlawful conduct in a civil action via the High Court. The provisions do not require a specific offence to be established against any particular company or individual, but merely that the property sought under the order is the proceeds of unlawful conduct. The powers were made available to the SFO from April 2008.


A Balfour Beatty subsidiary was party to a joint venture project to build the Bibliotheca Alexandria in Egypt. The project completed in 2001. Sometime after the completion of the project, Balfour Beatty conducted an internal investigation. An SFO press release stated “Balfour Beatty plc accepted that unlawful conduct, in the form of inaccurate accounting records arising from certain payment irregularities occurred within a subsidiary entity during the construction of The Bibliotheca Project in Alexandrina, Egypt, completed over seven years ago.”

Balfour Beatty agreed to a settlement payment of £2.25million together with a contribution towards the cost of the Civil Recovery Order proceedings. The company also agreed to continue to review and improve its compliance function and to engage in an agreed external monitoring programme.

Some of the reported factors that appear to have resulted in this outcome include the following:

• Balfour Beatty plc adopted a “transparent and responsible approach” in self reporting the issue and had co-operated throughout the investigation

• The SFO investigation concluded that there was no financial benefit to any individual employee and most of the relevant individuals have long since left the company. The SFO had concluded in the circumstances of this case that the prosecution of any individual or corporate entity was not merited

• The company had already taken comprehensive steps to review and improve its control processes and had committed to continue to review and improve its compliance function and to engage in an agreed external monitoring programme.

By proceeding in this way the SFO stated it had been able to signal its “continuing determination to deal with unlawful conduct wherever it occurs” and “impose a significant sanction on a major UK company whilst avoiding the extensive cost to the public purse of lengthy court proceedings”.

2.NielsTobiasen(CBRNTeamLtd)andAnanias Tumukunbe (September 2008)

This case is seen as a legal landmark as it was the first successful prosecution by the City of London Police (CoLP) Overseas Anti-Corruption Unit (OACU). Anti-corruption campaigners pointed out that the two convicts were, at that time, the only people to be convicted in the UK of an overseas corruption offence since the signing of the OECD anti-corruption treaty 11 years previously. By comparison, Transparency International pointed out that during the same period, the US had secured

105 foreign bribery prosecutions.

Tobiasen, a Danish national, was the MD of CBRN Team Ltd, a consultancy advising on the threat of chemical and nuclear attacks. CBRN won contracts to supply training and equipment to guard the commonwealth meeting in Kampala that was attended by world leaders. Ananias Tumukunbe, a science and technology advisor to the Ugandan President, had approached CBRN and demanded payments for “local taxes”. Tobiasen made five payments, which went to Tumukunbe and a Ugandan military officer.

Niels Tobiasen pleaded guilty and was given a jail sentence of five months, suspended for a year. Ananias Tukukunbe pleaded guilty and was jailed for a year. He has since been deported to Uganda. The Ugandan military officer, Rusoke Tagawire, is still wanted by the CoLP.

The case is noteworthy in a number of other respects:

• It is a reminder that local practices, or assertions about them, are rarely a reliable defence — Tumukunbe had apparently convinced Tobiasen that these “local taxes” were routine in Uganda

• The Foreign Public Official Tumukunbe was prosecuted by UK Courts relating to an offence committed abroad.

• It is not just large global businesses who are subject to such criminal proceedings. Small businesses may also be prosecuted for bribery and corruption offences.

1. Dobb White & Co (April 2008)

The bribery element of this case is a separate off-shoot investigation led by the SFO and Leicester Police Economic Crime Unit, connected to the investigation of a Ponzi fraud scheme by the US SEC. When the SEC sought a freezing order over bank accounts related to the Ponzi scheme, the fraudsters conspired to bribe the US Attorney General or other US law enforcement officers to lift a freezing order obtained over bank accounts holding the investor deposits obtained through the Ponzi fraud.

Dobb White & Co was an accountancy practice in the Midlands in which Shinder Singh Gangar and Alan White were partners. In addition to providing accountancy services, they ran a transatlantic high-yield investment pyramid scheme known as Vavasseur programmes which was operated by Terry Dowdell, an American citizen. A fourth person, Nigel Heath, was a solicitor who acted as a middleman introducing clients to Gangar and White. It is estimated that the total value of the fraud exceeded US$200 million.

Continued on page 23


Case reference Date Name Sector

Enforcement agency notified

Enforcement agency Source of enquiry

Self-reported?

Date of transactions Value of transactions Location of transactions Legal basis of action

Financial penalty Basis of financial penalty Other penalties Other financial effects

21 November 2011 Mazhar MajeedSalman ButtMohammed AsifMohammed Amir

Cricket/gambling N/A N/A Press investigation August 2010 £150,000 in total UK Criminal: Conspiracy to corrupt 32 months imprisonment30 months imprisonment12 months imprisonment6 months imprisonment

£105,000 between them in prosecution costs

20 October 2011 Munir Yakub Patel Public service N/A N/A Press investigation August 2011 £500 UK Section 2 Bribery Act 2010 3 years imprisonment

19 July 2011 Macmillan Publishers Limited (MPL) Educational materials December 2009 SFO and CoLP World Bank report Yes 2002 to 2009 £11.26m (total value of contracts) Rwanda, Uganda and Zambia

Civil: POCA (Part 5) £11.26m Revenue received from potentially unlawful conduct

MPL debarred from World Bank contracts for minimum 3 yearsSFO approved monitor put in place

MPL pay all investigation costsMPL pay £27k SFO costsMPL withdrew from all public tenders in education business in East and West AfricaLoss of bid securities

18 July 2011 Willis Limited Wholesale insurance and reinsurance broking

Not known FSA FSA and SARS 2005 to 2009 £32.7m (net insurance commissions earned)£27m (insurance commissions paid)

“High risk jurisdictions”Egypt, Russia and Argentina cited

Civil: FSMA (Section 206) £6.895m FSA fine considering “all relevant circumstances”High standards of regulatory conduct

Willis to carry out a review of past payments to overseas third parties“Significant” financial and management time costs per the FSA

17 April 2011 DePuy International Limited Medical goods October 2007 SFO Internal whistleblowerReferred to SFO by DoJ

1998 to 2006 £14.8m (profit on contracts)£4.5m (payments to Greek officials)

Greece Civil Recovery Order: POCA £4.829m Had regard to penalties, settlements and seizures in US and Greece

Depuy pay prosecution costs

16 April 2011 Mark Jessop Medical goods 2007 SFO UN Independent Inquiry Committee

2000 to 2003 US$12.3m (value of contracts)€339,886 in improper payments paid or due£40,000 paid in cash in Iraq

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000 £150,000 Fine — payable to the Development Fund for Iraq 24 weeks custodial sentence Jessop pays prosecution costs of £25k

15 February 2011 Aftab Noor al-Hassan Oil and gas September 2008 SFO UN Independent Inquiry Committee

2001 to 2002 US$4.4m profit on oil salesUS$1.6m in illegal payments

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000 16 months imprisonment suspended for two years

15 February 2011 Riad El-Taher Oil and gas August 2008 SFO UN Independent Inquiry Committee

2001 US$600k profit on oil salesUS$500k in illegal payments

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000 10 months imprisonment

14 February 2011 MW Kellogg Limited Oil and gas October 2009 SFO French prosecutors Yes 1995 to 2004 US$6bn (total value of contracts)US$182m (payments to government officials)

Nigeria Civil: POCA (Part 5) £7.028m Amount of share dividends payable from profits of parent company derived from contracts obtained by bribery and corruption

MWKL to overhaul its internal audit and control measures

MWKL pay costs of investigation

13 February 2011 Richard ForsythDavid MabeyRichard Gledhill(Re Mabey & Johnson Limited)

Engineering (temporary bridges)

January 2007 SFO 2001 and 2002

Iraq: €4.2m (contract revenues) and €420k payments to government

Iraq Criminal: The Iraq (United Nations Sanctions) Order 2000 21 months imprisonment and 5 years disqualification as a director8 months imprisonment and 2 years disqualification as a director8 months imprisonment, suspended for 2 years

£75k of prosecution costs£125k of prosecution costs

12 December 2010 BAE Systems plc Defence 2004 SFO Investigative journalism 1999 to 2005 US$39.97m (contract value)US$12.4m (payments to intermediaries)

Tanzania Criminal: Sec 221 Companies Act 1985 £500k£29.5m

FineEx-gratia payment for the benefit of the people of Tanzania

£225k in SFO costs Remediation as set out in the Report of Lord Woolf

11 December 2010 Weir Group plc Oil and gas services 2004 Crown Office and Procurator Fiscal (Scotland)

UN Independent Inquiry Committee

2000 to 2002 £13.9m (profit on contracts)£3m kickbacks

Iraq Civil Recovery Order: POCA (referencing Sec 221 Companies Act 1985)Criminal: The Iraq (United Nations Sanctions) Order 2000

£13,945,962£3m

Profit on contractsFine

10 October 2010 Julian Messent(PWS International Limited)

Insurance broking October 2005 SFO and CoLP Foreign and Commonwealth Office

February 1999 to June 2002

US$1,982,230 as inducements or rewards Costa Rica Criminal: Section 1 of the Prevention of Corruption Act 1906

£100k Compensation to the Republic of Costa Rica 21 months imprisonment and 5 years disqualification as a director

9 June 2010 Paul KentSilinder Singh SidhuStuart FordRebecca HoyleSarah Kent(Learning Skills Council)

Government funded training programmes

Not known SFO West Mercia Police

LSC Whistleblower June 2003 to August 2005

£1.3m (contract value)£270k kickbacks

UK Criminal: Section 1 of the Prevention of Corruption Act 1906Criminal: Section 329(1)(b) POCA (money laundering)Criminal: Section 328(1) POCA (acquisition, retention, use or control of criminal property)Criminal: Section 16 Theft Act 1968 (pecuniary advantage by deception)

4.5 years imprisonment3 years imprisonment2 years imprisonment1 year imprisonment, suspended for two years12 months imprisonment suspended for two years, 200 hours unpaid work and 12 month supervision order

8 April 2010 Robert Dougall(DuPuy International Limited)

Medical goods Not known SFOWest Yorkshire Police

Internal whistleblowerReferred to SFO by DoJ


Greece Criminal: Section 1 of the Prevention of Corruption Act 1906

12 months prison term, suspended for two years on appeal

7 March 2010 Innospec Limited Chemicals October 2007 SFO UN Independent Inquiry Committee

1999 to 2006 US$160m (total value of contracts)US$11.7m in commissions to agentsUp to US$8m in bribes

Indonesia Criminal: Section 1 of the Criminal Law Act 1977 (conspiracy to corrupt)Criminal: Section 1 of the Prevention of Corruption Act 1906

US$6.7mUS$6m

Confiscation penalty in respect of Indonesian corruptionCivil recovery of which US$5m to UN Development Fund for Iraq(penalties taking into account the ability to pay)

SFO appointed monitor No further funds available to fund confiscation or compensationInnospec to pay costs of a monitor for up to three years

6 October 2009 AMEC plc Engineering and project management

March 2008 SFO Yes 2005 to 2007 US$9m South Korea Civil Recovery Order: POCA (referencing Sec 221 Companies Act 1985)

£4.95m Contribution to costs of the Civil Recovery OrderExternal consultant appointed

5 September 2009 Mabey & Johnson Limited Engineering (temporary bridges)

January 2007 SFO Yes 1993 to 2002 Iraq: €4.2m (contract revenues) and €420k payments to governmentJamaica: £8m+ (contract revenues) and £200k payments to officialsGhana: £26m (contract revenues) and £470k payments to officials

Iraq, Jamaica and Ghana

Criminal: Conspiracy to corrupt Iraq £2mJamaica £750kGhana £750k

FineFineFine

Iraq reparations £618kJamaica reparations £139kGhana reparations £658kConfiscation order £1.1m

First year monitoring costs up to £250kSFO costs £350k

4 January 2009 Aon Limited Insurance broking April 2007 FSA SAR filed with SOCA and FSA

January 2005 to September 2007

US$7.1m and €1m (revenues arising)66 improper payments totalling US$2.5m and €3.4 to 9 intermediaries

Bahrain,Bulgaria, Myanmar, Bangladesh, Indonesia, Vietnam

Civil: FSMA (Section 206) £5.25m

3 October 2008 Balfour Beatty plc Engineering and construction services

April 2005 SFO Yes 1998 to 2001 Not known Egypt Civil Recovery Order: POCA (referencing Sec 221 Companies Act 1985)

£2.25m Not known Contribution to costs of the Civil Recovery OrderExternal monitor appointed

2 September 2008 Niels Tobiasen (CBRN)Ananias Tumukumbe

Security consulting services

Not known CoLP/CPS May 2007 £500k+ (value of contracts)£83k payments to officials

Uganda Criminal: Section 1 of the Prevention of Corruption Act 1906

Tobiasen: 5 months jail sentence suspended for a yearTumukunbe: one year jail sentence; subsequently deported

1 April 2008 Shinder Singh GangarAlan WhiteNigel Heath (Dobb White & Co)

High yield investments April 2006 SFOLeicestershire Police ECU

A separate SFO investigation

Not known US$500k bribe United States Criminal: Conspiracy to corrupt and conspiracy to defraudCriminal: Conspiracy to corrupt and conspiracy to defraudCriminal: Conspiracy to corrupt

18 months jail sentence for corruption and 6 years for fraud18 months jail sentence for corruption and 6 years for fraud6 months jail sentence

UK Bribery Digest cases — Edition 1, January 2012





Self-reported?















































£13,945,962£3m























US$6.7mUS$6m










FineFineFine





















UK Bribery Digest cases — Edition 1, January 2012





Self-reported?















































£13,945,962£3m























US$6.7mUS$6m










FineFineFine





















23 23

Abbreviations

CoLP City of London Police

CPS Crown Prosecution Service

CRO Civil Recovery Order

DoJ US Department of Justice

ECU Economic Crime Unit

FBI Federal Bureau of Investigation

FPO ForeignPublicOfficial

FSA Financial Services Authority

FSMA Financial Services and Markets Act

POCA Proceeds of Crime Act 2002

SAR Suspicious Activity Report

SEC Securities and Exchange Commission

SFO SeriousFraudOffice

SOCA Serious Organised Crime Agency


When enforcement action in respect of the fraud led to US bank accounts being frozen, Heath, Gangar and White thereupon conspired to pay a bribe of some US$500,000 to an unnamed US official to lift the freezing order over the bank accounts.

Gangar and White were found to be guilty of conspiracy to corrupt for which they each received a prison sentence of 18 months to be served consecutively to six year sentences for conspiracy to defraud. Heath pleaded guilty to an offence of conspiracy to commit corruption and received a six month sentence.

In addition to the actions taken by the SFO and Leicester Police, the FSA also took action against Dobb White & Co ten years prior to Gangar, White and Heath’s convictions for corruption. The FSA placed the accountancy firm into liquidation and the individuals into bankruptcy using its insolvency powers under the Financial Services and Markets Act (FSMA). This was the first occasion the FSA had used its insolvency powers.

The FSA decision to use its powers follows a conviction against Gangar for two offences of failing, without reasonable excuse, to produce documents and information required by the FSA for the purpose of investigating suspected illegal deposit taking in contravention of Section 3 or 35 the Banking Act 1987.

This is pertinent as it was the FSA who referred the more recent case to the SFO and indicates that Dobb, White & Co and/or Gangar, White and Heath were under the radar of enforcement agencies for at least ten years.

Some noteworthy aspects of this case include the following:

• It is a reminder that corruption may be ancillary to other commercial activities

• It is an example of how one investigation can lead to off-shoot investigations by a different authority and jurisdiction

• Terry Dowdell was made available in person during his US prison sentence to give evidence for the prosecution in the UK, together with the FBI, SEC and Federal Reserve Bank

• Heath’s sentence was substantially lower than that of Gangar and White and which we assume reflects his guilty plea

• The FSA also undertook its own enforcement action

• Regulators commenced investigations into Dobb White & Co in 1998. Whilst not all of the investigations were related, this case shows that enforcement against Gangar, White and Heath took place over a ten year period reflecting the scale and complexity of some corruption and fraud investigations.


Fraud Investigation & Dispute Services

John Smart +44 (0) 20 7951 3401

[email protected]

Jonathan Middup +44 (0) 121 535 2104

[email protected]

Steve Caine +44 (0) 20 7951 4433

[email protected]

David Lister +44 (0) 131 777 2308

[email protected]

Contacts

ii

Disclaimer

The factual content of this Digest is based on published sources. We provide comment based on our understanding as forensic accountants of the relevant laws and related guidance. This does not comprise legal analysis or advice.


Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

© 2011 EYGM Limited. All Rights Reserved.

In line with Ernst & Young’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

The opinions of third parties set out in this publication are not necessarily the opinions of the global Ernst & Young organization or its member firms. Moreover, they should be viewed in the context of the time they were expressed.

www.ey.com

Documents

Ernst&Young UK Bribery Digest Edition 1