On Feb. 23, 2018, a couple of months after the first French DPA ("CJIP - convention judiciaire d'intérêt public") in history was entered into between the French prosecutor office and HSBC Private Bank Suisse in relation to laundering of tax fraud proceeds, the first CJIPs for corruption charges have been approved by the vice President of the Nanterre Tribunal de grande instance.
As a summary:
What is the background of these cases?
In these two cases, the Chief security officer of EDF – a French public company – blew the whistle to the police services after being informed by a third party of the fact that one employee from EDF's Purchase Directorate requested commissions from companies in exchange for the award, or the keeping, of public contracts.
Criminal proceedings were then initiated by the public prosecutor, followed by the launch of a judicial investigation. It was established that officers of "KAEFER WANNER" (referred as "KW") and "SET ENVIRONNEMENT" paid commissions to this EDF employee for keeping, or being awarded with, contracts for the maintenance of thermal power stations.
KW and SET ENVIRONNEMENT recognized the corruption facts and agreed upon the criminal qualification attached to them. The investigating judge then decided to refer the two cases to the public prosecutor for the purposes of entering into a CJIP. An agreement was found between the public prosecutor and the companies, and both CJIPs have been approved by the aforementioned Court.
What are the terms of these CJIPs?
First, it should be recalled that if parties reach an agreement over this procedure, legal entities can see themselves imposed one or more of the following:
- payment of a fine determined proportionally to the benefits that result from the identified malpractices, which can reach up to 30% of the legal entity's average turnover calculated over the previous three years;
- implementing an anticorruption compliance program under the control of the French Anticorruption Agency ("AFA – Agence française anticorruption") for a maximum of three years, and paying the expenses incurred by the recourse by AFA to experts and other qualified authorities up to an amount determined in the CJIP;
- payment of damages to the victims of the offence, if identified.
In these cases, KW and SET ENVIRONNEMENT were imposed the three of the above sanctions, as follows:
1. Payment of a fine
KW and SET ENVIRONNEMENT were fined up to the amount of the benefits that result from the identified corruption malpractices, however not overreaching the cap of 30% of their average turnover calculated over the previous three years, as expressly outlined in the CJIPs.
Moreover, an so far, whilst neither French law, nor any French related sentencing guidelines provide for aggravating or mitigating factors to be referred to, the following factors were taken into account to reduce the amount of the fine:
- As aggravating
- duration of the facts;
- commission of the facts in the realm of a contractual relationship with an operator entrusted with public service missions.
- As mitigating
- departure and termination of involved employees, including management;
- cooperation with the investigation;
- changes in shareholding;
- changes in management either resulting from voluntary departures or disciplinary measures;
- strengthening of the company's compliance program in (i) appointing a general counsel, a chief compliance officer, and ethics' points of contact, (ii) creating an ethical website available to all the employees (which includes guides, practical questions, ethical rules), (iii) disseminating a whistleblower's charter, (iv) reinforcing measures to raising awareness of employees on corruption and cartel risks, (v) updating the compliance program, notably by providing classroom and e-Learning trainings, mapping risks, designing an integrity guide, and implementing an additional whistleblowing system with an independent service provider that allows to report alleged malpractices by phone and anonymously, is so wishes.
Interestingly, it is further upheld in the KW case that the company did not self-report the facts to the authorities, though not explicitly used as an aggravating factor.
Consequently, a fine of €800,000 was imposed on SET ENVIRONNEMENT, covering:
- €680,000 as disgorgement of profits; and
- €120,000 as a complementary penalty;
A fine of €2,710,000 was imposed on KY, covering:
- €3,3 million as disgorgement of profits, such amount having been probably reduced to a non-specified amount; and
- a non-amounted complementary penalty.
2. Implementing an anticorruption compliance program under the control of the AFA or being imposed a monitoring of the AFA over an existed program
SET ENVIRONNEMENT was imposed to implement an anticorruption compliance program in accordance with French law, under the control of the AFA for two (2) years.
As it had already set up an anticorruption compliance program, KW was imposed an eighteen (18) months monitoring to be conducted over this program by the same Agency.
Moreover, costs incurred by the recourse of the AFA will be charged to both companies, limited to €290,000 for KY and €200,000 for SET ENVIRONNEMENT.
3. Payment of damages to the victim
EDF filed suit against KY and SET ENVIRONNEMENT and was allocated, in both cases, the amount of €30,000 in damages put at their expense.
What key takeaways from these CJIPs can be captured?
Preceded by the CJIP entered into between the public prosecutor and HSBC Private Bank Suisse, these agreements have not been entered into before the initiation of criminal proceedings, but after a criminal investigation had been open for the same facts. As a consequence, it is still not possible to determine what are the criteria that could be used by the public prosecutor for proposing to enter into it before the initiation of criminal proceedings, although these two CJIPs closely refer, directly or indirectly, to some criteria notably used in the US, including:
- duration of the alleged facts;
- cooperation with the investigation;
- implementation of a compliance program; or
Moreover, what is striking and deserves to be mentioned is the fact that the aggravating and mitigating factors that are expressly referred to in these CJIPs do not appear to be used for the same purposes: they seem to be taken into account, in one case, only to determine the amount of the complementary penalty, in the other, to define the amount of the fine composed of both the disgorgement of profits and the complementary penalty. Further clarification would therefore be welcomed.
In addition, these cases help reminding that, in the current state of French law, any kind of company accused of corruption, influence peddling, related offenses, and laundering of tax fraud proceeds, might be imposed, under a CJIP, to implement such program, or to be monitored by the AFA when a program was already set up.
Finally, it is worth noting that this case have been initiated through whistleblowing and that setting up a "whistleblower's charter" was expressly upheld in one of these CJIPs as an essential feature of an anticorruption compliance program. Let us also recall, in that respect, that the questionnaire used by the AFA1 at the occasion of its controls to assess the effectiveness of a company's compliance program gives high priority to whistleblowing mechanisms.
What's ahead of us?
These two cases probably serve the major shift undertaken by the French Sapin II law when introducing the CJIP into the French criminal procedure, this law having been issued, as a matter of fact, to effectively counter corruption and related offenses.
Moreover, as above-said, it is noteworthy to mention that an indirect signal is being given to the whistleblowers: it is worth blowing the whistle since it can lead, at least, to CJIPs to be entered into.
Consequently, as previously mentioned 2, French legal entities would have to be even more concerned to get acquainted with compliance issues in order to effectively prevent and detect corruption.
2 See "The French Prosecutor Office Has Entered Into the First French DPA in History with HSBC Private Bank Suisse", 9 January 2018, Kramer Levin Alert.
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