In a recent decision, two individuals were sentenced for Bribery Act 2010 offences (bribing a person, and being bribed). The outcome of those criminal proceedings is instructive, both in terms of (1) illustrating the consequences to company directors of being found guilty of bribery offences, as well as, (2) providing some guidance to commercial organisations as to what might be meant by "adequate procedures".
The criminal conduct
The prosecution arose out of financial payments made by Stephen Banks, former managing director of Skansen Interiors Ltd (Skansen), to Graham Deakin, former project manager of DTZ Ltd. Mr Banks paid £10,000 to Mr Deakin (with the promise of further payments) during 2012 and 2013 to provide information that would assist Skansen secure contracts with DTZ. Skansen went on to secure contracts worth £6 million.
Having been charged with offences under the Bribery Act 2010, both men pleaded guilty. Mr Banks was sentenced to 12 months' imprisonment, whilst Mr Deakin was sentenced to 20 months' imprisonment and both were also disqualified from acting as a director of a company, for a period of six years and seven years respectively.
Those sanctions are also consistent with how courts in Scotland have previous dealt with corruption offences; in prosecutions arising out of the unlawful payments made in connection with Edinburgh Council building repairs - albeit, the individuals were charged under the Public Bodies Corrupt Practices Act 1889 – the Crown sought the imposition of director disqualification orders (five years) in addition to custodial sentences imposed by the Sheriff (between two and five years).
Consequences for the company
That criminal conduct was discovered at all was due to Skansen appointing a new CEO in 2014, and, having conducted an internal investigation, thereafter the company self-reported it's employee's actions to the National Crime Agency and to the police.
In separate criminal court proceedings, Skansen was charged under section 7(1) of the 2010 Act, on the basis that the bribe obtained business for Skansen.
Skansen sought to defend its position, relying on section 7(2) of the 2010 Act which provides that it is a defence for a commercial organisation to prove that it had in place "adequate procedures" to prevent the unlawful conduct.
The matter went to trial and, in March of this year, the jury returned a guilty verdict. Although no reasons are given by the jury, it can be assumed that the jury did not consider the controls that were instituted by Skansen to be sufficient or adequate.
What was argued on behalf of Skansen must be viewed in context. Skansen was a small company, employing around 30 people. It was said to have operated from a small office, and did not conduct its business on the international level.
As such, when attempting to make out the section 7 defence, Skansen relied on what might be described as 'softer controls' rather than an audit trail of paperwork: for example, no specific anti-bribery policy was needed on the basis that the small number of staff knew that bribery was wrong, there was a culture of honesty and integrity within the company, and financial/ contractual controls had been put in place.
What can be learned from this prosecution?
What can be observed is that a business asserting it has an 'ethical culture' is not going to be sufficient in the absence of any evidence to support that claim. Organisations will need to give thought as to what records demonstrating compliance exist, what processes were put in place in response to the Bribery Act coming into effect (and modified/reviewed in the intervening years), how policy and procedures are communicated to employees, and what training is in place to supplement the written policies.
It is also revealing that the CPS insisted on prosecuting Skansen at all. The circumstances of the case were a little unusual in that Skansen, by 2015, was dormant (although had been part of the wider Skansen Group Limited), had no assets and would be unable to meet any financial penalty imposed by the court. The company's position had also been to fully assist and co-operate with the investigation into the alleged criminal conduct.
Given Skansen had no assets or ability to meet a fine, the judge was only able to impose an absolute discharge, with the consequence that ultimately no financial penalty was imposed on the company following the trial.
Plainly, the decision of the CPS to prosecute was more about sending a message rather than the likelihood of any fine being imposed.
It remains to be seen whether the strong message sent out by the CPS might then need to be balanced against whether this case may have any impact on the future willingness of companies to self-report wrongdoing or rogue directors.
In addition, the message sent out by the Court in dealing with the first contested section 7 prosecution is equally strong, possibly setting the bar for a successful adequate procedures defence higher than commentators may have previously considered likely.
The Ministry of Justice guidance anticipates that commercial organisations will monitor and evaluate the effectiveness of their bribery prevention procedures and adapt them when necessary.
Senior managers would be well advised to use the Skansen case as a timely reminder to review the procedures that have been (or need to be) put in place to prevent bribery occurring.
Being able to demonstrate that a company has proactively considered its adequate procedures, rather than reactively dealing with the matter when corruption has been uncovered, will be significant for a successful section 7 defence.
Senior managers may wish to seek assistance from their legal advisers, and consider the MOJ guidance, in order to ensure a proportionate assessment of risk has been carried out. Equally important is to assess the robustness of policies, procedures, and training so senior managers can satisfy themselves that adequate procedures are in place to prevent bribery and to protect the organisation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.