FCPA Enforcement Measures

Posted on December 22, 2011 by Vivian Robinson Q.C.

In a recent article for the ABA Journal ‘Litigation’, Susan Hansen argues that prosecutors are wielding the Foreign Corrupt Practices Act more actively, but not always successfully, while business interests are calling for changes in the law.

One of the DOJ’s current priorities is FCPA enforcement and the suggestion has been made that by being ‘overzealous’ in this regard, the DOJ is making it more difficult for US companies to compete abroad.

In 2010 the DOJ brought 48 new FCPA actions, nearly double the number for the previous year. Thus far in 2011, the DOJ has entered into 12 deferred prosecution agreements and 8 non-prosecution agreements with corporates, 5 of which stemmed from voluntary disclosures to the DOJ.

However, Lanny Breuer, who heads the Justice Department’s criminal division, considers the level of enforcement to be ‘just right’.

Hitherto, few cases brought by the DOJ reached court. But this is changing, as an increasing number of cases are being brought against individuals, who are tending to contest the allegations. So far this has resulted in only mixed success for the prosecution.

By contrast, corporates are less disposed to let a case proceed to court, with all the attendant cost and bad publicity.

The question being asked is whether the DOJ is being too enthusiastic in its enforcement approach.

This is being compounded by what some perceive as a lack of clarity in areas such as the ambit of the term ‘foreign official’, or where the line is drawn between what might be considered a legitimate gift as opposed to a bribe, or on questions of successor liability following company mergers or acquisitions.

A number of legislative reforms are being proposed in these areas. There is also a suggestion that a compliance defence be introduced along the lines of the ‘adequate procedures’ defence available under the UK Bribery Act, something about which the DOJ currently appears to be less than enthusiastic although informally the adequacy of a company’s compliance is something the DOJ will have regard to when (a) deciding whether to prosecute and (b) determining the appropriate level of any sanctions.

New Director of the Serious Fraud Office appointed today

Posted on December 16, 2011 by Adam Greaves

It is reported in today's Financial Times  and other publications that the Attorney General, Dominic Grieve QC has appointed David Green QC as the new Director of the Serious Fraud Office. He will take over from Richard Alderman in April 2012.

Mr Green previously headed the Revenue & Customs Prosecution Office between 2004 and 2010, until it was subsumed into the Crown Proseuction Service at the beginning of last year.  He left that role in early 2011 and in the intervening period has been back in private practice at barristers chambers 6 King's Bench Walk.

We assume that, having once previously had his position as head of a prosecuting body reversed into another larger prosecuting body, that David Green would have sought assurances from the government that his new position at the SFO would not suffer a similar fate during his tenure. If that assumption is correct, it follows that in our view at least his appointment shows a sign of good faith in the continuation of the SFO in its current guise, which earlier this year had its very future threatened by the Home Office minister Theresa May.

Mr Green is very well respected as a white collar crime lawyer, and we believe that his appointment will be a great success. Good luck to him.

 

"No endemic corruption in the police service" - a new report on the British police

Posted on December 15, 2011 by Adam Greaves

The Chief Inspector of Police in the United Kingdom, Sir Denis O’Connor has called for an end to the “freebie culture” within the police service and an end also to the “revolving door” that permits police officers to leave their jobs and start working immediately for one of their police forces’ contractors.

A report by Her Majesty’s Inspectorate of Constabulary said that while it found no endemic corruption in the police service, many police forces had become complacent about the risks to their reputation from relationships with the media, businesses and contractors.  Just published, the report is worth reading even if you are unconnected with the police but are interested in anti-corruption compliance for your own company or clients.

Sir Denis O’Connor reported that accepting free tickets to sporting events such as the FA Cup Final and Wimbledon Tennis Tournament risked creating the deception that officers had conflicts of interest, which could damage the police service’s reputation in the eyes of the public.

The report, Without Fear Or Favour: A Review Of Police Relationships recognises that the public might wish to show their appreciation for the police (also, we suppose, sometimes possibly the reverse!).  The report concludes that among most police officers

 “a box of chocolates was seen as entirely acceptable, whereas an invitation to attend a sporting event or pop concert was felt to be unacceptable”.

Further,

“we found numerous examples of senior officers accepting hospitality from suppliers and others who are tendering for business…concert and premier sporting tickets were accepted from companies which were tendering for business or have been successful in tender”.

Twenty out of the 43 police forces in England and uidance to help them to decide whether to accept or decline a gift, with 15 placing an acceptable value on gratuities of between £5 and £75.  All forces have mechanisms for formally recording hospitality although these were not consistently completed in most cases.

Interestingly, the report does not offer the same guidance as the Government’s guidance which was issued on 30 March 2011 by the Ministry of Justice under the Bribery Act 2010.  This suggests that for businesses, ordinary hospitality could continue and would normally be acceptable including tickets to popular sporting events.

Whilst some of us may disagree with the Government’s Bribery Act guidance not least because there may be a view that inviting customers to expensive sporting events is of course intended to influence the customer’s decision making processes (whether that influence is improper is of course very much a subjective issue), it should be remembered that the police are not in the same position as ordinary businesses as they are in a very particular position of trust and authority to the community and to the country as a whole.  It follows, therefore, that one should not expect the public’s tolerance for the levels of hospitality for police officers to be the same as those people within the commercial sector.

In addition, if individual police officers, by accepting hospitality, undermine the confidence of the public within their particular police force, this naturally has an effect on the public’s perception all police forces around the country, particularly when reported in the media.

It is clear that the police, like employees in commercial organisations all around the world, need to receive much better training and much clearer guidance from their employers as to what is acceptable and what is not in order to avoid the suspicion of corruption.  Further, as with ordinary business people, there needs to be proper enforcement of these guidelines against the police themselves, because corruption within organs of the state undermines the very fabric of the state itself and of the society it serves.

The Rule of Law and Anti-Corruption Centre launched in Qatar

Posted on December 12, 2011 by Adam Greaves

Rule of Law and Anti-Corruption Centre was launched in Qatar yesterday with a call by the United Nations Secretary General Ban Ki-moon to  fight corruption and promote human rights to achieve all the Millennium Development Goals (MDGs) . This story was reported in The Gulf Times today.

Moon said the fight against  corruption is and should remain at the centre of rule of law, “and the fight against corruption requires more urgency now than before to promote human rights and ensure all the Millennium Development Goals (MDGs) are achieved”.

"Corruption is a global phenomenon  that impedes growth and development, which is also a threat to the important efforts being made in reducing poverty and achieving the MDGs. Because of corruption, many poor and vulnerable people are being denied education and other essential services they need to maintain a normal day-to-day living,” he said.

He described the centre in Qatar as a “step forward in a collective journey of implementing the UN’s effort against corruption”, saying: “The launching of this centre is coming at a time when people in the Arab world are rising and fighting against corruption. And as billions of ordinary people are saying no to corruption, the international communities must listen...all must heed their cry.”

Ki-moon, who drummed up support for the Doha centre, said the UN welcomed increased number of activities being initiated by governments and private organisations across the globe to fight corruption.
“Corruption distorts the market and increases costs for companies, so building partnership between public and private sectors is very crucial to combat the threat of corruption against global economy,” he noted while also calling on co-operations between civil society organisations (CSOs) across the board.

“All people have the responsibility to speak against corruption because combating it starts with every individual, which makes it important to focus on anti-corruption education in order to tackle the issue head on,” Ki-moon said.

While pledging further support by the UN for the centre’s operation, he commended Qatari leadership for always taking a pioneering role in the region, especially for hosting in Qatar, some two years ago, the Third Session of the Conference of Parties of States to the UN Convention Against Corruption. “Qatar has once again showed its role in championing efforts in the region and for setting international agenda and it should be our collective desire to recover the stolen future of the ordinary people...we can’t fail them,” he added.

Qatar’s Attorney General Dr Ali bin Futais al-Marri noted in a welcome address that corruption and lack of transparency as well as absence of such centre as the one being launched in Qatar have led to some of the recent uprisings in the region and also contributed to the financial crises in the eurozone. He maintained that Qatar has remained on top of the list of less-corrupt countries, attributing the present status to the country’s free and independent judiciary system.

“The launch of this centre here is a further proof of the commitments by HH the Emir Sheikh Hamad bin Khalifa al-Thani and HH the Heir Apparent Sheikh Tamim bin Hamad al-Thani to ensure the rule of law and guide against corruption, especially by making sure that the judiciary is completely independent which is not the case in many countries in the region,” he pointed out.

Although many people regard the Middle East region generally as a highly corrupt region (and there are many examples of corruption in the region often involving Western and other companies securing huge defence and infrastructure contracts by the use of bribes and so-called commission payments), Qatar should not be included within this group. Qatar has been ranked at 22 by Transparency International's recently published public perceptions index 2011 The UK by comparison was only a few places ahead of Qatar at 16, and the US has fallen behind Qatar at 24th place, with Spain at 31st place.

Compared with some of its Middle Eastern neighbours, Qatar is 1st in the regional rankings within the Middle East and North Africa geographic group, Israel being at 36, Bahrain at 46, Oman at 50, Saudi Arabia at 57 and Tunisia at 73.

The launch of this centre will not only encourage inward foreign investment into Qatar, but it will also set an example for the rest of the Middle East region and, we hope, encourage other regional countries to reform their own laws and enforce those laws properly in order to drive down the high levels of corruption.

9th December, International Anticorruption Day

Posted on December 09, 2011 by Adam Greaves

On 31 October 2003, the General Assembly of the United Nations adopted the United Nations Convention against Corruption and requested that the Secretary-General designate the United Nations Office on Drugs and Crime (UNODC) as secretariat for the Convention’s Conference of States Parties (resolution 58/4). 

The Assembly also designated 9 December as International Anti-Corruption Day, to raise awareness of corruption and of the role of the Convention in combating and preventing it.  The Convention entered into force in December 2005.

Today, 9th December 2011, the  Secretary-General of the United Nations, Mr Ban Ki-moon made this statement:

Corruption afflicts all countries, undermining social progress and breeding inequality and injustice.

When desperately needed development funds are stolen by corrupt individuals and institutions, poor and vulnerable people are robbed of the education, health care and other essential services.

Although the poor may be marginalized by corruption, they will not be silenced. In events across the Arab world and beyond this year, ordinary people have joined their voices in denouncing corruption and demanding that governments combat this crime against democracy. Their protests have triggered changes on the international scene that could barely have been imagined just months previously.

All of us have a responsibility to take action against the cancer of corruption.

The United Nations is helping countries combat corruption as part of our broader, system-wide campaign to help bolster democracy and good governance.

The United Nations Convention Against Corruption is a powerful tool in the fight. I urge all governments that have not yet ratified it to do so without delay. I also call on governments to include anti-corruption measures in all national programmes that support sustainable development.

The private sector, too, stands to gain enormously from effective action. Corruption distorts markets, increases costs for companies and ultimately punishes consumers. Companies can create a more transparent global economy through anti-corruption initiatives, including the work of the United Nations Global Compact.

On this International Anti-Corruption Day, let us pledge to do our part by cracking down on corruption, shaming those who practice it and engendering a culture that values ethical behaviour.

Transparency International UK has also today made this press release about the state of anticorruption laws in the UK :

Much more must be done by the Government to tackle the role that UK banks and companies play in fuelling and facilitating corruption overseas, according to a new report launched on International Anti-Corruption Day (9 Dec) by the Bond Anti-Corruption Group, whose members include leading UK-based international development organisations.

Melissa Lawson, Chair of the Bond Anti-Corruption Group and Tearfund policy adviser said: “The failure to act here in the UK when it comes to enforcing bribery laws and tackling dirty money has devastating effects on developing countries, undermining good governance and exacerbating poverty. This report shows why the UK must not remain ambivalent when it comes to addressing the real issues in the fight against corruption.”

The report notes improvements in the UK’s compliance with some of its commitments under the UN Convention against Corruption, but identifies a series of weaknesses:

• The Ministry of Justice guidance on the new UK Bribery Act is unclear, creating potential loopholes and confusion for business.

• The Serious Fraud Office has too few resources to ensure the bribery legislation is a real deterrent to stop companies paying huge bribes to foreign governments in return for lucrative contracts.

• According to the Financial Services Authority, 75% of British banks that were surveyed don’t know the source of the funds of their high-risk customers, leaving the UK wide open to corrupt funds.

• The UK fails to exert pressure on secrecy jurisdictions in Crown Dependencies and Overseas Territories to publish company registries.

"The laws are there to tackle corruption but there is complacency in the face of growing corruption threats,” says Eric Gutierrez, Senior Governance Adviser at Christian Aid and one of the report’s authors. “The Government’s International Anti-Corruption Champion must instigate an anti-corruption strategy and ensure that there are sufficient resources to tackle this issue."

The Bond Anti-Corruption Group welcomed the Bribery Act of 2010, but now calls on the Government to:

• Ensure sufficient resources for enforcing the Bribery Act

• Enforce its own anti-money laundering laws to ensure UK banks do not accept corrupt money and facilitate corruption

• Extend the UN Convention against Corruption and UK Bribery Act to all Crown Dependencies and Overseas Territories.

• Produce a transparent cross-government anti-corruption strategy under the responsibility of UK Anti-Corruption Champion, Rt Hon Ken Clarke MP.

Welcoming the report, Catherine McKinnell MP, Chair of the newly formed All-Party Parliamentary Group on Anti-Corruption said: “International Anti-Corruption Day provides the UK Government with the perfect opportunity to commit to tackling the obstacles identified if Britain is to play its part in addressing international corruption. We need a coherent, properly-resourced approach to dealing with this issue, which causes suffering to millions of people in the developing world, and threatens to undermine the important investment the UK makes in international development.”

We should just add that every day is an anticorruption day at the BriberyLibrary!

Transparency International's recommendations to the Government to assist in the prosecution of transnational financial crime

Posted on December 02, 2011 by Adam Greaves

This week saw the publication of the British Government's International Development Committee's report, on which we have already blogged. The committee focused much of its report on what it regarded as the deplorable delay in BAE Systems paying over to the people of Tanzania the agreed sum of reparation representing proceeds of sale of the air traffic control system it sold (prosecutors say illegally) to the Government of Tanzania.

A number of individuals and organisations were invited to submit written evidence to the committee, including Transparency International. It made some interesting and we believe very thoughtful suggestions to the committee. We quote part of the evidence which TI submitted on this subject:

 

II. Resources for Law Enforcement and its Coordination

23. The relevant questions raised in the IDC’s notice are as follows:

Whether the UK prosecuting authorities have the resources and powers they need to prosecute transnational financial crimes, particularly when there are also criminal proceedings in another jurisdiction in respect of the same issue.

How the Government co-ordinates its policy against transnational financial crime.

Resources

24. The investigation and prosecution of transnational financial crimes, especially when they involve multiple jurisdictions, can be complex, time-consuming and therefore relatively more resource-intensive than law enforcement in other areas. During the past few years, the SFO has been involved in multi-jurisdiction cases, notably those involving BAE and Innospec. Provided the extra-territorial reach of the Bribery Act has not been weakened by certain parts of the Government’s final Guidance to companies under Section 9, it is possible that UK law enforcement will become involved in a larger number of multi-jurisdiction cases.

25. The issues of resources and the institutional arrangements for law enforcement against financial crimes are of increasing concern to TI-UK. The budget of the SFO, which leads the UK’s enforcement efforts, has already been reduced substantially. It is reported that the SFO is to be disbanded with its investigative function merged with a new National Crime Agency (NCA) (expected to be set up in 2013) and its prosecutorial function subsumed into the Crown Prosecution Service. Since the NCA (into which the Serious Organised Crime Agency will be subsumed) is expected to have a mandate to focus chiefly on antiterrorism and organized crime, there is a danger that the prosecution of bribery will be given a much lower priority. The separation of the investigatory and prosecutorial functions may also have an adverse impact on law enforcement against bribery. The Home Office has stated that, “No decisions have been taken” on institutional restructuring. Unfortunately, uncertainty about the future has led to the departure from the SFO of several senior prosecutors in recent months.

26. TI-UK recommends that adequate financial and human resources should be allocated for the effective prosecution of transnational financial crimes. Any changes to the institutional arrangements for the investigation and prosecution of foreign bribery should not result in fewer resources for enforcement, a downgrading of the priority given to combating foreign bribery and a fragmentation of responsibility for investigations and prosecutions among different agencies.

Coordination

27. Several government departments and agencies are currently involved in combating transnational financial crime and there is clearly scope for improved coordination. It is unclear how the changes the Government proposes to make to law enforcement will affect coordination. The lack of transparency in this area could be remedied through publication by the Government of its proposals and a proper public consultation. Furthermore, the publication of an annual Action Plan for combating international corruption, including transnational financial crime, and periodic reviews of its implementation would make transparent the UK’s priorities, the resources devoted to them, and the effectiveness of activities to implement the Plan. A number of benefits can be expected to flow from mechanisms to improve co-ordination, oversight and reporting, including more efficient use of scarce resources by avoiding duplication of effort and consistency in policy across departments.

28. TI-UK makes the following recommendations to increase transparency and improve co-ordination, oversight and reporting:

A public consultation on the Government’s proposals for re-organising the machinery for law enforcement against financial crime;

Annual progress reports by the Secretary of State for Justice, who is the Government’s Anti-Corruption Champion, on the implementation of the Action Plan;

Creation of a new House of Commons committee to provide oversight of the implementation of the Action Plan - this committee could be made up of members of the following committees (recognising the cross-cutting nature of efforts to tackle corruption and transnational financial crimes): Business, Innovation and Skills; Defence; Foreign Affairs; International Development; Justice; and Treasury; and

Establishment of a cross-Whitehall group of officials to coordinate cross-Departmental work to deliver the Action Plan.

In short, TI is recommending better communication between all those in government who are involved in the prevention of international financial crime and better reporting so that the public and others can identify what the Government is actually doing and achieving in this regard. This will also employ scarce resources more economically. We at the BriberyLibrary wholly endorse TI's recommendations which must surely be unarguable.

One example of where the left hand of government doesn't know what the right hand is doing (at least by appearance anyway) is that the SFO is against the introduction of rewards for whistleblowers, whereas the Office of fair Trading, which of course regulates and prosecutes inter alia UK competition rules, reportedly does pay rewards of up to £100,000. We have blogged on this subject before. It makes no sense to us that one UK prosecutor has adopted this reward system whereas another takes the contrary view. Joined up thinking from Government should not be difficult to achieve.  How can we expect enforcement cooperation at an international level if there is an inadequate level of communication at national level?

The Snakes within the corrupt offices of Indian Government

Posted on December 01, 2011 by Patrick Gilfillan

It was reported in the Guardian newspaper, yesterday, that two farmers, fed up with facing repeated demands to pay bribes, emptied three bags filled with snakes in a busy tax office in Basti, northern India.

The farmers, Hukkul Khan and Ramkul Ram, had been asking for tax records for their land in nearby Narharpur village, but tax officials allegedly withheld the files for weeks while demanding bribes.  Although the snakes caused panic amongst the tax clerks and local villagers, no one was bitten or injured during the incident.

The almost daily requirement to pay small bribes to minor officials, policemen and even medical staff, has lead to widespread resentment in India.  In the last year, a series of anti-corruption campaigns have raised public awareness of the issue and mobilised opposition to the practice of paying such bribes.  In August, many thousands demonstrated in support of the creation of a new ombudsman with the power to investigate politicians and senior bureaucrats.

According to the Guardian, some Indian states have also been posting online videos to air the stories of victims of bribery, in which they name corrupt officials.  The development minister of northeastern state Bihar, Nitish Mishra, said:

“We feel the fear of their names going public in social networking sites, resulting in social embarrassment, will obviously force the ‘corrupt’ officials not to seek bribes from the common villages.”

However, local people in Bihar claim that the campaign will have little impact on corruption, as only a small section of the population have access to internet facilities.

Transparency International Corruption Perceptions Index 2011 published today

Posted on December 01, 2011 by Adam Greaves

The Transparency International Corruption Perceptions Index 2011 has been published today.

This is TI's explanation of the index:

"The Corruption Perceptions Index ranks countries according to their perceived levels of public-sector corruption. The 2011 index draws on different assessments and business opinion surveys carried out by independent and reputable institutions. The surveys and assessmentsused to compile the index include questions relating to the bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and questions that probe the strength and effectiveness of public-sector anti-corruption efforts."

Further, from the report:

"The 2011 Corruption Perceptions Index shows that public frustration is well founded. No region or country in the world is immune to the damages of public-sector corruption, the vast majority of the 183 countries and territories assessed score below five on a scale of 0 (highly corrupt) to 10 (very clean).

New Zealand, Denmark and Finland top the list, while North Korea and Somalia are at the bottom.  According to Huguette Labelle, Chair of Transparency International:

"This year we have seen corruption on protestors’ banners be they rich or poor. Whether in a Europe hit by debt crisis or an Arab world starting a new political era, leaders must heed the demands for better government.

Public-sector governance that puts the interests of its citizens first is a responsibility that is not restricted to any border. Governments must act accordingly. For their part, citizens need to continue demanding better performance from their leaders. If we work together, the situation shown by this year’s Corruption Perceptions Index can improve. These are our countries and our future."

The UK is 16th from the top, a position which needs much improvement but still higher, by comparison, than the US at 24, France at 25, Spain at 31 and Italy a depressing joint 69 with Ghana and Macedonia.

Here is TI's press release which accompanies the new index.