Bribery Library Blog - Commentary on the UK Bribery Act and Its Impact on International Business

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.

As reported in the Press Gazette, the Justice Secretary, Ken Clarke, has said he is “not persuaded” that there needs to be a public interest defence to protect journalists who fall foul of the U.K. Bribery Act by paying for stories.

Clarke, who was speaking at the Society of Editors Conference on Monday, was asked by Richard Caseby, the managing editor of the Sun newspaper, to consider the introduction of a public interest defence for journalists under the Bribery Act.

It was the Sun newspaper that exposed Munir Yakub Patel, a court clerk, who accepted £500 from one of its reporters for fixing a motoring offence.  Patel subsequently became the first person to be convicted of an offence under the Bribery Act.  Caseby complained that, as there was no public interest defence, the Sun reporter conducting the sting was himself potentially at risk of prosecution – and, given that he had personally authorised it, so was he as managing editor of the newspaper.

However, Clarke said that he was not minded to consider a change to the law: 

"We didn't invent that law, all we did was bring it up to date. There has never been a public interest defence for bribery. Your journalist could have been arrested for bribery any time in the last 100 years."

Instead, Clarke explained that the public interest considerations would be taken into account when the Director of Public Prosecutions (“DPP”) considers whether to give the go ahead to bring a case to court.  He went on to state that he could not imagine the DPP sanctioning such a prosecution, as a jury would probably acquit in such circumstances and, if not, a judge would opt for a conditional discharge.

Image © Crown Copyright 2011

Following the news that a former Business Unit Director of Innospec Ltd, David Turner, appeared before Westminster Magistrates' Court on Tuesday, charged with conspiring to make corrupt payments to public officials in Indonesia and Iraq, the Serious Fraud Office (“SFO”) announced yesterday that two further Innospec executives have now been charged with associated corruption offences.

Along with Turner, it is alleged that Dennis Kerrison and Paul Jennings, both former CEO’s of Innospec, gave, or agreed to give, corrupt payments to public officials and other agents of the Governments of Indonesia and/or Iraq as inducements to secure, or as rewards for having secured, contracts from those Governments for the supply of products, including Tetraethyl Lead, by Innospec.  The alleged offences took place variously between 2002 and 2008.

Turner and Jennings are additionally accused of conspiracy to defraud Ethyl Corporation by making payments to public officials and other agents of the Government of Iraq as inducements to ensure that tests on MMT, a competitor product manufactured by Ethyl Corporation, conducted by or on behalf of the Government of Iraq concluded with an ‘unfavourable’ assessment of that product.

Last year, Colorado based Innospec agreed to pay the U.S. authorities $27.5 million and the U.K. authorities $12.7 million, and pleaded guilty to 12 U.S. criminal counts (including violations of the Foreign Corrupt Practices Act (“FCPA”)), having admitted to bribing Iraqi oil officials, defrauding the United Nations through its Oil for Food Program and selling chemicals to Cuban power plants in violation of a U.S. embargo.  Earlier this year, Jennings also settled charges brought by the U.S. Securities and Exchange Commission ("SEC"), without admitting or denying the allegations that he had authorised the speciality chemicals company to pay bribes to Iraqi and Indonesian officials.

The cases have been sent to the Crown Court at Southwark, where Turner will appear on 2 November 2011 and both Kerrison and Jennings will appear on 6 January 2012.   

Following on from my post about the first person to be charged under the U.K. Bribery Act, Munir Yakub Patel recently appeared before Southwark Crown Court to answer the charge that, in exchange for £500, he used his job as an administration clerk to avoid putting details of a traffic summons offence on a court database.

Details of the incident were first uncovered in August 2011 and, having come into force on 1 July 2011, a prosecution was commenced under section 2 of the U.K. Bribery Act; which prohibits an individual from requesting and accepting a bribe in order to improperly perform their functions.

At the hearing, Patel admitted bribery and also misconduct in a public office, dating from 23 February 2009 to August 2011, in relation to which he advised people how to avoid being summoned for similar offences. 

Patel, who is due to be sentenced on 11 November 2011, could face up to 10 years in prison.

At this week's Cambridge Symposium on Economic Crime, the head of the U.K.’s Serious Fraud Office (“SFO”), Richard Alderman, warned that companies believed to be paying bribes to obtain work overseas will be forced to hand over their tax records to the SFO. 

As reported in various national newspapers, including the Telegraph, Mr. Alderman explained that the SFO suspected that these companies may still be claiming tax deductions on such payments, which was allowed under English law until 2002, or may have, in some other way, factored them into their tax calculations:

“Companies ought to have the information that they need in order to ensure that they are not claiming deductions in respect of bribes  We have, therefore, started to require companies to disclose to us relevant parts of their tax calculations.  We want to see how these have been drawn up and we want to see what evidence there is of the identification of bribes.”

Whether or not it produces any ‘smoking guns’, in the wake of a 25% cut to its annual budget, this move indicates that the SFO is seeking to be more creative when investigating cases of fraud and corruption.  This was confirmed by Mr. Alderman, who stated that this was only one of several “fresh approaches” being adopted by the SFO. 

Mr. Alderman also went on to address the widely held view that, having only come into force on 1 July 2011, it will be several years before any cases are actually brought by the SFO under the Bribery Act:

“There are some who have predicted that after all the controversy surrounding the Act, nothing is going to happen for many years.  That is not my prediction.  [The prosecution of bribery] is a very high priority for us.  Any companies that may have comforted themselves with the thought that nothing is going to happen will have a rude awakening when they start to see what the SFO is able to do in the future.”

This suggests that the SFO has had its eye on a number of prospective targets, and has been preparing its investigations, for quite some time...

Image © Crown Copyright 2011