The U.K. Serious Fraud Office’s strategy for tackling financial crime has been thrown into doubt after a senior judge criticized the plea deal that the agency reached with a company guilty of paying bribes.
In his judgment on the case
, Lord Justice Thomas, the U.K.’s deputy head of criminal justice, said the SFO "had no power to enter into the arrangements made and no such arrangements should be made again.”
Thomas said he wanted to fine the company, Innospec
, “tens of millions” for its bribery in Indonesia rather than the “wholly inadequate” £8m ($12 million) fine he felt obliged to impose.
The ability to reach plea deals—hereby avoiding expensive trials—is a key part of the SFO’s strategy
for tackling serious financial crime. But such deals are new to British law.
The SFO has only brought one plea-bargained case to court
so far, which was seen as a successful landmark. But its second plea deal, involving defense company BAE Systems, has proved highly controversial
and is yet to be accepted by a court.
The SFO is also trying to improve cooperation between prosecutors in foreign jurisdictions—especially the United States—and the Innospec case shows this can be hard in practice.
Under the U.K.’s plea-bargaining guidance, prosecutor and accused are not supposed to agree on the sentence—that has to be decided by a judge. But this case was complicated by the fact that the U.S. Department of Justice was also negotiating a plea bargain over offenses that came under its jurisdiction.
The SFO, DoJ, Securities and Exchange Commission, and Innospec had reached a deal about how any fines would be carved up between the United States and the United Kingdom: When the SEC announced
a $40.2 million global settlement, the U.K. judge felt he could not impose the higher fine that he felt the offending company warranted.
The case questions another part of the SFO’s strategy. As a carrot to entice companies into plea-bargaining, it offers them the possibility of “managing the publicity” around the case.
But Thomas noted that Innospec wanted to issue an SFO-approved press release about the sentence and said, “this is not a practice that should be adopted.” He added: “It would be inconceivable for a prosecutor to approve a press statement made by a person convicted of burglary or rape; companies who are guilty of corruption should be treated no differently to others who commit serious crimes.”
Susan Hawley of campaigners Corruption Watch said. “The SFO’s plea-bargain approach over overseas corruption has been shown to be far too lenient, utterly untransparent, and potentially unconstitutional.”
SFO Director Richard Alderman said
: “I am deeply grateful to Lord Justice Thomas for the detailed guidance he has given on all the complex issues involved. This is a very important decision which will guide the SFO in our approach to these matters in future."