The U.K. Serious Fraud Office last month sentenced and ordered the Sweett Group to pay £2.25 million to resolve an SFO investigation into the company’s activities in the United Arab Emirates. The conviction and punishment represents the first under Section 7 of the Bribery Act.
Section 7 provides that a company will be guilty of an offense if an “associated person” bribes another person intending either to obtain or retain business, or gain a business advantage, for the company. The Bribery Act defines an associated person as an individual who performs services for or on behalf of the company.
“This conviction and punishment, the SFO’s first under Section 7 of the Bribery Act, sends a strong message that U.K. companies must take full responsibility for the actions of their employees and in their commercial activities act in accordance with the law,” SFO Director David Green said in a statement.
The British property management, construction and surveying company pleaded guilty in December 2015 to a charge of failing to prevent an act of bribery intended to secure and retain a contract with Al Ain Ahlia Insurance Company (AAAI) in violation of Section 7(1)(b) of the Bribery Act.
The SFO’s investigation into Sweett Group, which commenced in July 2014, uncovered that its subsidiary company, Cyril Sweett International Limited, made corrupt payments to Khaled Al Badie, the vice chairman of the board and chairman of the Real Estate and Investment Committee of AAA, to secure the award of a contract with AAAI for the building of the Rotana Hotel in Abu Dhabi. The conduct occurred between 2012 and 2015.
Companies have only one potential defense to a Section 7 prosecution, and that is by proving that the company had in place “adequate procedures” designed to prevent associated persons from undertaking the unlawful conduct. “Sweett had no choice but to plead guilty because it was unable to avail itself of this defense and demonstrate it had implemented adequate procedures within its business. This is reflected in one of the judge’s sentencing remarks in which he described the offense as a ‘system failure,’” a client alert from law firm Eversheds stated.
With the £2.25 million amount, the Sweett Group will pay a £1.4m fine and £851,152 in confiscation. Additionally, £95,031.97 in costs were awarded to the SFO. The judge ordered the confiscation order to be paid within three months. Half of the fine is to be paid by Feb. 19, 2017 and the other half by Feb. 19, 2018.
“The Sweett case provides a clear example of the Bribery Act’s extra-territorial reach in action,” Eversheds said. “U.K.-connected companies must remember that their activities anywhere in the world are subject to the provisions of the Bribery Act and, potentially, the investigatory and enforcement powers of the SFO.”
Sweett’s oversight of its operations in the Middle East was “clearly inadequate,” reflected by its failure to detect and prevent the payment of bribes at the time, Eversheds added. “Companies should conduct rigorous and ongoing due diligence on all their associated persons, regardless of the country in which they operate,” the client alert stated.
The Sweett case further highlights that the SFO is serious about enforcing the Bribery Act. “This includes provisions that impose corporate liability for the actions of employees and other associated persons,” Eversheds wrote.
Compliance officers can avoid similar actions by making sure adequate procedures are in place and are able to convincingly demonstrate what those procedures are, Eversheds advises. “All procedures and policies must be practical, appropriate to the business and actively promoted to all staff members. Corporate culture and ‘tone from the top’ are vitally important in this regard.”
In Sweett’s case, the SFO did not offer a deferred prosecution agreement, potentially because the Sweett Group did not fully cooperate with the SFO’s inquiries. Receiving a DPA means convincing the SFO that you have given your full and transparent cooperation throughout the entire investigation.