How the courts are punishing corporate offenders for fraud, bribery and corruption offences
We have seen a spike in legal activity relating to bribery and corruption offences in recent months, with a bank, printing business and a large international property company all being subjected to fines and other penalties thanks to allegations of this kind.
One long-standing problem with assessing such cases has been in identifying the role played by a company in any act of wrongdoing versus the actions of an individual or agent acting on the company’s behalf. The introduction of the Bribery Act 2010, which makes it a criminal offence for a company to fail to prevent acts of bribery carried out on its behalf, has enabled prosecutors to tackle this issue much more effectively.
Unless a company can demonstrate that it has in place the necessary procedures to prevent criminal activity, or to put a stop to it when detected, it can find itself exposed to intrusive investigation and subsequent court proceedings.
Companies and individuals found guilty of bribery or corruption can find themselves with hefty fines if found guilty of illicit activity. In some cases the harm can be determined quite easily, such as the value of a contract won or retained through bribery. Fines will be calculated on the basis of these figures.
But in other cases the ‘profit’ can be harder to establish, and courts may end up looking at the company’s turnover in the relevant area of its business, and imposing a fine based on a percentage of this. This creates an unwelcome degree of uncertainty.
Courts have a significant level of discretion in assessing where on the range of available penalties any fine should fall. The judges in these recent cases recognised the need to serve the public interest in their sentences, but also to refrain from imposing such a high fine that the company would be pushed out of business.
There is also a responsibility on the courts to ensure that sufficient resources remain available to the company for it to implement an effective compliance policy (itself a matter of public interest), and to protect itself from similar situations occurring in the future.
In two of the recent cases the company was penalised for failing to adequately supervise and monitor the activities of its subsidiaries or sister companies. These cases are a valuable lesson that it is absolutely key to ensure that adequate compliance procedures are in place. Turning a blind eye to obvious risks, or failing to detect that wrongdoing is occurring, may, as we have seen, simply no longer be excused in court.