SFO signals move to US-style tactics
WHEN the Serious Fraud Office (SFO) said last week that it intends to seek the Attorney General’s consent to prosecute BAE, this signalled a significant change in its modus operandi. It has never in the past publicised to this extent its intended actions in an ongoing investigation.
In 2008, at about the same time that the present director Richard Alderman took over, Jessica de Grazia, a former US prosecutor, produced a report on the SFO. Her findings were that, when compared with two US prosecutors – both of whom have fewer resources than the SFO and dealt with similar cases – the British body secured fewer convictions. She found one significant factor to be the heavy burden that UK prosecutors face in having to disclose vast amounts of documents, most of which are never used at trial.
The SFO clearly hopes to become more efficient and effective by adopting a more pragmatic “US” approach to its function. Rather than seeking to deal with all matters by trial and conviction, it is now seeking in some cases to bring matters to a conclusion by plea bargains, and to dispose of matters by using an alternative route of civil settlements. In July the SFO published guidance on its Voluntary Disclosure programme. On 25 September Mabey & Johnson, a company that voluntarily disclosed its wrongdoing to the SFO, pleaded guilty to offences of corruption overseas and was sentenced to pay fines, reparation and costs totalling approximately £6.5m.
Those companies which want to go down the voluntary disclosure and plea bargain route should expect to have to make complete disclosure of all relevant evidence (including material produced by their lawyers), take remedial action in relation to its compliance procedure, and have to pay for an external monitor to oversee its compliance programme, as well as pay when fines are imposed by the court.
COMPLETE DISCLOSURE
Any failure to make complete disclosure could result in the SFO re-opening the investigations if new evidence were to come to its attention. The agreement resolves the wrongdoing of the company as a legal person, but individuals involved can still be punished for their wrongdoing.
Those running a company faced with the decision as to whether or not to make a voluntary disclosure have some difficult decisions to make. The advantages to a company of using the voluntary disclosure programme include a relatively quick resolution of the matter, greatly reducing the disruption of an ongoing investigation to the business. It is to be expected, in order to encourage use of the programme, that the SFO will push for heavy sentences of any company convicted after a trial.
The benefits of the programme for the SFO include avoiding the costly process of disclosure, and that there is a greater prospect of convictions. These are very difficult to achieve at trial, partly because to secure the conviction of a company you have to identify a person with both the necessary mental intent and control of the company’s relevant actions. Where management of a company is vested in a board of directors it has rarely possible to secure conviction at trial of a company for a crime such as corruption.
The harsh reality is that those in the boardroom who have to decide whether to use the voluntary disclosure programme will have to perform some form of “risk/reward evaluation”. A difficult assessment to make, given the rarity of case law against which one can evaluate the “upside” of voluntary disclosure.
George Brown is a Partner in the Global Regulatory Enforcement team at Reed Smith