Partner Richard Cannon discusses in Lawyer Monthly the recent decision by the SFO to drop their investigation into individuals for their alleged involvement in bribery at Amec Foster Wheeler Plc.
Richard’s article was published in Lawyer Monthly, 26 November 2021, and can be found here.
The SFO recently dropped its investigation into individuals being investigated for allegedly being involved in bribery at Amec Foster Wheeler Plc. Amec’s new parent company had agreed a $177 million global agreement in June 2021. The SFO took $141 million of this, while US prosecutors took $28 million. The case was resolved by way of Deferred Prosecution Agreement, which is a court approved settlement between the corporate and (in this case) the SFO whereby the company makes admissions to criminal conduct but agrees to pay a financial penalty and undergo supervision in return for not being prosecuted.
DPAs with corporates still leave the door ajar for those individuals involved in wrongdoing to be criminally charged and convicted. However, this has not often occurred in practice. For The SFO’s record £3 billion Airbus deferred prosecution agreement (DPA) was shared between the UK, US and French authorities. The DPA meant that Airbus would not face criminal charges. No individuals have been charged. The SFO’s 2017 £497 million DPA with Rolls Royce saw no individuals prosecuted. That is despite the judge noting “egregious criminality over decades”, along with “truly vast corrupt payments”.
At the same time, the SFO has actively lobbied for change to criminal test for the successful prosecution of corporates – “the identification principle” which has been labelled an obstacle to bringing home prosecutions against corporate offenders. Speaking after its 2020 Airbus settlement, SFO Director Lisa Osofsky told BBC Radio Four’s Today programme that, “In fraud cases I have got to have the ‘controlling mind’ of a company before I can get a corporate in the dock … That is a standard from the 1800s when ‘mom and pop’ ran companies – that is not at all reflective of today’s world.”
For a company to be convicted of a crime, the “controlling mind” of the company must usually be found criminally complicit. This means prosecutors must ordinarily show that controlling officers of the company, such as senior board members, were criminally involved.
The Law Commission is now reviewing the “identification principle” in the wake of its recent consultation into the matter. The Law Commission has said that the current law makes it “hard to prosecute a company for serious crimes, even where the commission of criminal offences by employees is incentivised or tolerated by the company.” However, it acknowledges concerns “that alternative models for assessing the criminal liability of corporations may place a disproportionate and costly compliance burden on law abiding businesses.”
Many of the DPAs which the SFO entered into in recent years involved failure to prevent bribery, including those agreed with Standard Bank, Sarclad, Rolls-Royce and Airbus. Interestingly, companies can be prosecuted for a “failure to prevent” bribery without proving that the “controlling mind” of the company knew of those criminal actions. Also, section 7 of the Bribery Act, 2010 enables such prosecutions to be brought in respect of bribery done anywhere in the world, by an agent, employee or subsidiary. The failure to prevent model was extended to Tax Evasion and as a result of the review be further extended to financial crime more generally.
The Law Commission’s proposals for corporate criminal liability could lead to even greater pressure on corporates to enter into DPA’s as a route out of a potential prosecution as the bar for successful prosecution of the corporate is lowered and the threat of a successful criminal prosecution appears more potent.
Indeed, The Law Commission’s discussion paper cited concerns that the risks “of a criminal conviction were such that corporations were too strongly incentivised to enter into DPAs … despite having a potentially meritorious defence.”
Reputation and the risks of commercial ruin after a conviction are one of the key selling points of a DPA. The recent case of Petrofac was an interesting and rare non DPA case. After a plea of guilty the company received total financial penalties of £77m comprising a confiscation order of £22.8m, a fine of £47.2m and costs of £7m. Immediately after the sentence was announced the share price went up by 17%. The markets reacted to the financial penalties in purely financial terms, the penalty was considered to be low and hence it was determined by the market that the company was more valuable as a result. The conviction of the company did not deter investors and the company was not viewed as beyond the pale, at least not by the market.
The SFO has successfully obtained 12 DPA’s and recovered sums totalling in excess of £1.5bn for the public purse, yet there have been a string of cases where individuals have been acquitted in jury trials, or as in the recent case they wrapped up their investigation without bringing charges.
The pattern between the SFO securing a DPA against a corporate and then failing to convict or even prosecute individuals is now set.
These cases are not just about numbers. The toll on individuals who have had to live under suspicion and investigation for many years is high. They face the loss of their reputation, financial stability and ultimately their liberty. Some have had to endure lengthy trials before being acquitted.
In announcing the recent decision regarding the individuals with Amec Foster Wheeler Plc, the SFO complained to Bloomberg that “There is a high bar for the SFO to charge individuals with a criminal offense.” This is an interesting position, the bar is the same one faced by every other Prosecuting agency in the UK, the burden and standard of proof are the same in SFO criminal prosecutions as all others.
Is there an implication here that the bar for prosecuting individuals should be lower?
Will the SFO next be asking the government to make it easier to prosecute individuals as well as corporates?
The standard of proof in criminal cases is set high to prevent the wrongful conviction of the innocent. Such fundamental principles should not be eroded for the convenience of prosecutors – especially when the same rules apply to everybody else.
15 Feb 2024
Partner Richard Cannon comments on the SFO and whistleblowers in The Times, City A.M. and The Law Society Gazette
09 Feb 2024