The Bribery Act 2010 – is the SFO turning from prosecutor to regulator?

The emerging views on where the Bribery Act is leading us were discussed this week at a seminar held by 5 St Andrew’s Hill. James Vine took attendees through the main sections of the Act and considerations such as facilitation payments and referral fees.  Then Dominic Connolly considered potential penalties, ancillary orders, confiscation and civil recovery. Corporate hospitality has to date been the big concern – it sends companies flocking to compliance courses as they’re whipped up into a frenzy by the media.  It is not, however, that relevant to most of the Act.  In fact, James Vine commented that the Act ‘might have more teeth than some journalists and lawyers have suggested…’

Richard Alderman retires in April 2012 – we can confidently expect that the first SFO prosecution under the Bribery Act will not come under his reign. And yet, given that it’s early days, the seminar largely centred on what Alderman has said thus far, and his aspirations for the SFO in relation to the Bribery Act.

In the week that Munir Patel pleaded guilty under s2 of BA 2010 – the first conviction under the Bribery Act 2010 – we discussed whether this prosecution sends out the wrong message in relation to the stances of both the CPS and the SFO in their respective prosecuting of corruption offences. James Vine’s response to this was that there is nothing wrong with the CPS prosecuting smaller cases – be it fraud or bribery. The SFO is then reserved for the more complex, large-scale work. And successful prosecutions play their part in topping up the pot of cash too.  The investigating authority and the prosecuting authority each get 17.5% of POCA confiscation sums. Where the SFO plays both roles, that’s a healthy 35% of the confiscated sum.

Discussions inevitably led, however, to the direction in which policy will go, particularly given that the ever-quoted Alderman will no longer be directing operations when the first SFO bribery prosecutions reach court.

Attendees debated whether the SFO and the government have accepted that financial crime is just ‘too difficult’ – especially when there is an international element to it. James Fletcher asked whether Vine thought that the SFO would consider increased numbers of civil penalties in the context of the current state of the economy and the squeeze in public funding.  Vine thought that whilst funding was a factor, issues pre-dated this – the Bribery Act will be operating against a background littered with huge, failed prosecutions from the 1980s and 1990s. It is a gamble for the SFO: risk losing a protracted, complex, hugely expensive trial, where no confiscation will then be available, or take a new approach and encourage self-reporting. This results in much less damage to the public purse and, further, there’s the benefit of the colossal fines which can be imposed through civil recovery. One of the conditions under self-reporting is also that the company itself funds an investigation into suspected corrupt practice within it.

Therefore, will the SFO move to more of an administrative approach and evolve into more of a regulator, rather than simply operating as a prosecutor of criminals? The seminar speakers and attendees alike were unsure where this left us on public policy.

Alderman clearly approves of civil recovery and whilst acknowledging the financial benefits, he points out that it ‘forces the company to reform its practices for the future.’  However, the inevitable question is ‘can companies buy their way out of criminal proceedings?’ Whilst we do not yet have deferred prosecution agreements in place, the Solicitor General has said that their introduction would provide ‘ a more effective approach to dealing with corporate crime in some cases.’ DPAs are an established part of the US response to corporate crime, and the DoJ has the potential to suspend or defer any prosecution in return for a payment of a substantial financial penalty, payment of compensation to victims and the imposition of a regime of corporate monitoring (at the company’s expense) for a period of two or three years.

The Attorney General issued guidance in November 2009 on the use of non conviction-based powers and emphasised that the underlying consideration is to ‘retain public confidence in the criminal justice system as a whole’. The Judgment of Thomas L.J. in R v Innospec followed these sentiments and stated that it will ‘rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order.’

So, the overwhelming conclusion on policy developments regarding the Bribery Act, from the St Andrew’s Hill seminar? Watch this space….

Corker Binning is a law firm specialising in fraud, corruption and bribery and general criminal work of all types. For more information, call us on 0207 353 6000.