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Failure to prevent bribery: guilty verdict in first contested case

 

27 March 2018

The first contested case for failure to prevent bribery under s7 Bribery Act 2010 (the Act) has resulted in a conviction at trial. Skansen Interiors Ltd (Skansen) reported bribery by two employees to the police and was itself charged with the s7 offence.  Skansen argued at trial that it had adequate procedures in place to prevent bribery, but a jury found this not to be the case.  There are lessons to be learned from this case for all businesses: R v Skansen Interiors Ltd, Southwark Crown Court.

Skansen was, until it ceased trading in 2014, a small refurbishment company operating mainly in London.  In 2013, it won two tenders for office refurbishment from a company called DTZ, worth GBP 6 million in total.  In January 2014, Skansen appointed a new CEO.  Skansen’s Managing Director, Stephen Banks, informed the new CEO that following the award of the DTZ contracts to Skansen, GBP 10,000 had been paid to Graham Deakin, a project manager at DTZ.  Mr Banks also said that a further GBP 29,000 was due to Mr Deakin on completion of the contracts.

The CEO was concerned that these payments were designed to give Skansen an improper advantage over its rivals in the DTZ tender.  He therefore: (i) initiated an internal investigation; and (ii) established an anti-bribery and corruption policy, having identified that none appeared to be in place.  When Mr Banks attempted to make the GBP 29,000 payment to Mr Deakin, it was blocked, and at the conclusion of the internal investigation, both Mr Banks and Skansen’s Commercial Director were dismissed.  

Self-reporting 

Skansen then submitted a suspicious activity report to the National Crime Agency and reported the matter to the police. The company gave extensive assistance to the police during their investigation, including handing over legally privileged material.   

At the conclusion of the investigation, Mr Banks and Mr Deakin were charged with and pleaded guilty to offences under s1 and 2 of the Act.  Skansen was also charged under s7.

The “failure to prevent” offence

Section 7(1) of the Act provides that a company is guilty of an offence of failing to prevent bribery if a person associated with it bribes another person, intending to obtain or retain business or an advantage for the company.  It is a defence under s7(2) of the Act, however, if the company had in place adequate procedures designed to prevent people associated with it from undertaking such conduct.

The “adequate procedures” defence

Skansen declined to plead guilty to the s7 offence on the grounds that it had adequate procedures in place to prevent bribery.  Although its controls were limited, it argued that they were proportionate for a small company operating only in the United Kingdom.  There were also clauses in the DTZ contracts prohibiting bribery and providing a termination right in the event that bribery occurred.

The jury did not accept Skansen’s defence and returned a guilty verdict.  Given that the company had no assets by this time, the only penalty available was an immediate discharge.

COMMENT

The greatest lessons from this case are naturally for smaller companies, especially those reliant on “company values” to establish proper behaviour rather than having in place official anti-bribery and corruption policies and dedicated compliance departments.  However, there are lessons too for larger companies, in particular that self-reporting and provision of assistance to investigating authorities may not – if the offence is serious – mean avoiding prosecution.  Skansen had hoped to negotiate a deferred prosecution agreement (DPA), but the fact that it had no assets meant that this was not considered an option by the Crown Prosecution Service (CPS) and charges were brought.

A further point of interest is the decision of the CPS to pursue Skansen for the s7 “failure to prevent” offence rather than the direct bribery offence under s1 of the Act (which carries no defence).  On the basis of Mr Banks’ guilty plea and his senior role at the company, it would have potentially been open to the CPS to charge Skansen on the basis that the ‘directing mind and will’ of the company had committed the offence.  One possible conclusion is that the CPS felt it better to make an example of the company on the basis of its lack of procedures than to pursue it for the s1 offence, which is more fact-dependant and therefore carries fewer lessons for others. 

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication.  If you wish to receive this publication, please contact Amy Edwards, amy.edwards@allenovery.com. ​

 

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