Woefully inadequate anti-bribery measures lead to deferred prosecution agreement for aircraft refurbishment company

ASL engaged an agent to assist with winning work in 2011.ASL agreed to pay the agent 5-10% commission of the value of any contracts he helped ASL to win. The agent also doubled as a procurement consultant for a commercial airline, meaning that he was privy to commercially sensitive information that he passed to ASL to assist in refining its bids. The information included details of competitors’ bids, internal design specifications and updates on the process of evaluating bids. The agent reviewed ASL’s bid documents by revising drafts before submission. The agent worked closely with senior individuals in ASL’s sales team to help win over GBP7 million worth of contracts with the airline.

ASL reported its concerns to the SFO in July 2015, after an internal investigation by an external law firm into another matter cast light on the activities of the agent. After five years of investigation the SFO has entered into a deferred prosecution agreement with ASL, settling offences under s7 Bribery Act 2010, which applies where a company fails to prevent bribery by an associated person. Under the DPA, ASL has to pay disgorgement of profits of c. GBP 991,000 and a penalty of c. GBP 1.24m. It also has to pay the SFO’s costs of GBP 750,000.

ASL’s anti-bribery and corruption procedures ‘negligible’

The s7 offence is one of strict liability. The only defence is where a company has adequate policies and procedures in place to prevent bribery.

ASL’s ABAC measures were described in the DPA judgment as being “negligible” and “woefully inadequate”. They consisted of:

• Instructing an external law firm in 2010 to assess ASL’s ABAC policies and procedures, given the impending implementation of the Bribery Act 2010. This led to a report recommending measures to address non-compliance, and a draft anti-bribery policy document.
• A training session in June 2011 for senior managers and regional sales managers which referred to the draft policy.

The report had recommended amending ASL’s standard terms and conditions for contracts involving overseas suppliers/agents and arranging regular compliance training for staff. Other than this one training session, ASL did not take any further steps to act on these recommendations, such as implementing the draft policy document and circulating it more widely with staff during the relevant period.

It is obvious that for ABAC policies and procedures to have any real bite, it is not sufficient simply to take external advice on them. Recommendations (including regular training) need to be implemented, and then reviewed regularly. Here, circulating draft policy guidelines to a small circle of sales directors as part of one training session amounted to “wilful disregard of the commission of bribery offences”.

Culpability and culture

The culpability multiplier under the Sentencing Guidelines (used to calculate the financial penalty) was in the highest category owing to the sustained period of offending, and the culture of wilful disregard by senior management of the offences committed by staff. The multiplier was reduced due to mitigating features such as no previous convictions or regulatory enforcement action, prompt self-reporting, extensive cooperation, and the fact that the offences were committed under previous management.

ASL’s cooperation with the SFO

ASL’s financial penalty was reduced by 50% due to its “high degree” of cooperation with the SFO. Having initially self-reported its concerns, this cooperation included ASL:

• Facilitating the SFO’s interviews with ASL’s board, senior management and relevant employees and refraining from interviewing once the SFO had begun its investigation.
• Providing some information voluntarily.
• Waiving privilege on a limited basis over some – but not all – legally privileged material.

The voluntary provision of information, including some privileged material, is a familiar feature of all DPAs concluded with the SFO to date. Not all companies however that have been offered DPAs have self-reported in the truest sense. Some have had their hand forced, eg. by a third party threatening to report the company if it does not report itself, or have not self-reported at all. On past performance, it cannot be said that self-reporting is a condition to being offered a DPA, and this is confirmed in the SFO’s most recent operational handbook guidance on DPAs, published last month. The Handbook clarifies that a corporate’s failure to self-report is not a bar to entering DPA negotiations per se, although it explicitly states that a lack of self-reporting will be a factor when conducting the public interest test (ie whether to prosecute). It is also comforting to note that ASL’s waiver of privilege did not extend carte blanche to all privileged material, suggesting it is still possible to maintain a claim to privilege over some material without this impeding a company’s prospects of a DPA, let alone a discount.

Comment

Companies who took ABAC compliance advice over a decade ago when the Bribery Act 2010 was first introduced should regularly review their compliance programmes. They should consider whether they are up to date and take into account how business practices (and operating jurisdictions) have evolved. Taking advice and then leaving it on a shelf to gather dust (as ASL did) means that a company will not be able to avail itself of the adequate procedures defence under s7 Bribery Act 2010. How the SFO assesses compliance programmes was the focus of an additional chapter in its operational handbook, which it updated earlier this year: ‘Evaluating a corporate compliance programme’.