ROUND TABLE DISCUSSION
WHITE & CASE LLP
5 OLD BROAD STREET, LONDON EC2N 1DW
ON
WEDNESDAY, 30 JUNE 2010
SPEECH BY RICHARD ALDERMAN
DIRECTOR, SERIOUS FRAUD OFFICE
Thank you for the opportunity to come here this evening with my colleagues to talk to you about economic crime and what we have been doing in the SFO. I have to say that I find it a fascinating time. A strong lead is being set by Global Leaders as you will no doubt have seen from the G20 Toronto Summit Declaration. In the UK we have the Bribery Act, of course, and I shall have something to say about the Act in a moment. Also, we are starting to bring before the Courts a range of novel and difficult issues. The Courts will give us guidance and our approach will develop. Examples of the sorts of questions that are arising are these:
- What is the future of global settlements?
- What is the future of plea bargaining?
- Is the SFO still committed to the principles of self reporting set out in our guidance last year?
- What will be our approach under the Bribery Act?
- And indeed what is the future of the SFO?
Let me deal with each of these issues. What I have to say on each topic will necessarily be brief but perhaps we can develop some of the subjects in discussion.
Global Settlements
The question here is whether the SFO remains committed to taking part in global resolutions in cases where a corporate is subject to the jurisdiction of the authorities in a number of different countries. The answer to that emphatically is yes. We are very committed to this. Clearly we are feeling our way. Global resolutions in cases of concurrent jurisdiction are new and, until recently, our Judges have not had to consider the issues that arise in these cases. Innospec was our first global resolution and we obtained guidance on some of the issues from the Judge in that case. There will be more cases to come. Let me now just offer some observations about where we are on this.
These resolutions are in everybody's interests. The corporate wants this in order to be able to draw a line under the past and to move on. It is in the interests of the authorities in each jurisdiction as well to reach a satisfactory settlement and to move on to the next case. So far we have been exploring global resolutions primarily with the US but I have no doubt that the time will come when we shall be factoring other jurisdictions into these settlements.
Something that is very clear is that these resolutions are subject to the role of the court in each jurisdiction. Ultimately, it is for the court to reach a decision on the appropriate penalty. This is not, and never should be, an application for some form of consent order. The Judges can accept or reject what the parties submit because in criminal cases the Judge's discretion on sentencing is paramount. This is as true in the US as it is in the UK. The task of the parties is to devise a resolution, having regard to any guidelines or precedents in each jurisdiction that will give the Judges the flexibility needed to reach the decision that they consider appropriate. One of the very interesting features of the Innospec case was the way that the UK and US Judges discussed the case. Discussions between Judges on these cases is something that I have no doubt we shall see again as we move to a system of global resolutions.
But it is not just for the authorities to devise this resolution. I regard it as being a very significant part of the role of the professional advisers to be able to do this. Through professional advisers such as White & Case with offices in many different jurisdictions and great expertise, I would expect the firm to be able to come up with the right range of appropriate responses which can be the subject of discussions between the authorities in the different jurisdictions. Bringing about that type of settlement is a crucial part of the role of the modern professional adviser in these cases.
We also have to work out how we deal with these cases where it is vital that, as in the Innospec case, the hearings before the Judges are held on the same day. There were various reasons for that in the Innospec case and these reasons may not always be present, although I imagine that in many cases they will. The task for us all is how we get to the situation where Judges can properly exercise their discretion in that way on the same day.
An aspect also about which I personally feel strongly is how we ensure that the countries that suffered from the corruption actually benefit from any money recovered from the corporate. This is something we have been trying to develop.
I leave these points open because there is still much to be done and experience will show us how it is to be achieved.
Plea Discussions
Is the SFO still committed to plea discussions? Again, emphatically yes. The plea discussion framework has been a very important advance for the SFO and for those involved in cases of serious economic crime. We have had a number of cases before the Courts involving plea discussions and two of these have given rise to some publicity. Let me explain this although, for reasons of time, I will be unable to deal in detail with the background and why we dealt with these issues in that particular way.
Let me talk first of all about Innospec. First of all this case is very significant because of the praise that the Judge gave to the SFO for our vigorous approach in dealing with corruption. It is also notable for the Judge's comments that corruption of foreign Government Ministers and senior civil servants is at the top end of corporate offending and should be taken very seriously by English Courts. He considered that fines should be high and should be on the US model. And he also believed that asset forfeiture in these cases should be the value of the contract obtained through corruption.
Those were particularly important points for the SFO. The Judge also though commented on the way in which we had carried out the plea discussions. The Attorney General's guidance clearly states that there should be a joint submission to the Court on sentence. A joint submission naturally means a submission by the defence and prosecution. This submission should set out the views of the prosecution and the defence on aggravating and mitigating circumstances and should set out joint views on the appropriate range. What, of course, cannot be done is to express a view on the precise sentence. And, of course, the guidelines make it clear that it is ultimately for the Court to reach a decision on the appropriate penalty.
What Lord Justice Thomas decided was that the prosecution (ie the SFO) had in fact gone too far in the joint sentencing submission and that a sentence had been agreed with the defendant. Now I am not here to explain why we acted as we did in the particular circumstances of the case and what we meant by this. The Judge decided that we had gone too far and that, of course, was the Judge's role. Our role is to ensure that we reflect that view in what we do in the future.
Let me talk now about the next recent case involving Dougall and corruption in Greece. Once again, the Lord Chief Justice stressed that overseas corruption is a very serious offence. He obviously felt considerable unease about the maximum term of imprisonment permitted and thought it too low. His view was that sentences should be high. We explained the importance of whistleblowers in the joint sentencing submission and the importance of giving them an incentive to come and co-operate with us. Again, the court thought we had gone too far and said that this was advocacy and so was not acceptable from the prosecutor. Clearly, we accept the criticism and in future cases we shall have to see how we can draft the joint sentencing submission in order to avoid advocacy.
There are a lot of issues arising from these cases that will require development in the future. What will remain the same though is our commitment to using the plea negotiation framework as the basis for dealing with suitable cases.
Self Reporting
Self reporting is a very significant part of the SFO's strategy for dealing with corruption cases. It is in everyone's interests that corporates come and make a full disclosure of corruption issues to the appropriate authorities and offer full restitution and remediation. We have learned a lot from the US system on this although we have adapted it for UK purposes.
One of the features that we share with the US is that there are no unconditional guarantees here. In this connection I was very interested to hear about the speech that George Terwilliger of White & Case made recently in which he called for this. It is clearly an issue of much debate at present and there has also been comment by Lanny Breuer in the US on this particular issue.
Our position remains that there will be appropriate cases where we will want to reach a civil settlement by way of civil recovery. There may though be other cases and uncertainty has come into this area as a result of remarks by Lord Justice Thomas in the Innospec case in which he said that the public would expect corruption cases to be dealt with criminally and not civilly. Some have commented that this means the end of the SFO's policy of civil settlement in appropriate cases and that in future every instance of corruption will be the subject of a criminal prosecution before the Courts. I do not see it that way.
You will have seen from the cases of Mabey & Johnson as well as Innospec that there will undoubtedly be cases where we prosecute. We have to take a view though on which cases are suitable for a criminal investigation and prosecution and which are not. Although I do not have enough time to go into much detail on these issues, let me give you some insight into some of the issues that we would consider:
- First and foremost, of course, is the question whether our current (pre Bribery Act) law is likely to be satisfied. This means looking to see if the directing mind principle is satisfied. The position in the US is very different and this perhaps explains why the US is regarded as having a far better record in tackling serious economic crime by corporates than the UK.
- A further factor we have to look at in cases when there is concurrent jurisdiction with the authorities in another country is the impact that any proceedings taken in the other country may have on proceedings here. There is extensive English and European authority on double jeopardy which we have to take into account. This can mean that proceedings in another jurisdiction operate as a bar to proceedings here. This needs to be considered by us in these cases.
- Another issue that we would look at once the evidential test is satisfied is the potential impact of Article 45 of the EU Public Sector Procurement Directive 2004 which debars a corporate found guilty of corruption from being awarded public works in the EU. Sometimes this may be a factor in favour of a prosecution - sometimes it will be a factor against. It will all depend on the facts.
- We also need to look at policy guidance on prosecuting corporates. This is set out in the Guidance on Corporate Prosecutions that the Director of Public Prosecutions and I issued and the Guidance that the SFO issued in 2009. This sets out the sorts of factors to take into account in deciding whether or not a prosecution is appropriate.
I am told by some that there is some uncertainty amongst corporates and advisers on what the SFO's approach on self reporting is as a result of what Lord Justice Thomas said. My view is this. What is clear from the Guidance is that there is a decision to be made on the cases where there should be a prosecution and the cases where an alternative is appropriate. This is a difficult decision and will depend upon a range of factors which are set out in the Guidance.
We are very conscious of what Lord Justice Thomas said and we shall undoubtedly have to look at the Guidance to see if changes are needed because of what Lord Justice Thomas has said as well as because of the impact of the Bribery Act and new Government Guidance. Let me add as well that in practice we are still being approached by corporates who want to self report issues to us.
We shall also have to get a lot better as well at explaining ourselves if we decide not to prosecute and to use civil recovery. As I look back, for instance, at Balfour Beatty (which was not a corruption case) and AMEC, I see that we could have done better at explaining the approach that we took. Clearly, there is very great interest in transparency here and I would expect that future cases where we agree civil recovery will be subject to the publication of far more material including, in particular, why we considered that a civil rather than criminal outcome was appropriate. Corporates that discuss civil recovery with us need to be ready for greater transparency in what is published.
The Bribery Act
I am delighted that we now have a Bribery Act. I look forward to the Guidance to be published and then the coming into force of the Act.
There are two aspects of the Bribery Act that are particularly relevant to the SFO. The first is the new corporate offence of failing to prevent bribery together with the defence of adequate procedures. This will make a very significant difference to the range of offences that the SFO can charge.
The second major change is one which for a long time seemed to excite surprisingly little interest but which is now, as I understand it, becoming much better known. This is the extension of jurisdiction to foreign corporates who have some business in this jurisdiction. Assume a foreign corporate with a number of outlets here. Assume quite separately that the foreign corporate is involved in corruption in a third country. We shall have jurisdiction over that corruption. This is novel and is a very significant addition to the powers of the SFO.
Those are the big changes that will have the most impact on our work.
Let me explain to you next how we have been approaching corruption issues and what we are likely to do in the future. We have a twofold approach. First of all, we are here to provide help and support to those ethical corporates that are doing their best to establish an anti-corruption culture. We recognise that they are in different places on that journey. We want to help by engaging with them.
We find a lot of interest in this approach. Many corporates talk to us about the issues both in their own organisations and as well as the challenges in doing business in other parts of the world. What we find is that the corporate learns a lot from us and from our perception of these issues, and we in turn learn a lot from our engagement. I certainly get a lot of positive feedback from the corporates about these engagements. Sometimes they come about through the professional advisers, sometimes they are direct approaches. We welcome them.
The other aspect of our approach is a vigorous approach to those corporates who not only do not have an anti-corruption culture but who actually believe that using corruption gives them a business advantage over ethical corporates. It is vital that we are vigorous and effective in dealing with those corporates. It is our answer to ethical corporates who ask what we are doing to help them when they believe that they are being undercut by unethical corporates in other parts of the globe. The extension of the jurisdiction in due course to foreign corporates and their activities abroad in certain circumstances will make this particularly important to us.
I have to say as well that we are becoming very effective in our role, both in terms of corruption and generally. We are over half way through a major transformation programme in the SFO. We have already lifted the conviction rate from the historic average of 61% a year to 91% a year. We get cases to Court much more quickly than ever before and we have already halved the time it takes to bring charges in a case. Our aspiration is that in the majority of cases it will take one year to bring charges. We are already partly there. And also, as part of this transformation, when this phase is over at the end of four years, we shall have taken 45% of our cost base out of the business while at the same time increasing our outcomes in this way. The message that the SFO is a very credible and effective investigator and prosecutor is certainly known to professional advisers.
Economic Crime Agency
You may want to hear something about the Economic Crime Agency. The Coalition Government published its coalition programme shortly after it took office and committed itself to the establishment of an Economic Crime Agency. The commitment was as follows:
'We take white collar crime as seriously as other crime, so we will create a single agency to take on the work of tackling serious economic crime that is currently being done by, among others, the Serious Fraud Office, the Financial Services Authority and Office of Fair Trading'.
I am very pleased that the Government is looking at these issues. The amount of fraud in society is running at £30 billion a year. For corruption, although there is no breakdown for the amount of corruption involving UK companies, the World Bank calculates that 1 trillion dollars of bribes are paid each year. Clearly, it is absolutely right that the Government should be looking at these issues with a view to seeing how we can improve the UK's performance in tackling these very serious issues. We believe that we have a lot to contribute to this and will certainly do so.
Finally, I hope that this has given you some idea about what has been happening in the SFO and a range of the topical issues. As I said at the beginning, I regard it as a particularly fascinating time in dealing with serious economic crime. One thing I am sure about though is that the challenges will continue and that the issues will be as novel and as difficult as they have been over the last year or so. I am also very clear that the relationship that the SFO has with corporates and advisers is very important in working through these issues and in helping to develop the anti-corruption culture that we all want to see.
Thank you for inviting me and my colleagues. I look forward to your questions.
