The Serious Fraud Office (“SFO“) had its first day in court in a Bribery Act prosecution on 24 September 2013, with three of four defendants connected with a £23m fraud at Sustainable AgroEnergy plc (“AgroEnergy“) facing charges of making and accepting a financial advantage contrary to sections 1(1) and 2(1) of the Bribery Act 2010.
All four defendants were charged with conspiracy to commit fraud by false representation and conspiracy to furnish false information, contrary to section 1 of the Criminal Law Act 1977, following an investigation by the SFO which centred on the selling and promotion of biofuel to UK investors between April 2011 and February 2012. All previous charges under the Bribery Act have been brought by the Crown Prosecution Service, despite the expectation when the Act came into force just over two years ago that the SFO would be the lead prosecutor for corruption offences. It is unclear at this stage which particular “Cases” under sections 1 and 2 of the Act the three men are alleged to have contravened.
The Bribery Act has faced some criticism since coming into force, and this has focused on the minimal number of charges being brought, the absence of corporate prosecutions and the confusion and uncertainty over its application. The House of Lords’ Select Committee on Small and Medium Sized Enterprises recommended earlier this year that the Act be reviewed.
While it is significant that the SFO has brought the charges under the Bribery Act, in this instance they are reportedly secondary to the principal charges of conspiracy to commit fraud by false representation and to furnish false information.
Nonetheless, our view is that these charges reinforce the message that the SFO has a new and more aggressive direction. It appears that the SFO will increasingly be willing to exercise its powers under the Bribery Act and related instruments for tackling corporate and white collar crime. However, these charges have been brought against individuals, so it remains to be seen what approach the SFO will take to companies which contravene the Act. Companies will be particularly interested to see whether a corporate prosecution sheds some light on liability for conduct of “associated persons” and the scope of the “adequate procedures” defence under section 7 of the Act. In the meantime, corporates should ensure they have taken steps to make sure that they have robust anti-bribery and corruption procedures in place and so mitigate the risk of prosecution, which can result in potentially unlimited fines (likely to be higher as a result of the forthcoming Sentencing Guideline in this area).
“It is said that conviction of the corporate adds nothing to the conviction of the individuals, where they are prosecuted. To that I would say that there will be cases where a company should be marked with a conviction for failing to prevent fraud by its employees. This is particularly so where the company has profited from the dishonest activity.
If the public interest requires more corporate prosecutions, then such a change is high on my wish list.”
While the SFO’s first prosecution under the Bribery Act seems only a secondary charge to the fraud alleged in the AgroEnergy case, companies, directors and senior managers should expect these charges to be but the first of a new wave of enforcement action in the corporate context. Corporates should also expect the momentum in this sphere to pick up early next year once the provisions introducing Deferred Prosecution Agreements come into force.