In a recent bribery case, a company that was the first defendant to rely on the "adequate procedures" defence, was convicted of failing to prevent bribery. Discover more about the case and the salient learning points.


Background

Skansen Interiors Limited (SIL) is a London-based dormant company which prior to 2014 traded in office interior design. It was recently convicted of failing to prevent bribery under section 7 of the Bribery Act 2010 (BA 2010). SIL was the first defendant to rely on the "adequate procedures" defence and was ultimately unsuccessful.

The facts

SIL won tenders from DTZ Debenham Tie Leung (DTZ) for two office refurbishment contracts worth £6 million in 2013. It subsequently emerged that SIL's former managing director, Stephen Banks (SB) had paid bribes to Graham Deakin (GD), a former project manager at DTZ, in order to secure the contracts. A number of steps were made to conceal the bribes, with invoices routed through a separate company and then recorded to an internal cost code.

In January 2014, SIL appointed a new CEO, Ian Pigden-Bennett (IP). IP was concerned by the payments made to GD. He initiated an internal investigation and put in place a specific ABC policy. SB tried to make one further payment to GD, which was stopped before it was made. The internal investigation concluded with the dismissal of SB. SIL then submitted a suspicious activity report to the NCA and reported the matter to the City of London Police and Action Fraud. Both SB and GD pleaded guilty to bribery offences. SIL cooperated with the police investigation fully but was also charged.

The defence and verdict

SIL argued that it had adequate procedures in place at the time of the misconduct. Despite there being no specific ABC policy at that time, there were a number of procedures for maintaining transparency and integrity. There were also anti-bribery clauses in the contracts to which the bribes related, and the system for approving and settling invoices required multiple levels of approval. Evidence given at trial and email evidence showed that SIL employees, including SB, were aware that bribery was prohibited. SIL argued that these checks and balances were sufficient for a company of its size (30 employees) given its localised operation.

The jury decided that the controls in place at SIL were insufficient and returned a guilty verdict.

Commentary on adequacy of procedures and self-reporting

The salient learning points are as follows:

  • The importance of record-keeping and up-to-date policies

During SIL's trial, a junior finance clerk gave evidence that the culture of the company was one of honesty and integrity. However the prosecutor drew attention to the fact that there were few records of SIL's compliance culture or changes made to recognise the new offences in the BA 2010. The prosecution also emphasised that before IP's arrival there was no policy specific to the BA 2010. This highlights the importance of keeping compliance records and having written policies expressly referring to relevant legislation.

  • The importance of training and communication

It was not enough for SIL to have transparency and integrity procedures in place without evidence that they were being adequately communicated to staff, and that staff were being trained in them. The prosecution used the introduction of the new ABC policy by IP to show that the previous policies had not been adequate. Training is also expected to be updated to reflect changes in the law.

  • The importance of clear reporting lines and responsibility

The prosecution highlighted the fact that SIL did not have a designated compliance officer with responsibility for anti-bribery policy at the time of SB's actions. It is perhaps unrealistic to expect small firms to have a dedicated compliance director, but there should at least be a member of senior management with formal responsibility for anti-bribery. Along with designated responsibility, firms should establish clear reporting lines for junior staff to report their concerns. Though perhaps impractical at a firm the size of SIL, one possible route for larger firms to achieve these clear reporting lines might be through escalation to a non-executive director.

  • The CPS's approach to self-reporting

IP reportedly claimed that the CPS was planning to offer SIL a DPA, as it had self-reported, made remedial changes, and cooperated with the authorities. However, the CPS decided that as a dormant company SIL would not be able to comply with any terms imposed by the DPA. The CPS therefore resolved to prosecute in order to send a message to the industry. SIL has no assets and the result of the conviction was an absolute discharge. Furthermore, the fact that the authorities chose to make an example of SIL has served to highlight the risks inherent in self-reporting. The CPS may have sent a strong message about adequate procedures but it has diluted the message about the benefits of cooperation.

  • The high threshold to pass to successfully run the adequate procedures defence

The SFO has already held out SIL's conviction as an example of the difficulty bound up with successfully running a section 7 BA 2010 defence. Speaking at a conference on 15 March 2018, Camille de Silva, SFO Joint Head of Bribery and Corruption, referred to the case as "a salient reminder to corporates to ensure their compliance procedures are sufficiently robust" and reminded businesses of the "high bar" to be reached for the defence to succeed. If a section 7 defence is being run, corruption must have already occurred in the organisation. Firms therefore will always have a difficult task to prove that their compliance programmes were not only appropriately tailored but also working properly at the time of the offence.

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Nichola Peters

Nichola Peters

Partner, Head of Global Investigations/Inquiries
London

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Michelle de Kluyver

Michelle de Kluyver

Partner, Global Investigations
London, UK

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