By Dan Smith and James Fagan
On 25 September 2015 the United Kingdom saw its first disposal of the offence of failure by a commercial organisation to prevent bribery under section 7 of the Bribery Act 2010 (the “Failure Offence”). The Civil Recovery Unit of the Scottish Crown Office and Procurator Fiscal Service has reported that it has recovered £212,800 under an agreed civil settlement with Brand-Rex Limited, a developer of industrial and network cabling solutions based in Scotland.
The settlement is of interest for a number of reasons.
First, it highlights the importance of self-reporting if a company discovers wrongdoing. In this case, it was a significant factor against prosecution in favour of a civil settlement. In England & Wales the Serious Fraud Office may enter into civil recovery orders to claim from a person the gains derived from wrongdoing. However, the Serious Fraud Office has in recent times placed more emphasis on its powers to prosecute and/or enter into a deferred prosecution agreement, and the factors it will take into account in these decisions overlap considerably.
Secondly, it serves as a reminder for businesses to put in place adequate procedures for preventing bribery. Having adequate procedures in place might have prevented this bribery, and in any case might be a factor against prosecution or a defence to a prosecution under the Failure Offence.
Thirdly, it highlights the risk to companies of criminal liability under the Failure Offence for bribery committed by third parties, often a high risk category of business partner, even without the knowledge of the company.
Facts and outcome
Between 2008 and 2012 Brand-Rex operated an incentive scheme for its UK distributors and installers. In return for meeting or exceeding sales targets, third party installers and distributors were eligible for various rewards, including foreign holidays. An independent installer of Brand-Rex products offered his company’s travel tickets to a customer’s employee. The ultimate recipient of these tickets was in a position to influence their company’s purchasing decisions.
Once Brand-Rex became aware of the issue it launched an extensive investigation conducted by external solicitors and forensic accountants. Brand-Rex self-reported to the Scottish Crown Office and accepted that it failed to prevent the bribery. Brand-Rex did not seek to argue that they had “adequate procedures” in place designed to prevent bribery by persons associated with it, a defence to the Failure Offence.
The Scottish Crown considered the case suitable for civil settlement rather than criminal prosecution. The value of the settlement was based on Brand-Rex’s gross profit related to the bribery and misuse of the incentives scheme.
If you found this interesting, you may also enjoy Latham’s guide to the UK Bribery Act