On 19 February 2016, Southwark Crown Court heard the conclusion of the sentencing hearing of Sweett Group Plc (“Sweett Group”) for an offence under Section 7 of the Bribery Act 2010 (“the Act”). While the Smith and Ouzman case was the first conviction after trial of a corporate for offences involving bribery of foreign public officials, this case marks the first conviction of a corporate secured by the Serious Fraud Office (“SFO”) for the strict liability offence.
His Honour Judge (“HHJ”) Martin Beddoe sentenced the Defendant Company for failing to prevent bribery of a Bahraini national, Khaled Al Badie, by its Cypriot subsidiary, Cyril Sweet International Limited (“CSI”). The motive for the bribery was to secure a contract with Al Ain Ahlia Insurance company (“AAAI”), for the project management of a contract in relation to the building of a £63m hotel in Dubai. By its plea entered into on 18 December 2015, the Company admitted that it did not have in place adequate Anti Bribery and Corruption (“ABC”) procedures in order to prevent the bribery and, therefore, that it was unable to invoke the statutory defence under Section 7(2) of the Act.
The AAAI is part of a collection of companies controlled by the Al Badie Group. The principle contract in question was worth £1.6m – 2.65% of the project value. Collateral to that contract, which was signed by Khaled on behalf of AAAI, was another made on the same day, between CSI and North Property Management Limited (“NPM”), a company of which Khaled was the beneficial owner. This contract, in respect of which there is no evidence of a tendering process having been taken, provided for payment in monthly instalments of 1.08% of the overall project value – approximately £680,000.
Mr Michael Brompton QC for the Prosecution told the court that minutes of project process meetings provided by Sweett Group make no mention of NPM or its services. There is however, evidence that regular payments were made to NPM, the invoices of which were created by Simon Higgins, the Executive Director of CSI. Higgins, who is an Australian citizen, is not being pursued by the SFO as his actions fall outside its jurisdiction.
Despite its guilty plea, a deferred prosecution agreement (“DPA”) was not offered to Sweett Group, as the SFO did not deem the Group cooperative, particularly with regard to its unwillingness to provide evidence gathered. So much so that Sweett Group had to withdraw a statement issued claiming cooperation with the SFO.
The SFO obtained its first DPA against Standard Bank in December 2015. The case came before Lord Justice Leveson and held similar facts as Standard Bank were found to have failed to prevent bribery and did not have a realistic prospect of raising the defence under Section 7(2).
In considering the Fraud, Bribery and Money Laundering Guidelines (“the Guidelines”), the judge found the offence amounted to “High Culpability” (Category A) due to aggravating factors, including:
- Sweett Group’s wilful ignorance of the KPMG reports which concluded that CSI’s financial controls were unsatisfactory and required urgent attention from management. One key observation was CSI’s failure to document the business justifications for engaging consultants;
- CSI’s attempt to procure a letter from AAAI confirming that NPM was a legitimate sub consultant. This, the judge held, was an attempt by CSI to conceal the misconduct and mislead the SFO in their investigation as NPM was merely a shell company used to make payments to Khaled to secure and maintain the AAAI contract; and
- That the offending took place over a prolonged period of time as payments to NPM were made over an 18 month period.
In mitigation, Ms Moore QC blamed the predicament of the parent company (Sweett Group) on CSI, describing it as “a gangrenous limb” that was operating improperly without the parent company’s knowledge. The judge did not accept this as a mitigating factor, stating that Section 7 imposes a duty to supervise subsidiaries and their activities.
In further reinforcing that CSI was an “associated person” for the purposes of Section 7, the judge highlighted that CSI was not autonomously operated, was a wholly owned subsidiary of Sweett Group and was effectively the Group’s MENA division.
This approach is reflected in the case of Standard Bank where Lord Justice Leveson adjusts a “Medium Culpability” (Category B) offence by applying the highest multiplier of the category range – 300%. This is despite the fact that the offence was a one off payment made by Standard Bank’s sister company, without its knowledge or involvement. As the case relates to a DPA, the judge’s approach suggests he acknowledges the great benefit a DPA provides in allowing the company to avoid prosecution and conviction. He cites the Guidelines, saying it is clear that “the fine must be substantial enough to have a real economic impact which will bring home to both management and shareholders the need to operate within the law”.
Judge Beddoe also refused to recognise the closure of Sweett Group’s MENA business, termination of all contracts with the Al Badie Group and termination of the employment of Simon Higgins, Graham Hill and one other on the basis of breach of company policies, as mitigating factors. The judge asserted that the MENA division had been suffering losses for a while and thus, closure of the MENA business was “clearly a commercial decision rather than out of humility”.
Despite being classified as a high culpability offence, the starting point of which is 300%, as applied in the Smith and Ouzman case, HHJ Beddoe reduced the multiplier to 250% to reflect the following mitigating factors:
- Sweett Group has no previous relevant convictions;
- Sweett Group has, since July 2015, progressively cooperated and slowly but surely taken other steps to remedy the situation; and
- Sweett Group’s admission of guilt.
Sweett Group was ordered to pay a total of approximately £2.35m.
The sum broken down included a fine of £1.4m, to which the judge considered no adjustment necessary. A compensation order was not sought but the Prosecution and Defence agreed a confiscation order for the amount of £851,152.53, which the judge duly approved. This amount, as in the cases of Standard Bank and Smith and Ouzman, reflects the Company’s gross profit obtained from the wrongdoing, after a deduction of the project costs (direct labour, travel, subsistence etc) which amounted to £361,070.
A costs order was also made in the sum of £95,031.97.