The sentencing of Graham Marchment on 11 May 2015 and the bringing to an end of the SFO’s Operation Navigator investigation is a reminder of the need to be vigilant when supervising procurement and the supply chain.
Marchment was sentenced to two and a half years in prison as the fifth person to be sentenced for his part in a scheme to profit from his role in major procurement contracts. Marchment’s co-conspirators Andrew Rybak, Ronald Saunders, Philip Hammond and Barry Smith had already been sentenced for terms of up to five years.
What was the scheme?
The conspirators in this scheme included contractors who worked for large infrastructure companies acting as procurement agents for large projects. They knew that individuals working on these contracts often did so on a short-term basis. They used their short-term positions in these companies to get access to bidding information and offer to sell it to other companies who were bidding in exchange for payments. These payments were disguised as “consultancy services” and shared out amongst the group.
There are unconfirmed rumours that the investigation started after a large multi-national was approached by the group offering bidding information in exchange for cash. Unconfirmed reports suggest that that company decided to blow the whistle on the scheme instead. In April 2008 a joint operation began between the Serious Fraud Office and City of London Police. The trial focused on contracts in Iran for the construction of a styrene monomer plant, Egypt in connection with an oil and gas project, Russia again in connection with oil and gas contracts, Singapore in connection with a train project and Abu Dhabi in connection with a power plant. Information was shared with companies based in the US, Italy, Canada and France.
The investigation was comprehensive and included looking at mobile phone data, travel records and emails. Matters were protracted as Marchment was resident in the Philippines and it was not possible to extradite him. However the UK authorities exercised patience and arrested Marchment on his return to the UK to renew his passport. The SFO estimates that some £70 million worth of contracts were allocated by the group.
Impact of the UK Bribery Act 2010
The contracts in question were put out to tender between 2001 and 2009. As a result the defendants were not charged under the Bribery Act 2010 which applies only to events which have taken place from July 2011 onwards. Since the 2010 legislation came in there’s also the possibility of the individuals’ employers facing investigation under the new offence under s.7 of the Bribery Act 2010 where a commercial organisation fails to prevent bribery – although there is no suggestion in this particular case that the procuring companies knew in this case what was going on.
There are obvious issues for businesses with ad hoc and complex supply chains like this. These include:
- The fact that contractors are often engaged on a short-term basis to deal with high value projects – these people are often transient and so companies will have to make extra efforts to train them well on the company’s policies and procedures and check that they are being observed.
- These projects are often done away from an organisation’s home office – the geography involved makes it difficult for an organisation to supervise and train.
- Despite the wide geographical scope of these projects the UK had jurisdiction as UK nationals were involved. Whilst this is not a case under the Bribery Act 2010 it illustrates the long arm of UK jurisdiction.
- As the Bribery Act 2010 also illustrates the law criminalises the receipt as well as the payment of bribes.
- The case also illustrates the information resources at the SFO’s disposal. Here they acted on a tip-off in concert with City of London Police and used a wide array of investigatory techniques including emails, phone logs and travel records to identify the guilty parties.
Cordery are experienced in putting policies and procedures in place to help prevent bribery. We’re experienced in investigating, assessing risk and in training at risk individuals. There are details of our bribery and corruption practice here.
For more information contact Jonathan Armstrong who is a lawyer with Cordery in London where his focus is on compliance issues.
Jonathan Armstrong, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH
Office: +44 (0)207 075 1784