Last month we wrote about pressure on the UK’s Serious Fraud Office (SFO) as a result of allegations made against the SFO about its conduct in the Unaoil investigation and following the successful employment case against it brought by former SFO investigator Tom Martin. You can read more about those developments here https://www.corderycompliance.com/sbm-exec-convicted-in-sfo-case/. The acquittal this week of for two former Serco executives will add to the pressure the SFO is under and may lead to a review of the UK’s single agency system for prosecuting bribery and serious fraud offences. It is also yet another demonstration of the difficulties that prosecutors have in securing convictions against individuals.
What was the case about?
The case concerned allegations of fraud at Serco in connection with a contract its subsidiary Serco Geografix Ltd had with the UK Ministry of Justice (MoJ) to run an offender tagging scheme. Serco investigated alleged irregularities in the payments claimed under the contract and eventually agreed a Deferred Prosecution Agreement (DPA) with the SFO on 4 July 2019. Whilst Serco settled the case against it under the DPA the SFO brought charges against two Serco executives, Simon Marshall and Nicholas Woods.
Simon Marshall, former Operations Director of Field Services, was charged with three counts of fraud in relation to representations made to the MoJ between 2011 and 2013. Nicholas Woods, former Finance Director of Serco Home Affairs, was charged with one count of fraud in relation to representations made to the MoJ in 2011.
What were the terms of the DPA?
Under the terms of the DPA, Serco Geografix Ltd paid a financial penalty of £19.2 million together with the SFO’s investigative costs of £3.7m. The SFO confirmed yesterday that this has been paid in full and is in addition to the £12.8m compensation already paid by Serco to the MoJ as part of a £70m civil settlement in 2013.
In addition, Serco committed to strengthen its compliance program. This included carrying out annual reporting on its Group-wide assurance programme.
Why happened with the prosecutions of individuals?
During the trial of Woods and Marshall it became apparent that the SFO had failed in its disclosure obligations and that documents which should have been disclosed to the defendants had been withheld. As a result, the SFO has offered no evidence against Woods and Marshall and the judge directed the jury to return verdicts of not guilty.
The SFO sought an adjournment to remedy the position so that it could pursue a retrial, but this was rejected by the judge. Judge Amanda Tipples said that she had “real concerns in relation to the nature of the prosecution case” and that it was not in the public interest to continue.
Is this the end for DPAs?
It is probably an exaggeration to say that DPAs are at an end in the UK but there have always been concerns about the DPA process. Given the failure of this case, and the general perceived lack of activity at the SFO it will be harder to get companies to agree to a DPA. It may well be that the SFO will want to impose more conditions on DPAs going forward too to make sure that they have the evidence they want, in the form they want it, to try and increase their chances of prosecuting individuals who they think might be involved.
It is important to remember that this is not a problem limited to the UK. The US was seen as a model when the UK introduced the DPA process and the experience in the US has been similar. It is relatively easy to agree a DPA with an organisation but much more challenging to secure a conviction against an individual especially when faced with the higher burden of proof in criminal cases. Criminal cases also require fairness in the disclosure of documents – a hurdle which the SFO was unable to clear in this case.
Over the past six years the SFO has agreed a total of 9 DPAs. It has however failed to secure a single conviction of an individual in connection with any wrongdoing exposed in them. In total 11 individuals have been charged after a DPA. None have been convicted. 11-0 is not a good result. This seems especially surprising given the number of emails collected in DPAs like Rolls-Royce (http://bit.ly/rrdpa) and Airbus http://bit.ly/busbribe), the seemingly incriminating content of some of those emails referred to in the DPAs there and the fact that in some cases no charges have been brought after the DPA. The fact that the SFO did manage to secure another guilty plea this week of another Airbus related entity is unlikely to relieve the pressure. There are some thoughts on that case here – http://bit.ly/gptbribe
What happens next?
One of the issues in this case may have been the fact that the disclosure exercise was not reviewed at an early enough stage in the criminal process. With most conventional prosecutions in England & Wales the investigation authority (e.g. the police) investigates the crime which is then prosecuted by a separate prosecution authority (usually the Crown Prosecution Service or CPS). This in theory at least ensures that the evidence in the case is independently reviewed and prosecutions only proceed which are fair. The SFO was created and given its powers under the Criminal Justice Act 1987 and was established in 1988. It has been accused of over-reaching the powers it has been given, for example in the KBR case here https://bit.ly/kbrbribe. The failures in this case will add weight to those who feel the SFO’s role should be reviewed and may see a push for the SFO’s somewhat unique one-tier system to be removed.
Despite the SFO’s troubles bribery is still high on the agenda of many corporations. In the US, 2020 brought a record breaking $2.78 billion in corporate fines and penalties. We’ve written too of the increase in bribery cases during the pandemic (see www.bit.ly/covbribe) which shows that bribery risks are changing and that organisations still need to take the usual steps – including training, investigations and due diligence – to make sure that they do not let bribery take a hold in their business.
This case also underlines the need to conduct investigations fairly. Whilst we do not know what went wrong here conducting in investigations fairly can be challenging, especially give data transfer and data protection considerations (see https://www.corderycompliance.com/data-transfers-and-investigations/) and it is likely that prosecutors will be more focused on fairness, more driven on electronic searches and more questioning of internal investigations as a result.
There is more information about this and other bribery related topics here https://www.corderycompliance.com/category/bribery-corruption/. You can find out more about Cordery’s work in bribery and corruption prevention here https://www.corderycompliance.com/bribery-corruption/ and investigations here https://www.corderycompliance.com/internal-investigations/. There is more information on the Serco DPA here https://bit.ly/3t2NmC2 and more on the failed prosecutions here https://bit.ly/3u98szS.
For more information please contact Jonathan Armstrong or André Bywater who are lawyers with Cordery in London where their focus is on compliance issues.
|Jonathan Armstrong, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH||André Bywater, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH|
|Office: +44 (0)207 075 1784||Office: +44 (0)207 075 1785|