Last month, the first contested criminal trial involving a bribery allegation concluded. Skansen Interiors Ltd (SIL), was convicted for failing to have in place adequate procedures to prevent bribery, which is a criminal offence under section 7 of the Bribery Act.
SIL’s former managing director, Stephen Banks, gave Graham Deakin of developer DTZ Ltd £10,000 and promised him a further £29,000 in return for confidential information in 2012 and 2013. Banks was intending to use the information to help SIL win commercial property contracts from DTZ.
It remains to be seen whether the case continues into the Court of Appeal, but whatever happens, the issues in the trial will be of interest to all those working in the corporate criminal liability field.
The extent of the bribery was no more than £40,000.00 and involved a small company with modest resources. In the past prosecution agencies have shown a willingness to enter into deferred prosecution agreements, but these have all been with significantly larger organisations with substantial resources.
The development of corporate criminal liability from an identification principle to a failure to prevent model was designed not only to make corporate prosecutions easier but it was also intended to stop the disproportionate number of smaller companies being prosecuted.
The decision to prosecute Skansen, a small contracting company with no more than 30 members of staff is an ominous warning to all small and medium sized businesses of the risk of prosecution.
In the past prosecuting agencies have shown a willingness to test the boundaries of corporate offences by targeting small businesses and this case could be the start of a similar trend with Bribery and Tax evasion offences.
Section 7(1) of the Act provides that a company is guilty of an offence of failing to prevent bribery if a person associated with it bribes another person, intending to obtain or retain business or an advantage for the company. It is a defence under s7(2) of the Act, however, if the company had in place adequate procedures designed to prevent people associated with it from undertaking such conduct.
What are reasonable preventative procedures? To what extent do these procedures need to apply? This all depends on the nature and size of the business. It is not a case of one size fits all. The case of Skansen Interiors was an opportunity to test this defence and the suitability of the company’s procedures.
SIL argued that it had adequate procedures in place at the time of the misconduct. Despite there being no specific anti-bribery 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 Stephen Banks, 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 were insufficient and returned a guilty verdict. Although the jury cannot provide reasons for its verdict, there are a number of lessons which we can learn from this case.
The case provides an insight into what factors may and may not be taken into account by a jury when considering whether anti-bribery procedures are “adequate”. The Ministry of Justice guidance accompanying the UKBA repeatedly makes clear that adequate bribery prevention procedures only need to be proportionate to the bribery risks that an organisation faces. Specifically, the guidance notes that if an organisation is small or medium sized “the application of the principles is likely to suggest procedures that are different from those that may be right for a large multinational organisation” and that “[t]o a certain extent the level of risk will be linked to the size of the organisation and the nature and complexity of its business, but size will not be the only determining factor.”
Clearly in this case the jury did not consider that the steps Skansen had taken to prevent bribery were adequate. The case therefore serves as a reminder to small and medium sized companies to ensure that a rigorous risk assessment is conducted in relation to bribery risks and robust procedures are in place to deal with those risks that comply with the six guiding principles set out in the Ministry of Justice’s Guidance.
The case also highlights the importance of documenting steps taken to implement “adequate procedures”, irrespective of the size of the organisation.
I am preparing a series of seminars discussing the impact of recent corporate criminal offences and the adequate procedure defence. If you or your organisation wishes to attend the seminar please contact me directly and I will send out the relevant details nearer to the time.