Although not strictly relevant to the Bribery Act, I was interested to read about a Californian case reported this week. This was a five week trial of a US company and some individuals prosecuted under the Foreign Corrupt Practices Act (“FCPA”), the nearest US equivalent to the UK Bribery Act 2010. The case is USA v. Noriega et al., case number 2:10-cr-01031, in the U.S. District Court for the Central District of California.
Although there have been many hundreds of prosecutions under the FCPA, particularly over the past 10 years or so, this was, we are told, the first such case against a company which had made it all the way to a jury trial. This alone I found rather surprising. Usually corporations do not like to fight the charges in a public trial, and they negotiate a deal whereby they often agree to plead guilty to a lesser offence, often the books and records offence under the FCPA (which has no UK equivalent), and to pay civil damages, disgorgement and/or a criminal fine. I do not think I had appreciated until now that the fear of the consequences in terms of reputation, fines and possible public contract debarment means that every company had hitherto negotiated their way out of the prosecution rather than face a damaging trial and possible conviction.
On this rare occasion the defendants, Lindsey Manufacturing Co., its president, Keith Lindsey, and CFO, Steve Lee, and an intermediary, Angela Aguilar, all defended the charges. In fact, the jury eventually found against them all on every charge.
The case concerned bribes paid through an intermediary to a state owned Mexican utility company.
The defendants challenged the interpretation of “foreign public official”. It was argued that the utility company was not part of the state and that therefore its employees could not be foreign public officials. The law states that a foreign official is “any officer or employee of a foreign government or any government agency or instrumentality thereof”. The judge rejected this challenge and the jury convicted the defendants.
The facts show a serious breach of the law which included amongst other bribes giving a $300,000 Ferrari motor car in order to win contracts for Lindsey manufacturing.
Certainly on the facts as reported they would have given rise to a liability under the Bribery Act which of course covers both bribery of foreign public officials AND business-to-business bribery, assuming the UK court had jurisdiction over the defendants. Under S.6 (5) of the Act, foreign official can include an employee of any public enterprise.The defendants will appeal but are facing severe financial penalties and imprisonment for the individuals if the conviction stands.Assistant Attorney General, Lanny Breuer, said after the trial that
“Today’s guilty verdicts are an important milestone in our Foreign Corrupt Practices Act (FCPA) enforcement efforts. Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last. Foreign corruption undermines the rule of law, stifling competition and the health of international markets and American businesses. As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes – the executives who conceive of the criminal plans, the people they use to pay the bribes, and the companies that knowingly allow these schemes to flourish. Bribery has real consequences.”
So will it take 34 years for there to be a contested trial in the UK under the new Bribery Act? Well I seriously doubt it (and I may not be here to see it if it does take that long!) for a number of reasons including that fines are unlikely to be so large in the UK as they are in the US, so not such a great deterrent and not so much incentive to do a deal before trial. We have not seen any evidence of the UK courts imposing fines anywhere near the size of those levied in the US. Further, there is not the same encouragement to whistle blow in the UK (there is no equivalent of the US Dodds-Frank Act which rewards whistle blowers), and the culture of self-reporting, whilst encouraged by the Serious Fraud Office officially, has not yet been inculcated into the UK legal system in the same that it has in the US. Added to which the UK Court of Appeal last year dealt a fatal blow to the Serious Fraud Office’s hopes that they could encourage the use of plea bargaining to encourage people to come forward and self-report. Only primary legislation can change that view, and former Attorney General, Lord Goldsmith, is amongst those (as am I) who believe that plea bargaining should now be permitted by the UK courts in order to achive justice more cost effectively.
Still, despite all the above, its still curious that it took 34 years for there to be a jury trial under the FCPA.