According to a recent press release, the Director of the Serious Fraud Office (SFO) has taken action in the High Court, which has resulted in an Order that Oxford Publishing Limited (OPL) pay £1,895,435 in recognition of sums it received which were generated through unlawful conduct related to subsidiaries incorporated in Tanzania and Kenya.
OPL is owned by Oxford University Press (“OUP”), which itself is owned or is part of the universally esteemed and world famous Oxford University.
OUP discovered that its subsidiaries in Kenya and Tanzania had used illegal means to win contracts to sell its educational publications in these two countries. Some of these contracts are funded by the World Bank. OUP acted immediately to investigate the matter, instructing independent lawyers and forensic accountants to undertake a detailed investigation. Subsequently OUP self-reported some concerns which it had to the SFO.
The SFO required OUP to follow a procedure based on the guidance contained within its published protocol document – “The Serious Fraud Office’s Approach to Dealing with Overseas Corruption“.
Because two of the tenders were funded by the World Bank, OUP also voluntarily reported on a potential breach of the World Bank’s Procurement Guidelines to the World Bank.
The investigation was thorough – involving numerous interviews and an extensive review of documents and electronic data – and completed to the satisfaction of the SFO. The substantial product of those investigations was presented to the SFO and, in a separate presentation, to the World Bank. The product of that work led the SFO and the World Bank to believe that OUP East Africa (“OUPEA”) and OUP Tanzania (“OUPT”) had offered and made payments, directly and through agents, intended to induce the recipients to award competitive tenders and/or publishing contracts for schoolbooks to OUPEA and OUPT.
Civil Recovery Order
As wholly owned subsidiaries, OUPEA and OUPT pay dividends and certain fees to OPL. Accordingly, OPL has and would receive revenue that had been derived from unlawful conduct; namely bribery and/or corruption. Following an accounting examination of the benefit obtained from the affected contracts, the SFO was in a position to determine the appropriate amount to be recovered. The approach to costs was conservative, with the result that the agreed methodology produced a higher figure than would normally be recognised as trading surplus in the accounts. No allowance has been made for the payments which are considered bribes or inducements.
Since the occurrence of the conduct that is the subject matter of the civil recovery order, OUP has introduced enhanced compliance procedures intended to significantly reduce the risk of recurrence of such conduct within OUP. These procedures will be subject to review by a monitor who will report to the Director of the SFO within twelve months, with additional and separate reporting to the World Bank. The monitor must meet strict criteria including clear independence from OUP.
Reasons for civil recovery order
A number of relevant features have led to the decision to pursue a civil recovery order in place of a criminal prosecution. They include the following (we will not repeat them all but the most relevant appear to be as follows):
a) The test under the Code for Crown Prosecutors in relation to the case meeting the criteria to prosecute has not been met at this point and there is no likelihood that such a standard would be met in the future. This view is based on a number of factors including, but not limited to, (i) key material obtained through the investigation is not in an evidentially admissible format for a criminal prosecution and (ii) witnesses in any such prosecution would be in overseas jurisdictions and are considered unlikely to assist or co-operate with a criminal investigation in the UK.
b) OUP has conducted itself in a manner which fully meets the criteria set out in the SFO guidance on self reporting matters of overseas corruption.
c) The products supplied were of a good standard and provided at ‘open market’ values. This means that the jurisdictions involved have not been victims as a result of overpaying for the goods or as a result being supplied goods which were unsuitable or not required.
Finally the SFO Press Office reports that in addition to the property recovered under the civil recovery order, OUP unilaterally offered to contribute £2,000,000 to not-for-profit organisations for teacher training and other educational purposes in sub-Saharan Africa. This was a reflection of the seriousness with which OUP views the course of events that were subject to the investigation and a wish to acknowledge that the conduct of OUPEA and OUPT fell short of that expected within its wider organisation. The contribution would benefit the people within the affected region and be consistent with the overall mission of OUP. The offer also confirmed that the funds would not be used so as to provide OUP with a commercial advantage.
This press release appears to address previous criticisms which were made of the SFO that it had not been sufficiently transparent about the settlements it had made, no doubt being leant on by the corporate defendants and their lawyers to be treated in confidence.
It also reinforces the view which the SFO publicly encourages that where the illegal acts are not systemic within the organisation, and particularly in circumstances where the organisation owns up to the wrongdoing by self reporting, the SFO will “reward” the defendant by offering a civil settlement.
The use of a monitor, a frequent practice in the US, and used in the Innospec case in the UK has been employed in this case too and signals to the defendant and to other corporates the tremendous burden on your organisation if you are unable to put in robust compliance procedures – the court will make sure that you do it by the imposition of a monitor, which itself is costly.
This appears to be the first civil settlement approved by the new Director of the SFO, David Green QC. It confirms what he has said publicly, that he will agree to civil settlements where appropriate (even though they have been the source of criticism in the past) but the SFO will prosecute when it is the public interest to do so.
Related court documentation is linked to on the SFO’s own press release.
In a separate press release from the World Bank on 3 July 2012, it said that the World Bank Group had announced the debarment of two wholly-owned subsidiaries of Oxford University Press (OUP), namely: Oxford University Press East Africa Limited (OUPEA) and Oxford University Press Tanzania Limited (OUPT) – for a period of three years following OUP’s acknowledgment of misconduct by its two subsidiaries in relation to two Bank-financed education projects in East Africa.
The debarment is part of a Negotiated Resolution Agreement between OUP and the World Bank Group. In May 2011, investigators from the World Bank’s Integrity Vice Presidency (INT) approached OUP about potential misconduct in Africa. Following this, OUP conducted an internal investigation into its operations and reported its findings to INT.
“This debarment is testimony to the Bank’s continued commitment to protecting the integrity of its projects. OUP’s acknowledgment of misconduct and the thoroughness of its investigation is evidence of how companies can address issues of fraud and corruption and change their corporate practices to foster integrity in the development business. In this case, working with the Serious Fraud Office also demonstrates the scope of collective action in deterring corruption impacting the progress of development,”
said Leonard McCarthy, World Bank Integrity Vice President.