Author: Azizur Rahman
26 January 2016
3 min read
Brand-Rex Limited made an unwanted piece of legal history.
The Scottish company would prefer to be talked about for its expertise in developing cabling solutions for business. Yet it is perhaps now best known for being the first UK Company to be penalised for contravention of Section 7 of the Bribery Act 2010. Brand-Rex avoided criminal prosecution and was instead ordered to pay £212,800 by way of a civil recovery order after self-reporting that it had failed to prevent bribery by a third party associated with the company – an offence under Section 7.
The punishment arose from an initiative the company ran from 2008-12, called Brand Breaks. It involved UK distributors and installers being eligible for various awards - including foreign holidays - for meeting or exceeding sales targets.
Brand Breaks was completely legal. But the problem arose when an independent installer of Brand-Rex products – a person associated with the company for the purposes of Section 7 - offered tickets earned by him under the scheme to an employee of one of his customers. This went beyond the intended terms of the scheme, as this customer was a user of Brand-Rex products, not an installer or distributor. The individual who received the tickets was in a position to influence decisions as to where his company purchased cabling from – making Brand-Rex in breach of Section 7 of the Bribery Act, even though it had no direct involvement in that person gaining the tickets. As soon as Brand-Rex became aware of the issue - and its potential liability under the Bribery Act – it called in solicitors and accountants. The firm self-reported the matter to the Scottish Crown Office and Procurator Fiscal Service (COPFS) last June and accepted its responsibility for failing to prevent bribery by an associated person under section 7 of the Bribery Act.
Due to Brand-Rex’s self-reporting and its co-operation with the authorities, the COPFS showed leniency and agreed to a civil recovery order. The civil settlement was based on the gross profit made by Brand-Rex due to misuse of the incentive scheme. Brand-Rex also agreed to introduce more extensive anti-bribery policies and training programmes. It had policies in place while Brand Breaks was operating but the firm never claimed they were adequate; which would have constituted a defence under Section 7(2) of the Bribery Act.
At this point, it is important to acknowledge that Scotland has a specific voluntary disclosure programme that does not exist in England. There is the possibility that had the case been in England it would have been handled by the Serious Fraud Office (SFO), which may have offered a Deferred Prosecution Agreement (DPA) as an alternative to a criminal prosecution. DPA’s allow for the suspension of a prosecution for a set period of time, providing the organisation agrees to abide by a set of conditions, which may include fines, compensation orders or other corrective measures. But it is worth noting that instances of DPA’s being agreed are rare – the first one is only now coming to court almost two years since the DPA became part of UK law. It is also worth noting the size of the Brand-Rex financial penalty. When the two points are considered, it becomes clear that there is no cheap, easy or fast way out if you or the authorities discover that bribery has been carried out in your company’s name.
The Brand-Rex case is a timely reminder of the need for companies to devise and implement strong and appropriate anti-bribery procedures. Perhaps most tellingly, the case highlights the risk of failing to supervise the activities of third parties when it comes to bribery prevention. Brand-Rex had some procedures in place but they were clearly not comprehensive enough to prevent the instance that cost the company almost a quarter of a million pounds.
The Bribery Act makes a company liable for the activities of anyone with any connection to it anywhere in the world. Making sure you do not fall foul of this legislation is not easy but it can be done. Rahman Ravelli has advised many companies and organisations on how to introduce adequate anti-bribery measures. Such measures not only ensure a culture of compliance that greatly reduces the potential for corruption: it also makes it easier to identify any wrongdoing and can provide a complete defence should a bribery prosecution be brought.
Brand-Rex self-reported its bribery. It was able to utilise a legal facility unique to Scotland, avoided a criminal conviction and was treated leniently for its frank and honest admission. And yet it still had to pay out a six-figure sum. Many companies around the UK would do well to consider what sort of penalties they could receive if they were found guilty of an offence under the Bribery Act. Few would be able to use the Scottish voluntary disclosure programme and many would have the wrongdoing uncovered by the authorities rather than being able to self-report, thus removing the potential for lenient treatment or any chance of a DPA.
The maximum penalty under the Bribery Act is 10 years in jail or an unlimited fine. Many companies currently have to consider whether they are able or willing to pay such a price for the sake of not making a concerted effort to prevent bribery being carried out in their name.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.