Author: Azizur Rahman
11 March 2020
3 min read
There is a widely-accepted view that, when it comes to corporate crime, self-reporting your wrongdoing can help you gain more lenient treatment than if you are caught doing wrong by the powers that be.
It’s a view that has been reinforced by some high-profile cases – and some recently-obtained figures. After Rahman Ravelli made a Freedom of Information request it was disclosed that in the last ten years only two companies that have self-reported bribery or corruption concerns to the Serious Fraud Office have been formally prosecuted
What amounts to one prosecution of a company self-reporting bribery every five years has to be classed as an infrequent occurrence. But for those two companies it must have been galling to be open and honest about their problems and be shown little or no leniency for doing so. And for the rest of the business world those two cases have to be seen as a warning about the importance of going about self-reporting in the right way.
So what is the right way? First and foremost a company has to know the full extent of the wrongdoing and how it was able to be committed. This requires a carefully planned and conducted internal investigation into all aspects of the company’s working. Only then can a company consider self-reporting. Doing so without knowing the full picture can be damaging if the SFO then carries out its own investigations and uncovers more wrongdoing that the company had not reported to it.
Self-reporting can be a good idea. But if the internal investigation is not carried out properly, if its findings are not handled carefully or if reporting those findings is done in the wrong way or at the wrong time a company can be heaping trouble on itself rather than removing it. The SFO wants co-operation from those seeking leniency. But some of the SFO’s senior figures have been openly dismissive of companies trying to appear co-operative in order to secure a favourable outcome, such as a deferred prosecution agreement (DPA). The SFO’s 2019 document, “Corporate Co-operation Guidance’’, emphasises that even full and robust co-operation is no guarantee that a company will obtain the conclusion to an investigation that it desires. The SFO is not an organisation that is easily satisfied.
Looking to start again with a clean slate is not, therefore, a magic cure for the company that finds itself mired in bribery. Co-operation can play its part but quite often more needs to be done. Which is where reform comes in. If the SFO is considering whether to take a lenient approach to those it is investigating, it is more likely to “go easy’’ if that company is already in the process of taking steps to put right the wrongs. Standard Bank obtained the UK’s first DPA after immediately reporting its wrongdoing – failure to prevent bribery under Section 7 of the Bribery Act 2010 - but it also showed a desire to put right its problems as quickly as possible.
Such activity is, it could be argued, to be expected of any company that has been found to have acted illegally, regardless of whether or not it self-reported its wrongdoing. But taking such action is not just valuable in preventing a repetition of the problems – it can also go some way to convincing the SFO that a company is genuine in wanting to resolve its difficulties. And that can bring rewards in the shape of an offer from the SFO that is less painful than the cost, reputational damage and conviction that can stem from a decision to prosecute.
Yet is should be made clear that, in some cases at least, all manner of diligent self-reporting and action to improve workplace practices can count for little if the company is not then capable of holding its nerve when dealing with the SFO.
As an example, in the most recent DPA, between the SFO and seismic equipment company Guralp Systems Ltd (GSL), GSL agreed to disgorge profit of £2,069,861, keep co-operating with the SFO and review its compliance procedures. It accepted that it had been involved in conspiracy to make corrupt payments and had failed to prevent bribery in relation to its dealings in South Korea. And yet before the DPA could be formally announced all three senior company figures who were charged with conspiracy to make corrupt payments in relation to the alleged wrongdoing were cleared by a jury at Southwark Crown Court.
It is understandable that GSL was attracted when a DPA was offered after the company had self-reported. But with all three being acquitted of the alleged wrongdoing it would be surprising if there are not some in the company now wondering about the wisdom of taking the DPA. And GSL is not the only company that has taken a DPA only for prosecutions of individuals to fail.
Self-reporting, therefore, cannot be seen as a cure-all. If it is backed by real co-operation and reform it can help secure a more agreeable outcome than prosecution. But each and every step must be approached with care.
This article originally featured on Law360. (Subscription required)
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.