Are bribe firms escaping justice?

by BBC Radio 'File on 4'

first published 25 May 2010

File on 4, BBC Radio 4

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A 40-minute BBC radio programme, "File on 4", asks whether the new strategy -- plea bargaining -- adopted by the UK's Serious Fraud Office (SFO) in the past two years "to punish firms who use bribery and corruption to win contracts abroad" is working.

It queries several aspects of the Serious Fraud Office's proposed settlement with BAE Systems to end the SFO's investigations since 2004 into alleged bribery and corruption involving "the world's largest arms manufacturer".

It describes how, after the SFO controversially dropped its investigation in 2006 into BAE's contracts with Saudi Arabia, the agency continued to look into long-standing allegations of bribery and corruption involving other BAE sales in Eastern Europe, South Africa and Tanzania, and even threatened to bring charges.

But then in what File on 4 described as "an extraordinary climb down", the SFO struck a plea bargain deal with BAE in February this year. Lawyer Jamie Beagent (who represented The Corner House and Campaign Against Arms Trade in their legal challenge) said the decision "was met with shock and disbelief", not least because of the SFO's "extraordinary commitment" to BAE as part of the deal that it would never again allege that the company was involved in corruption and bribery.

File on 4:

The deal was agreed jointly between BAE, the US Department of Justice and the SFO. BAE agreed to pay fines of around £250 million to settle the case in America where the DoJ condemned the company for intentionally failing to put appropriate anti-bribery measures in place. It's said BAE made hundreds of millions of dollars in payments to third parties while knowing of a high probability that money would be passed on to foreign government decision makers to favour BAE in the award of defence contracts.
In England, the fine was far less, £30 million for breaching a duty to keep accounting records. The settlement brought to an end the SFO's investigations into its defence contracts.[1] According to lawyer Jamie Beagent, it even effectively gives immunity from prosecution to any individual who might have committed wrong-doing in those affairs.

Jamie Beagent:

We know from papers released in the judicial review that the Serious Fraud Office as part of the plea bargain have agreed with BAE Systems never in future in relation to those allegations of corruption and bribery to allege that BAE was in any way involved in corruption or bribery. That being the case, it won't be possible for the Serious Fraud Office to bring individuals to court in relation to those activities because to do so they would necessarily have to make out the allegation that BAE were involved in those activities.

File on 4:

Have you ever heard of that kind of a deal being struck in the British system before?

Jamie Beagent:

No, and on the face of it, it's a rather extraordinary commitment not to ever again allege that BAE was involved in corruption and bribery relating to those matters would seem to be unlawful. It's binding the Serious Fraud Office and other prosecutors in future from bringing prosecutions against individuals who may be shown to have taken, given or received bribes, yet because of a deal with a third party, they won't be prosecuted.[2]

This explains why the SFO's investigation and prosecution of "an Austrian aristocrat who's been acting as a lobbyist" for BAE, Count Alfons Mensdorff Pouilly, was also dropped in February. Mensdorff Pouilly is now "under preliminary investigation by Austrian prosecutors over allegations of money laundering, fraud and bribery relating to arms deals involving BAE aircraft". Austrian prosecutors came to London in May this year to view the evidence gathered by the SFO against Mensdorff Pouilly, but were left "reflecting on what the SFO was up to."

File on 4:

Were you expecting him to be prosecuted in England?

Thomas Vecsey [for the Austrian public prosecutor's office]:

I think the Serious Fraud Office is investigating quite a longer time than we are doing, I think they started in 2002. So it's right that we thought that they have done much more progress than we did and they would have indicted Mensdorff, that's right.

File on 4:

In fact, Count Mensdorff Pouilly was arrested and charged in Britain. But the case against him was dropped by the SFO on February 5th this year, the same day they announced they'd done a deal with BAE Systems.

The File on 4 programme also highlights comments made in March this year by a UK judge on another SFO plea bargain settlement that may "have stopped prosecutors in their tracks over the way they've been trying to secure convictions".

The SFO and the US Department of Justice had struck a joint deal with UK company Innospec, the world's only producer of the fuel additive, tetraethyl lead (TEL), which had agreed to plead guilty to bribing officials in Indonesia to keep using the product. The plea bargain deal included an agreed fine, which was "a step too far for the UK judiciary."

File on 4:

According to Bill Waite, a former investigator for the SFO and now a lawyer in private practice, Lord Justice Thomas ruled that the agency was out of line in its deal with Innospec.

Bill Waite:

The judge said that the Serious Fraud Office should never again enter into a global settlement with the Department of Justice, this is a significant order. The judge said that the Serious Fraud Office should never again put before the court essentially a completely formatted plea agreement because it was for the courts to determine both the scope of criminal liability and the sanctions to be imposed. . . .

File on 4:

And those orders have effectively ended the central strategy [plea bargaining] of the Serious Fraud Office, haven't they?

Bill Waite:

I would think that people at the Serious Fraud Office and at the Attorney General's office are thinking very, very long and very hard about where they go from here.

The radio programme concludes by stating that:

Two months after the new Bribery Act was passed by Parliament, there still seems a long way to go before Britain can lay claim to be fulfilling its moral and practical responsibilities to tackle corruption. Judges have stopped prosecutors in their tracks over the way they've been trying to secure convictions . . . The new Bribery Act is not yet in force and there's already been lobbying for a phased introduction. It was supposed to start in October, but we were told that at the moment there's no commitment to any dates until Ministers have given it their consideration . . .

Corner House Notes:

  1. As of 26 May 2010, the Serious Fraud Office has not yet brought its plea bargain settlement with BAE before the UK courts to be approved and has still to do so.
  2. The Director of the Serious Fraud Office indicated that it was BAe that had requested this undertaking. See Serious Fraud Office Summary Grounds of Resistance (para 18).