Sweett Group sentenced after first ever corporate conviction for failing to prevent bribery

• United Kingdom

• Fraud and financial crime
• Energy and infrastructure
• Industrials

23-02-2016

Sweett Group PLC (“Sweett”), a UK-listed provider of professional services for the construction sector, has become the first company to be sentenced and convicted for the corporate offence of failing to prevent bribery pursuant to section 7 of the UK Bribery Act 2010 (“Section 7”). The case illustrates the far-reaching extra-territorial effect of the Bribery Act and emphasises the need for UK-connected corporates to exercise strong oversight over their global operations.

Following media allegations in June 2013, Sweett began an internal investigation. As a result, it identified and reported two suspicious contracts to the Serious Fraud Office (“SFO”). The SFO began its own investigation into the AIM-listed company in July 2014. It concluded that one of Sweett’s Middle Eastern subsidiaries had made corrupt payments to Khaled Al Badie, a senior Emirati official at Al Ain Ahlia Insurance Company, in order to secure a contract to consult on the development of the Rotana Hotel in Abu Dhabi.

In December 2015, Sweett admitted failing to prevent bribery contrary to section 7(1)(b) of the Bribery Act. On 19 February 2016, it was sentenced at Southwark Crown Court with HHJ Beddoe imposing a total penalty of £2.25 million. This figure included a fine of £1.4 million and a confiscation order of £850,000. The judge also awarded the SFO costs of £95,000. Sweett has a year to pay half of the fine and another year to pay the remainder.

Section 7: the context

Section 7 was introduced in the UK in 2011. It provides that a company will be guilty of an offence if an “associated person” bribes another person intending either to obtain or retain business, or an advantage in the conduct of business, for the company. Sweett admitted to the second form of illegal conduct by way of bribes paid to Mr Al Badie.

An associated person is defined in the Bribery Act as a person who performs services for or on behalf of the company. This can include an employee, an agent or even a subsidiary company: in the Sweett case, it was Middle Eastern subsidiary Cyril Sweett International Limited which made the corrupt payments.

There is only one potential defence to a Section 7 prosecution: to prove that the company had in place “adequate procedures” designed to prevent associated persons from undertaking the unlawful conduct. Sweett had no choice but to plead guilty because it was unable to avail itself of this defence and demonstrate it had implemented “adequate procedures” within its business. This is reflected in one of the judge’s sentencing remarks in which he described the offence as a “system failure”.

The SFO has faced criticism from some quarters for being unable to successfully bring a prosecution under Section 7, and so the news of the Sweett sentence is likely to be well received at the agency. The successful outcome also gives the SFO further positive publicity following the news of the first deferred prosecution agreement (“DPA”). The SFO agreed this with ICBC Standard Bank Plc on 30 November 2015. The DPA means that no Section 7 prosecution has been brought against the bank in that case.

Lessons for corporates

The Sweett case provides a clear example of the Bribery Act’s extra-territorial reach in action. UK-connected companies must remember that their activities anywhere in the world are subject to the provisions of the Bribery Act and, potentially, the investigatory and enforcement powers of the SFO. Sweett’s oversight of its operations in the Middle East was clearly inadequate. This is reflected by its failure to detect and prevent the payment of bribes at the time. Companies should conduct rigorous and ongoing due diligence on all their associated persons, regardless of the country in which they operate.

News of the Sweett sentence also gives further confirmation that, despite the lack of prosecutions, the SFO is serious about the enforcement of the UK’s wide-reaching anti-bribery laws. This includes provisions that impose corporate liability for the actions of employees and other associated persons.

It is important for companies not to become complacent. In order to avoid being placed in a similar position to that of Sweett, companies must make sure they have adequate procedures in place and will be able to convincingly demonstrate what those procedures are. All procedures and policies must be practical, appropriate to the business and actively promoted to all staff members. Corporate culture and ‘tone from the top’ are vitally important in this regard.

In Sweett’s case, no DPA was offered by the SFO. It has been reported that, despite Sweett’s contrary assurances to the market, the SFO did not feel Sweett was fully cooperating with its enquiries. Companies facing a Bribery Act investigation should consider that the SFO has shown itself willing to make use of the relatively new tool of the DPA (as seen in the Standard Bank case). However, success here means being able to satisfy the SFO that it has received full and transparent cooperation throughout the process.