Corporate Update - Inadequacy of adequate procedures under Bribery Act

R v SkansenBanks, the managing director of Skansen Interiors paid bribes to Deakin, a former project manager at real estate company DTZ Debenham Tie Leung (DTZ) to secure two refurbishment contracts worth £6 million

Skansen won the two refurbishment contracts and made two payments to Deakin amounting to £10,000. A third payment of £29,000 was also offered but was ultimately never paid. The first two payments to Deakin were made to a separate company that had not provided any services to Skansen. The management board approved the invoices for the payments. Skansen appointed a new CEO in 2014. The CEO was requested to make the third payment of £29,000 to the DTZ employee. However, he had suspicions concerning the legitimacy of the £29,000 payment, which he stopped.  He instigated an internal investigation, as a result of which a new anti-bribery and corruption policy was established.  A suspicious activity report was made to the National Crime Agency, and the matter was reported to the City of London Police.

Despite these actions, Skansen was charged with the corporate offence under section 7 Bribery Act, whereby an organisation will commit an offence if a person associated with it gives bribes to win it business or an advantage in business. It pleaded not guilty, arguing that it had adequate procedures in place to prevent bribery and that the acts of a rogue individual so senior in the company could not have been prevented by any further reasonable steps.

In particular it argued that:

• due to the size of the company and its small open plan office space (smaller than the courtroom) it did not require complex and sophisticated control procedures;
• its business operated locally, not internationally. Therefore, less stringent controls were necessary;
• it was established across the business that staff should not pay bribes. Accordingly, no specific policy was required;
• a culture of honesty and integrity had been installed in the company;
• at the time of the bribe, Skansen did have in place policies that required employees to deal with third parties ethically, openly and honestly. One such policy was prominently displayed on the wall of the open plan office;
• financial controls were in place so any significant transaction had to be approved by multiple people within Skansen;
• the clause in the contract specifically prohibited bribery and contained a right of termination where bribery had been committed; and
• the third payment was not actually paid to the employee at DTZ due to the adequacy of procedures in place

However, the lack of any policy that mentioned bribery by name, and the lack of any staff training were relied upon by the CPS to argue that Skansen did not have adequate procedures. Banks pleaded guilty to three offenses and Deakin to two offenses under the Bribery Act, both are yet to be sentenced.

 

Comment

The CPS were not deterred by the relatively small size or (by the time the case came to trial) the dormant status of the company, and specifically expressed that it was their intention to "send a message" to others in the industry.   So, although an organisation's size is a factor in determining what procedures will be adequate, this case makes it absolutely clear that smaller companies as much as larger ones need to address bribery risk specifically. No matter how many employees a business has, every organisation must assess its risk  taking into account its sector, customers, geography of operations and business practices. A weakness in Skansen's defence was that the separate policies it did have in place were outdated and did not amount to one comprehensive anti-bribery policy. 

So, it would seem that a specific anti-bribery policy which is trained out to staff is an absolute minimum, and this should be monitored and updated as a continuing obligation.