Friday, 10 December 2010

UK Serious Fraud Office to fight bribery by foreign companies

riberyIn recent years the USA has started extraditing individuals from around the world to face courts in America for alleged crimes committed elsewhere. This report appeared in The Times last week

“Jeffrey Tesler, 62, a dual British-Israeli national, is accused by US authorities of conspiring to funnel more than $130 million (£85 million) in corrupt payments to Nigerian officials to secure engineering contracts.

It is one of several cases in recent years in which British nationals have fought to avoid being sent for trial on American soil.

In 2006 a group of bankers known as the “NatWest Three” were extradited on Enron-related fraud charges. In March Ian Norris, the ailing former chief of the applications engineering company Morgan Crucible, was sent to the US where he was convicted for conspiring to obstruct justice.Gary McKinnon, who is accused of illegally accessing Pentagon computers, continues a lengthy legal fight against extradition.”

Tesler’s lawyer said In essence this case is concerned with an allegation that a non-US national and non-US resident conspired to bribe officials in a third party state: Nigeria. The conduct and alleged criminality, at its heart, is extraterritorial and does not concern bribery in America, nor in the UK.”

The unattractive word for this is extraterritoriality – though, just to confuse things, as well as countries reaching beyond their borders to impose their laws it also refers to the opposite: individuals (such as diplomats) being exempt from the laws in their host country. And it is a side effect of globalisation. If a country outlaws a practice, such as bribery, then it cannot permit people (or companies) to evade the law by using intermediaries hiding overseas. The UK has also gone down this road; recently the Times reported…

“the former chief executive of PWS, a London based insurance broker….was prosecuted by the fraud office after the case was referred by the Foreign and Commonwealth Office in October 2005. He was accused of presiding over a network of corrupt payments during his time as head of the company’s American division before he became chief executive.” He “oversaw 41 illicit payments to senior officials at Instituto Nacional de Seguros (INS), the Cost Rican state insurance company…”  He was imprisoned for 21 months

But this is not just about principle…it is about commerce. The Times (6 December 2010) quoted Richard Alderman, director of the Serious Fraud Office (SFO)

I’m determined that British companies that pursue good corporate governance and ethical business practice shouldn’t be placed at a competitive disadvantage by foreign companies, wherever they are based, using bribery and corruption to win contracts.

In a global market, if you take a principled stance then you have to try to stop your competitors from taking advantage. I don’t disagree with the approach, but it raises difficult issues. Since the SFO could prosecute companies with any presence in the UK, will it drive business from the UK? Will the UK start prosecuting corrupt politicians from other countries who accept bribes?

Interesting times.

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