Surfing The SFO

Director Richard Alderman says, “The Serious Fraud Office has changed significantly over the past year. We have become much more proactive and innovative in our approach to combating serious fraud and corruption.” The Financial Times reported Thursday that David Mabey, the former head of British construction firm Mabey & Johnson Ltd, will be charged by the Serious Fraud Office with false accounting and breaching the United Nations’ sanctions on Iraq.

Mabey & Johnson was sentenced in September last year by an English court for overseas corruption and violating the U.N.’s oil-for-food program. The bridge-building specialist paid £6.6 million in criminal fines and related assessments. It had pleaded guilty to bribing officials in Jamaica and Ghana to win public contracts, and paying more than £123,000 to the pre-war Iraqi regime in violation of U.N. sanctions. The privately-held company was also required to retain and pay for an SFO-approved compliance monitor.

The press report said David Mabey is scheduled to appear at the City of Westminster Magistrates’ Court on February 2. It said,

The prosecution of Mr Mabey highlights a new potential legal pitfall facing existing directors and those aiming for boardroom jobs. Follow-on criminal cases against individual directors in corrupt businesses are common in the U.S., where prosecutors have for many years successfully used companies’ confessions as platforms to pick off executives allegedly involved.

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In December, the SFO charged a former executive of a Johnson & Johnson subsidiary with overseas corruption. Robert John Dougall, 44, an ex-vice president of DePuy International Limited, was accused of making corrupt payments to medical professionals in the Greek public healthcare system in order to sell orthopaedic products. A copy of the SFO’s December 1 announcement is here.

In February 2007, Johnson & Johnson said it had “voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission that subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries. “

DePuy and four other orthopedic device makers — Biomet, Zimmer, Smith & Nephew and Stryker — agreed in September 2007 to pay $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products. Since the U.S. settlement, the four companies, along with Medtronic Inc. and Wright Medical Group, have disclosed DOJ and SEC Foreign Corrupt Practices Act investigations. 

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The SFO’s website says the agency is “an independent Government department that investigates and prosecutes serious or complex fraud and corruption.” It’s part of the U.K. criminal justice system with jurisdiction in England, Wales and Northern Ireland but not in Scotland, the Isle of Man or the Channel Islands. The director (Richard Alderman, above) is appointed by and accountable to the attorney general (Baroness Scotland).

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The SFO now has about 80 ongoing cases and is pushing for enactment of the new Bribery Bill. In November the bill was sent to the House of Lords. The Ministry of Justice says the legislation would replace the “fragmented and complex offences at common law and in the Prevention of Corruption Acts 1889-191.” It would also create two general offences — paying or offering bribes, and asking for or receiving bribes. Like the FCPA, it would create a separate offence of bribery of a foreign public official, and add a new corporate offence of failing to prevent a bribe being paid on the company’s behalf. See our post here.