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Headwinds In London

SFO Director Richard Alderman: Good job, don’t do it again. A senior Crown Court judge on Friday warned the head of Britain’s Serious Fraud Office (SFO) that he doesn’t have the legal authority to settle corruption prosecutions with plea bargains.

The judge’s comments raise doubts about the SFO’s ability to cooperate with the DOJ and SEC in crafting global settlements for companies that agree to plead guilty. And companies seeking joint settlements may now fear being fined twice for the same offenses.

Lord Justice Thomas, Britain’s second-ranking criminal judge, was speaking during a hearing involving the British division of Innospec, Inc., the Delaware-based chemical maker that in mid-March reached a global settlement with U.S. prosecutors and the SFO.

The judge approved the U.K. plea deal and penalty but said the $12.7 million fine the SFO agreed with Innospec was inadequate and went beyond the SFO’s authority. In the U.S., Innospec agreed with the DOJ to pay a $14.1 million criminal fine and disgorge $11.2 million in profits to the SEC. It also agreed to pay $2.2 million to the U.S. Office of Foreign Assets Control for violating America’s embargo against Cuba.

According to the Independent, the judge, who’s the deputy head of criminal justice, said: “I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.”

The Financial Times (registration required) reported Lord Justice Thomas as saying that “while [SFO director] Alderman’s ‘vigorous prosecution’ of Cheshire-based Innospec was praiseworthy, the director had exceeded his powers in the course of striking a joint deal with the U.S. authorities over the total penalty of just over $40 million the company would pay. The judge said he confirmed the U.K. part of the fine ‘reluctantly,’ as it was ‘wholly inadequate’ and should have been in the tens of millions for a ‘very serious’ offence.”

The judge said under English law only judges can impose sentences. “This has always been the position under the law of England and Wales. Agreements and submissions of the type put forward in this case can have no effect,” he said, according to the Times.

Judge Thomas’ remarks also open the possibility that BAE’s settlement with the SFO may come under judicial fire. The company agreed in February to a U.K. penalty of £30 million. At the same time, it agreed with the DOJ to a U.S. criminal fine of $400 million.

In the U.S., plea bargains also need court approval. However, judges usually defer to the DOJ and SEC and accept the terms those agencies agree with defendants.

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