SFO Facing Uncertain Future

For the second time in recent months, U.K. judges have warned the Serious Fraud Office not to make plea deals in overseas bribery cases, throwing into doubt the agency’s whistleblower program and its partnership with the U.S. Justice Department in resolving global corruption cases.

This week a U.K. appeals court affirmed the suspended sentence agreed between the SFO and a former sales executive who helped bribe Greek doctors and then turned whistleblower. But at the same time, the court said the SFO’s U.S.-style approach was unconstitutional.

Robert John Dougall, 45, formerly marketing director of DePuy, pleaded guilty in April to making £4.5 million in corrupt payments to Greek medical professionals within the state-controlled healthcare system. DePuy, acquired by Johnson & Johnson in 1999, makes and sells orthopedic devices. 

The SFO said Dougall was the first “co-operating defendant” in a major SFO corruption investigation. It had recommended leniency in exchange for his guilty plea and help in the case, as typically happens in U.S. white-collar prosecutions. The SFO asked for a suspended sentence; the trial court instead sent Dougall to prison for a year.

The appeals court reversed the sentence but hammered the SFO. It said “agreements between the prosecution and the defense about the sentences to be imposed in fraud and corruption cases were constitutionally forbidden” and solely under the purview of judges, according to reports.

In March, Britain’s second-ranking criminal judge said the $12.7 million fine the SFO agreed with a U.K. division of Innospec Inc. went beyond the SFO’s authority. Delaware-based Innospec had reached what it believed was a $40 million global settlement with U.S. prosecutors and the SFO.

At Innospec’s hearing, Lord Justice Thomas, the deputy head of criminal justice in the U.K. courts, 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.” Although he confirmed the U.K. part of the fine agreed by the SFO, he called the amount “wholly inadequate.” See our post here.

The SFO first charged Dougall in November 2009 after a “referral” from the U.S. Justice Department. Two months earlier, DePuy and four other orthopedic device makers — Biomet, Zimmer, Smith & Nephew and Stryker — had agreed 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. See our post here.