Corruption enforcement in 'seismic shift' as SFO uses new powers

The SFO has used new powers granted to it just this year to recover money, which it claims is the result of unlawful conduct. Prosecutors have in the past been under pressure to introduce US-style plea bargaining tactics into corruption and other criminal cases, said one expert, and this is the first use of such an approach.

Balfour Beatty has agreed to pay the £2.25 million pursuant to a Consent Order obtained in the High Court under the Proceeds of Crime Act. The case centres on its contract for the building of the Bibliotheca Alexandrina in Egypt. The contract was begun in 1996 and the building was completed in 2001.

"Pressure has been brought to bear on prosecutors for some time to adopt practices which are commonplace in the USA," said Claire Shaw, a fraud specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "This is the beginning of a response to that pressure. The landscape of prosecution practice is going through a seismic shift."

The case related to the existence of what each party calls 'payment irregularities' that occurred in the joint venture set up between Balfour Beatty and an Egyptian company to carry out that contract. Business records relating to those payments were inaccurate, the SFO said. Balfour Beatty conceded that its accounting records in relation to the payments were inaccurate.

The SFO was notified of the inaccuracies by Balfour Beatty itself, which said that it had conducted its own internal inquiry into the irregularities. The SFO has conducted its own investigation.

The SFO was given powers in April this year under the Proceeds of Crime Act, and, in the action against Balfour Beatty, has used them for the first time.

"This is a highly significant development in our efforts to reform British corporate behaviour. We now have a range of enforcement tools at our disposal, and a major factor in determining which of those tools is deployed will be the responsibility demonstrated by the company concerned," said Richard Alderman, director of the SFO.

The settlement means that no criminal prosecution will be brought against the company by the SFO.

Shaw said that other companies should see the fact that such settlements are now available as an opportunity, not simply as a threat, and that other firms should consider acting as Balfour Beatty has done in alerting authorities to issues they have found.

"More and more prosecutions for corruption are being brought around the world, so companies are best advised to put in place comprehensive anti-corruption compliance programmes," said Shaw. "Those who operate in a 'high risk' business sector or in jurisdictions with a poor corruption reputation may feel that an examination of historic as well as future business practice is an appropriate way to manage the risk of exposure to a criminal investigation."

Shaw, who was previously a senior prosecutor at the SFO, said that companies should consider being proactive about any problems they have or have had in order to reduce the likelihood of a full criminal prosecution.

"By taking the initiative should the worst be discovered during an internal investigation, companies are more likely to be able to maintain control of the situation, contain the damage and potentially extricate the company from a dangerous situation," she said. "Prosecutors are professional, pragmatic and realistic; they will want to encourage good business practice and crime prevention in companies."

"By being seen to do the right thing, businesses may well be able to tip the 'public interest' consideration in their favour and away from prosecution – and, in the right circumstances, the circumvention of hugely expensive, time-consuming and damaging criminal trials has to be a good thing," she said.