Pondering section 27 Integrity in Public Life Act 2000 (as amended) of Trinidad and Tobago

The Hon. Prime Minister, Kamla Persad Bissessar

From the first time I heard that the Hon. PM's "free lodging" at the Gopaul's was being interpreted as a "fee, gift or personal benefit" under section 27 (1) of the Integrity in Public Life Act 2000 as amended, I intuitively thought it an uncomfortable interpretation but I could not put my finger on exactly why it was so.  It was certainly a benefit received and so I understand the readiness to conclude that it must be covered under the section dealing with the prohibition and declaration of gifts by public officials. I held my tongue on the topic ( even though as most of you know I am most inclined to comment on topics of this sort) and pondered a little.  Why was I uncomfortable with this interpretation?  Why did it seem like forcing a square peg into a round hole to me?  

Let us look at section 27 closely :

"27. (1) A person to whom this Part applies shall not accept a fee, gift or personal benefit, except compensation authorized by law, that is connected directly or indirectly with the performance of the duties of his office.

         (2) Subsection (1) does not apply to a gift or personal benefit that is received as an incident of the protocol or social obligations that normally accompany the responsibilities of office.

          (3) Where a gift or personal benefit referred to in subsection (2) exceeds five thousand dollars in value or where the total value received directly or indirectly from one source in any twelve-month period exceeds five thousand dollars, a person in public life shall file with his declaration, a statement indicating the nature of the gift or benefit, its source and the circumstances under which it was given or accepted.

           (4) For the purposes of this section, the amount of a gift comprising property, other than money, shall be deemed to be an amount equal to the value of the property.”

If we were to look at 27 it would appear that there is not there created an absolute bar to the receipt of any gift whatsoever.  Further from a consideration of the section in its entirety it is clear that there are distinctions made between categories of gifts etc.  Let us break it down.  From my reading of it there are at least four potential categories of gifts :

Gift Category 1

Defined by section 27 (1) - those fees, gifts, personal benefits, not authorized by law, that are connected directly or indirectly with the performance of one's duties of office. -Prohibited

Gift Category 2

Defined by section 27 (2) - those gifts/benefits received as an incident of the protocol or social obligations that normally accompany the responsibilities of office (under the value of 5000TT) - Permitted

Gift Category 3

Defined by section 27 (3) - those gifts/benefits received as an incident of the protocol or social obligations that normally accompany the responsibilities of office (over the value of 5000TT) - To be declared

Gift Category 4

Not defined by the section but nonetheless must exist - those fees, gifts, personal benefits received by public officials which are NOT connected directly or indirectly with the performance of one' duties of office. - Not Covered by the Act

It is of course category 4 which causes the most concern but given the manner in which the section 27 is drafted - it must exist.  Section 27 (1) breaks down the elements which one must find in the type of fee, gift or benefit which is prohibited eg. 

1. Must be a Fee, gift or personal benefit

2. Must not be authorized by the law (wages, salaries, benefits or perks of office)

3. Must be connected directly or indirectly to the performance of one's duties of office. 

The Gift of Free Lodging 

In the instant situation relating to the benefit of "free lodging", whilst elements 1 and 2 are made out, it is questionable whether element 3 is made out. There are two sub elements to 3 which are (a) must be connected directly or indirectly and (b) to the performance of one's duties of office. 

Taking the latter sub element first, the reference in s.27(1) (as amended) to “the duties of office” would seem to be a reference to public duties, ie duties which are an incident of the holding of a public office. Section 23 provides that Part IV of the Act applies to “a person in public life and to all persons exercising public functions”. Such persons are defined in section 2 and include all persons holding office under the Public Service. “Public functions” is a term not defined in the Act but “persons exercising public functions” is defined in s.2 to include, inter alia, the Judicial, Police and Teaching services.  Sections 24 to 27 are concerned with the use and misuse of office. This must, ex hypothesi, mean ‘public’ office. Similarly, the reference in s.24(1) to the performance of functions must be a reference to ‘public’ functions.

S.24(1)(a) makes express reference to the exercise of “public duty”. The term is not defined. However, it must necessarily encompass duties which are an incident of the public office and, possibly, which are owed to the public. A public duty may, in principle, be distinct from a ‘private’ duty, which may, eg, include those duties arising by way of contract of employment.

Accordingly, holding a public office may, in principle, give rise to both public and private duties. So a teacher’s duties might include, eg, one to mark exam papers impartially which could properly be characterized as a public duty; and a duty to work the hours stipulated in her contract, which is perhaps more readily categorized as a private duty. 

If this public/private distinction is in principle valid, then one can interpret s.27(1) as being concerned with matters “connected directly or indirectly with the performance of the [public] duties of his office”.

Leaving aside, for one moment, the meaning of “connected directly or indirectly”, one can interpret s.27(1) as, therefore, being concerned with the relationship between the acceptance of a fee, gift or personal benefit and the performance of a public duty which is an incident of the holding of a public office.

Considering the first sub element (a) “Connected” is defined in Collins English Dictionary as meaning “joined or linked together”. Using this definition, the term is suggestive of there being a link or relationship between said acceptance and said performance. That is to say that the acceptance of the benefit (and presumably also its offering) is referable to the performance of the public duty, or is linked to the performance of the public duty. 

It can be seen that s.27 distinguishes between benefits connected directly or indirectly with the performance of the duties of office (s.27(1)) and benefits “received as an incident of the protocol or social obligations that normally accompany the responsibilities of office” (s.27(2)). As explained above, this is not an exhaustive characterization of all benefits that a holder of public office could receive. Thus, by way of example, a birthday present from a family member would not fall under either category of benefit identified in s.27(1) or (2). The gift does not fall within s.27(1) because it is not connected with the performance of the duties of office. It does not fall within s.27(2) because it was not received as an incident of the protocol or social obligations that normally accompany the responsibilities of office, and therefore would not fall within s.27(3) either, even if its value exceeded TT5,000. Let us refer to this type of gift/benefit as the Category 4 gift outlined above. 

Similarly, the gift of free lodging from a friend without any evidence of a "connection directly or indirectly" with the performance of a public duty (for example the public duty to award a contract fairly and impartially) would not therefore appear to infringe section 27 (1). It would also not infringe section 27 (2) as it is not a gift given as an incident of protocol or social obligation accompanying the office and neither is it declarable under section 27 (3). 

On the above interpretation of the Act, it follows that, the mere fact that a fee, gift or benefit may be convenient to the performance of a public duty does not by itself establish the connectivity required by section 27(1).  

A Note on the Integrity in Public Life Act

Ok so I understand the discomfort with this.. it may be readily accepted that the Act is not the best example of parliamentary draftsmanship. Party financiers who are friends can give gifts of value and once no evidence can be adduced showing a connection with the performance of a public duty there is no infringement.  I am uncertain whether this was the intention of the framers. Perhaps a simpler expression of the rules would be 

1. Create an absolute bar on all gifts received in connection with the performance of duties of office (as is done by section 27 (1) as amended). 

2. However, require full disclosure of ALL gifts received over the value of 5000TT so that in the event of an allegation being made there should be appropriate records to assist with the investigation.  Our section 27 (3) requires only the declaration of gifts over 5000TT which are received as an incident of protocol or social obligation relating to the public office, thereby creating a fairly large loophole relative to Category 4 gifts. 

A Note on the NP Procurement Process 

All of this to say, I am not defending the NP procurement process nor am I saying that the Hon. PM did or did not interfere and or influence the process.  All I am saying, is

(1) the mere fact of the acceptance of the gift/benefit of free lodging by the Hon. PM  does not of itself establish a breach of section 27 (1) and

(2) the award by an SOE of a contract to the donor of the said gift/benefit of free lodging,  is not, without more, sufficient to support an allegation of impropriety.  

This notwithstanding, there may be evidence which is adduced later on pointing to unfairness of procedure, breaches of duties to award the contract as tendered, to disqualify non compliant bids etc, and there may even be evidence elicited relating to political interference and influence over the award.   In such circumstances, it may be that the Hon.PM or other public officials may have a case to answer.  

New Anti-Corruption Compliance Checklist issued by TI Canada

Transparency International Canada (TI-Canada) today announced the launch of its Anti-Corruption Compliance Checklist (TI-Canada ACC).

In line with Canada’s Corruption of Foreign Public Officials Act (CFPOA), the TI-Canada ACC is a critical tool for those Canadian corporations seeking to significantly enhance their risk management processes.

Implementation of the TI-Canada ACC will enable a Canadian corporation of any size to conduct itself in international markets in compliance with ethical and legal obligations to avoid corruption and operate with transparency, accountability and integrity.

As the Canadian chapter of TI, the global coalition leading the fight against corruption, TI-Canada’s mandate is to promote methods to eradicate corruption in Canada, and via education to help Canadian companies address and avoid corruption in their international business activities.

The recent revelation from the RCMP Sensitive Investigations and International Anti-Corruption Unit that 23 CFPOA investigations are underway means that, “Canadian companies can no longer hide behind the world’s perception that business is done here in a completely ethical manner. Companies must learn to operate internationally without paying bribes,” according to James M. Klotz, Chair and President of TI-Canada. The TI-Canada ACC, available for free download from www.transparency.ca, is a solid tool for Canadian corporations faced with the challenges of operating ethically in today’s global environment.

New Anti-Corruption Era in Egypt

Transparency International (TI), the global anti-corruption organisation, hosted a two-day workshop in Cairo to debate the reforms necessary to make Egyptian institutions more resilient to corruption and more accountable to the public.


Entitled “Towards a new integrity system in Egypt”, the workshop brought together more than 75 members of government, media, academics, judiciary and civil society to agree on the first steps to making Egyptian institutions strong and independent so that they can enforce anti-corruption laws and uphold freedom of expression.


These discussions can act as a starting point for a new anti-corruption framework, with measures that ensure all actors in the Egyptian state – including leaders, public officials and security forces - act with integrity.
“In this meeting people inside and outside worked together driven by a common determination to create a truly effective and comprehensive anti-corruption system. There is a very clear mood that we cannot allow rules and institutions to be side-stepped by those in power,” said Omnia Hussein, In-Country Programme Coordinator for Transparency International in Egypt. “Egypt must have a state-of-the-art system of checks and balances so that there are no longer exceptions to anti-corruption rules.”



Among the measures called for to improve accountability and transparency are:

• New laws that guarantee that all public officials are accountable, with no exceptions.

• Ensure the total independence of anti-corruption bodies, and expand their remit to include relations between the public and private sectors such as public procurement. Their reports must be made publicly available.

• Strong laws on freedom of information and whistle-blower protection. Accountability rules must apply to all areas of government, without exemptions for areas like defence or justice

• Financial institutions must exercise constant scrutiny of any clients who are public officials

• Creation of a national body responsible for a comprehensive national strategy for combating corruption

• The creation of the role of ombudsman to investigate citizens’ complaints.

Learning from the past


“Egypt is still suffering from corruption. The fall of one leader will not cure the weakness of institutions that until now have not been able to consistently enforce anti-corruption rules,” said Omnia Hussein. “This is where civil society can make a difference if given space to operate freely, in a way that was not allowed in the past. The fact that members of government and judiciary are openly discussing the future transparency of state institutions is a good start for the new Egypt.”


Last year, Transparency International published an analysis of Egyptian state institutions and their contribution to accountability and integrity. It found that even where mechanisms for transparency and accountability did exist, they were undermined by lack of independence and political will to fight corruption. It also highlighted lack of space for civil society and protection for whistleblowers.


Egypt scores 3.1 on Transparency International’s Corruption Perceptions Index, a scale which goes from 0 (highly corrupt) to 10 (very clean).



Transparency International is the global civil society organisation leading the fight against corruption, with chapters in 94 countries around the world, including Morocco, Lebanon and Palestine.

Media Contact
Deborah Wise Unger
Tel: +49 30 34 38 20 666
Email: press@transparency.org

US courts interpret "Foreign Official" to include employees of State-Owned Enterprises

Below there is a case note prepared by the US law firm of Fulbright & Jaworski on the landmark Lindsey Manufacturing decision in interpreting bribery of foreign officials legislation in the US (the Foreign Corrupt Practices Act -FCPA 1977).  However, it's importance will be instructive in other jurisdictions which have also passed counterpart legislation eg the Canadian Corruption of Foreign Public Officials Act 1999 and the UK Bribery Act 2010.  These legislative frameworks emanate principally from the obligations of member states under the OECD Anti Bribery Convention 1997. The OECD Anti Bribery Convention is the first global anti-corruption convention attempting to deal with supply side (cross border) bribery.  Signed by 30 OECD countries in December 1997 this convention entered into force in February 1999 and there are now 38 signatories.  The Convention permits countries to move in a co-ordinated manner to adopt national legislation making it a crime to bribe foreign public officials.  It provides a broad definition of bribery, requiring countries to impose dissuasive sanctions and committing them to providing mutual legal assistance.  Though the US FCPA pre dates the Convention, the provisions were incorporated under the Act in 1998.  In the US the FCPA complements other legislation in this area such as the USA Sarbanes Oxley Act which also requires firms to operate effective systems of control and come clean about instances of fraud. For the Risk Management and Compliance functions of financial firms there is no getting away from these pieces of legislation indeed compliance with one assists the other. 

California court retains government's broad interpretation of 'foreign official'

Contributed by Fulbright & Jaworski LLP

April 18 2011

On April 1 2011 US District Judge Howard Matz issued an opinion from the bench in one of three pending cases challenging the US Department of Justice's broad interpretation of the term 'foreign official' under the US Foreign Corrupt Practices Act. The court in US v Enrique(1) (the case has informally been referred to as Lindsey Manufacturing in reference to one of the three defendants) is the first of the three to rule on this seminal issue. The court denied the defendants' motion to dismiss, concluding that employees of state-owned enterprises are foreign officials for purposes of the act. The precise issue before the court was whether officials of Mexico's state-owned utility company, Mexican Comisión Federal de Electricidad (CFE), were foreign officials under the act.

The Foreign Corrupt Practices Act defines a 'foreign official' as:

"any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization."(2)

However, the act does not define 'department', 'agency' or 'instrumentality'. The Department of Justice and other US enforcement authorities have utilised this apparent lack of clarity to construe liberally the statutory definition and apply it to interactions with employees of commercial state-owned or controlled enterprises. The Department of Justice's interpretation has previously been challenged by defendants in two other recent cases.(3) However, in both cases the court dismissed the defences' challenges with either no substantive analysis of the issue or very little useful analysis. Lindsey Manufacturing marks the first time that the issue appears to have been squarely addressed by the court.

The defendants in Lindsey Manufacturing, as well as the defendants in two other pending cases - one in another California federal district court and the other in the Southern District of Texas(4) - challenged the Department of Justice's broad interpretation of 'foreign official' in pre-trial motions to dismiss. The motions were extensively briefed in all three cases, but Lindsey Manufacturing is the first to be decided. The most elaborately briefed motion is still before the court in the Carson case pending in the Southern District of California. All three motions were filed within the last three months.

The Lindsey Manufacturing defendants argued that:

• the plain meaning of the term 'instrumentality' excludes state-owned enterprises;
• the legislative history of the Foreign Corrupt Practices Act indicates that Congress did not intend to include employees of state-owned enterprises as foreign officials; and
• if employees of state-owned enterprises are foreign officials, then the statute is unconstitutionally vague.

The defendants in Carson and O'Shea have made similar arguments.

Reliable media sources reported that Matz stated in his oral ruling from the bench that the defendants' attempt to argue for a more limited definition of the term was "improper, unfounded and incorrect".(5) The judge is expected to issue a written order confirming his oral ruling.

Following the hearing, Lindsey Manufacturing's defence counsel conveyed that the judge's decision was based on the nature of CFE and the "essential governmental function" that CFE performs.(6) Defence counsel further stated that the essential governmental function "appeared to be more important to his ruling than the legislative history" of the Foreign Corrupt Practices Act, and that "it was clear [the judge] felt [CFE] functioned as an agency or department of the Mexican government", and "relied heavily" on the Mexican Constitution and Mexican law.(7)

The Lindsey Manufacturing ruling is significant as it represents a victory for the Department of Justice that - at least for the time being - will likely strengthen and embolden the government's efforts to bring enforcement actions against companies and individuals based on its expansive interpretation of the term 'foreign official'. Additionally, while the extent to which the ruling will affect the Carson and O'Shea courts' decisions is uncertain, the decision will likely be weighed as both courts consider whether to narrow the current government view of who is a 'foreign official' for purposes of Foreign Corrupt Practices Act enforcement under the respective facts of each of those cases.

The next two decisions will be highly anticipated. Certainty regarding who will be considered a foreign official under the Foreign Corrupt Practices Act, and thus who should be considered a potential recipient of an improper payment under the act, is critical as companies determine how best to formulate an effective compliance programme in the current enforcement environment. Definitive rulings from the three courts in the pending cases will impact on enforcement and corporate compliance initiatives alike.

For further information on this topic please contact Richard Craig Smith, Marsha Z Gerber, Mary Beth Balhoff or Kimberly Sullivan Walker at Fulbright & Jaworski LLP by telephone (+1 202 662 0200), fax (+1 202 662 4643) or email (rcsmith@fulbright.com, mgerber@fulbright.com, mbalhoff@fulbright.com orkwalker@fulbright.com).

Endnotes

(1) No 2:10-cr-01031-AHM (CD Ca).

(2) 15 USC §§ 78dd-1(f)(1)(A), 78dd-2(h)(2)(A), 78dd-3(f)(2)(A).

(3) See US v Nguyen, No 2:08-CR-522 (ED Pa); US v Esquenazi, 1:09-cr-21010 (SD Fla).

(4) See US v Carson, No 08:09-00077-JVS (SD Ca); US v O'Shea, No 4:09-cr-00629 (SD Tex).

(5) See Steven Mikulan and Aruna Viswanatha, "Judge Upholds DOJ Definition of 'Foreign Official'", Main Justice: Just Anti-Corruption (April 1 2011).

(6) Id.

(7) Id.

Long Awaited Guidance on UK Bribery Act 2010 Issued Amidst Heavy Criticism

Amid much criticism the Government of UK has issued the long awaited Guidance Procedures to support the implementation of the UK Bribery Act which was passed on 9th April 2010.   The Government says the Act aims to ensure the UK can clampdown on corruption without being burdensome to business. For example, ensuring anti-bribery procedures are proportionateto the bribery risks firms face and to the nature, scale and complexity of its activities. The Guidance issued on 30th March 2011 underscores six (6) principles which corporations seeking to avoid liability should follow.

The six key principles are:

• Proportionate procedures

A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.

• Top-level commitment

The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.

• Risk assessment

The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.

• Due diligence

The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

• Communication (including training)

The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.

• Monitoring and review

The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.

Justice secretary Kenneth Clarke says: “I have listened carefully to business representatives to ensure the Bribery Act is implemented fully and in a workable, common sense way – this is particularly important for small firms that have limited resources. I hope this guidance shows that combating the risks of bribery is largely about common sense, not burdensome procedures.”

The above notwithstanding, the Guidance has already come under some severe criticism.  Transparency International UK calls the Guidance "deplorable" and insists it will weaken enforcement efforts under the Act.  Chandrashekhar Krishnan, Executive Director of Transparency International UK explains:

"The Bribery Act, as passed by the last Parliament, is one of the best anti-bribery laws in the world. But the Guidance will achieve exactly the opposite of what is claimed for it. Parts of it read more like a guide on how to evade the Act, than how to develop company procedures that will uphold it.

‘It is deplorable that changes made to the draft Guidance since late last year, and now enshrined in the published version, depart from international good practice in several areas. The Ministry of Justice has exceeded its brief with this final Guidance which undermines the Act and will limit its effectiveness. There is now a significant risk that bribery will go unpunished."

Some of the identified loopholes include:

• A non-UK company listed on the London Stock Exchange (LSE) is not automatically caught by the Bribery Act. This means that a) it could use capital raised in the UK to pay bribes overseas, and b) a UK-based company that loses a contract to a non-UK company listed on the LSE which paid a bribe to win the contract, may have no recourse in the UK courts. [Guidance para 36]
• A non-UK parent company A with a large UK subsidiary B could pay bribes through subsidiary C based in a third country. If UK subsidiary B did not directly benefit from the bribes, the non-UK parent company A would not be caught by the Bribery Act – even if its other subsidiary C was competing unfairly with honest UK companies. [Guidance paras 36 & 42]
• A UK company would be able to outsource bribery by building a chain of subcontractors sufficiently long to distance itself from bribe paying [Guidance para 39]

The Bribery Act 2010 was passed with all-party support. It introduces an offence of corporate failure to prevent bribery unless a company can prove that it had ‘adequate procedures’ in place to prevent bribery. The Secretary of State for Justice is required, by section 9 of the Bribery Act, to provide official Guidance on ‘adequate procedures’. The corporate offence of failing to prevent bribery can only come into force after the Guidance has been issued. Transparency International UK has been campaigning for early publication of the official Guidance that would not dilute the Act. Publication of the Guidance was delayed by further consultations in late 2010 and a last-minute burst of lobbying in early 2011 by some business groups.

It is expected that the Act will come into effect from July 2011. 

Download a copy of the UK Bribery Act 2010 and the Guidance. 

OECD Report on Enforcement of Canada's Corruption of Foreign Public Officials Act (CPFOA) 1999

Although Canada has recently made progress in investigating the bribery of foreign public officials by Canadian businesses, Canada has only completed one prosecution since it enacted its foreign bribery law in 1999. A new March 2011 report by the OECD states that Canada’s regime for enforcement of the Corruption of Foreign Public Officials Act (CFPOA) remains problematic in important areas.

The OECD Working Group on Bribery has just completed a report on Canada’s enforcement of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Enforcement has recently increased, with one company convicted in 2005 for violating the CFPOA, one ongoing prosecution and over 20 active investigations, the report notes. Credit for these cases is largely attributed to the RCMP International Anti-Corruption Unit, established in 2008. The RCMP Unit has two teams – one in Ottawa, Canada’s capital, and another in Calgary, Canada’s hub for the extractive industries. The Unit is also commended for its substantial public outreach and awareness-raising efforts.  But the report warns that Canada’s ability to successfully prosecute these investigations will be in jeopardy unless the Public Prosecution Service of Canada is given the resources it needs to prosecute the large volume of cases that may soon follow the investigations. 

Other main recommendations of the Group are as follows:

• Amend the CFPOA so that it is clear that it applies to bribery related to the conduct of all international business, not just business ‘for profit’;
• Ensure that sanctions applied in practice for CFPOA violations are effective, proportionate and dissuasive;
• Take such measures as may be necessary to prosecute Canadian nationals for bribery of foreign public officials committed abroad; and
• Clarify that police and prosecutors may not consider factors such as the national economic interest and relations with a foreign State, when deciding whether to investigate or prosecute allegations of foreign bribery. 

The Working Group commended Canada for codifying corporate liability in the Criminal Code for CFPOA and other offences, as well as important initiatives for increasing reporting of foreign bribery in the public and private sectors, including enacting a Criminal Code offence of threatening or retaliating against employees who report misconduct.

The report, available at www.oecd.org/daf/nocorruption, lists all of the recommendations to Canada adopted by the Working Group on Bribery - which includes the 34 OECD Member countries plus Argentina, Brazil, Bulgaria and South Africa - and includes an overview of enforcement efforts and specific legal and policy features in Canada for combating the bribery of foreign public officials. Due to the significance of the issues raised in this report, the Working Group recommends that Canada report back to it on progress in October 2011. Following the usual process, Canada will also make an oral report within one year and a further written report within two years, which will be made publicly available.

MW Kellogg Ltd to pay £7 million in SFO High Court action

The Serious Fraud Office (SFO) has taken action in the High Court today which has resulted in an Order for the company, M.W. Kellogg Limited (MWKL), to pay just over £7 million in recognition of sums it is due to receive which were generated through the criminal activity of third parties. The High Court made the Order under Part 5 of the Proceeds of Crime Act 2002. 

The SFO recognised that MWKL took no part in the criminal activity which generated the funds. The funds due to MWKL are share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by MWKL's parent company and others.  The agreement will lead to the payment of £7,028,077 within fourteen days in full and final settlement of the case.  This sum represents the share dividends due and the interest which has accrued on these sums.

The contracts were awarded to a company partly owned by MWKL on behalf of its US parent company.  MWKL reported concerns to the SFO under the "self referral" scheme and fully co-operated with the subsequent investigation. The SFO, working in partnership with the US Department of Justice, reviewed the conduct of MWKL and decided that the most appropriate approach was to remove the funds which will become due to the company through the unlawful conduct. This reflects the finding that MWKL was used by the parent company and was not a willing participant in the corruption.

The US parent company was one of four corporate entities which formed a joint venture to bid for contracts on a liquefied natural gas project in Nigeria. The joint venture created three special purpose vehicles to bid for, and subsequently run, the contracts. Three of the four contracts won by the joint venture were obtained through promises to pay or payments of bribes.  The US parent company, Kellogg Brown and Root LLC and its predecessors (KBR) has been subject to a criminal and civil investigation in the US.  The criminal investigation, which was conducted by the Department of Justice (DOJ), into the Bonny Island Project related to KBR and a number of other corporate and individual parties being involved in bribery and corruption.  KBR has acknowledged, in its plea agreement with the DoJ, that it owned the special purpose vehicle created for the Nigerian project, through MWKL in order to distance itself from the corruption and avoid the consequences of the Foreign Corrupt Practices Act 1977.  KBR had resolved all matters with the US authorities, including a civil settlement with the Securities and Exchange Commission, by February 2009.   

The agreement also ensured that MWKL overhauled its internal audit and control measures to enable it to satisfy the SFO that its compliance systems are in accordance with UK law.  MWKL has also agreed to pay the costs of the investigation.

The Director of the Serious Fraud Office, Richard Alderman said: "The SFO will continue to encourage companies to engage with us over issues of bribery and corruption in the expectation of being treated fairly. In cases such as this a prosecution is not appropriate. Our goal is to prevent bribery and corruption or remove any of the benefits generated by such activities.  This case demonstrates the range of tools we are prepared to use."

Notes for editors:

1. The Serious Fraud Office is a government department responsible for investigating and prosecuting serious and complex fraud.  The SFO is headed by the Director (Richard Alderman) who exercises powers under the superintendence of the Attorney General. These powers are derived from the Criminal Justice Act (1987).

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