Richard Alderman is the former Director of the United Kingdom Serious Fraud Office (“SFO”). Since leaving the SFO in April 2012, Alderman has remained active in anti-corruption projects.
In this Q&A, Alderman discusses certain of these projects and offers insight on the following issues: the current international enforcement climate including multi-jurisdictional issues; voluntary disclosure; DPAs; and a compliance defense.
In April 2012, you left the SFO. What have you been doing since?
I have been working with some international institutions and NGOs dealing with anti-corruption on the front line. This is what I wanted to do because I had met a number of individuals who inspired me. Recent examples are the Convention on Business Integrity in Nigeria and an initiative by the Egyptian Junior Business Association aimed at the vibrant SME sector in Egypt. I have also had the privilege of meeting individuals involved in the radical transformation of the procurement practices of Moscow City Council.
How do you see the current international corruption enforcement scene?
We have moved on from where we were a few years ago when there were only a few states that took action in these cases. Examples of issues now are-
- How do we deal with the interests of the different states that want to enforce the law?
- What will be the impact of more enforcement by demand states (including demand states that are also supply states)?
- When will law enforcement agencies uncover and prosecute corrupt companies that have no intention of complying with global rules?
- How do we get the proceeds of settlements back to the demand states?
- Can a system of incentives be devised to reward companies with top quality anti-corruption systems?
In current enforcement era, multiple sovereigns may have jurisdiction over the same alleged conduct. What issues do you see regarding multi-jurisdictional enforcement?
This is becoming a key issue. I prepared a detailed report for the UNCAC conference in Panama in November 2013 that covered these and other issues.
Companies are undoubtedly at risk here. If we look at violations first, different states can prosecute for the same violation. The company’s only protection is the principle of double jeopardy but this is interpreted in different ways in different states. For example it is not an issue for the US because the US does not recognise foreign convictions and acquittals for this purpose.
This will become a particular issue when one of the enforcing states is the demand state. Why should such a state be prevented from taking action in its own courts because of a resolution elsewhere? We can expect national sovereignty issues.
Companies can also seek to exclude a state with a wide concept of double jeopardy by reaching a settlement with another state and then pleading double jeopardy in the first state. I have seen this.
The issue also arises with asset forfeiture. I do not understand how multiple states can confiscate the same asset or profit. Once the money has been paid to law enforcement somewhere then any further disgorgement is actually a criminal fine.
What about global settlements?
I am very much in favour of these. I know from my own experience that they are very difficult to bring about. The international mechanisms in Article 47 of UNCAC and Article 4(3) of the OECD Convention should be used to discuss how the different enforcing states should work together and how a global settlement should be structured. Neither mechanism has yet been used for this purpose but they are available. Enforcing states will be nervous but these mechanisms will be vital as more and more states start to enforce the law.
Do the recent Libor settlements have any implications for global settlements in corruption cases?
These settlements have been very remarkable. A UK prosecutor cannot however enter into such an agreement if there are criminal pleas in the UK. This is because the senior judge in the Innospec case said that it was wrong for the SFO to discuss the penalty to be paid by the company even if the penalty was subject to the overall approval of the court.
One consequence of the new UK DPA system is that the UK enforcing authority can enter into these discussions if what is being discussed is a DPA rather than a traditional prosecution. It will be up to the judge to decide if this is the right way forward.
The result is that UK prosecuting authorities will not be able to participate in global settlements in the future unless there is a DPA approved by the court. I see this as an issue that will be increasingly important in the UK.
Do you still favour corporate self-reporting of conduct that could implicate bribery and corruption laws?
Yes. I remain a keen supporter of self-reporting. This has however become more difficult for companies. There are two main reasons. These are-
- No enforcing state has set out its policy on when it will refer the self-report to another state. A company considering a self-report therefore has to think about the other states that may see the report (and whether employees are at risk). We need a proper understanding of what enforcing states should do. This needs to be publicly available and agreed by the UN and the OECD.
- Even if the report is not passed to another state, that other state is likely to see media reports of the resolution and the admissions made by the company and decide to start its own action. There is an increasing risk of these follow up cases.
Should companies carry out their own investigations when alerted to alleged instances of improper conduct?
My experience is that major global companies take these allegations very seriously and want to see what happened. There is an issue about whether the company should self-report immediately or whether it should carry out some preliminary work to satisfy itself that there is something in the allegation. The expectations of enforcing authorities can vary here. My view has always been that the company should be satisfied first that there is something that requires detailed investigation.
I am in favour of companies carrying out their own investigations with agreement from the enforcing state about scope, milestones and regular updates. I know that some enforcing states will also want to carry out their own independent investigation. I understand the reasons for this but it means that the authority is spending its scarce resource on a case where the company is willing to cooperate and not on the more difficult cases where the company has no intention of self-reporting and cooperating. As I see it there is too little action by enforcing authorities in finding such companies and dealing with them.
Recently the U.K. adopted DPAs. How do you feel about DPAs and what are the issues as you see them? What issues do you see regarding DPAs?
I have always been in favour of DPAs as one tool available to prosecutors. My experience was that the UK was in a poor position in global cases with international resolutions with the traditional criminal justice tools. I saw two main advantages of DPAs. These are-
- They can form part of a system of incentives to encourage companies to self-report and cooperate and to improve compliance.
- They enable prosecutors to discuss global resolutions without contravening the Innospec case.
I know that the FCPA Professor has expressed considerable public opposition to DPAs. I agree that they need to be transparent and that the judges have to be fully involved. I also agree that we still need to see the traditional full prosecution with debarment in suitable cases. This could be where the company is systemically corrupt and has no intention of abandoning corruption. I want to see more of these cases being pursued by enforcing states.
The full prosecution should be part of the toolkit of the prosecutor. There should be other tools for other types of case. It is notable that the only states that have made a sustained attack on corporate corruption over the years have either not used traditional prosecution or have used it sparingly and have also used alternatives. This is significant although it seems to me to be insufficiently appreciated.
Should corporate compliance be a defence to a bribery or corruption offense or merely mitigate the potential fine and penalty amount?
I remain in favour of the compliance defence. The Bribery Act offence is an excellent model in this area. I have seen how much impact this had on companies and the scale of the improvement made in their anti-corruption work. There are a number of other states that have compliance as a defence.
There is however an issue that is going to be increasingly relevant in those states that have compliance as a defence. The public wants to see the offence produce results in terms of criminal convictions. So far there do not appear to be any in the states with a compliance defence. There will be a question about whether compliance as a defence is right or whether the US approach with compliance as mitigation is to be preferred because of the results achieved. We can expect a lot more on this. It may be one of the issues to be considered in the recently announced UK review of the effectiveness of the enforcing institutions.
You have talked publicly about sanctions and incentives for companies as it relates to bribery and corruption offenses. Can you elaborate on this issue?
Alternatives to traditional prosecution together with self-reporting and cooperation are important incentives in the area of violations. There is though a wider issue that is not sufficiently recognised and discussed. This is whether there should be more general incentives to companies that have brought about an excellent standard of anti-corruption compliance.
There was a Recommendation by the OECD in 2009 encouraging states to look at public procurement, licenses, aid funding and export credits as a way of recognising companies with the highest standards of anti-corruption. There has been little progress on this although a few states have introduced some initiatives.
I am very much in favour of this. For example the citizens of a state will benefit if a company that meets very high standards is successful in a public procurement exercise and companies with a poor anti-corruption approach are not. If those companies with a poor record decide that they have to reform then that is a benefit to everyone.
I see this as one of the key issues in anti-corruption that will become increasingly prominent in the coming years. It has great potential to make a difference.