Previous posts here, here, here, here, and here focused on various aspects of the recent U.S. and U.K. enforcement action against Amec Foster Wheeler / John Wood Group.
This guest post by London-based Debevoise attorneys Karolos Seeger, Aisling Cowell, Thomas Jenkins, and Andrew Lee highlights key issues and questions arising from the UK DPA Amec Foster Wheeler Energy Limited (“AFWEL”).
Prosecution of individuals. All of the AFWEL DPA documents contain introductory wording stating that the Court made no findings of fact or assessment of the culpability of any individuals who may have been involved in the company’s wrongdoing. This is the first time a SFO DPA has included this, or equivalent, wording. This statement is likely due to the SFO’s failure to secure the convictions of any individuals who have been prosecuted in connection with previous DPAs, and is therefore intended to avoid prejudicing the position of those who may be prosecuted following the AFWEL DPA. Edis LJ noted documents indicating that senior employees and directors of AFWEL had engaged in corrupt activities, and that SFO decisions about whether to charge them would be made within three months.
Successor liability. Unlike in the United States, there is currently no established principle in English law that companies can be held criminally liable for the acts of companies they acquire where such acts took place prior to the acquisition. As with the Sarclad DPA, Wood appears to have agreed voluntarily to pay the penalty imposed on AFWEL as a ‘good corporate citizen’ and due to its group structure and the dividends it has received as AFWEL’s parent company, as well as to secure a DPA rather than risk AFWEL being prosecuted. The judgment states that Wood did not take into account the SFO investigation in its 2017 valuation of Amec, since this was announced shortly after its offer was made and the offer was based only on publicly available information. This demonstrates the potential importance of pre-transaction anti-bribery due diligence.
Edis LJ emphasised that FWEL’s criminal conduct was so serious that if the individuals involved were still connected with the company, a DPA would not have been appropriate. It was vital that, through the two takeovers, Wood was ‘twice removed’ from the ownership and management of FWEL. Other factors relevant to the Court’s determination that a DPA was in the interests of justice here were Wood’s full cooperation with the SFO investigation, its implementation of a robust corporate governance system, and its commitment to ensure that business was carried on without corruption in the future.
Handling of investigation and self-reporting. Edis LJ found that FWEL had a “widespread and high level culture of criminality” and that “corruption appears to have been endemic”. In particular, he condemned the FWEL Board’s “deplorable” failure to self-report to the SFO following investigation reports produced by the company’s lawyers from 2007 to 2009. While Edis LJ acknowledged that companies have no legal obligation to self-report, he stated that FWEL should have done so “as a matter of ethical corporate governance”. However, this was not taken into account in determining the financial penalty. Edis LJ also criticised FWEL’s “ineffective” measures to address the corruption identified in the reports, noting that the wrongdoing continued despite the Board’s knowledge of it.
Penalty calculation. The penalty calculation in this case was unusual and complex. It incorporated various discounts, including reductions for a guilty plea, cooperation, and Wood being ‘twice removed’ from FWEL. The penalty also included a 10 per cent totality reduction for the conduct (except the Malaysian charges), as the total fine was deemed disproportionate when the sentences for the different offences were added together. This is the first time that a specific totality reduction percentage has been included in a DPA rather than taking a more holistic approach in applying the totality principle when following the steps set out in the sentencing guidelines; however, the judgment does not explain how this figure was determined.
AFWEL agreed to pay £210,610 compensation to Nigeria due to FWEL’s corrupt payments to Nigerian police and tax officials to settle an allegation of tax evasion. The compensation was calculated as the difference between the tax claimed and the amount paid. This is only the second time that a company has agreed to pay compensation in a DPA to those impacted by its offences. Other DPA judgments note the typical difficulty in bribery cases of identifying the victims and quantifying the bribes paid and the resulting loss.
Undertakings. Unlike previous DPAs, Wood gave the undertakings and guaranteed AFWEL’s performance of all its obligations, as well as taking on the same commitments across the entire Wood group. The undertakings are broadly similar to those found in previous DPAs, including enhancing Wood’s ethics and compliance programme and continuing to cooperate with the SFO.