Justice vs Settlements: Serious Fraud Office Criticised Again For Handling Of Bribery Case

The UK’s Serious Fraud Office has an unenviable task: tackling fraud and money laundering and related activities, in all their various forms.

Whilst attempting to tackle these white collar crimes, the Serious Fraud Office (SFO) has come under great criticism for recent failed cases, and its own activities. The cessation of a case against ‎a firm accused of bribery for a fine in excess of £6m once again brought the Office under unfavorable scrutiny.

In details released to the media, the ‎UK subsidiary of an (unnamed) US company recently agreed to pay in excess of £6m for bribery and corruption offences. This is the second deferred prosecution agreement (DPA) that the much criticised SFO has arrived at with a company under investigation for fraud related offences. ‎The deal struck between the unnamed company (identified due to ongoing legal proceedings only as ‘a UK SME’) and the SFO was formally approved in a court hearing ‎by Lord Justice Leveson.

Th‎e charges against the comp‎any include alleged conspiracy to corrupt – ‎contrary to Section 1 of the Criminal Law Act (1977) – conspiracy to bribe – also contrary to Section 1 of the same Ac‎t – and failure to prevent bribery – contrary to Section 7 of the Bribery Act (2010). These and other charges are ‎all in connection with contracts to supply products to customers in a several overseas countries. ‎
Further details released of the case and the DPA indicate that allegedly the company’s employees and agents were involved in systematically offering (or paying) bribes to secure contracts overseas. These offences happened between 2004 and 2012. In 2011, the parent company started a global program of compliance and similar checks; that is when the alleged fraud first came out into the open, with questions raised over how some foreign contracts were obtained. With concerns raised internally, a law firm was hired by the SME to conduct an independent internal investigation. In turn, the law firm passed the results of its findings to the SFO, which began a two year investigation into the alleged activities of the UK company in February 2013. When sufficient evidence had been gathered, the SME was taken to court by the SFO on fraud charges.

In line with the DPA earlier this year, legal proceedings concerning the alleged offences wereimmediately suspended. In return, the ‎the company will pay financial orders of £6,553,085. This includes a £6,201,085 payment of gross profits, and a financial penalty of £352,000. Of the main payment, £1,953,085 will be paid by the US registered parent company, as a reflection of the dividends received by them from the UK subsidiary.

What helped in the negotiations towards the settlement was the fact that the company had effectively self – reported the misconduct, and investigated the alleged fraud itself, involving an external party and the relevant authorities at an early stage.

Indeed, following the settlement bei‎ng formally approved in Southwark Crown Court, Lord Justice Leveson said of the settlement that ‘[this conclusion] provides an example of the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption.’

‎SFO Director David Green attempted to silence critics of the deal by saying of the case that it said ‘raised the issue about how the interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfil the terms of a DPA but demonstrates exemplary co-operation.’‎

The SFO has been greatly criticised in recent years, after a string of high profile fraud cases that either resulted in no prosecutions, or cases that revealed glaring errors or issues with the SFO. Fraud and money laundering are never easy cases to prosecute; such cases are inherently complicated, and regularly involve money changing hands globally, shell companies, and more often a degree of legality and legitimacy. The relevant laws and regulations do not make things easy for the British authorities, with unclear definitions of various offences, and a lot of latitude in how various laws can be interpreted. Further, communication between the various government investigative agencies is rarely effective; the sand can be said of communication between the financial and legal sectors involving suspected fraud.

Although that issue of communication is being addressed (with some success), th‎e fact remains that fraud by its very nature is a hard area to prosecute successfully. As such, quite often an agreement similar to a deferred prosecution agreement can be the only way to see justice done. Instead of risking a lengthy and expensive trial, which could very well result in no convictions, it could be argued that a DPA does see justice done, in that the alleged perpetrators of fraud and money laundering in effect admit to their guilt. Although there are no jail terms or stiff fines handed down, a fine is handed down, and a degree of guilt is reached at.

Admittedly, though, there are many who would see such agreements as a miscarriage of justice. The case is dropped, the charges dropped, and the party at fault walks away free, and with only a fine to pay in reparation for their wrongdoing. Morally and ethically, such agreements remain questionable.

Although not ideal – a DPA or similar does make the fraudsters suffer, and sees them make at least some reparation for their crimes. The question is though, whether it is better to see justice done with a trial that could result in no prosecutions – or whether such a deal and indirect acknowledgment of guilt is better for justice.

This case and settlement with the unnamed UK based US subsidiary company is the second of its kind. ‎Whatever the morals and merits of such agreements – rest assured it will not be the last. With the Serious Fraud Office under increased pressure and scrutiny to tackle and successfully prosecute fraud and money laundering in all its various guises – DPA’s are a welcome method the Office can use to resolve complex and uncertain fraud cases.

The final word goes to ‎Christopher David, legal counsel in WilmerHale’s white collar crime team. Commenting on the case, he said of the judgement that it ‘‎may well give comfort to lawyers and companies that the DPA regime is going to provide a meaningful alternative to a guilty plea in cases of corporate misconduct – not least because the penalty has been carefully designed to remove the benefit of the criminality but not force the company into insolvency.’ Further, Mr David noted that the case‘does… reinforce the SFO’s stated view that companies that self-report and provide full co-operation will be see this co-operation recognised by a favourable resolution’.

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Government Reviewing Criminal Courts Charges

Lord Chancellor Michael Gove has indicated that the government is reviewing the controversial charges attached to criminal courts in light of the concerns that have been expressed by a number of groups. Speaking in the House of Commons, where he was answering questions recently, Gove said that the government intended to review “the operation of the charge.”

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This has led to hopes from many quarters that the charges could be reduced or dropped altogether. A number of different groups raised concerns about the introduction of charges to the criminal courts, including MPs, independent campaign groups, magistrates, and legal professionals.

The charges were first introduced in April, and attracted considerable controversy before and after being rolled out. Under the system, defendants who plead not guilty and are subsequently convicted could be required to pay fees of up to £1,200. This led to concerns that innocent people may be encouraged to plead guilty out of fear that pleading not guilty will just make things worse if they should still be convicted.

Controversy also surrounded the way in which new fee guidelines were introduced. In the closing days of the last parliament before the general election earlier this year, these guidelines were pushed into legislation with little or no debate – a move which attracted considerable criticism from organisations such as the Law Society.

Controversy only grew after the charge was introduced in April. Over 50 magistrates have resigned in order to protest the fees, and criticism has been widespread from parliament, the legal industry, and independent bodies.

Gove’s suggestion that the government may be looking into making changes to the new system has therefore been widely welcomed, with many organisations expressing hopes it will be scrapped altogether. There have already been some previous suggestions that the charges could be dropped, including discussion of the possibility of making up revenue from a new levy on the biggest City law firms instead of through these fees.

Gove was responding to a question from Conservative MP Alex Chalk when he gave the indication that the charges could be subject to review. Chalk asked whether judges and magistrates could have any discretion when it came to whether and how the charge should be imposed. Gove called this question a “valuable submission” and admitted that the fees on criminal courts were “cause for concern for the house.”

Gove also said that while the government had listened to the various concerns expressed and indicated that the situation would therefore be reviewed. However, he also insisted that these concerns had to be balanced against various other considerations.

Law Centres Recovering From Impact of Cuts

According to an annual review of this area of the legal system, law centres are successfully managing to recover from the impact of significant cuts to their funding. “Picking up the Pieces,” the latest annual review from the Law Centres Network, said that while centres had been “certainly knocked” they were finding “surprising ways” to come back from the loss of funding.

Law centres are independent sources of professional legal advice, and can be invaluable to those on low incomes who need help with legal matters. They are in essence publicly funded, but significant cuts to funding, introduced in 2013 as part of wider legal budget cuts, have left many struggling to support full provision of their services with these funds alone. However, the Law Centres Network’s report has revealed that law centres around the UK have begun finding a number of new ways to subsidise their operation.

A number of centres have made up the shortfall in available funding, at least in part, by charging certain clients – those who can afford to pay a fee – for some services. The decision by some centres to charge for services has been a controversial one, but is proving effective. Rochdale Law Centre, for example, now works closely with a non-profit legal practice, Rochdale Legal Enterprise. This practice operates in much the same way as any other firm of solicitors, but specialises in providing its services at low costs which are affordable to those on lower- and middle-tier incomes. Money generated by this solicitors’ practice is first used to cover  staff and overheads, and money earned over and above running costs goes to Rochdale Law Centre in order to support its provision of free services.

A similar arrangement has been created in Islington with the emergence of a social enterprise named Green Roots. The goal of Green Roots is to provide legal services that will be accessible to “people who would otherwise go without a lawyer,” by ensuring support is made available “at as low a price as possible.” The enterprise is owned by Islington Law Centre.

Others have formed links, partnerships, and cooperative arrangements with non-legal organisations and charities such as mental health or disability support organisations, projects supporting domestic violence victims, and food banks. These mutually-supportive arrangements help all involved parties, including Law Centres, to more effectively generate funding to cover the cost of continuing to operate.

Some law centres have even managed to expand their offerings when it comes to free advice, and in some cases this forms part of such a partnership. A number of centres are offering legal advice and services for free to organisations they are partnering with, or more particularly the people those organisations support, as part of an arrangement that also has benefits for the law centre in return.

Firefighters Across the UK Win Accident at Work Compensation Claim

A total of 66 firefighters from around the country have successfully obtained compensation in a recent accident at work claim. The case related to a stomach illness that afflicted the firefighters following flood training events held between 2008 and 2012.

When somebody has been injured or afflicted with an illness in the workplace and it is down to their employer’s negligence, they are legally entitled to compensation from that employer. While firefighters are naturally exposed to greater levels of professional risk than people in most other jobs, their employer is still required to take steps to protect their health and safety and do all they reasonably can to minimise those risks. As such, if negligence on their part is the cause, fire brigades are just as liable as any other employer for injuries resulting from accidents at work.

This particular claim relates to training events held at the UK National Watersports Centre, which is located in Nottingham. Fire brigades across the UK were required to provide firefighters with Swift Water Rescue Training following a bout of extreme weather in some parts of the country, and the one of the National Watersports Centre’s fast water canoe courses was used to replicate the conditions in question.

However, the water used by the centre came from the River Trent, a known polluted source which had been found to contain harmful contaminants and bacteria. The majority of firefighters taking part in the training became ill afterwards, many for a number of days, with key symptoms including vomiting and diarrhoea.

However, despite the fact that the great majority of firefighters attending training events at the centre became ill and a substantial body of evidence being presented to show that the Centre’s water was contaminated, fire brigades continued to advertise and use the venue for training events for some time. This was a clear case of negligence, which led to many more firefighters becoming avoidably sick after a number of subsequent events.

The Fire Brigade Union (FBU) pursued the compensation case against the fire brigades in question through the help of specialist accident and compensation solicitors. The brigades fought the case and denied wrongdoing, but it was found that they had failed in their duty to protect staff from avoidable risk by continuing to use a venue that presented a known hazard to health, and denying that hazard despite clear evidence. As such it was ruled that, like anybody injured through an employer’s negligence, the firefighters were entitled to the compensation they sought.

Small Businesses not Seeking Professional Legal Help

According to the Legal Services Board, the majority of small businesses tend to avoid seeking professional legal support unless they feel they have no option. Many small businesses, the Board said, see legal advice as expensive and as something to be kept as a last resort.

In a recent report, the Legal Services Board identified considerable reluctance among small businesses to make use of solicitors’ services, largely because of the costs involved. According to the research presented in the report, most small businesses have had little or no professional contact with the legal sector in the past year.

The report, The Legal Needs of Small Businesses 2015 Survey, identifies a number of trends among small businesses when it comes to seeking the help and support of lawyers. For the purposes of the survey, small businesses were defined as those employing 50 people or fewer – a group which, the report says, represents 99% of all UK businesses, 48% of employment, and 33% of the nation’s total business turnover.

Less than 10% of all small businesses in the UK, the report showed, had either an in-house lawyer or an external legal services firm with which they held a retainer. When businesses did pursue professional help and advice with their legal challenges, this was more often the advice of an accountant rather than of a solicitor.

Nearly half of all small businesses responding to the survey either agreed or strongly agreed with the statement that professional legal services represented a “last resort” when it came to dealing with relevant problems faced by their business. This compares to a mere 12 % who said that they either disagreed or strongly disagreed. This is perhaps explained b the fact that a mere 13% of respondents said that seeking the help of a lawyer was, in their opinion, a cost-effective solution to problems.

Usage of legal services from external providers has also declined since 2013. However, the report says the past two years have seen a significant reduction in the number of legal issues that small businesses encounter as a result of “better trading conditions,” so this could partly account for the decline. Nonetheless, legal issues remain an expensive problem for smaller businesses, costing them an estimated total of £9.7 billion annually.

Legal Services Board chair Sir Michael Pitt expressed disappointment at the survey’s findings. “Access to good-quality and affordable legal services,” he said, “helps small businesses to start up and grow.”

The findings of the Board’s new research, he continued, “provides further worrying evidence that their legal needs are not being satisfactorily met.”

Major Insurer Enters Legal Market

One of the UK’s biggest insurers has announced its imminent entry into the legal market. Liverpool Victoria, better known as LV=, is to launch LV= Legal Services which will provide assistance in a number of specific areas of the law.

LV= is one of the UK’s biggest providers of insurance and related financial services. It currently employs over 6,000 workers and has roughly 5.7 million customers across the country. The announcement that the firm will begin offering legal services makes it the latest company to move into the legal sector under an Alternative Business Structure (ABS) license.

In order to supply clients with advice and assistance in legal matters, LV= will be cooperating with national legal services provider Lyons Davidson. This firm is no stranger to working in partnership with insurance companies, as it has already entered into partnerships with Admiral Insurance and with the AA.

Among the legal areas that LV= will cover are employmant law, conveyancing, and personal injury. The firm’s new legal operations will also provide help and advice on wills, and on matters relating to probate and power of attorney. Legal operations within LV= will be established with the lelp of Lyons Davids onto provide a basic level of legal support which will be sufficient for the majority of customers. Those who require more specialist, involved, or expert assistance on matters such as employment law and personal injury will be passed on to Lyons Davidson’s own legal professionals who will be able to provide this higher level of support.

LV= intends to offer its new legal services through an online quote generator – something that will be familiar to many consumers as a tool used in LV=’s primary industry. Much like an insurance quote generator, the system will allow consumers to enter their personal details and information about their requirements, and will then be provided with an up-front, fixed quote for legal support.

As well as the online quote system, the LV= Legal Services website will contain what the firm has called a “jargon buster,” which aims to clarify legal terminology for consumers. The company will also have advisers available to take calls from 8.00am to 9.00pm, the announcement claims.

LV= General Insurance’s managing director John O’Roarke said that the firm would try to tackle the “confusing, stressful and expensive” nature that currently defines legal advice. The firm’s new venture, he said, “will offer a transparent and affordable solution for those with a genuine need for high-quality legal service and want the security of knowing what their costs will be upfront.”