Rahman Ravelli | View firm profile
Aziz Rahman looks at the case of Petrofac, explains how
bribery can ruin a company and emphasises what must be done to prevent it.
We may not always know the extent of bribery or who is
involved in it. But we can safely assume it is going on.
A European Parliament-commissioned report last year
concluded that corruption costs the EU up to 990 billion euros a year; which
gives some idea of the scale of bribery.
What many in business may be unaware of is the damage that
bribery can bring to their companies, directly or indirectly. There are those
in business who, despite the tight restrictions imposed by the UK’s Bribery
Act, maintain that bribery is an essential tool for “greasing the wheels’’ when
it comes to trading in certain countries.
The fact that the Bribery Act carries unlimited fines, up to
ten years in prison and can lead to assets being confiscated after a conviction
should be enough of a deterrent to those who still see bribery as an everyday
part of doing deals. But if it is not, let’s look at the case of Petrofac.
Allegations
The Serious Fraud Office (SFO) has started an investigation
into Petrofac, its subsidiaries and employees because of suspicions of bribery
and money laundering.
Since that investigation began, the firm has been warned it
faces a legal claim based on allegations that it misled investors over the
scandal. This claim followed a huge fall of more than 50% in the value of
Petrofac’s shares following the announcement that it was being investigated by
the SFO.
Added to this, the Chief Operating Officer has resigned
after being suspended indefinitely. He and the Chief Executive have been
arrested by the SFO and questioned under caution.
Of course, we do not yet know the outcome of the SFO
investigation. The allegations of bribery and money laundering remain, as yet,
unproven. But the allegations alone have led to a hugely unsettling
investigation, the prospect of damaging legal action, a massive fall in
Petrofac’s worth and boardroom chaos. The damage has been done months, or even
years, before any legal penalties may be imposed.
Prevention
The Petrofac case illustrates perfectly the idea of business
being like a “house of cards’’ if something is not right. If bribery or another
crime is being committed in a company’s name, the discovery of it can lead to
the loss of its reputation, financial standing, personnel and prospects. Which
can hardly be considered to be greasing the wheels.
Bribery must be viewed as something that needs to be
prevented rather than celebrated or permitted.
The Petrofac case is the perfect advert for the value of
prevention. Only by introducing preventative measures can a company have any
hope of ensuring they do not suffer a similar fate.
If you do not devise proper compliance procedures you can
hardly be surprised if you are then investigated for failing to comply with the
relevant law. The Bribery Act, for example, covers the activities anywhere in
the world of any company with a UK connection. Hoping to avoid prosecution
under an Act with such a wide-ranging scope, while not having proper compliance
in place, is muddled thinking.
Compliance
Regardless of the nature of a business or the geographical
or trade sectors it operates in, a well thought-out and carefully enforced
compliance programme will greatly reduce the chances of bribery or money
laundering – or other white-collar crimes – being committed by people within
that company.
It enables a company to prevent identify any possible
wrongdoing or, at the very least, recognise it early. Such early recognition
and reporting of bribery can be incredibly valuable when dealing with the
authorities.
If wrongdoing is carried out, a company will be treated less
harshly by the authorities if it can demonstrate that it did all it possibly
could to be legally compliant. It will also be treated more leniently if it
reports the wrongdoing swiftly, having identified it through its procedures.
While we do not yet know what will happen with Petrofac, it
is safe to say that any punishment that may be administered will be far more
severe if the SFO finds little or no evidence of appropriate compliance
procedures being acted upon.
When it comes to acknowledging a company’s commitment to
compliance, the authorities will not give any credit for preventative measures
that look as if they are paying mere lip service to the idea of prevention.
With Petrofac, and other similar cases, the authorities will
be looking for evidence that the company has:
A strong culture of white-collar crime prevention.
An awareness of the bribery and money laundering risks in
the countries and business sectors in which it operates – and procedures to
minimise those risks.
Effective procedures for carrying out due diligence on those
who work with, for or on behalf of the company.
A whistle blowing procedure for reporting wrongdoing that is
operating effectively, regularly reviewed and made known to everyone working
for the company in any capacity.
Scope
The authorities are looking to come down hard on business
crime. As a result, business has to act to make sure it is reducing the
potential for such illegal activity.
While the punishments can be severe, the scope for leniency
is large. The introduction of deferred prosecution agreements (DPA’s) has given
the authorities the opportunity to impose conditions on a firm that has broken
the law, as opposed to prosecuting it.
But such leniency will only be made available to those who
made the effort to prevent crime. Anyone else found to have allowed or ignored
bribery, money laundering or other wrongdoing will still have to pay the heavy
price that accompanies a lack of compliance.