Aziz Rahman explains why the SFO’s enquiries into Formula

One are relevant to all senior executives and corporates.

Formula 1’s racy image seems to have spilled off the track,

as the sport finds itself at the centre of enquiries regarding possible corruption.

The high-profile sport has attracted the attention of both

the Serious Fraud Office (SFO) and MP’s; both of whom are interested in a major

deal that was agreed by motor racing’s power brokers.

Attention is focused on the 2013 Concorde Implementation

Agreement, the contract which outlined the sport’s governing principles and

power structure. It was signed by the sport’s governing body, the Fédération

Internationale de l’Automobile (FIA) and the Formula One Group. At the time,

Formula One Group was controlled by private equity firm CVC but was then sold

to investment firm Liberty Media for £6.2 billion.

Formula One Group paid the FIA £3.9m ($5m) in recognition of

it signing the Concorde Implementation Agreement. The deal also gave the FIA a

1% stake in the Formula One Group for the tiny price of £360,000. The FIA’s

approval was needed for Liberty’s takeover of Formula One Group: which it gave

and made a £62m profit by then selling its stake.

Agreement

Everyone involved has denied any hint of bribery regarding

the agreement.

The FIA has stated that: “The Concorde Implementation

Agreement entered into by the commercial rights holder (CRH) of Formula 1 and

the FIA in 2013 introduced a new governance structure for Formula 1 and

redefined certain conditions applicable to their relationship, in particular to

ensure that the FIA be properly remunerated for its regulatory role.

“Within this agreement, a lump sum payment of $5m was made

to the FIA as part of the global consideration received in connection with the

renegotiation of the terms of the agreements between the commercial rights

holder and the FIA, and of the Concorde Agreement, at that time.

“Following its approval, the Concorde Implementation

Agreement came into force and this sum was paid to the FIA and properly

accounted for. No individual received any payment out of this sum. Any

allegation to the contrary would be defamatory.”

It added: “There is no conflict of interest on the part of

the FIA with regard to its approval of the change of control of the CRH which

has been approved... taking into consideration exclusively the terms of the

existing agreements between the CRH and the FIA and the best interests of the

Championship.’’

Concerns

However, MP Damian Collins, chairman of the government’s

Culture, Media and Sport Select Committee, had concerns about the deal. He alerted

the SFO to the deal.

In a reply to the MP, the SFO Director David Green states:

“The SFO’s Intelligence Unit is following this issue very

closely and reviewing materials pursuant to allegations of bribery and

corruption

“I can assure you that the SFO will conduct a thorough

examination of the facts in order to determine whether or not there are

suspected offences that on reasonable grounds involve serious or complex

fraud.”

Mr Collins has said that the main issue is “whether the FIA

discharged its duties responsibly’’ and has expressed concern about why F1

would need to make a payment to its governing body and regulator as part of the

Concorde.

It seems almost inconceivable that an organisation as high

profile and powerful as FI would find itself subject to business crime

allegations. But alarmingly, this is not the first time in recent years that

the sport has been the subject of bribery allegations.

Three years ago, the then head of F1, Bernie Ecclestone, was

set to go on trial in a German court, accused of bribing a banker with $44M to

ensure the sale of a stake in F1 to a private equity firm went ahead. That case

came to what seemed – to British observers, at least – a bizarre end when

Ecclestone, who always denied the allegations, settled it in an arrangement

that involved a £60M payment.

Sport and every other type of business is now subject to far

more stringent scrutiny than ever before. And while it would be a mistake to

think that elite sport is immune to bribery prosecution, it would be an equally

big error of judgement for any company with a lower profile than F1 – which is

just about all of them – to think any of its corrupt activities will never come

to the SFO’s attention.

Bribery Act

The Bribery Act 2010 sets high standards for all companies and

anyone acting on their behalf. It covers the activities of anyone and everyone

representing any company and its punishments include unlimited fines and, for

individuals, up to ten years’ imprisonment.

The Act, which came into effect in 2011, makes a company

liable for the corrupt actions of any staff, agents or third parties acting for

it, either in the UK or abroad. The bribery does not even have to be carried

out in the UK. The person committing it simply has to have a close connection

to the UK. Being a British citizen, national, subject or resident or working on

behalf of a company that does at least some business in the UK is adequate for

the purposes of the Act. If such a person pays, receives or requests a bribe,

either directly or indirectly, to perform a relevant function improperly

anywhere in the world then there are grounds for a Bribery Act prosecution.

There is also an offence of using a bribe to influence a foreign official to

gain a business advantage.

Any company facing investigation for breaching the Bribery

Act does have a valid defence if they can show that it had carried out all

adequate procedures to prevent anyone representing it acting illegally. But if

that is not the case, a prosecution of the company is likely. And if that offence was committed with the

consent or “turning of a blind eye’’ of a senior officer of the company then

that person can have criminal proceedings brought against them.

Scope

The scope of the Act, therefore, makes it impossible to

ignore. Companies of all types and sizes must take steps to make sure they have

done everything to prevent them being prosecuted for bribery. This means each

company assessing all aspects of its work to examine where the potential for

bribery exists.

Workplace procedures must then be introduced to “design

out’’ that potential. Staff have to be given advice and, if necessary, training

on both the dangers and tell-tale signs of bribery. Whistle blowing procedures

also have to be introduced to ensure that staff or anyone else with a

connection to the company can raise concerns of wrongdoing.

When the damage that can be prevented by such actions is

considered, such procedures have to be seen as worthwhile. If companies are

wary of what they should do, there is no shortage of specialist legal advice

available – however high or low-profile your business is.