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.