Brand-Rex Limited, a Scottish company specialising in developing cabling solutions has become the first UK company to be penalised for contravention of section 7 of the Bribery Act 2010.
Brand-Rex was ordered to pay £212,800 as part of a civil penalty imposed by the Scottish authorities after self-reporting an instance of failing to prevent bribery by a third party associated with the company.
What had Brand-Rex failed to do?
Brand-Rex had been involved in a totally legitimate scheme called ‘Brand Breaks’, in which UK distributors and installers were rewarded for meeting or exceeding their sales targets.
The difficulty for Brand-Rex stemmed from the fact that an independent installer of its products (an associated person, as defined under the Bribery Act) offered tickets from the scheme to an employee of one of his customers. That employee was in a position to influence decisions as to where his company purchased cabling from (therefore any bribe would have been in favour of Brand-Rex). In the absence of any “adequate procedures defence” Brand-Rex was in breach of section 7 of the Bribery Act even though it may not have intended this employee to receive any tickets.
Once the issue had been identified, Brand-Rex conducted an internal investigation to establish what had occurred, then reported the matter to the authorities.
Lack of “adequate procedures”
Of course, Brand-Rex would not have been guilty under section 7 had it been able to assert that it had “adequate procedures in place” to stop this type of behaviour occurring. However, it appears that Brand-Rex accepted that its procedures fell short of allowing it such a defence. Instead, it agreed to ensure the implementation of robust ABC policies, procedures and training programmes.
Why a civil penalty?
Scotland operate a particular voluntary disclosure scheme, which means that companies who self-report and cooperate are able, in some circumstances, to persuade the authorities to pursue a civil penalty rather than criminal prosecution.
Would the SFO react in the same way?
Probably not. There is no such scheme operating in England, and the best a company could hope for in these circumstances from the SFO is likely to be a deferred prosecution agreement (DPA). A DPA allows for the suspension of a prosecution, but only if the company agrees to strict conditions. In addition, the SFO has stressed that whilst self-reporting will be taken into account when considering the appropriate course of action, there is never any guarantee that a DPA will be offered.
What can companies learn from this?
Companies should also be aware of the importance of undertaking a full internal investigation into alleged wrongdoing as soon as possible.
Brand-Rex would have had a complete defence were there in place adequate ABC procedures to prevent bribery by its associated persons. In this case, such measures may have included compliance training to third parties and on-going monitoring of the way in which they conduct their business.