A jury at Southwark Crown Court acquitted three former employees of Guralp Systems Limited (‘GSL’) who were accused of conspiring to make corrupt payments in relation to payments made to a South Korean public official between 2002 and 2015.
Following the acquittal and the removal of reporting restrictions, the Serious Fraud Office (‘SFO’) revealed on the 20 December 2019 that a Deferred Prosecution Agreement (‘DPA’) had previously been agreed with Guralp on 22 October 2019.
GSL, despite being relatively modest in size, has an international business. It was incorporated in 1987 by a Dr. Cansun Guralp. During the relevant period (namely from November 2003 to May 2015) he managed every aspect of GSL’s business. GSL employed Natalie Pearce from October 1997 onwards. By 2010 she was Head of Sales. In 2010 Andrew Bell joined GSL. He as director of the company from then until he resigned in July 2015.
Mr Justice William Davis in his judgment sets out that in February 2003 Dr. Guralp and Dr. Chi signed an agreement whereby Dr. Chi agreed to provide support and advice to GSL in the seismological market in Korea and to recommend GSL products to those requiring seismology equipment and expertise. During the following twelve years GSL made payments to Dr. Chi totalling $1,034,931. The Judge noted that Dr. Chi provided assistance to GSL in four areas:
- His position at the Korea Institute of Geoscience and Mineral Resources (“KIGAM”) meant that he was able to recommend GSL’s products to other public and quasi-public companies in Korea.
- He advised GSL on pricing strategy and on public procurement practices within Korea.
- He was in a position to influence the technical specifications required of seismic equipment because KIGAM was responsible for issuing certificates for such equipment.
- Dr. Chi provided GSL with confidential information, for example, a presentation provided by one of GSL’s competitors to KIGAM and details of a rival company’s pricing policy.
Mr Justice William Davis noted that in the year ending January 2003 revenue for GSL barely exceeded £20,000. By 2015 it had increased to an annual figure of over £1.45 million. He did flag that not all the increase was tainted by the relationship with Dr. Chi, it had been calculated for the purposes of the DPA that the total gross profit attributable to corruption over the relevant period was £2,069,861.
In December 2014 Dr. Christopher Potts was appointed Executive Chairman. By the middle of 2015 he had assumed the roles of Chief Executive and Chairman of GSL. In September 2015 he had formed suspicions around the relationship between GSL and Dr. Chi (who had held various positions with a government funded research institute in the Republic of Korea). After speaking to individuals with knowledge of GSL’s dealings with Dr. Chi, Dr. Potts terminated all contractual and other relationships existing between GSL and Dr. Chi. He then instructed a law firm to undertake an internal review.
On 23 October 2015 as a result of that review, GSL reported its concerns to the SFO and to the United States (‘USA’) Department of Justice.
In 2017 Dr. Chi was tried in the USA for and convicted of money laundering offence relating to the corrupt payments he had received from GSL and another company based in the USA. Dr. Guralp, Ms. Pearce and Mr. Bell were then charged with the counts that they have subsequently been acquitted for.
The GSL DPA
The GSL DPA related to a charge of conspiracy to make corrupt payments and a failure to prevent bribery by employees in relation to the payments made between 2002 and 2015. GSL accepted the charges.
Under the DPA GSL has agreed to pay £2,069,861 for disgorgement of gross profits to the SFO. GSL are also required to cooperate fully and truthfully with the SFO and to review and maintain its existing internal controls, policies, and procedures regarding compliance with the Bribery Act 2010 (‘the Act’). Regarding the review, GSL’s Compliance Officer is required to prepare a report on GSL’s current anti-bribery and corruption policies and their implementation for submission to the SFO within twelve months of the date of the DPA and annually thereafter during the Term of the Agreement. The duration of the agreement is to be five years.
It is worth noting some of the factors raised by Mr Justice William Davis in favour of a DPA:
- GSL reported the making of the corrupt payments to the authorities both in this country and in the United States. This included engaging an outside law firm to assess their position.
- Those responsible for the corrupt payments are no longer associated with GSL. Those now in charge of GSL were the ones who reported the criminal activity to the authorities.
- GSL had not previously engaged in criminal conduct.
- Significant steps had been taken by GSL since the conduct was detected. This included the termination of relationships with five different distributors. In addition, pre detection of the relevant conduct, GSL had introduced a new compliance programme.
- The DPA can and will enshrine the co-operation thus far provided by GSL to the relevant authorities on a continuing basis.
Another acquittal post a DPA
As noted in a previous post by Fulcrum Chambers Ltd in relation to the Sarclad Ltd DPA in July 2019, this is yet another example of a case in which the SFO has entered into a DPA with a corporation, but has then subsequently been unable to prosecute successfully its senior executives. The outcome of this particular trial must be concerning given that Mr Justice William Davis noted in his judgment at paragraph 25 that “[t]he criminal conduct was planned by senior officers and employees of the company and it continued over many years.”