HMRC no longer reviewing Family Investment Companies
The SFO’s four-year bribery investigation into the printing company Smith & Ouzman has concluded with the company being ordered to pay a financial penalty of £2.2 million. The company, and two of its directors, were convicted under the Prevention of Corruption Act 1906 in December 2014 but complex confiscation issues meant that sentencing of the company did not take place until last week. The two directors were sentenced in February 2015.
The conviction of Smith & Ouzman was regarded as a milestone for the SFO as it was the first company to be convicted of corruption by a jury. It had made corrupt payments of £400,000 to public officials in Kenya and Mauritania in order to secure contracts. The £2.2m penalty mirrors the estimated value of the advantage gained by the company through the payment of these bribes. It is comprised of a fine of £1,316,799, a confiscation order in the amount of £881,158 and costs of £25,000. Confiscation and costs orders were also imposed on the two directors.
The SFO’s success in securing a conviction of Smith & Ouzman was in part due to the fact that as a small, family-owned printing company, corporate attribution was easier to establish than it would have been in the case of a larger corporate. This is because the English identification principle – the need to attribute guilty knowledge to the directing mind of the company – means that the involvement in the corrupt conduct of the directing mind is easier to establish when small companies are involved. In the case of Smith & Ouzman the chairman, Christopher Smith, and sales and marketing director Nicholas Smith, were both convicted as well. David Green, the Director of the SFO, has frequently complained about the inadequacy of English law on corporate criminal liability but despite this, the government shelved plans to review the law at the same time that it dropped its review of whether s7 of the Bribery Act 2010 (“the s7 offence”) should be extended to encompass a wider range of economic crime.
Despite the SFO’s continued corporate successes last year, securing its first deferred prosecution agreement with ICBC Standard Bank plc as well as a guilty plea to the s7 offence by Sweett Group plc (who will be sentenced next month) without a change in the law on corporate criminal liability, it is likely that corporate convictions by a jury for bribery will remain the exception rather than the norm.
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