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R v Skansen Interiors Limited - company convicted of failing to prevent bribery

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Editorial Staff

A director entered into an agreement to bribe someone into making sure the company was awarded a contract worth GBP6 million, approx. A new CEO found out, prevented payments, filed a suspicious activity report, asked the police to investigate. Then it all got complicated ...

Skansen Interiors Limited (Company number 04314810, Dormant Company, all accounts up to date) has only one officer, Ian William Pigden-Bennet appointed in 2014. There isn't even a company secretary. Since the company was formed in November 2001, it has had a surprising turnover in directors and secretaries, some being appointed more than once over the life of the company. When it was active, Skansen was a small company - about 30 people.

During one of those frequent changes in officers, a new CEO arrived. He discovered the corrupt deal. GBP10,000 had been paid out of the company's accounts. The CEO stopped another payment, GBP29,000 being made. He ordered an internal investigation and put in place new compliance and risk management policies and procedures to detect and deter bribery.

Prior to that, the company did not have policies and procedures specifically under the Bribery Act but it did have policies covering ethical dealings with third parties, a general culture of honesty and accounting policies to prevent the making of payments that should not have been made. The person who made the corrupt arrangement, the former managing director, was, specifically, aware that the company would not become involved in corruption. The new CEO dismissed all those involved and filed a suspicious activity report with the National Crime Agency. He also asked the City of London Police to investigate.

What happened next is an example of the law of unintended consequences: the authorities investigated the company itself and laid charges of "failing to prevent bribery" under the Bribery Act (s7).

The prosecution was brought and proceeded with despite the company being dormant. The Crown Prosecution Service, it is reported, told the Judge who questioned the point of pursuing a prosecution against a company with no hope of any penalty being satisfied, that, in effect, there were matters of public interest and that the case would provide a warning lesson to other companies.

The company tried to agree a Deferred Prosecution Agreement and took steps to bring itself into the necessary condition to do so but the CPS was adamant: the case would go to trial so that there would be precedent for future cases. As an indictable offence, the case was heard in the Crown Court.

The company therefore found itself having to defend the failures of previous management who had acted corruptly. It gave up and closed its doors. But the prosecution would not go away.

The company argued that it was a tiny company with 30 people working in one room and that huge, costly, administration was over-kill and that its policies were enough unless someone in a position of authority specifically set out to commit an offence. It argued that it had done everything that a small company might be expected to do.

The jury disagreed and the company was convicted under section 7. The lessons are stark for all small businesses: you have no choice - you must have a full Bribery Act compliance system in place; an ethical, trusting culture and a set of policies is not enough.

The CPS was probably right to keep going once the company was out of business - lessons must be taught. But it does seem unduly harsh to have prosecuted in the first place: the company itself, in the shape of its new CEO, took all required steps to remedy the situation. The correct target in this case should, surely, have been those who authored the arrangement inside and outside the company.

There is little incentive for companies to report past mistakes if they are going to be harried out of business once the problems are being rectified and those involved in the predicate crime have been removed from their positions.

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