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White Collar Crime & Investigations 2020 SFO Enforcement Round-Up: Corporates

Posted on 26 January 2021

This article is intended to serve as a round-up of the Serious Fraud Office's (SFO) investigations into corporates in 2020.

Our forward-looking piece on what can be expected from the SFO in 2021 can be found here. For further information on the SFO's enforcement action against individuals in 2020, please refer to our previous article.

Investigations

A number of the SFO's existing corporate investigations continued in 2020. After it was announced in March 2019 that London Capital & Finance Plc ("LCF") would be subject to an investigation by the SFO and the Financial Conduct Authority (FCA), five individuals were arrested and released pending further investigation into the sale of mini bonds and ISA bonds by the company. 2020 saw further developments in the case, which relates to conduct between 2013 and 2018. In September 2020 investors in LCF were asked to complete a questionnaire to assist the SFO with the provision of information, with a view to identifying potential witnesses and to assess any potential loss. The case involves regulatory, statutory and criminal investigation, and has already resulted in the collapse of LCF and the FCA banning permanently the promotion of speculative mini-bonds to retail investors.

In April 2020, Quindell Plc (now Watchstone Plc) was informed by the SFO that it was no longer a suspect in the investigation into the company's business and accounting practices. The SFO opened a criminal investigation into Quindell's business and accounting practices in 2015 following allegations that the 2014 published accounts contained substantial restatements of prior year revenues, post tax profits and net assets. Although the company is no longer a suspect, the overarching investigation is ongoing and action against individuals may still be taken.

On 5 November 2020, the SFO confirmed that it had opened an investigation into Canadian aircraft manufacturer Bombardier Inc. No charges have been brought against the company, which has been cooperating with the investigation. The investigation relates to alleged bribery and corruption in connection with contracts for a deal to sell and lease aircrafts to the national airline of Indonesia, Garuda Indonesia, agreed in 2011-2012. Although the investigation into Bombardier is at an early stage, in May 2020, the former CEO of Garuda was convicted for corruption and money laundering related to the Bombardier deal. The conviction also took account of findings that the CEO had taken bribes from other aerospace businesses investigated by the SFO, Airbus and Rolls Royce. The bribes paid by Airbus to Garuda relates to one of the counts included in the Airbus DPA (more on which below).

The SFO closed its investigations into ABB Limited (May 2020) and De La Rue PLC (June 2020).

Deferred Prosecution Agreements

2020 saw the SFO progress various investigations, but the stand out cases from the year were the three Deferred Prosecution Agreements (DPAs) entered into by the agency, making 2020 the most prolific for DPAs since they were introduced in 2014.

The SFO started the year boldly, announcing the DPA with Airbus SE in January involving a fine of £830 million. This agreement formed part of a global resolution, totalling a record €3.6 billion for bribery offences involving multiple jurisdictions, including Sri Lanka, Malaysia, Indonesia, Taiwan and Ghana and parallel investigations by the French and US authorities. The DPA covered five counts of failure to prevent bribery across the company's Commercial and Defence & Space divisions. The DPA was heralded by the SFO as an example of its clout and international reach, and the SFO Director, Lisa Osofsky, praised her office's collaboration with the French and US authorities.

In April 2020, the SFO confirmed that the DPA with Tesco Stores Limited was over, with Tesco having fulfilled the relevant terms of the agreement, including the implementation of an ongoing compliance programme. This was the third DPA to be concluded (after Standard Bank PLC and Sarclad Limited).

In a year where public sector contracting has come under particular scrutiny, the SFO announced a DPA with G4S Care & Justice Services (UK) (G4S C&J) in July 2020. G4S C&J was found to have been part of a scheme to defraud the Ministry of Justice (MoJ) in its contracts for the monitoring of offenders. The company accepted that it was responsible for three counts of fraud relating to the scheme. The terms of the DPA require G4S C&J to pay a financial penalty of £38.5 million and the SFOs full costs of £5.9 million. Compensation had already been paid to the MoJ as part of a civil settlement in 2014. Critically, the agreement also provides that G4S C&J will be subject to stringent compliance obligations and must undertake a period of review, assessment, and reporting on the compliance operations and procedures of the Group. Lisa Osofsky commented that parent company G4S "will be subjected to unprecedented, multi-year scrutiny and assurance".

Finally, in October 2020, a DPA between the SFO and Airline Services Limited (ASL) was approved in which ASL were required to pay a financial penalty of £1,238,714.31 plus £750,000 towards the SFOs costs and profits disgorgement of £990,971.45. The agreement saw ASL accept responsibility for three counts of failing to prevent bribery which relate to the company's use of agents to win contracts worth £7.3m. ASL, which is no longer trading, is required to cooperate with any other domestic or foreign law enforcement agencies. The SFO collaborated with German public prosecutors in the investigation into the company. Our blog on the ASL DPA can be found here.

Whether 2021 will be another bumper year for DPAs remains to be seen, but it has been reported that the SFO are in talks with Rio Tinto regarding a DPA. The SFO continues to investigate Bombardier, Chemring, Amex Foster Wheeler and ENRC, some of which could conclude with a 2021 DPA.

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