 |
PROSECUTION OPENING NOTE
Note: This statement is provided for the assistance of the Court and the parties. While it substantially sets out the Crown’s case, it is not, nor does it purport to be, a full and exhaustive pleading of that case.
I. INTRODUCTION
1. Mabey and Johnson Limited (“M&J” or "the Company") is a privately-owned, family-run company, founded in 1923 by the Mabey family and incorporated in 1943. One of the original directors was a Mr Bevil Mabey who remained a director of the Company until December 2007.
2. M&J is an engineering company whose principal business over the last 35 years has consisted of supplying bridging equipment in over one hundred countries, largely in the developing world. In general, the bridges supplied consist of standardised and interchangeable components which can be easily transported after manufacture in the United Kingdom. Similarly, erection on site is a relatively simple engineering process. On its website M&J proclaims that it manufactures “quick, simple, reliable bridges” and goes on to assert “our modular steel panel bridge systems provide a means of helping communities and markets connect reliably and safely”.
3. Over the years - according to its website - M&J has become the “world leader” in its field. Current turnover is around £50 million. During the indictment period turnover was on average £56 million.1 In the year to 30 September 2008, pre-tax loss (before exceptional provisions) was c.£2 million. The Company employs around 240 people, 210 of whom are based in the UK. Its manufacturing site is at Lydney in Gloucestershire, where 160 people are employed in creating around 20,000 tonnes of bridging components annually. The Mabey family has reportedly accumulated over £200 million pounds as a result of their ownership and management of the Mabey Group, including M&J.
4. M&J’s overseas clients consist principally of government departments and highways authorities. Its contracts with foreign governments have often been underwritten by the United Kingdom's Export Credits Guarantee Department
("ECGD") which is a statutory body whose role is to benefit the UK economy by helping exporters of UK goods and services win business and UK firms to invest overseas by providing guarantees, insurance and reinsurance against loss. The
Jamaica and Ghana contracts which are the subject of this indictment were in fact supported by the Export Credit Guarantee Department (“ECGD”).
II: SUMMARY OF ALLEGATIONS AGAINST M&J
5. In order to establish and secure its business abroad, M&J appointed agents to act on its behalf in the various countries where it was seeking to win contracts to build bridges.
6. It is accepted by M&J for the purposes of sentencing that the payment of commissions to agents was a routine aspect of the Company’s business, authorized at director level. These payments were structured into the Company’s commercial processes and were factored into contract pricing. Commission fees paid to local agents or middlemen ranged from contract to contract and by jurisdiction. However, historically, it was not atypical for agents to be paid between 5-15% by M&J, although M&J maintain the average was about 8%.
7. In Jamaica and Ghana M&J knew that its agents were involved in corrupt relationships with public officials with influence over M&J’s affairs in those jurisdictions. M&J accept that they agreed with their agents to pay bribes directly to public servants in those jurisdictions. Those bribes were deducted from the overall commission due to the agents.
8. It is not asserted by the SFO, in this case and generally, that all payments to agents are illegitimate or that all agents act corruptly. Agents, in some jurisdictions are both necessary and play a useful marketing and other legitimate function to the exporter. However it is equally beyond reasonable argument that unless properly monitored and controlled, the employment of local agents and payment of commissions is a corruption “red flag” exposing the company to risk. What it may provide is a convenient smokescreen to deny corporate or individual knowledge of arrangements conducted overseas. This was the reality of business practices of this era.
9. In both Jamaica and Ghana M&J’s agents were involved in corruption in those jurisdictions. Their corruption was known to M&J and the SFO suggests, though it is not accepted by M&J, that this would have been part of the rationale of their appointment. The direct bribes were deducted from the overall commission to be paid to the agent with respect to Jamaica and the majority were deducted from the agent's commission for Ghana. In short it is the SFO’s case that the Company therefore employed known bribers as agents for commercial gain from the outset.
10. The SFO’s contention, based on inference from all the available facts, is that those agents were appointed to facilitate corruption. The SFO believes this was known to the directing minds of M&J. However this is not accepted by the Company. Nevertheless in the light of the scope of what is admitted by the Company and what is before the Court, namely bribes of more than £1 million on contracts valued in the region of £60-70 million, it is the Director’s view that this difference is not so substantial that it should require resolution by calling evidence. After all where there are direct payments to public servants, it does not make much difference, for the liability of the Company, if there were additional payments through the agents to facilitate corruption. In some respects it may well be seen as aggravating where modestly paid public servants are corrupted for relatively small amounts in proportion to the commercial gain for the company concerned.
11. In Jamaica M&J’s agent was paid 12.5% of the Jamaica 1 contract price. As will be explained later, this was a headline figure as the Jamaica 1 contract was a Joint Venture with Kier International Limited.
12. For budgeting purposes in relation to the Priority Bridge Programme II in Ghana, M&J created a notional fund of £750,000 called the "Ghana Development Fund" ("GDF") against which direct payments to public officials were made. In total from the GDF and associated accounts, between December 1994 and 18 August 1999, £470,792.60 were paid in bribes.
13. In a lot of cases monies, represented on M&J's commission cards, would be deducted from the agents' commission to be paid direct to the public servant. M&J authorised these requests at director level and payments were processed both to UK and overseas bank accounts.
14. Although the appointment of agents to assist an exporter in obtaining overseas contracts is commonplace and legitimate, payments to agents also carry an accepted and obvious corruption risk.
15. The Company does not accept that there was a corrupt intent in the appointment of and subsequent commission payments to the agents in Jamaica and Ghana. However it is accepted by M&J that in Jamaica and Ghana and in the countries referred to below (where corruption has also been identified as a result of internal investigations conducted on behalf of the Company) that in paying agents large commissions there was a risk that unknown proportions of those payments might be passed on to public servants as bribes. It also follows in countries with a similar risk of corruption where M&J operated, such a system must have given rise to an identical risk.
16. Although, historically, M&J’s corrupt business practices appear to have been carried on in a number of the countries in which it operated, for reasons which will become clear the Company is indicted for its dealings in Jamaica, Ghana, and - in a separate and distinct matter - Iraq. In addition the company has disclosed four further jurisdictions in which corruption occurred, Madagascar, Angola, Mozambique and Bangladesh, the relevance of which is described further later in this Opening Note.
17. A number of individuals are the subjects of investigation with regard to the corrupt business practices of M&J. Those investigations may be protracted. Currently, however, the position appears to be that if any proceedings are to be commenced against individuals associated with the Company, they will be contested, despite the fact that the Company is pleading guilty to allegations which are largely evidenced by the Company’s own documents.
18. Given that the case against the Company could not have been brought before the
Court as expeditiously as it has been without the co-operation of and admissions by the Company. Any long criminal investigation into the business affairs of a company can have a damaging effect on it. The SFO are of the view that it is appropriate to prosecute the Company before the completion of the investigations into the conduct of the individuals.
19. As will be described below, this is a Company that has replaced its board and is changing and continues to review its business practices. It is, to a notable extent, no longer the company that committed these crimes. Therefore mindful of both the SFO’s domestic and international obligations, the SFO wishes to conduct its duties in a way that does not unnecessarily damage the Company’s ability to trade. Of course, that objective can only be fully discharged, as in this case, where the Company fully and properly co-operates with the prosecuting authority.
20. In this context it should be noted that the policy of the SFO under the present Director, further referred to below and Appendix 1, is that boards of companies should be encouraged to approach the SFO and make a full disclosure of fraud or corruption they have discovered together with proposals about the changes and monitoring needed in the future to re-assure the public that the behaviour of those companies meet the highest ethical standards. If companies do this then the SFO is prepared to discuss with them the pleas or other resolution that the SFO considers to be in the public interest.
III: BACKGROUND TO THE REFERRAL AND INVESTIGATION OF
CORRUPTION ALLEGATIONS RELATING TO M&J
21. The referral of alleged breach of sanctions legislation is dealt with at section X of this document. However, additionally during the last decade there has been some speculation in the media and elsewhere concerning alleged corruption in relation to M&J’s business practices abroad.
22. The Metropolitan Police and latterly, the SFO, have sought to progress those investigations, but, they could not be successfully progressed.
23. On 11 January 2007 M&J commenced proceedings in the Chancery Division against certain former employees and its agent in Jamaica. One of the Defendants in these proceedings was Jonathan Danos. Amongst his other duties, Mr. Danos had been responsible for negotiating commissions payable to M&J’s agent in Jamaica.
24. In short, M&J claimed that Mr. Danos had acted in breach of his contract of employment and his fiduciary duty by agreeing to pay an inflated commission figure to the Jamaican agent in order that he and the agent could secretly profit at M&J’s expense, and then direct those secret profits to their own commercial purposes. What was involved was a “kickback” arrangement, by which Mr. Danos and his co-Defendants not only unjustly enriched themselves, but then ‘invested’ that enrichment in commercial schemes of their own.
25. In his draft amended defence and counterclaim Mr. Danos asserted it was “common practice” for M&J to pay government officials in order to secure contracts. In terms, he further asserted that there was a bribery culture within M&J which was sanctioned by certain directors. Given the nature of the evidence with respect to the six jurisdictions referred to below which corroborates these particular assertions on the part of Mr. Danos, the SFO agrees.
26. On 9 January 2008, Herbert Smith LLP, solicitors for M&J, received from the Mr. Danos’s draft amended defence and counterclaim. Although it did not contain a signed statement of truth by Mr Danos those acting for Mr. Danos made it clear in correspondence that it had been settled on his instructions. Subsequently, a decision was taken by certain directors (including Director B, Director A and Director C, who were directors of M&J at the time) to voluntarily report issues to the SFO. As a consequence, on 11 February 2008, Herbert Smith LLP approached the SFO to provide details of the evidence that the Company had been or may have been engaging in corrupt practices. Documents relating to an internal investigation undertaken by Herbert Smith LLP were provided to the SFO. Importantly and in the spirit of exemplary and proper co-operation, the Company provided copies of privileged notes of internal interviews of certain directors and employees, conducted during the internal investigation. As an aside, the SFO regards this approach, namely conducting an internal investigation which is then fully disclosed to the SFO as meriting specific commendation. In cases where this is not the practice of the suspect company, the SFO will not regard the co-operation as a model of corporate transparency.
27. Thereafter a process of disclosure took place by which M&J through its solicitors progressively disclosed to the SFO Company documents which evidenced instances of corruption in Jamaica, Ghana and other jurisdictions.
28. Accordingly the SFO commenced an investigation into the affairs of M&J, its directors, executives, agents and other employees.
29. It is appropriate at this point to acknowledge the considerable level of co-operation which M&J, through its solicitors, has afforded the SFO, enabling the investigation into the affairs of M&J to be expedited. Indeed, the level of co-operation, coupled with the Company’s readiness to admit its guilt, is one of the factors which persuades the Director of the SFO that it is appropriate for the case against the Company to be proceeded with and disposed of before allied investigations against individuals are concluded.
30. The SFO also recognises that since the commencement of the investigation M&J has taken certain remediation steps. The SFO has been informed that five former directors have stepped down as directors and ceased to be employees. They have been retained as consultants to assist M&J in its co-operation with the SFO. The SFO has been told that further training has been provided at both Board level and to sales managers and commercial staff. It has also introduced new ethical procedures and agreed to the appointment of an external monitor.
IV: M&J’s OWNERSHIP STRUCTURE
31. M&J is one of a group of companies owned by the Mabey family. The majority shareholder of the Mabey Group is Mabey Family Trustees Ltd., which owns the majority of the shares in Mabey Holdings Ltd., which in turn owns Mabey Engineering (Holdings) Ltd., a subsidiary of which is M&J.
32. As of 3 September 2008, David Mabey was the Company Secretary and one of six Mabey family members who were directors of Mabey Family Trustees Ltd. Although his five sisters were board members, David Mabey, and his father, Bevil Mabey, were the only family members who had taken an executive role in the management and activities of the group of companies, prior to their resignation.
33. Mabey Holdings Ltd. was incorporated in 1985. The Company's authorised share capital comprises 550,000 ordinary shares and 2,000,000 preference shares. Both types of share have a nominal value of £1.
34. Mabey Engineering (Holdings) Ltd has 30,000,000 issued shares, all of which are owned by Mabey Holdings Ltd. Mabey Engineering (Holdings) Ltd also owns the entirety of the share capital of M&J – 4,000,000 shares. David Mabey resigned as one of the three directors of Mabey Engineering (Holdings Ltd) on 2 July 2008, and he resigned as a director of M&J and of Mabey Holdings Ltd on the same day. David Mabey no longer has any executive role in the MHL group of companies.
35. The reality of the ownership structure of M&J is that the Mabey family in general, and David Mabey in particular, have at all material times been in exclusive control of the affairs of M&J. Whilst directors within the Mabey group could be appointed or removed at the behest of the shareholders, those same shareholders were David Mabey and his family.
V: DEVELOPMENTS IN THE CONDUCT OF M&J’s OVERSEAS BUSINESS
36. In 2002 the Company - evidently aware of the ramifications of sections 108 and 109 of the Anti-Terrorism, Crime, and Security Act 2001 – introduced new anti-corruption policies and procedures for the conduct of its business.
37. In May 2002 a “Group Gifts and Hospitality Policy” was distributed. Director A, sent out two memoranda on 14 and 22 May 2002, defining the Company gifts and hospitality policy. The Company also created an Export Committee to oversee the appointment, remuneration, and conduct of its representatives in foreign jurisdictions, as well as writing and publishing a policy set out in its Business Ethics and Conduct Policy Manual (“BECPM”), which was circulated amongst its relevant employees.
VI: THE WIDER CONTEXT OF THE CASE AGAINST M&J
38. There are indicators, however, for asserting that the policies and measures described above did not wholly bring about an immediate cessation of potentially corrupt or unethical practices overseas by individual persons connected with M&J and its business. Since the voluntary disclosure in February 2008, M&J, through its new management, have undertaken a review for the purpose of maintaining ethical standards within the Company.
39. For the reasons developed at paragraphs 16 and 20 above, and further explained below, the SFO is content to accept pleas of guilty from the Company to the conduct alleged in this indictment.
40. The indictment contains allegations pre-dating the coming into force of sections 108 and 109 of the Anti-Terrorism, Crime, and Security Act 2001. The issue of jurisdiction has been considered by the SFO and M&J's legal advisers and it is their respectful view that there is no jurisdictional bar to the prosecution of the indictment before the Court.
41. The Director of the SFO wishes to emphasise that by accepting the proposed pleas, the SFO does not fetter itself in any way from investigating (and, if appropriate, prosecuting) undeclared allegations of corruption against the Company if these are discovered at a later stage. The SFO is also continuing with investigations concerning a number of the individuals allegedly involved in corruption. Prosecutions will be considered in due course if the tests in the Code for Crown Prosecutors are satisfied. However given the admission of the Company of the widespread historical corrupt practices within the indictment in relation to its business affairs in a number of jurisdictions (see below), the SFO accepts that having taken this feature into account in the sentencing of the Company, further undisclosed criminality within the indictment period will not be the subject of prosecution against the Company. For the avoidance of doubt, this is not the position taken by the Director of the Serious Fraud Office in relation to ongoing investigations against individuals.
42. The policy of the SFO with regard to companies which 'self-refer' themselves to the SFO for offences which can be described as - at least, relatively - historic, as in this case, is to apply a proportionate approach to investigation and prosecution, both so as to acknowledge endeavours at remediation, and to encourage other companies which have a history of improper conduct to come forward and "clear the slate".
43. Hence, in the light of the agreement of M&J to institute a system of independent monitoring (see Appendix 1) of its overseas business activities and transactions on the same model as that envisaged in the United States of America under the Foreign Corrupt Practices Act 1977, as well as certain steps it has already taken to remove certain directors it views as "involved" in the corrupt practices, and further improvements to procedures as outlined at paragraphs 19 and 20 above, the SFO is respectfully of the view that the public interest is not best served - as against the Company only - by what might well be long-drawn out litigation over remaining unproven allegations of corrupt practices.
44. Accordingly, the Director of the SFO is minded to accept the pleas proffered on the part of M&J, without prejudice to its ongoing and unfettered investigations of corrupt practices - on the part of individuals associated in various capacities with M&J.
VII: THE JAMAICA CONTRACTS
(i) Relevant personnel
45. The relevant Ministry responsible for bridge contracts has undergone changes of name over time. In 1989 the department was known as the Ministry of Construction (Works). In 1996 the department became known as the Ministry of Local Government and Works and in 1998, it became the Ministry of Transport and Works (“the Ministry”) and retains that name today.
46. In 2001, the National Works Agency was established. This is an executive agency working under the control of the Ministry.
47. Joseph Uriah Hibbert was born on 20 July 1948 He served as a Jamaican government official until October 2000.
48. Mr. Hibbert joined the Ministry on 10 July 1972 as an engineer. By 1989 he had risen to the position of Chief Engineer and in November 1993 he was promoted to Chief Technical Director of the Ministry. He left the Jamaican Civil Service on 28 October 2000.
49. During his tenure he held delegated powers to act on behalf of the Permanent Secretary of the Ministry, including entering into binding financial commitments, and where there was a vacancy in that position, he could lawfully act as the Permanent Secretary. In short he held a very important and influential position in regard to his principals affairs and respectively, M&J’s affairs.
50. At all relevant times when Mr. Hibbert was in receipt of money from M&J he was bound by the relevant Public Service Staff Orders. He was not entitled to receive the money M&J paid him in respect of the exercise of his duties.
51. Subsequently Mr. Hibbert entered national politics. In 2002 he became a Member of the Jamaican Pa
Source: The Statesman
No comments:
Post a Comment