Anti bribery legislation begins to bite in Australia
Wednesday, October 03, 2012
IN earlier editions of this magazine we have brought you articles about the provisions of the US Foreign Corrupt Practices Act and the introduction of new UK legislation aimed at bribery in the UK and beyond the UK if there is a UK connection. The the UK legislation is even more stringent than that in US.
At the same time, we have also addressed proposed legislative change in Australia which would make our own existing “anti – bribery” legislation more aligned with the UK legislation. Part of that would be effected by removing our current “trade facilitation” defence to an offence which allows a lower level of “facilitation payment” in certain circumstances. The effect of that amendment would require all Australian companies to review their corporate policies and stop paying even those “facilitation payments”.
Reports from the US regularly include reference to fines against US companies involved in illegal activity. For example the US Securities and Exchange Commission reported in August that a California-based enterprise systems firm had agreed to pay a US$2 million penalty to settle charges that it violated the Foreign Corrupt Practices Act.
Corrupt payments The Australian media is now focusing more heavily on the issue and question how many major deals overseas have somehow been the subject of corrupt payments to assist trade. In many cases they try to attribute knowledge or culpability at Reserve Bank level. This includes the well – known issues associated with Australia’s “Securency” and “Note Printing” companies and allegations that practices in securing overseas contracts may have breached Australian law. As far back as July 2011, the Australian Federal Police exercised search warrants at the business premises of the companies and the homes of their former executives seeking information on alleged bribes paid to foreign officials to secure contracts overseas.
Those steps by the Australian Federal authorities seem to be ending in prosecutions. In August 2012, the former company secretary and cfo of Securency pleaded guilty to one charge of false accounting, which Justice Elizabeth Hollingworth said involved “a false and elaborate attempt to justify” the payment of commissions to promote the company’s banknote supply business in Malaysia.
Avoiding jail At that time however the judge agreed not to impose a jail sentence on the basis that the defendant had agreed to give evidence against other officers of other companies in trials to be held against them. Those is not an unusual event as those who first agree to plead guilty and give evidence often avoid jail for their actions. In this case the “agreed” offence was one of “false accounting”, described as a “mid-range offence” aimed at hiding illegal payments by senior employees under pressure from those senior employees. Even in the absence of documentary evidence of those payments, the oral evidence of the former executive was seen as valuable.
This is all taking place at the same time as competition regulators find continued success in actions again those airlines involved in alleged “cartel” behaviour to fix various prices for air cargo services both here and overseas. This has included “agreed” findings of fault here (with fines) and in the US as well as US actions and fines against a Japanese freight forwarding company. More recently an Australian High Court challenge by Garuda Airlines challenging the authority of the ACCC to bring action against it for cartel behaviour due to “sovereign immunity” was unsuccessful. The High Court upheld on 7 September 2012 the right of the ACCC to pursue those actions as they were based on commercial actions not those of the Indonesian State, which would be protected by the Foreign State Immunities Act.
So what is the messages from all of this? If companies have not already taken serious note of these bribery and competition issues, they should do so immediately. The investigating authorities are having successes with some providing more evidence in actions against other and potentially larger defendants.
Companies must now introduce proper practices and training to ensure that these types of provisions are not breached and to ensure their corporate culture actively opposes such actions. Remember that the UK legislation puts a positive obligation on companies to ensure that no bribery takes place and it is a good idea to adopt similar measures here and ensure that companies can show that all possible steps were taken to stop offending activity – and that such policies and procedures and how they were implemented are able to be produced when the regulators arrive.
At the same time, we have also addressed proposed legislative change in Australia which would make our own existing “anti – bribery” legislation more aligned with the UK legislation. Part of that would be effected by removing our current “trade facilitation” defence to an offence which allows a lower level of “facilitation payment” in certain circumstances. The effect of that amendment would require all Australian companies to review their corporate policies and stop paying even those “facilitation payments”.
Reports from the US regularly include reference to fines against US companies involved in illegal activity. For example the US Securities and Exchange Commission reported in August that a California-based enterprise systems firm had agreed to pay a US$2 million penalty to settle charges that it violated the Foreign Corrupt Practices Act.
Corrupt payments
The Australian media is now focusing more heavily on the issue and question how many major deals overseas have somehow been the subject of corrupt payments to assist trade. In many cases they try to attribute knowledge or culpability at Reserve Bank level. This includes the well – known issues associated with Australia’s “Securency” and “Note Printing” companies and allegations that practices in securing overseas contracts may have breached Australian law. As far back as July 2011, the Australian Federal Police exercised search warrants at the business premises of the companies and the homes of their former executives seeking information on alleged bribes paid to foreign officials to secure contracts overseas.
Those steps by the Australian Federal authorities seem to be ending in prosecutions. In August 2012, the former company secretary and cfo of Securency pleaded guilty to one charge of false accounting, which Justice Elizabeth Hollingworth said involved “a false and elaborate attempt to justify” the payment of commissions to promote the company’s banknote supply business in Malaysia.
Avoiding jail
At that time however the judge agreed not to impose a jail sentence on the basis that the defendant had agreed to give evidence against other officers of other companies in trials to be held against them. Those is not an unusual event as those who first agree to plead guilty and give evidence often avoid jail for their actions. In this case the “agreed” offence was one of “false accounting”, described as a “mid-range offence” aimed at hiding illegal payments by senior employees under pressure from those senior employees. Even in the absence of documentary evidence of those payments, the oral evidence of the former executive was seen as valuable.
This is all taking place at the same time as competition regulators find continued success in actions again those airlines involved in alleged “cartel” behaviour to fix various prices for air cargo services both here and overseas. This has included “agreed” findings of fault here (with fines) and in the US as well as US actions and fines against a Japanese freight forwarding company. More recently an Australian High Court challenge by Garuda Airlines challenging the authority of the ACCC to bring action against it for cartel behaviour due to “sovereign immunity” was unsuccessful. The High Court upheld on 7 September 2012 the right of the ACCC to pursue those actions as they were based on commercial actions not those of the Indonesian State, which would be protected by the Foreign State Immunities Act.
So what is the messages from all of this? If companies have not already taken serious note of these bribery and competition issues, they should do so immediately. The investigating authorities are having successes with some providing more evidence in actions against other and potentially larger defendants.
Companies must now introduce proper practices and training to ensure that these types of provisions are not breached and to ensure their corporate culture actively opposes such actions. Remember that the UK legislation puts a positive obligation on companies to ensure that no bribery takes place and it is a good idea to adopt similar measures here and ensure that companies can show that all possible steps were taken to stop offending activity – and that such policies and procedures and how they were implemented are able to be produced when the regulators arrive.