It could hardly get much worse for Macmillan. The publisher said yesterday it was "co-operating" with the Serious Fraud Office, a day after the World Bank said it had banned the publisher from taking up any contracts with the bank for six years.
The ban was imposed after the company admitted it had made "corrupt payments" in a failed bid by one of its subsidiaries to secure an education project funded by the Bank in war-ravaged southern Sudan. The company issued a lengthy mea culpa, saying: "Our message today is clear: we will not tolerate any form of potentially unlawful behaviour. We are deeply shocked to have discovered these issues, and are sorry for the harm that such behaviour will have done.
"Macmillan is a business with strong values," it said, adding, "We will work tenaciously to protect it from bad conduct. There is no suggestion that these concerns have affected any of Macmillan's other principal businesses, and it is the case that they are confined to a limited part of our education business. Despite this, we take the situation very seriously and have been co-operating fully with the authorities."
Seriously enough to call in external help to create a "revised ethical framework". But is this an isolated incident or is it indicative of wider problems in British business?
Britain's public sector may get high marks from the global corruption watchdog Transparency International (the UK is the world's 17th-least-corrupt country, notwithstanding little local difficulties like the MPs' expenses scandal), but most of the world does not. Transparency gives countries a grade of 1-10, with 10 being the least corrupt and 1 being the most. It is based on 13 independent surveys and, sadly, 129 countries out of 180 have scores of less than five.
Which means that in much of the world taking bribes is seen as one of the perks of the job by public officials and, privately, there are plenty of executives who argue that taking a tough line with corruption leaves British businesses disadvantaged. And taking a tough line is something Britain is now doing, with a new Bribery Act coming into force.
Omar Qureshi, a partner at CMS Cameron McKenna, specialises in bribery cases. He won't comment on individual instances. However, he points out that if there is a problem with corruption among British companies it needs to be put in context. "It is impossible to gauge the extent to which British companies engage in inappropriate payments, but it is worth noting the report by Transparency International, which, while it focuses on the public sector, is an important indicator of perception.
"Their 2008 Bribe Payer's Index, which ranks 22 of the world's richest countries by the likelihood of their businesses to bribe abroad, places the UK joint fifth, for example."
Mr Qureshi says that the private sector will have to take the new bribery law very seriously when its offences come into force later this year. "Under the old legislation it was very difficult to find evidence to prove corruption to a criminal standard (i.e. beyond all reasonable doubt). That is one of the reasons why prosecutions have been so rare, especially prosecutions of companies. Prosecutors have to prove that the "directing mind and will" of a company, i.e. the board, knew of or were implicated in the corrupt activities." The new Act, however, lowers the bar significantly.
"Now, for bribery of foreign public officials, all you have to do is prove that an advantage was given or offered intending to influence a public official and intending to obtain or retain business." He adds, "Even more significantly, a company will in future be automatically liable if anyone performing services on its behalf, anywhere in the world, commits bribery to win or retain business for the company. So any agent or intermediary or subsidiary that commits an offence in this way can make the company liable." There is a defence – companies have to prove that they have adequate compliance procedures in place designed to prevent this sort of thing from happening. It's just that what is meant by "adequate" is not defined.
The Government is preparing guidance, but it is unlikely to be very prescriptive. Says Mr Qureshi: "You could say that this offence will effectively make every company a regulated entity." Guidance has so far been forthcoming from the SFO, which has warned companies that it will take a dim view where it finds instances of bribery overseas: "So far, the SFO has convicted one UK lawyer in respect of overseas corruption. Pleas from a corporate to overseas corruption have also recently been obtained. More will follow. We shall be using all of the tools at our disposal in identifying and prosecuting cases of corruption that we find," it says.
The SFO has, however, said that where companies are willing to self-report and alert it to instances where their people have been involved in the making or receiving of corrupt payments, it will be more lenient.
Jomo Kwame Sundaram, the United Nations assistant secretary-general for economic development, recently contributed a foreword to a report by Transparency International into private-sector corruption.
He was unequivocal about the damage it causes, saying: "The level of corruption in the private sector remains disturbingly high. It is not uncommon for domestic firms and multinationals to pay bribes in order to secure public procurement contracts, nor unusual to learn of powerful corporate entities exerting undue pressure so as to capture institutions and influence regulations to elicit favourable investment conditions.
"Such practices are all too often encouraged by, or met with cooperation from, civil servants... or corrupt political leaders who use politics to make money that they may claim they need to advance their political ends or to pay for political support. Some who amass huge fortunes while in office may smuggle these assets out of their countries into secret personal bank accounts abroad.
"We know only too well that corporate corruption significantly diminishes or threatens the dynamism and growth that comes with fair competition." So we shouldn't worry too much about complaints over the new law's "get tough" provisions.
Sleaze cases are becoming more common
Innospec's UK operations hit
The UK arm of Innospec, a Nasdaq-listed chemical company, pleaded guilty to bribing employees of Pertamina, Indonesia's state-owned oil company, and other Indonesian officials in order to secure sales of a fuel additive, TEL. The company was hit with a $12.7m (£8.5m) fine. The case was seen as ground-breaking in that it involved a global settlement brought by the UK's Serious Fraud Office to the English courts.
DePuy executive jailed
Robert John Dougall, a former executive at healthcare company DePuy, in December admitted involvement in £4.5m of corrupt payments to medical professionals within the Greek state healthcare system. He was sentenced to 12 months in prison. The case came to light during due diligence by Johnson & Johnson, the US group that owns DePuy, and was referred on to the SFO by the US Department of Justice.
Mabey is first to be prosecuted
Mabey & Johnson, a Berkshire supplier of steel bridging, was ordered to pay £6.6m at Southwark Crown Court in September last year after it admitted offences of overseas corruption and breaching UN sanctions, in what was the first prosecution brought in the UK against a company for such offences. The company voluntarily disclosed to the SFO evidence that it had sought to influence decision makers in public contracts in Jamaica and Ghana between 1993 and 2001. It was also fined for breach of UN sanctions during 2001 to 2002, as they applied to contracts in the Iraq "Oil-for-food" programme.Reuse content