Tom Stocker – Swapping lap dances for prison; corruption in Scotland

The four men at the centre of the recent Edinburgh building works corruption case have swapped a lifestyle of lap dancing bars, drinks receptions and football match hospitality for berths in Saughton Prison.

Two former directors (now disqualified) of Edinburgh Action Building Contracts Ltd pleaded guilty to bribing two formercouncil property services staff to secure a contracts for building works over a four year period.

Sheriff Michael O’Grady QC said the offences were “very grave indeed”, describing the quartet as an “unholy alliance stealing from and manipulating the public purse almost at will.”

The gravity of the offences brought the maximum five year sentence, minus a guilty plea discount, for one of the men and lesser sentences for his three accomplices. .The Chartered Institute of Building published a survey report in 2013 which reported that 49% of respondents believed corruption was common in the UK construction industry. The recent bribery convictions in Edinburgh serve to show that there is perhaps some substance to those industry concerns. The case also demonstrates that the risk of being caught has greatly increased in recent years. It is no secret that there are a number of bribery investigations being conducted by Police Scotland, the City of London Police and the Serious Fraud Office. Prosecutors north and south of the border are encouraging companies to self-report bribery in return for more lenient treatment and too blow the whistle on competitors who engage in corrupt practices.

So what can organisations do to prevent being caught up in the next bribery scandal? That has been the question on everybody's lips since the Bribery Act 2010 introduced a new offence of corporate failure to prevent bribery. Thanks to the advent of technology in the compliance sector, we believe there are now ways to mitigate further the risk of bribery and corruption in any organisation in a pre-emptive and cost-effective way.

In our experience at Pinsent Masons, many business could find themselves on the receiving end of allegations of corporate failure in compliance matters and would find it difficult to argue a defence of having in place ‘adequate procedures’ under the Bribery Act.

To have 'adequate procedures', . there must be real top level commitment within a business to bribery prevention and the board of directors must be able to demonstrate they are making serious efforts to bribery risks posed by using third party intermediaries and the misuse of hospitality and other business expenditure.

A risk assessment is a must but many companies fail at this hurdle or, if they have carried out an assessment, it may have been done years ago and then not updated. Due diligence should also be performed on third parties that pose a bribery risk but again, in our experience, this is often not carried out.

It must be communicated to employees that the business has an anti-bribery policy in place, which includes procedures that are suitable for that business and the conduct expected of employees, and there should be annual or more regular training in those procedures.

The final step is the need to r monitor and review those policies and procedures periodically but again it’s fairly common for this not to be done, with the exception of more sophisticated companies that if in place a dedicated compliance officer or team.

Putting in place anti-bribery procedures and implementing an ethics or business integrity programme can seem daunting or unnecessary. However, the risk of bribery is real and present. Compliance programmes should be simple and user friendly such that it becomes part of a company's "business as usual" processes. For smaller companies a short form risk assessment and a policy may well be enough. For larger businesses or businesses that use contractors, the use of technology can greatly help through automating and speeding up otherwise laborious processes.

Helpfully, there are available a number of compliance tools and technologies such as online gift and hospitality registers, compliance certification portals third party due diligence and screening systems, and eLearning. A good system will provide remote access from anywhere in the world, a complete audit trail and digestible management reports.

The three elements of committing or commissioning a financial crimeare opportunity, rationale or justification, and pressure, usually stemming from financial problems or ambitions.

Through regular communication and training in, and certification against a company's ethics policy it is more difficult for employees to justify or rationalise their actions on the basis that they didn’t know it was wrong – which to the Sheriff’s incredulity was a claim made in this court case.

If you compare anti-bribery and corruption practices to health and safety compliance (since the introduction of the Health and Safety at Work Act 1974), you can see similarities as it has taken decades to firmly embed health and safety good practice across industry.

There is a similar learning curve in reaching the stage where the wide-scale adoption of strong anti-bribery and ethical practices is the norm but the tide is turning. Increasingly large companies subject their supply chain to anti-bribery due diligence and audits. This is leading to many more businesses prioritising anti-bribery compliance because, ultimately, a good anti-bribery management system can now give a company a competitive advantage.

Tom Stocker is a Director of Cerico and corporate crime partner at international law firm Pinsent Masons. This article first appeared in www.scotsman.com , 1 July 2015

Published: Jul 15, 2015