First sentence under the new Bribery Act

Munir Patel has been sentenced to six years’ imprisonment, following his conviction under the new UK Bribery Act.  He pleaded guilty to receiving a bribe of £500 in exchange for offering to change a record at the Magistrates’ Court where he worked.  I am guessing that he will appeal against the sentence – which seems a little draconian on the face of it – and it will be interesting to see how that goes.

Whilst the sentence is a heavy one, it’s worth mentioning that it was for the dual offences of accepting a bribe and the abuse of public office, and it is arguable that the relative severity of the sentence was as much because Patel profited by abusing his position as a Clerk to a Magistrates’ Court, as it was for accepting a bribe.  From his point of view, it’s unfortunate that, as the first person to be sentenced under the new Act, he has probably suffered from the double whammy of being an example for others, and having had particulars of his offence plastered across the front page of The Sun – who would probably have complained loud and long if the person caught by their sting had got off with a suspended sentence, or a community service order.

Appeal or no appeal, the sentence sends out a clear message to anybody involved with, or contemplating bribery, whether they be an individual or an employee of a multinational.  Judges now have significant powers to award long sentences to offenders, (up to ten years’ imprisonment) and it appears that even if you are (a) a person of previous good character who (b) pleaded guilty and (c) was convicted of the receipt of a relatively small bribe (£500, though it has been suggested – by the defendant himself – that he had taken at least 53 other payments previously) you will, nevertheless, go to prison for a considerable length of time.  What will happen to someone with a previous history, or who has paid or received thousands of pounds, remains to be seen but is probably going to be messy.

In the meantime, the message to all companies must be to get your compliance programmes in place, train your employees and make sure that you have done everything possible to devise and implement “adequate procedures” as a defence against any allegations of bribery. 

The Judiciary – well, His Honour Judge McCreath, anyway – is on the warpath.

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Protected conversations – a charter for bullying bosses?

The Government has confirmed that it intends to launch a consultation on the introduction of an Employer’s right to hold “Protected Conversations”  with employees.  To underline the importance that the Government attaches to the proposal, the details were outlined by the Prime Minister rather than Ian Duncan Smith, or one of his underlings.

In essence, the proposal would allow for conversations to be held between an employer and an employee that would be inadmissible in any Employment tribunal proceedings.  It would, said Mr Cameron, allow:

“….. a boss and an employee (to) feel able to sit down together and have a frank conversation – at either’s request”

The proposal has been put forward after a previous suggestion that “no-fault” dismissals should be introduced was turned down –  presumably, on the grounds that no Government should present the Opposition with a sitting duck to shoot at, with quite such alacrity.  As someone who has frequently sat, grinding my teeth, through performance or disciplinary meetings where one or other of the protagonists has said things that will come back to haunt them in court, you might think that I would be in favour of a proposal such as this.  I am not, however, and here is why.

In the first place, I doubt that any employee is going to find a Protected Conversation useful or helpful.  If I have a problem with my employer, and I want to discuss it, I will almost certainly want it to be a matter of record, whether it is an informal discussion about my concerns, as part of an appraisal, or a formal grievance using established procedures.  I cannot really think of any circumstances in which I might want to hold an off-the-record conversation unless it were to blow the whistle on something – in which case, I would have statutory protection against unfair treatment in any case.  So – it’s a one-way street, of use only to employers.

Secondly, and more significantly, I can see such conversations being used, by unscrupulous employers and managers, to put unfair pressure on employees, safe in the knowledge  that they can say whatever they wish without fear of the consequences.  In particular, bullying managers will see it as a way of putting pressure on vulnerable colleagues without fear of repercussions.  Claims of workplace bullying are, of course, easy to make and are sometimes abused by those making them, to deflect legitimate criticism from themselves.  However, at one time or another in the course of our careers, we have all seen bullies make the lives of some of their colleagues a misery, through their behaviour, and I don’t believe that we should be enacting legislation that would effectively give such people carte blanche to carry on like this, unchecked.

Providing a fair legal environment in the field of employment is always a balancing act, but in this case the fulcrum is being pushed too far towards the employer.  This is a bad proposal and it will make for bad law if it is enacted.

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Bribe Payers’ Index – Could Do Better

Transparency International have just released the 2011 Bribe Payers’ Index – a ranking of relative business incorruptibility amongst the World’s leading trading nations.  Because it’s based on perception it’s a rather subjective survey, but it gives an overview of the most and least corrupt markets in the Developed World.

The good news is that if you live in the Netherlands, Switzerland or Belgium, your businessmen are the most squeaky-clean incorruptibles  anywhere.  For us Brits, however, the news is less encouraging.  Although we’re ranked at number 8, ahead of many of our European neighbours, we have dropped 5 places in the rankings since last year.   It is disappointing that, after a year in which draconian new anti-bribery laws have been introduced, we’re not further up the list.

Being realistic, I suppose it’s asking a bit much to expect an immediate improvement in performance – we have the legislation in place but it has not yet had an opportunity to bite.  Indeed, and as already mentioned, the only charges brought under the new law so far have been against a minor Court Official, for accepting a bribe to amend Court records (sentencing on the 11th of this month, folks!).

Much rhetoric continues to revolve around the Authorities encouraging Companies to self report cases of bribery and to organise and meet the costs of their own investigation rather than being taken to Court with resultant damage to their public image (and their finances).  This is all very well but, in the words of the UK Director of Transparency International:

With the entry into force of the Bribery Act we would have expected to see the UK higher up in the rankings. UK companies need to make sure they have a rigorous zero tolerance approach towards bribery.

For reasons of cost, inter alia, the authorities seem to be steering clear of launching any large scale investigations, or bringing any prosecutions.  However, in my view, they need to beware of making empty threats, which will certainly encouarge companies to ignore their legal obligations.  What we really need is a nice, juicy test case with swingeing penalties,  pour encourager les autres.  At the moment, all we seem to have is an SFO Hotline; well,  I suppose it’s a start …..

There is also – still – the issue of whether Companies will ever pay more than lip service to the new laws whilst the playing field remains so uneven, which was the subject of  one of my earlier blogs.  Interestingly, the UK Director of Transparency also had this to say:

At the same time the UK government needs to level the playing field for honest UK businesses ……

Until this happens, there’s a continuing risk that UK businesses will pay bribes to get lucrative overseas contracts “because that’s the only way we will get the business” and we will continue to languish in the Doldrums of the Index.

Could do better, indeed.

 

 

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What’s the deal? Er, dunno…..

Nearly one in three workers accept a new job without knowing whether or not the package includes a pension, according to a survey by the NAPF.  If true (and I have no reason to believe that it isn’t) it is an alarming statement, both because of the apparent insouciance of those concerned and also because it indicates the extent to which pensions have become discredited as a worthwhile benefit.

There are lots of reasons for this, of course, from the Maxwell scandal that robbed thousands of people of their pensions, to the drift (or stampede, as it has become) of employers moving away from Final Salary pension schemes and towards Money Purchase schemes which are seen – rightly in most cases – as being of inferior quality.  There’s always been a tendency for people to make inadequate provision for their retirement, with so many other calls on their finances, and current economic constraints don’t help to change the picture.

Nonetheless, a good employer’s pension scheme should be an excellent selling point to potential employees and even now, with the Final Salary pension more or less a thing of the past, employers who offer good levels of contribution into a Money Purchase scheme should be using it as a USP to attract high calibre employees to their company.  Of course, it’s difficult to interest people in something that won’t give them any tangible return for decades, in some cases, but any employee who turns down membership of an employer’s pension plan is effectively turning down the opportunity to be paid extra money for doing his or her job and only a fool would refuse that.  It appears, however, that there are lots of fools out there.

With auto-enrolment to employers’ pension schemes taking effect in a year’s time, it may be that more people will take advantage of this benefit, by default, but in the mean time,  if you’re an employee who hasn’t joined your employer’s pension scheme at the first available opportunity, maybe you should re-visit your decision (I should probably stress, at this point, that I’m not qualified to give financial advice and you should not treat these casual musings as constituting advice of any kind).  If you’re an employer with a pension scheme, maybe it’s time to review how effective it has proved to be as a recruitment tool and how it’s perceived by your employees.  If you’re not sure of the answer, it’s worth some time, effort and – dare I say? – expense to find out how to make it work better for you.

Pension schemes are expensive to provide and administer, and should form the backbone of your benefit structure.  Surely that’s worth taking some trouble over?

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Guilty, M’Lud

Munir Patel, the first person to be charged with an offence under the new Bribery Act, has entered a guilty plea, and will be sentenced on 11th November.

Watch this space…..

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Fiddling while Rome burns?

It’s not much fun being a public sector employee at the moment.  As well as constant job cuts and adjustments to working conditions, the Government is also proposing changes to pension rights for many of them – though not for MPs, as many have been quick to point out.

Things have now reached the stage where Unison, the main Public Sector Trade Union, is balloting its members over strike action, in an effort to force the Government to change its mind.  By and large, sympathy from people working in the Private Sector has been distinctly muted over this issue and it’s not hard to see why:  most people who work in Industry or Commerce (even Bankers….) suffered major losses to their pension rights 10 or 15 years ago, when the majority of Private Sector employers began to close Defined Benefit, (or Final Salary) pension schemes to new entrants and began to offer Defined Contribution (or Money Purchase) schemes in their place.  More recently, there has been a second wave of closures, where DB schemes have been closed completely and their remaining active members have been transferred to new, and generally less favourable DC pension arrangements.  It’s easy to see why these people are not too worried about the demise of Public Sector DB pensions (which they are indirectly paying for, via taxation), when they faced the same issue some years ago.

It’s also worth noting that, whilst the changes include increases in contributions in return for diminished benefits, the schemes continue to be related to earnings, rather than depending on the accrual of a cash sum to buy benefits at retirement – so benefits are predictable and secure, rather than depending on the joint uncertainties of fund growth and annuity rates at the time of retirement.

The argument in favour of generous pensions for public sector employees used to be based on the fact that earnings were traditionally less in the public sector and that additional benefits, such as bonuses, company cars and the like, were less in evidence.  In recent years the picture has changed somewhat and, if you believe some statistics, Public Sector employees now earn, on average, more than their opposite numbers in the Private Sector, whilst still enjoying high quality pensions and (until recently, at least) relative job security.

I have a lot of sympathy for those working in the Public Sector but, like an awful lot of people, I believe that the current strike ballots – and subsequent strike action – will not get mass support from elsewhere.  Much time will be spent, and rhetoric spouted, by Unison, to little avail.  Most people laugh at the idea of a multi-millionaire Old Etonian telling us that “We’re all in this together” and – I fear – the same laughter will greet the public sector unions as they try to convince us to carry on paying the ever-increasing cost of their pensions.

Help! I sound like a Daily Mail editorial………………

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Let him without sin caste the first stone

No; it’s not a spelling mistake!  The Government is coming under increasing pressure from the UN, and as a result of an ongoing Employment Tribunal case, to add unfair treatment on grounds of caste to the list of  types of racial discrimination.  The Equality Act of 2010 currently has the provision to do this, but the subject is out for consultation at the moment, a fact that, I must admit, had passed me by.

Current interest in the subject has been stirred up by the Begraj case, which involves a British couple who, ironically, met whilst working for a law firm, Heer Manak Solicitors.  The wife (who is of high caste) came under a lot of pressure not to marry  her husband, who is from a lower caste but, in a clear case of amor omnia vincit, they got married, only to find that Mrs Begraj was – allegedly – given more work to do by her employer and provided with less support to help carry it out.  Both of them also allege that they were the subject of hurtful remarks, although their employer denies all of the allegations, and describes them as “outrageous”.  In the finest traditions of the Legal Profession it is turning into a long-running and (for the lawyers) lucrative engagement; the 10 days originally earmarked for the case have proved insufficient and a further hearing, for which 15 additional days have been allocated, is scheduled for the spring.

All very typical of a discrimination case, you might say, and I would probably agree.  I must confess, however, to a feeling of unease about the rationale behind this particular claim.  Firstly, I find it hard to see why the alleged acts of the employer constitute grounds for a race discrimination claim – both the Begrajs are of Indian ethnic origin.  Secondly, I cannot see why any claim of this kind should be limited to one particular ethnic or cultural group.  It’s true that the caste system is a rigid set of social conventions, with absolutely no flexibility built into it: once you are born, you are a member of a caste for life, in the same way that you are born to be Caucasian, Afro-Caribbean or Chinese.  However, one could posit a very similar argument about discrimination on grounds of class in the UK – whilst not as rigid a demarcation, the fact is that many people are unfavourably treated because they have the wrong accent, or didn’t go to the right school – indeed, my plummy, patrician tones have prevented me getting several jobs in the Refuse Disposal Industry.

Many of Britain’s Industrial woes over the years have been attributed to blinkered management and pig-headed unions, constantly at loggerheads because of class differences.  The most successful companies, in my opinion, are those who ignore class and social standing, and concentrate on being meritocracies where talent is the only reason for discriminating between employees.  If the allegations made by Mr and Mrs Begraj are true, then their employer has been guilty of very poor behaviour, for which they deserve to be castigated, but race discrimination?  I’m not so sure.

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Imran Khan – Anti-bribery campaigner

There’s a fascinating interview with Imran Khan in today’s Guardian.  Those of you who remember him as one of the great cricketers of his generation may also know that, after a career as a sportsman and international playboy, he discovered God (or, to be more accurate, Allah) and politics, has set up his own party and immersed himself in the complex politics of Pakistan.

He is, of course, electioneering, and the tone of the interview reflects this but it’s interesting to hear someone who candidly acknowledges that Pakistan is being severely damaged by corruption.  Quotes such as:

 “We will cut down expenditure, tax the rich and fight corruption. The reason we’re bankrupt is because of corruption. Asif Ali Zardari [Pakistan’s current president] puts his cronies on top and they literally siphon off money”

pull no punches, but they also posit an interesting question, namely: are we encouraging corruption by paying foreign aid to countries where it is impossible to validate where the money ends up?

It also underlines another important point.  Corruption is often spoken of as a “victimless crime” and the widespread tendency to accept payment of bribes as part of the cost of doing business in certain markets is, to an extent, fed by this perception.  In reality, as Khan reminds us, the cost of corruption can be seen in impoverished third-world nations with plutocratic rulers and bankrupt economies.  Every Pound (or Dollar, or whatever) that is paid as a bribe helps to stifle enterprise, institutionalise corruption and thereby impoverish ordinary people who can ill afford to pay bribes but whose life is made intolerable if they don’t.

Prosperous First World businesses don’t like paying bribes of course, because it depletes their bottom line, but it’s easy to forget that the real cost of corruption is borne by those least able to afford it.  It’s difficult for me to put this point across without sounding overly pious, but if Imran is saying it, I feel I’m in good company.

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Good Morning Judge ……

….. or the trouble with having an independent judiciary.

One of the great strengths of British Law is that the Judicial System is separate from the Legislative and Police functions, and can make decisions based on legal writ (both legislative and case law) rather than bowing to inappropriate pressure from the establishment – or, indeed, the tyranny of public opinion.  However, this can sometimes cause problems, and nowhere is this more the case than with Companies considering whether or not to self-report when they find evidence of the payment of bribes within their organisation.

In the US, there is a well established mechanism for plea bargaining so that, if a Company can reach a deal with the authorities, they can go to court for the agreement to be “rubber stamped” by a judge and everyone can go home happy.  In the UK, there is no such process, as John Dougall of Depuy found out, to his cost, when he went to Court, reassured by promises from the SFO that, in return for his co-operation during the investigation of his Company, he would get a suspended sentence.  Mr Justice Bean did not agree and – I suspect – was not impressed by the SFO making promises, effectively on his behalf, to someone facing charges in his court.  Mr Dougall went to prison and, although he was released on appeal, his sentencing sent out shockwaves on all sides, and left several Companies that had self-reported, wondering if they had done the right thing.

In the wake of this case, the Authorities have done a great deal to try and calm the situation.  A couple of recent high-profile cases, involving Willis and Macmillan have underlined the fact that Companies who self-report will be treated leniently (if such a word can be applied to multi million pound fines) and that matters can be resolved by the use of civil recovery orders, validated in court.  Quite how this works in practice remains a mystery – the Judiciary is still independent and, in spite of their blandishments, there is still no mechanism by which the SFO can absolutely assure malefactors that they will avoid prosecution and a custodial sentence, if they co-operate with the authorities.

However, it’s worth looking at the SFO’s guidelines (no, honestly!), as set out in their document “Approach to dealing with Overseas Corruption”, where they state that “wherever possible following a self-report, full co-operation and meaningful action to address the problems uncovered and to ensure an ethical future, the SFO will proceed via the Civil route”.  In other words, if you make a clean breast of matters to the authorities, take substantive action to put your house in order and make sure it doesn’t happen again, the SFO will probably try and settle the matter via a civil, rather than a criminal, route.  So that’s all right then.  Isn’t it?

Well; probably.  Bear in mind, however, that there are certain contra-indications to such a happy outcome, including any suggestion that Directors of a Company have been complicit in paying bribes, particularly if they have benefitted personally from it.  Furthermore, if it becomes apparent that a Board of Directors was aware that corrupt activities were taking place, and chose not to do anything about them, it is probably too late to do anything about it when the SFO arrive at your offices first thing in the morning, armed with search warrants and a pair of handcuffs.

Transparency is a word – and a concept – much in vogue in the Anti-Bribery field.  If you think there is a problem within your business, it’s better to admit to it straight away and to talk to the authorities.  You won’t escape scot-free, but you will probably be doing a great deal to mitigate the consequential damage – and to ensure that you don’t end up in the dock facing a judge who got out of bed the wrong side, that morning…..

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The ingenuity of the Banks knows no bounds

A report in the Financial Times, a few days ago, indicated that a number of Britain’s biggest banks have found a novel way of reducing their pension fund deficits by transferring hard-to-sell assets into their employee pension funds, usually in lieu of one-off lump sum payments.

It is easy to see the advantages of doing this for the banks – not only are they getting illiquid assets off their balance sheets, but they are, in theory at least, also reducing the need to make transfers of hard cash into employee pension funds whilst, at the same time, further improving their balance sheets (because pension fund deficits now have to appear on them as a company liability).  They will also get various capital and tax reliefs on the transaction, particularly if the investments have been given a “haircut” (i.e. they have been transferred over with a deliberately reduced valuation, in order to give the Pension Trustees some comfort over accepting hard-to-sell assets instead of cash).

The claim is that this is a win-win situation:  both banks and pension scheme members benefit, and no-one loses.  I am pretty much an innocent in financial matters, but experience and a certain natural cynicism make me wonder whether this is really as wonderful a deal as it’s being portrayed.  Pension funds work on the basis of long-term growth  rather than short term profit-taking, runs the argument, so that by the time the money is needed, the assets will have regained their value and can be sold.  This will be all well and good if it works but, if it doesn’t, it may leave some pension funds in even worse shape than they are now.  The Financial Markets have dipped significantly since these transactions took place, and even “haircuts” may still have left the pension funds in question with increased deficits.  Also – and only half-jokingly –  can you really trust any idea dreamed up by the institutions that bought us bundles of toxic debt?

Nonetheless, anybody at the banks in question with a bonus target related to the efficient disposal of illiquid assets is no doubt lifting the phone to ring the local Ferrari Dealer, even as we speak.  It’s an ill wind……

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