Andrew Mitchell QC acted for the SFO and Kennedy Talbot advised and appeared on behalf of Balfour Beatty in a landmark case of corruption settled, for the first time, using a civil recovery mechanism, - no doubt an approach that will continue to be considered if and when the facts of a case permit it.
The Serious Fraud Office deployed new powers made available to it as from April 2008. These powers include civil recovery under the Proceeds of Crime Act 2002, under which the SFO can recover property obtained by unlawful conduct. These provisions do not require a specific offence to be established against any particular company or individual, merely that the property sought is the proceeds of unlawful conduct.
Having itself brought these matters to the attention of the SFO, Balfour Beatty plc accepted that unlawful conduct, in the form of inaccurate accounting records arising from certain payment irregularities, occurred within a subsidiary entity, during the construction of The Bibliotheca Project in Alexandrina, Egypt, completed over seven years ago. The project was undertaken by a Balfour Beatty subsidiary in a joint venture with an Egyptian company.
The unlawful conduct relates to entries in a subsidiary company's records in respect of payment irregularities, in respect of the execution of the contract. The documentation prepared in connection with these payments did not comply with the requirements for accurate business records to be kept in accordance with S221 Companies Act 1985.
Once Balfour Beatty plc had discovered and investigated these payments, it immediately notified the SFO, which has conducted a detailed investigation. Balfour Beatty has co-operated throughout this investigation.
In a Consent Order agreed before the High Court, Balfour Beatty agreed to a settlement payment of £2.25m together with a contribution towards the costs of the Civil Recovery Order proceedings.
Balfour Beatty has also voluntarily agreed to introduce certain compliance systems, and to submit these systems to a form of external monitoring for an agreed period.
The SFO has this to say:
"The SFO is committed to combating improper corporate behaviour in line with similar efforts being made in other jurisdictions. As such the use of these new powers should be seen as an important example of how the SFO will use the new tools at its disposal to enhance the criminal justice process.
The outcome signals the SFO's continuing determination to deal with unlawful conduct wherever it occurs. The SFO has concluded in the circumstances of this case that the prosecution of any individual or corporate entity is not merited. By proceeding in this way the SFO has been able to impose a significant sanction on a major UK company whilst avoiding the extensive cost to the public purse of lengthy court proceedings.
The SFO investigation concluded that there was no financial benefit to any individual employee and most of the relevant individuals have long since left the company. The main work undertaken by the joint venture took place between 1998 and 2000, with the project being completed in 2001.
The SFO welcomes Balfour Beatty's transparent and responsible approach in self reporting this issue. The SFO is satisfied that, through its actions, the current management of Balfour Beatty has demonstrated its desire to address these issues, and has already taken comprehensive steps to review and improve its control processes. It has volunteered to continue to review and improve its compliance function and to engage in an agreed external monitoring programme."
In particular, Richard Alderman, Director of the SFO commented:
"This is a highly significant development in our efforts to reform British corporate behaviour. We now have a range of enforcement tools at our disposal, and a major factor in determining which of those tools is deployed will be the responsibility demonstrated by the company concerned."