Friday, April 25, 2014

Global Bribery: The UK’s GlaxoSmithKline Prosecution


The UK’s Bribery Act 2010  represents a bold step toward leveling the commercial playing field for UK companies doing business worldwide and for foreign companies doing business in the UK.  It has been called the “toughest anti-corruption legislation in the world,” due mostly to four important provisions.  First, the Act is broadly extraterritorial, applicable to companies anywhere where those companies have any “close connection” with the UK.   It applies to payment of as well as receipt of a bribe to obtain or retain business or to secure a business advantage.   Second, it contains a new corporate strict liability provision for failing to prevent bribery by any ‘associated person’ in connection with its business.  A person will be ‘associated with’ the company where that person performs services for the company, whether as employee, subsidiary, intermediary, or supplier.   The only defense against this strict liability crime requires proof that a company maintained “adequate procedures.”  Third, the Act provides for Deferred Prosecution Agreements as an alternative to prosecution, something that is not widely available in typical UK criminal prosecutions.  Finally, the level of fines under the UK’s sentencing guidelines are intended to result in punishments that are “substantial enough to have real economic impact.”  Individuals are subject to sentences of up to ten years and both individuals and companies are subject to unlimited fines.  

For US readers, the differences between the UK’s Bribery Act and the US’s Foreign Corrupt Practices Act should be apparent.  First, the FCPA applies only to bribery of foreign public officials, not to payments made to private individuals.  In addition, there is no criminal culpability for receipt of a bribe.   Second, it does not have the same kind of broad extraterritorial applicability: it applies to acts by US issuers, concerns and their agents and employees outside of the US, and to acts by US citizens or residents anywhere. .   Third, there is no strict liability offense for failing to prevent bribery by any individual. Fourth, there is no liability for receipt of a bribe.    Finally, sentences of imprisonment are limited to up to five years.  Corporations and other business entities may be fined up to $2 million per violation and officers, directors, stockholders, employees and agents up to $250,000 per violation.  Under the Alternative Fines Act, a fine may be up to twice the benefit that the defendant sought. 

Does the UK’s Bribery Act have teeth?  In the absence of a major prosecution to date, observers are watching the pending GlaxoSmithKline prosecution.  Already under investigation in China and in Iraq, GSK is now being investigated by the UK’s Serious Fraud Office for allegedly bribing doctors to prescribe its medicines in Poland.     GSK has asserted an Adequate Procedures defense to the strict liability charges.   How this will play out – or whether it will play out - in a Deferred Prosecution Agreement, given this initial non-cooperation – remains to be seen.   

Whether or not the GSK prosecution results in a significant penalty by deferred prosecution agreement or through a full prosecution, international companies may still be subject to the US’s FCPA.    Thus, on several levels, the GSK case will provide substantial information about corporate responsibility for corruption worldwide.  

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