International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, December 1, 2015

Standard Bank's Bribery of Tanzanian Officials Leads to UK's first UK Deferred Prosecution Agreement

The Serious Fraud Office's first application for a Deferred Prosecution Agreement was today approved by Lord Justice Leveson at Southwark Crown Court, sitting at the Royal Courts of Justice.

The counterparty to the DPA, Standard Bank Plc (now  known as ICBC Standard Bank Plc) ("Standard Bank"), was the subject of an indictment alleging failure to prevent bribery 220px-Serious_Fraud_Office (1)contrary to section 7 of the Bribery Act 2010. This indictment, pursuant to DPA proceedings, was immediately suspended. This was also the first use of section 7 of the Bribery Act 2010 by any prosecutor. 

As a result of the DPA, Standard Bank will pay financial orders of US$25.2 million and will be required to pay the Government of Tanzania a further US$7 million in compensation. The bank has also agreed to pay the SFO's reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.

In addition to the financial penalty that has been imposed, Standard Bank has agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer (Price Waterhouse Coopers LLP).

Commenting on the DPA, Director of the SFO David Green CB QC said:

"This landmark DPA will serve as a template for future agreements. The judgment from Lord Justice Leveson provides very helpful guidance to those advising corporates. It also endorses the SFO's contention that the DPA in this case was in the interests of justice and its terms fair, reasonable and proportionate. I applaud Standard Bank for their frankness with the SFO and their prompt and early engagement with us."

The suspended charge related to a US$6 million payment by a former sister company of Standard Bank, Stanbic Bank Tanzania, in March 2013 to a local partner in Tanzania, Enterprise Growth Market Advisors (EGMA). The SFO alleges that the payment was intended to induce members of the Government of Tanzania, to show favour to Stanbic Tanzania and Standard Bank's proposal for a US$600 million private placement to be carried out on behalf of the Government of Tanzania. The placement generated transaction fees of US$8.4 million, shared by Stanbic Tanzania and Standard Bank.

On 18 April 2013, Standard Bank's solicitors Jones Day reported the matter to the Serious and Organised Crime Agency and on 24 April to the SFO. It also instructed Jones Day to begin an investigation and to disclose its findings to the SFO. The resulting report was sent to the SFO on 21 July 2014.

The SFO reviewed the material obtained and conducted its own interviews. Subsequently, the Director of the SFO considered that the public interest would likely be met by a DPA with Standard Bank and negotiations were commenced accordingly.

The SFO has worked with the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) throughout this process. A penalty of $4.2m has been agreed between Standard Bank and the SEC in respect of separate related conduct.

We are very grateful to the DoJ, the SEC, the Foreign and Commonwealth Office, the Financial Conduct Authority for their assistance in resolving this investigation and deferred prosecution.

Notes for editors:

  1. Please see the Deferred Prosecution Agreement, the Statement of Facts, the preliminary judgment and full judgment regarding the agreement.
  2. The charge against Standard Bank has been suspended for three years, after which, subject to the bank's compliance with the terms of the DPA, the SFO will discontinue the proceedings.
  3. Standard Bank's US$25.2 million total financial penalty, which is payable to HM Treasury, consists of a US$16.8 million financial penalty and a US$8.4 million disgorgement of profits. The compensation due to the Government of Tanzania consists of US$6 million, plus interest of US$1,046,196.58.
  4. Standard Bank is required to pay the compensation, disgorgement of profits, financial penalty and costs within seven days of today's judgment.
  5. The money due to the Government of Tanzania will be returned in line with advice being received from the Department for International Development.
  6. A DPA is not a private plea "deal" or "bargain" between the prosecutor and the defendant company. It is a way in which a company accounts for its alleged criminality to a criminal court, and can have no effect until a judge confirms in open court that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate. Further information on the history of DPAs and how they are intended to be used can be found here.

SECThe Securities and Exchange Commission today charged Standard Bank Plc with failing to disclose certain payments in connection with debt issued by the Government of Tanzania in 2013.  The London-based bank acted as a lead manager for the offering and failed to disclose payments made by an affiliate to a Tanzanian firm that received a portion of the proceeds of the $600 million offering but performed no substantive role in the transaction.

Standard Bank, now ICBC Standard Bank Plc, agreed to settle the SEC’s charges by paying a $4.2 million penalty and admitting the facts underlying the SEC’s charges.  As part of a coordinated global settlement, the United Kingdom’s Serious Fraud Office also announced a settlement today in an action it brought against Standard in the U.K. for Standard’s violations of the U.K.’s Bribery Act of 2010.  The Bribery Act of 2010 is similar to the United States’ Foreign Corrupt Practices Act (FCPA).  The SEC did not have jurisdiction to bring charges under the FCPA because Standard was not an “issuer” as defined by that Act.  Standard will pay a total of approximately $36.9 million in monetary relief in the SEC and U.K. actions.

According to the SEC’s order, the offering documents and statements to potential investors in the sovereign debt offering were materially misleading because they failed to disclose that Standard’s affiliate, Stanbic Bank Tanzania Limited, would pay $6 million of the proceeds to Enterprise Growth Markets Advisors Limited (EGMA), a private Tanzanian firm. The order found Standard did not seek to understand EGMA’s role in the transaction despite red flags that the $6 million payment was intended to induce the Government of Tanzania to select Standard and Stanbic as managers for the offering.  One of EGMA’s directors was a representative of the Government of Tanzania and the offering was not finalized until Standard and Stanbic committed to pay EGMA one percent of the proceeds of the offering.  Standard and Stanbic split 1.4 percent of the proceeds, with each receiving $4.2 million for their participation in the transaction.

“Standard failed to disclose EGMA’s involvement in the bond offering to investors despite red flags suggesting some of the proceeds of the offering were going to EGMA for the purpose of influencing the Tanzanian Government’s selection of bankers for the transaction,” said Gerald W. Hodgkins, Associate Director of the SEC’s Division of Enforcement.  “This action against Standard demonstrates that when suspicious payments made anywhere in the world result in tainted securities offerings in the United States, the SEC is fully committed to taking action against the responsible parties.”

The SEC’s order requires Standard to cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) of the Securities Act of 1933 that prohibits obtaining money by any materially untrue statement or omission, and to pay a $4.2 million civil penalty.  The order also requires Standard to pay disgorgement of $8.4 million, which the Commission has deemed satisfied by a payment of equal amount in the U.K. matter.

https://lawprofessors.typepad.com/intfinlaw/2015/12/standard-banks-bribery-of-tanzanian-officials-leads-to-uks-first-uk-deferred-prosecution-agreement.html

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